Seng Hpa v Walker

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
TESTATORS FAMILY MAINTENANCE LIST

S CI 2017 05389

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

-and-

IN THE MATTER of the will and estate of LYNETTE PEARL SENG HPA, deceased

BETWEEN:

REGINALD SENG HPA (by his litigation guardian Zanda Dinsdale)	Plaintiff
v
DEBRA LYNNE WALKER (as executor of the will and estate of Lynette Pearl Seng Hpa, deceased)	First Defendant
and
TRAYCIE LOUISE WALKER	Second Defendant

---

JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF JUDGMENT:	8 June 2017
CASE MAY BE CITED AS:	Seng Hpa v Walker & Ors
MEDIUM NEUTRAL CITATION:	[2017] VSC 320

---

COSTS – Where family provision proceeding compromised – Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 – Whether conduct of parties unreasonable – Where plaintiff substantially successful – Whether defendant beneficiary should pay costs of plaintiff and the executor of the estate – No point of principle.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Rigby Cook
For the First Defendant	Peter Falconer & Associates
For the Second Defendant	Champions Lawyers

HER HONOUR:

Introduction

Lynette Pearl Seng Hpa (‘the deceased’) died on 9 July 2011. She was survived by her husband, the plaintiff, and two adult daughters from her first marriage, the first defendant and second defendant.

The plaintiff is 80 years old and has been diagnosed with a degenerative dementia. He is no longer capable of living independently and requires supported accommodation. This transition involves payment of a $550,000 accommodation bond.

On 15 October 2015, the plaintiff by his litigation guardian, Ms Zanda Dinsdale, commenced this proceeding seeking further provision for his proper maintenance and support from the estate of the deceased, pursuant to Part IV of the Administration and Probate Act 1958. Ms Dinsdale is the plaintiff’s adult daughter from his first marriage.

The family provision claim was settled and on 8 December 2016 the Court approved a compromise, in accordance with r 15.08 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’).

The remaining issues requiring determination are:

(a) how costs should be awarded between the three parties; and

(b) whether costs should be ordered against the lawyer for the second defendant.

The parties agreed for these issues to be determined on the papers. Affidavits and written submissions were filed. The value of the deceased’s estate was estimated to be $372,367 for probate purposes. The total of the combined costs of the parties is $176,772.

Orders

For the reasons that follow, the Court will order that the plaintiff’s costs of and incidental to the proceeding, assessed on the standard basis, and the first defendant’s costs of and incidental to the proceeding, assessed on the trustee basis, are to be paid and retained from the estate of the deceased and the second defendant bear her own costs of and incidental to the proceeding.

Background

The Court is mindful of the comments of the Court of Appeal that ‘the court would set its face against any proposition which would require judges disposing of questions of costs to give elaborate reasons’.[1] Rather, the parties should assume that ‘every matter addressed in argument on costs has been considered’.[2] Although questions of costs can usually be determined with a degree of brevity, in this proceeding it has been necessary to consider the conduct of the parties in some detail.
[1]Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481, 484.
[2]Ibid.

The plaintiff and deceased were married for 34 years in a close and loving relationship. In 2000, they purchased a family home in Highton, initially as joint tenants, and before the deceased executed her will dated 18 August 2004, as tenants in common in equal shares.

The plaintiff and deceased are also the specified beneficiaries of the Reg Seng Hpa Family Trust (‘the Trust’), created by deed in 1994. The class of general beneficiaries is broad, including extended family members, and the trustee is given discretionary powers as to the application or accumulation of funds. The trustee of the Trust is Tai Trading Pty Ltd (‘Tai Trading’). Since 2000, the directors and shareholders of Tai Trading have been Ms Dinsdale and the second defendant.

Some 21 months after the deceased’s death, on 16 April 2015, probate of the deceased’s will and estate was granted to the plaintiff and first defendant, with leave reserved to the second defendant to prove same.

For probate purposes the deceased’s estate comprised her half share in the family home valued at approximately $300,000; the sum of $64,135 in the bank and shares valued at $8,231.

The deceased’s will bequeathed her shares and money in the bank to the defendants in equal shares, gave a right of residence in the family home to the plaintiff, and then devised her half interest in the family home to the defendants equally and left her residuary estate, which has no value, to the plaintiff.

From at least 8 May 2013, the second defendant raised concerns with the executors that all of the deceased’s assets had not been identified for probate purposes. In a letter of that date the lawyers for the executors, Peter Falconer & Associates, who now act only for the first defendant, referred to a sum of $100,000 and stated:

When discussing the assets & liabilities with [the plaintiff] & [first defendant] they advised me that there was no further assets they were aware of and that [the deceased] had managed those that she held as per her Inventory herself but have asked me to ask you [second defendant], to provide in writing all the queries you have regarding the assets & liabilities of the estate and they will upon [the plaintiff’s] return look at same…
Included in this request is [the plaintiff’s] wish that this not become a drawn out situation or a matter for Court so it is also requested that [the second defendant] provide what it is she believes that she is entitled to more than what is detailed in the assets and liabilities.

On 1 July 2015, Peter Falconer & Associates wrote to the lawyers of the second defendant, Champions Lawyers, stating that the plaintiff was considering relinquishing his executorship and pursuing a possible Part IV claim. Specifically, the plaintiff was said to be seeking an absolute interest or a life interest in the family home. Relevantly, the letter raised the concern that as the estate was ‘very small’, every attempt should be made to avoid the costs associated with litigation. The possibility of a deed of family arrangement and without prejudice discussions were raised. The letter also identified that the first defendant had indicated her consent to such further provision for the plaintiff. As stated by Peter Falconer & Associates:

… it would be imprudent to involve the Estate in such expensive litigation and it would be appropriate for the principal Beneficiaries to at least have some discussion about the prospect of resolving the matter between them before substantial legal costs are incurred…. We would therefore invite you to indicate your willingness to enter into ‘without prejudice’ discussions at this time so that the value of the Estate will not be eroded by legal costs.

Champions Lawyers replied on 8 July 2015:

As you well know our client contends that there were more assets of the estate than those you assert. Asserting as fact matters which you know to be contentious is not helpful…
Whilst we do not agree to your firm acting on behalf of [the first defendant] or [the plaintiff] in their capacity as beneficiaries, you may consider it appropriate to point out to [the plaintiff] that the first steps in any application of the type he claims to be considering is to provide an affidavit as to assets, income, liabilities and expenditures as well as all documentation in his possession relevant to those issues. Our instructions are that our client will not consider without prejudice negotiations until such documentation is provide on an open basis. If [the plaintiff] is not prepared to do so, then he should either make the foreshadowed application or abandon any further thought of it.

It is common ground that Mr Michael Champion, the lawyer who appeared solely responsible for the second defendant’s file at Champions Lawyers, is also the domestic partner of the second defendant.

Of final note, in addition to being the plaintiff’s litigation guardian, from 23 December 2015 Ms Dinsdale was also his limited guardian and administrator in accordance with VCAT orders. Prior to those orders, the first defendant was the plaintiff’s financial power of attorney.

Course of the proceeding

On 15 October 2015, this proceeding commenced by way of an originating motion. The application was made with some urgency as the plaintiff’s cognitive condition was deteriorating and he required supported residential care, rather than remaining in the family home.

In contrast to the claim of Champions Lawyers, on 13 November 2015 the originating motion was supported by a position statement rather than an affidavit.[3] The plaintiff’s position statement disclosed he was in receipt of a pension of $1,720 per month. His total income for the financial year ending 30 June 2015 was $22,790 and his expenses were approximately $18,902. His assets were identified as his half share in the family home, savings of approximately $40,413, a 2002 Holden Berlina and shares valued at approximately $3,008.
[3]In accordance with Supreme Court of Victoria, Common Law Division, Practice Note No 7 of 2015: Testators Family Maintenance List (5 November 2014) [5.2], which identifies certain procedural options when the value of the estate is less than $500,000 (‘Practice Note No 7 of 2015’).

At the first directions hearing on 24 November 2015, orders were made for the second defendant to be notified of the application in the prescribed written form. Such notification included the paragraph:

The Honourable Associate Justice Derham has authorised us to inform you that although legal costs incurred by a party to a proceeding of this type are usually allowed by the Court out of the Estate of the Deceased, it is unlikely that more than one set of legal costs of separately represented parties with the same or similar interests will be allowed.[4]

[4]Orders of the Honourable Associate Justice Derham made 24 November 2015, schedule 1.

The plaintiff’s solicitors, Rigby Cooke, wrote to the second defendant on 25 November 2015 in the prescribed form. On 7 December 2015 Champions Lawyers responded and on 14 December 2015 the second defendant sought to be added as a party. At this time, Champions Lawyers requested information as to what form of supported care was envisaged and at what cost, and what were the ongoing expenses of the plaintiff and made a request for a number of medical reports.

On 15 December 2015, the second defendant was added as a party to the proceeding. Mr Champion and representatives of the plaintiff appeared at the hearing and the lawyers of the first defendant provided written consent.[5] By letter of the same date, Rigby Cooke wrote to Champions Lawyers seeking clarification of certain funds that were withdrawn from a Commonwealth Bank of Australia bank account associated with the Trust (‘CBA Trust Account’). The letter asserted that six days earlier the sum of $16,480 was withdrawn from the CBA Trust Account, and that in addition to Ms Dinsdale, the second defendant was the only other authorised signature on the account. A demand was made for the funds to be returned.
[5]Orders of the Honourable Associate Justice Derham made 15 December 2015.

On 15 January 2016, Champions Lawyers wrote to Rigby Cooke again requesting the information identified in the letter of 7 December 2015, noting that the plaintiff had been assessed further on 29 December 2015. A response from Rigby Cooke was received dated 18 January 2015, citing that all relevant documents had been provided to the second defendant on 17 December 2015, and that an update was not possible as Ms Dinsdale was currently investigating all options.

On 21 January 2016, the second defendant filed her position paper. It noted that although she had sought information as to the medical condition of the plaintiff, no ‘adequate response’ had been received in reply. While reserving her right to amend the position paper subject to an adequate response, the second defendant identified the following six issues regarding the plaintiff’s claim:

(a) The value of the deceased’s estate was more than that set out;

(b) The plaintiff’s assets exceeded those disclosed in his position statement;

(c) The financial position of the plaintiff, including the likelihood that the assets of the Trust would be available for his benefit, was such that the deceased did not fail to make adequate or sufficient provision for the plaintiff;

(d) The plaintiff was able to provide adequately for his proper maintenance and support. If the plaintiff was not able to do so, the assets of the Trust were available for that purpose;

(e) The first defendant was a wealthy individual, controlling assets with an estimated value of several million dollars; and

(f) The second defendant was the beneficial owner of a Honda CRV, but otherwise was not the beneficial owner of other significant assets. While a potential claim to property pursuant to the Family Law Act was identified, the value of such claim was uncertain.

On 8 February 2016, the first defendant’s position statement was forwarded to the second defendant.[6] Her position statement noted that although as executrix the first defendant had a duty to uphold the will, she conceded that the plaintiff had the highest claim on the bounty of the deceased.[7] Her view was that the plaintiff should have been provided with a true life interest in the deceased’s half share in the family home, which would enable him to sell the life interest and invest it in an accommodation bond. Further, she did not agree with the matters contained within the second defendant’s position paper. In order to avoid costs, the first defendant was happy not to be actively involved in the proceeding and to allow the second defendant ‘to prosecute her position in opposition to the plaintiff’s claim’.
[6]There is some uncertainty as to the date that the first defendant’s position statement was filed. The list of the Court file appears to indicate that it may have been filed 9 February 2016, but it was not on the file. In any event it was forwarded to the Court on 6 April 2016, after orders of the Honourable Associate Justice Derham made 5 April 2016 requiring same.
[7]Cited in support of this position were King v White (1992) 2 VR 417; Youn v Frank [2011] VSC 649 (16 December 2011).

On 19 February 2016, Rigby Cooke forwarded to Champions Lawyers an aged care accommodation assessment prepared by Equity Trustees. The report included the information that the plaintiff would be at high risk if left in an independent living arrangement, at the time of the report he was living in transitional care awaiting placement in recommended aged care and that the accommodation bond for the recommended care facility was estimated to be $550,000. Depending on the options pursued, the report concluded that ongoing expenses of $99,372 per annum may be incurred.

The parties attended mediation on 23 February 2016 but settlement was not achieved.

On 29 February 2016, what is described as a Calderbank Offer was made by the plaintiff and first defendant to the second defendant (‘the Offer’). In addition to the assets of the plaintiff previously noted in the plaintiff’s position statement, the Offer identified that the plaintiff was also a beneficiary of the Trust, which had as its main asset a property in 153 Main Street, Stawell. That property was said to be unlet and in a deteriorating condition. Additionally, as at 23 February 2016 the plaintiff’s legal costs were $38,000, the first defendant’s were $23,000 and the second defendant’s were $16,000. The terms of the Offer provided for the deceased’s last will to be amended such that:

(a) the shares, funds in bank accounts and half interest in the family home would be bequeathed to the plaintiff for life, and upon his death to the defendants in equal shares; and

(b) the trustees of the deceased’s estate would be afforded an express power to apply the proceeds of sale of any shares, or the proceeds of bank accounts, or the proceeds of sale of the deceased’s interest in the family home, in the event that the plaintiff had to go into a nursing home or other care facility permanently, in the payment of any accommodation bond or other ingoing or ongoing payments, on the basis that any such funds that were repayable on the death of the plaintiff would be paid to the defendants in equal shares.

The plaintiff and first defendant proposed that:

(a) The [family home] be sold;

(b) Out of the sale of the [family home], the costs of selling the [family home] … shall be paid. The net proceeds of sale of the [family home] then remaining shall be paid as follows:

(i) one-half to the plaintiff for his use and benefit absolutely;

(ii) one-half which shall be added to the deceased’s estate;

(c) all debts and liabilities of the deceased shall be paid and discharged;

(d) the legal costs of the plaintiff and the defendants of and incidental to this proceeding, including all reserved costs, shall be paid out of the deceased’s estate, such costs to be fixed as follows:

(i) The plaintiff, $40,000;

(ii) The first defendant, $23,000;

(iii) The second defendant, $16,000;

(e) the reasonable costs of completing the administration of the estate then remaining shall be paid;

(f) the balance of the deceased’s estate then remaining shall be held for the life of the plaintiff in accordance with [the amended will].

The Offer was open until 4.00 pm 15 March 2016. If it was not accepted and the proceeding continued to trial, at which the plaintiff succeeded to the same extent or bettered the Offer, the plaintiff was to seek an order that the second defendant’s costs were not to be paid out of the deceased’s estate.

By letter of 3 March 2016, Rigby Cooke forwarded to Champions Lawyers a loan agreement between Tai Trading and borrowers identified as Ms Dinsdale and the second defendant. The loan was said to be related to the sale of a property at 6 Barnes Street, Stawell (‘6 Barnes Street’) to Ms Dinsdale and the second defendant. Reference was made to a joint CBA bank account in the names of Ms Dinsdale and the second defendant, and payments that had been made from that account perhaps by way of interest due under the loans. The letter also requested that the second defendant take action to ensure that Ms Dinsdale was included as a signatory on the CBA bank account.

On 6 March 2016, Champions Lawyers sent identical letters to both Rigby Cooke and Peter Falconer & Associates. The letter noted that the second defendant was ‘anxious to resolve the proceeding but on appropriate terms’ and that the difficulty which she faced was ‘the lack of proper financial information’. A request was made for any document:

1. relevant to the assets of the plaintiff (including those held on trust for him) since 1 March 2008;

2. relating to the disposition of assets owned by or held on trust for the plaintiff since 1 July 2009;

3. recording the assets bequeathed to the deceased from the estate of [the mother of the deceased] and disposition thereof;

4. relating to the disposition of the proceeds of sale of a property at 44 Caithness Crescent, Corio (‘44 Caithness Crescent’);

5. being a financial record for [Tai Trading] for each year since 30 June 2006;

6. being a financial record for [the Trust] for each year since 30 June 2006;

7. being the trust deed(s) for:

(a) [the Trust];

(b) Any trust over the properties at 6 Barnes St Stawell (‘6 Barnes Street’);

8. Recording the receipt and distribution of funds from the rental property know as 6 Barnes Street since 1 March 2008, including correspondence with the estate agent managing those properties;

9. Which relates to the needs of the plaintiff for aged care accommodation or the cost of provision of aged care accommodation for him.

The letter also sought advice as to who the plaintiff and first defendant said were the beneficial owners of 6 Barnes Street, the registered proprietors of which are the second defendant and Ms Dinsdale. The relevance of the requested documents was said to be identifying the plaintiff’s financial position in light of the deceased having given ‘a good deal of consideration’ to the matter when she made her last will, and clarifying the second defendant’s own financial position, particularly in relation to her interest in the Trust and 6 Barnes Street. By separate letter of the same date, Champions Lawyers stated that the Offer would be given further consideration once the requested documentation was provided. The Offer was considered premature as the second defendant did not ‘have full and accurate financial information about the plaintiff’s financial position, or indeed her own’. Further, it was asserted that the Offer was not a proper Calderbank Offer as it fixed costs, and the level of costs claimed by the plaintiff were grossly excessive given the size of the estate, that no affidavit had been served and that the mediation conducted was at no cost.

At a directions hearing on 8 March 2016 the proceeding was adjourned to allow discovery of the documents requested.

By letter of 9 March 2016, Rigby Cooke responded to the second defendant’s requests. As to the first two classes of documents, Rigby Cooke commented that the request was ‘very wide and non-specific… it also goes back some 8 years in time’ before asking for further specification of the nature of the documents that the second defendant was seeking. The plaintiff reported having ‘no such documents’ in response to classes three to six and reference was made to the possibility that more documents may ‘come to light’ as the family home was cleaned. Further, Rigby Cooke noted that it was the second defendant who had essentially operated Tai Trading, was ‘the sole signatory to the account’ and was in possession of trust documents. A request was made by the plaintiff for the financial statements and income tax returns for the Trust and Tai Trading. Reference was also again made to a loan of $180,000 from the Trust to Ms Dinsdale and the second defendant in 2006. In relation to the final three classes of documents requested, the following documents were forwarded to the second defendant: a copy of the Trust Deed, a bank statement for the CBA Trust Account from 2015 and five health care reports. At this point the Offer of 29 February 2016 was extended to 1 April 2016.

On 29 March 2016, Champions Lawyers sent a further letter to Peter Falconer & Associates seeking a response to their letter of 6 March 2016.

By letter dated 1 April 2016, Champions Lawyers responded to the letter of Rigby Cooke dated 9 March 2016. An assertion was made that none of the material provided disclosed the financial position of the plaintiff at the time of the deceased’s death, nor how those assets were dealt with since. The letter stated that it was ‘not possible for us to limit the extent of the discovery required’ and that proper consideration of the documents would reveal that prior to the death of the deceased the plaintiff operated the Trust for his benefit and that of the deceased, that this continued after the death of the deceased and that the plaintiff received the benefit of further significant assets. Concern was raised that the plaintiff answered the request for discovery with reference to what he held personally, rather than ‘documents in the possession power or control of the plaintiff’. Specific reference was made to the possible contents of the plaintiff’s former study at the family home and, in light of the cleaning being undertaken, an updated response to the discovery requests was sought. Champions Lawyers pointed to the plaintiff’s practice of not owning assets in his own name, and having received $100,000 in relation to the sale of the 44 Caithness Crescent in May 2008, as well as the sum of at least $100,000 from the first defendant in June 2012, which had been held on trust for the plaintiff’s benefit. Reference was additionally made to a significant sum that the deceased inherited from her own mother’s estate. Finally, the details of the account that the second defendant was asserted to be ‘sole signatory’ in relation to Tai Trading were sought, and forwarded to the plaintiff were financial records of the Trust from 2008. It was also stated that the second defendant held no further Trust documents.

In a letter dated 4 April 2016, Peter Falconer & Associates replied to the second defendant’s letter of 6 March 2016 enclosing a copy of the Trust Deed. It was noted that the first defendant did not hold any other documents in relation to the classes requested. Regarding the second, sixth and eighth class of documents, it was suggested that the second defendant make inquiries with the trustees of the Trust. Champions Lawyers later alleged that this response was evasive and inaccurate. In a letter of reply dated 4 April 2016 they stated:

We note you say your client does not ‘hold’ documents in relation to this category. Our inquiry related to documents in your client’s ‘possession power or control’. The language you have used does not extend to documents which are not presently in your client’s physical custody. Please do so we would grateful if you would make proper inquiries as to the matter and provide us with a proper response.

In an affidavit affirmed 5 April 2016, Mr Champion outlined the correspondence sent to both the plaintiff and first defendant seeking discovery and the responses received. As is evident in a later affidavit, the affidavit incorrectly stated that no reply had been received from the first defendant. A directions hearing on the same day made procedural orders as to the second defendant applying for discovery, and adjourned the matter to 27 May 2016.

On 19 April 2016, the second defendant filed a summons seeking the production of documents. Two affidavits in support were relied upon, one of the second defendant and one of Mr Champion. The second defendant’s affidavit simply deposed to reading the affidavit of Mr Champion and providing the instructions as referred to in Mr Champion’s affidavit.

Mr Champion’s affidavit again asserted that at the date of the deceased’s death, the plaintiff had more assets than those disclosed in the plaintiff’s position statement, and that the deceased’s estate had more assets than those identified. Reference was specifically made to:

(a) Gold medallions and a sword which may have been of significant value;

(b) A caravan that was replaced with a more expensive model after the deceased’s death;

(c) $100,000 which was lent to Mr Champion personally in approximately 2008, then paid to the first defendant to hold on trust for the deceased. The first defendant then paid instalments of $98,000 and $2,000 into a Progress Saver account;

(d) A sum of $106,253 which was payable to the second defendant upon sale of 44 Caithness Crescent in 2009, of which she was registered proprietor. The associated conveyancing file from the firm of solicitors at which the plaintiff and second defendant had both previously worked, Bowman & Knox, was unable to be located, but the settlement statement indicated that the money was payable to the second defendant;

(e) $70,000 that the deceased inherited from her mother, who died 20 August 2009, and had planned to purchase a caravan with;

(f) Financial records for Tai Trading and the Trust since June 2006, some of which were asserted to be in the study of the family home. The study was now inaccessible by the second defendant as the locks had been changed. The Trust was said to be operated by the plaintiff, and the second defendant would be asked to sign documents or cheques from time to time on behalf of Tai Trading which ‘she would sign without reading or checking’. The second defendant considered that the assets of the Trust, including a property in Main Street, Stawell estimated to have a value of $250,00, should be applied toward the welfare of the plaintiff; and

(g) The property at 6 Barnes Street, which appeared to be leased by the plaintiff for the benefit of the plaintiff and/or the Trust.

In a responding affidavit of 5 May 2016, Mr Champion’s affidavit was objected to by the first defendant on the basis that it was substantially constituted by hearsay or based on opinion or speculation. In any event the first defendant responded to the affidavit by providing a number of explanations. She deposed that after the deceased’s death, the plaintiff went on three overseas trips. While the first defendant had seen gold medallions, she could not be confident that they were solid gold and she had been unable to locate them. As to the sum of $100,000, the first defendant asserted that she had held it on behalf of the deceased and the plaintiff, and that it was transferred to an ANZ account of the plaintiff after the deceased’s death. It was thereafter used to fund the series of trips overseas. Further, the locks of the study at the property were changed on account of the plaintiff losing his keys, and the deceased was thought to have inherited only one third of $70,000 from her mother’s estate. The affidavit went on to note that documents were being sought from Bowman & Knox. A 2015 contract of sale for a caravan, involving the sum of $7000 was disclosed.

Rigby Cooke also responded to the requests of the second defendant on 5 May 2016 with a list of discoverable documents. The documents included: financial reports for Tai Trading from 2009 and 2010; settlement and adjustment statements for 114 Main Street Stawell; bank statements from 2012 to 2016 for an ANZ Online Saver account (‘Seng Hpa Online Saver account’), ANZ Progress Saver account (‘Seng Hpa Progress Saver account’) and an ANZ Pensioner Advantage account (‘Seng Hpa Pensioner Advantage account)’; correspondence regarding 6 Barnes Street; a statement of reconciliation in relation to 44 Caithness Crescent; a deed of family arrangement relating to the estate of the deceased’s mother; and a copy of bank cheques from 2009.

On 18 May 2016, Champions Lawyers inspected the documents and was given photocopies.

On 20 May 2016, Champions Lawyers wrote to Peter Falconer & Associates inquiring as to any response that had been received from Bowman & Knox in relation to the estate of the deceased’s mother and the sale of 44 Caithness Crescent. By letter dated 23 May 2016 Peter Falconer & Associates informed Champions Lawyers that they had received about fifty documents and that these could be made available to the second defendant.

Mr Champion affirmed a further affidavit on 25 May 2016. It noted that the letter of Rigby Cooke still did not respond to all of the categories of documents identified in Champions Lawyers’ letter of 6 March 2016; nor did it state that neither the plaintiff or Ms Dinsdale had ever had in their possession or control ‘any other documents relevant to this proceeding’. Additionally, bank statements were not provided for an ANZ account with a specified number, an ‘Access Cheque Account’, the ‘Reg Seng Hpa Saving Account’ and an account into which the $100,000 was paid. The bank statements that were provided from the 2014 and 2015 period also disclosed savings of approximately $22,814 rather than the $40,413 provided for in the plaintiff’s position statement. Additional issues were raised regarding a possible life insurance policy and certain shares that had not been disclosed yet were referred to in the plaintiff’s bank statements.

In relation to the first defendant’s response, Mr Champion again noted that the affidavit did not reply to each of the categories requested in the letter of 6 March 2016 nor state that the first defendant did not have in her power possession or control ‘any other documents relevant to the matters in issue in this proceeding’. The assertion was made that all of the funds held in the ANZ Account from which the first defendant transferred the payments of $98,000 and $2,000 were in fact held on trust for the plaintiff’s benefit, and statements regarding a related Bendigo Bank account from which funds were transferred had not been disclosed. Although certain materials had been made available to the second defendant, these did not include material from the file of Bowman & Knox regarding the estate of the deceased’s mother. Additionally, the second defendant was in possession of a draft inventory of assets of the deceased from 2013 that listed a number of bank accounts, the statements of which had not been discovered. It was asserted that Trust payments had previously been made into those accounts for the benefit of the deceased and/or plaintiff.

The summons for the production of documents was heard on 27 May 2016. In written submissions, the plaintiff continued to question the relevance and specificity of the documents sought. It was asserted that: the assets of the plaintiff four years before the deceased died were not relevant; the issue of the sale of 44 Caithness Crescent was unrelated to the position when the deceased died; that no third party discovery was sought from Ms Dinsdale as a director of Tai Trading; and that the issues as to 6 Barnes Street were between Ms Dinsdale and the second defendant and not relevant to the proceeding. In contrast, while the second defendant conceded that discovery as to 6 Barnes Street was not going to be further pressed, she asserted that:

To enable a proper assessment of the plaintiff’s financial resources… it is necessary to examine documents related to these resources. The defendant should not have to rely upon the say so of the plaintiff…
The affidavits of Mr Champion of 19 April and 25 May 2016 make it clear that the plaintiff organized his financial affairs in a way which involved the use of various persons or entities to hold assets… Neither the Court nor the [second] defendant can be satisfied that all relevant documents have been discovered…. There is good reason to suppose that they have not been.

Orders were made that the plaintiff and Ms Dinsdale make discovery via an affidavit of documents relating to:

(a) the financial resources of the plaintiff at or immediately after the death of the deceased, including as to:

(iii) the ANZ bank account with the specified number;

(iv)the account into which the $98,000 was paid to the plaintiff on 5 June 2012;

(v) The ‘Access Cheque Account’;

(vi)The ‘Reg Seng Hpa Saving Account’;

(vii) the life policy;

(viii) Tai Trading; the Trust; and

(ix) shares held by the plaintiff;

(b) documents evidencing what became of the sums paid to the plaintiff by the first defendant;

(c) the file of Bowman & Knox relating to the sale of 44 Caithness Crescent;

(d) the proceeds of the estate of the deceased’s mother; and

(e) financial records of the Trust and Tai Trading since 30 June 2006, other than those already discovered.[8]

[8]Orders of the Honourable Associate Justice Derham made 27 May 2016.

Similarly, the first defendant was ordered to make discovery via an affidavit of documents relating to: the financial resources of the plaintiff at or immediately after the death of the deceased including funds held on trust for the plaintiff and the bank accounts for which statements had not been discovered; documents relating to the proceeds of the estate of the deceased’s mother; and documents relating to specified ANZ bank accounts.[9] Costs of the application were reserved and the proceeding was adjourned until 19 July 2016.
[9]Ibid.

Subsequent to the orders of 27 May 2016 (‘the Orders’) a number of affidavits were filed and documents disclosed. The first defendant deposed in an affidavit sworn 23 June 2016 that she had held $100,000 on the plaintiff’s behalf. While this was initially held in a term deposit, in 2012 the plaintiff directed the first defendant to deposit the funds into an ANZ account. Some funds were removed on account of the deceased’s funeral expenses and subsequently $98,000 was deposited into an online saver account in the first defendant’s name (‘Walker Online Saver account’). This was the ANZ account with the specified number referred to in the Orders. The money was then transferred to another ANZ account in the first defendant’s name that had been opened by the plaintiff (the ‘Walker Progress Saver account’). In July 2012 the plaintiff then independently transferred the funds into his own account. The first defendant deposed to having a number of statements in relation to the Walker Progress Saver account. While at one time she did have financial records for Tai Trading and the Trust, as she had paid bills after the deceased’s death and was the plaintiff’s financial power of attorney, in December 2015 those records were passed on to Ms Dinsdale. The first defendant also listed a number of documents that she had received from Bowman & Knox in relation to 44 Caithness Crescent and the estate of the deceased’s mother. No further bank statements or the passbooks for the Bendigo Bank accounts which were in the plaintiff’s name were said to be in the first defendant’s possession.

Ms Dinsdale affirmed three affidavits in response to the Orders. On 23 June 2016, she stated that in contrast to the second defendant’s claims, the letter of Rigby Cooke dated 9 March 2016 did respond to all of the categories of documents sought by the second defendant. She clarified that two of the bank accounts referred to in Mr Champion’s affidavit of 25 May 2016, the ‘ANZ Access cheque account’ and ‘Reg Seng Hpa Saving account’, had changed names to the Seng Hpa Pensioner Advantage account and Seng Hpa Progress Saver account respectively. A number of statements were provided for those accounts, adding to those discovered on 18 May 2016. As to the ANZ account which was specified in paragraph (1)(a)(ii) of the Orders, Ms Dinsdale said that it was ‘not an account in the name of the plaintiff’. While reference was made to a life policy in the orders, this was stated to be a funeral plan policy. Ms Dinsdale then went on to disclose: additional financial records for Tai Trading and the Trust from 2007 and 2008; statements relating to NIB, IOOF and AMP shares; the settlement statement for 44 Caithness Crescent; two documents regarding the estate of the deceased’s mother; a CBA Trust Account statement from 2015; and bank statements for two term deposits. In response to paragraph (1)(b) of the Orders, Ms Dinsdale deposed ‘I am unable to determine to the best of my knowledge what payments the court is referring to’. The affidavit then concluded with:

To the best of my knowledge I do not have and never have had any other documents relevant to this proceeding, however, the [first] defendant, the [second] defendant and the [second] defendant’s domestic partner the said Michael John Champion had access to the plaintiff and the deceased’s house immediately following the death of the deceased. I cannot confirm if any documents relevant to this proceeding were removed.

Ms Dinsdale affirmed a second affidavit on 28 June 2016. That affidavit discloses statements for the Walker Online Saver account and the Walker Progress Saver account, as referred to by the first defendant in her affidavit of 23 June 2016. Ms Dinsdale did not disclose them previously as she believed that they were ‘not the plaintiff’s to disclose’. In response to the first defendant’s affidavit, Ms Dinsdale also contacted the Bendigo Bank and identified that the plaintiff had four passbook accounts, all as trustee for his grandchildren. Finally, the affidavit disclosed further bank statements for the Seng Hpa Progress Saver Account, the Seng Hpa Online Saver account and the Seng Hpa Pensioner Advantage account.

By letters dated 30 June 2016, Champions Lawyers responded to the affidavits of the first defendant and Ms Dinsdale. The letter to Peter Falconer & Associates asserted that the first defendant’s affidavit failed to comply with the Orders in a number of respects. Much of the claim was based on the failure of the first defendant to specify that she did not have or never had documents with each category:

Although reference to this account is made in paragraph 3(iv) of the Walker Affidavit, the affidavit does not specifically state or address whether she has or had any and if so what documents within this category…
…
The Order requires the deponent to identify whether she has had any and if so what documents relating to this account. It is not sufficient to state that the deponent is not currently in possession of the passbook and does not know what happened to it.

While the letter sought copies of the documents identified in the first defendant’s affidavit, it concluded with the further request that an affidavit which satisfied the requirements of the Orders be provided ‘as a matter of urgency’.

The letter of Champions Lawyers to Rigby Cooke also raised concerns with both the first and second affidavits of Ms Dinsdale. As to Ms Dinsdale’s belief that certain bank statements were not the plaintiff’s to disclose, the reply stated:

That statement does not satisfy the requirements of the Order. The Order requires discovery of all documents relating to that account, irrespective of the name of the account holder. The response generates concern that other relevant documents may not have been discovered upon the grounds that they were not in the name of the plaintiff…

Regarding Ms Dinsdale’s reference to paragraph (1)(b) of the Orders, Champions Lawyers responded: ‘the Order clearly relates to the payment of $98,000 made on 5 June 2012. We insist upon a proper response which directly satisfies the requirements of the Order’. Again, the letter requested as a matter of urgency that another affidavit be deposed:

…that affidavit should be made after making all due and proper enquiries. The enquiries should not be limited to the Bendigo Bank – the affidavit of [the first defendant] identifies an account with the ANZ Bank – and should identify all relevant accounts.

On 13 July 2016, Ms Dinsdale deposed a further affidavit responding to each paragraph of the order, specifying which documents she had in her possession custody and power, and affirming that she had not been able to locate any others. Specific reference was made to searches of the property and requests directed to the plaintiff, who was suffering from Alzheimer’s and was by then residing in a secure dementia specific nursing facility. The affidavit does not appear to disclose any documents beyond those already discovered in Ms Dinsdale’s two earlier affidavits responding to the Orders, and those discovered in the letter of Rigby Cooke dated 5 May 2016. In contrast to her affidavit of 23 June 2016, however, Ms Dinsdale deposed that the ‘Reg Seng Hpa Saving Account’ was known as the online saving account specified in paragraph 1(a)(i) of the Orders, that is, the Walker Online Saver account. Regarding paragraph 1(b) of the Orders, the affidavit again stated ‘I am unable to determine to the best of my knowledge what payments are referred to’.

In an affidavit sworn 14 July 2016, Mr Champion exhibited the correspondence of Champions Lawyers dated 30 June 2016. He deposed that as of the date of the affidavit he had not received a response from either the plaintiff or the first defendant. The affidavit was posted to the Rigby Cooke and Peter Falconer & Associates with a cover letter dated 14 July 2016. Also enclosed were minutes of proposed consent, requiring the plaintiff and first defendant to file and serve affidavits which ‘strictly’ complied with the Orders by 26 July 2016.

On 14 July 2016, Peter Falconer & Associates replied to Champions Lawyers enclosing the documents referred to in the affidavit of the first defendant sworn 23 June 2016. It was disclosed that the first defendant had disposed of certain documents, namely statements for the Walker Online Saver account and documents regarding the estate of the deceased’s mother, in the municipal waste service in 2003 and 2012 respectively. The first defendant had also identified documents in relation to a Bendigo Bank account held in her name on behalf of the deceased and plaintiff, and some associated statements were discovered. The letter stated further:

We trust that this will bring the issue of Discovery to a close. We have not put the further material in an Affidavit form. This is a small Estate and we believe that the final Discovery should be made by a less expensive means than going through the expensive process of having full affidavits drawn and sworn…
We also take this opportunity to express concern at your firm’s continued involvement in this matter. In that regard we refer to the letter of the Ethics Committee of the Law Institute of 19 June 2014 a copy of which is attached…

Assertions were then made that certain references in Mr Champion’s affidavits were confusing, making the process of discovery more complex and difficult than it should have been, and in the view of Peter Falconer & Associates, Mr Champion should have ceased to act on behalf of the second defendant.

On 15 July 2016, Champions Lawyers wrote to Rigby Cooke responding to the affidavit of Ms Dinsdale sworn 13 July 2016 which was also considered unsatisfactory. A number of comments were made:

In case you are not aware of it, it is apparent from the documents that have been discovered in this proceeding that there have been bank accounts other than those specifically identified in the subparagraphs of paragraph 1(a) of the Order. The continuing failure to address all of the financial resources of the plaintiff at the relevant time is perfectly consistent with the plaintiff and/or his litigation guardian having and/or having had in their possession power or control documents relevant to the matters in issue in this proceeding which have not been discovered…

Regarding Ms Dinsdale’s inquiries of the plaintiff:

The second paragraph is close to meaningless. If what is intended to be conveyed is that the plaintiff was asked specifically about the existence -past or present- of the category and he was unable to respond except to say that all relevant documents were kept at [the family home] – then the affidavit should say so…

The letter then continued on to detail a number of bank transfers in relation to paragraph 1(b) of the Orders. On 5 July 2012, an ANZ account in the first defendant’s name had a balance of $128,393. On the same day, $98,000 was transferred to what is referred to as a ‘Deeming Cheque Account’. It is apparent that this is the account that Ms Dinsdale previously disclosed as having changed names to the Pensioner Advantage account. By 16 July 2012, the balance of the ANZ account in the first defendant’s name was $268.96, and that of the Deeming Cheque Account was $58,488. The next statement discovered for the Pensioner Advantage Account showed a balance of $6727 on 14 March 2016. A request was subsequently made by Champions Lawyers for ‘discovery of all documents relating to what became of the funds of $128,393 held on trust for the plaintiff on 5 July 2012’.

Mr Champion swore a further affidavit 18 July 2016 exhibiting the letters of Champions Lawyers to the plaintiff dated 14 and 15 July 2016, and to the first defendant dated 14 July 2016. He stated that as of 18 July 2016 he had not received a reply to that correspondence. In response, Mr Peter Falconer of the first defendant’s lawyers swore an affidavit the same day refuting the assertions of Mr Champion.

By letter dated 18 July 2016, Champion Lawyers requested that Rigby Cooke send better copies of the discovered bank statements for the Seng Hpa Pensioner Advantage account. It appears that some pages from statements dating from 2014 had been omitted.

On 19 July 2016, at a directions hearing, representatives of the second defendant continued to press the deficiencies in the affidavits of discovery filed by the plaintiff and first defendant and sought orders for strict compliance with the Orders as well as discovery of documents relating to what became of the $128,393. No further orders as to discovery were made and the matter was adjourned for directions on 5 August 2016.

By letter dated 4 August 2016 Rigby Cooke sent better copies of the Pensioner Advantage bank statements as requested by Champion Lawyers. That letter referred to the request by Champions Lawyers for the documents as being on 3 August 2016.

At the directions hearing on 5 August the first defendant tendered a statement of trial issues. It noted, inter alia, that the plaintiff was living in supported accommodation but now required a high care nursing home. The accommodation bond for an appropriate home was said to be in the order of $550,000. The plaintiff and first defendant agreed that the plaintiff should have a life interest in the deceased’s shares, bank account funds and interest in the property, which, upon his death, would then fall to the first and second defendant’s equally. An open offer was made to the second defendant to this end. The offer also specified that the costs of the plaintiff and defendants would be paid out of the estate, in amounts fixed by the court.

On 16 August 2016, Champions Lawyers wrote to Rigby Cooke proposing terms of consent said to be ‘in light of the additional information’ and in reliance on the accuracy of the affidavit material. The proposed terms of consent sought amendments to the deceased’s will to the same effect of those proposed by the plaintiff and second defendant, save that there was no provision for the trustees of the deceased’s estate to apply funds toward ‘other ingoing or ongoing payments’. Further, the parties’ costs were to be paid out of the deceased’s estate, in amounts fixed by the court.

A directions hearing was adjourned on 19 August 2016. On 26 September 2016, Rigby Cooke forwarded draft terms of settlement to Champions Lawyers and after two more adjourned directions hearings, terms of settlement were entered into on 25 October 2016.

On 28 October 2016, the hearing was again adjourned for one week and the plaintiff was ordered to file an application for the approval of the compromise.[10] The terms of settlement provided for changes to the will to the effect that:

(a) the shares, funds in bank accounts and half interest in the family home would be bequeathed to the plaintiff for life, and upon his death to the defendants in equal shares; and

(b) the trustees of the deceased’s estate would be afforded an express power to apply the proceeds of sale of any shares, or the proceeds of bank accounts, or the proceeds of sale of the deceased’s interest in the family home, in the event that the plaintiff had to go into a nursing home or other care facility permanently, in the payment of any accommodation bond on the basis that any such funds that were repayable on the death of the plaintiff would be paid to the defendants in equal shares.

[10]Orders of the Honourable Justice McMillan made 28 October 2016.

The application for the approval of compromise pursuant to r 15.08 was filed 14 November 2016. It disclosed that the value of the deceased’s estate had increased to $415,980. Further, in early 2016 the plaintiff had moved from the family home to a supported care facility requiring an accommodation deposit of $550,000. A down payment of $20,000 had been made and a further payment of $250,000 was paid by the plaintiff from his share of proceeds of the family home which by then had been sold. Interest had accrued on the unpaid deposit. Due to his behavioural issues the plaintiff later moved to a psychiatric residential facility and a sum of $233,160 had been refunded from the first aged care facility. The accommodation deposit for the second facility was being assessed, but was estimated to exceed $300,000. The plaintiff’s expenses in 2015/2016 were $45,039, his Centrelink pension was said to be $1,900 per month, and his assets were identified as savings of $323,263 (including proceeds from the sale of the family home), a motor vehicle valued at $4,000 and shares worth just over $10,000.

On 8 December 2016, the Court approved the compromise of the proceeding. Affidavits now filed on the issue of costs disclose costs amounting to $176,722: the plaintiff’s costs at $80,087; the costs of the first defendant at $41,062 and the costs of the second defendant at $55,623.

Applicable principles

Costs are at the discretion of the Court, unless as otherwise provided by an Act or the Rules.[11] As recently summarised by Derham AsJ, this discretion has been described as:

absolute, unconfined or unfettered, although that discretion must be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation. In the exercise of the discretion, practices or guidelines have been developed, which are not legal rules that confine the exercise of the discretion.[12]

[11]Supreme Court Act 1986 (Vic), s 24.
[12]Innes-Irons v Forrest (Costs) [2017] VSC 10 (25 January 2017) [5] (citations omitted); see G E Dal Pont, Law on Costs (Lexis Nexis, 3^rd ed, 2013) (‘Dal Pont’) [6.15].

The central principle is to make an order that is fair and just between the parties in the circumstance of each case.[13] Additional principles relevant to the discretion in the current circumstances concern the lack of hearing on the merits, the existence of the Calderbank offer, that costs are sought in the context of a claim for family provision context and that costs are sought against a non-party.
[13]Earnshaw v Loy (No 2) [1959] VR 252, 253; see Dal Pont [6.15].

No hearing on the merits

Ordinarily, for reasons of fairness and policy, costs ‘follow the event’ such that a successful party is awarded costs in their favour.[14] The relevant ‘event’ is success in the action or on particular issues.[15] The applicable principles in circumstances where the court is deprived of a hearing on the merits were considered by the Court of Appeal in ASTA Developments Pty Ltd v Amasya Enterprises Pty Ltd:[16]
[14]Oshlack v Richmond River Council (1998) 193 CLR 72, 97.
[15]Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622, 624–5 (‘Lai Qin’).
[16][2016] VSCA 186 (3 August 2016) [25] (‘ASTA Developments’).

In Australian Securities Commission v Aust-Home Investments Ltd¹⁰, Hill J summarised the following principles concerning the exercise of a court’s discretion to order costs where the parties to a proceeding no longer wish to continue:¹¹

(1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order.

(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. …

(3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them.

(4) In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation.

(5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted.

¹⁰(1993) 44 FCR 194 [‘Aust-Home Investments’].

¹¹Ibid 121 (citations omitted).

In Lai Qin, McHugh J endorsed this approach: [17]

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. … In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. …
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. …
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.

[17]Lai Qin (1997) 186 CLR 622, 624–5 (citations omitted).

When referring to cases where ‘one party was almost certain to have succeeded’, Lai Qin[18] cited South Queensland Electricity Board v Australian Telecommunications Commission Qld[19] where the applicant sought to challenge a decision by the respondent. Although there was no hearing on the merits, the costs incurred were referred to as ‘very substantial’ and principally incurred in relation to discovery. The submissions of the parties as to costs, which relied largely upon the documents discovered, persuaded Pincus J that ‘the applicant had, on the face of it, a fairly strong case – one more promising than the respondent’.[20] That finding in addition to the fact that the trial did not go ahead because of a change of mind by the respondent, led his Honour to conclude that the respondent should pay 80 per cent of the applicant’s costs.[21] Such cases, however, have been described as ‘rare’,[22] involving questions of law and clear, undisputed facts.[23]
[18]Ibid 625.
[19][1989] FCA 15 (10 February 1989).
[20]Ibid [21].
[21]Ibid [22].
[22]Lai Qin (1997) 186 CLR 622, 625.
[23]Ibid; Jeruth Pty Ltd v Haybale Pty Ltd [2004] VSC 319 (30 August 2004) [4]; Ploder v Garcea [2013] NSWSC 201 (13 March 2013) [22] (‘Ploder v Garcea’).

In One.Tel Ltd v Deputy Commissioner of Taxation,[24] Burchett J considered the principles identified in Lai Qin and sought to further distinguish cases in which: [25]

… one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs.

[24](2000) 101 FCR 548 (‘One.Tel’).

[25]Ibid 553.

Where one party effectively surrendered such that there was ‘a clear winner’, costs should be awarded to the successful party.[26] In the circumstances of that case, the applicant sought to have certain notices set aside. Although the respondent initially defended the application, due to difficulties in locating the instrument of authorisation upon which the notices had been issued, it was eventually conceded that the notices should be set aside.[27] Both Aust-Home Investments and Lai Qin were distinguished on the basis that in those cases, an extra-curial event had ‘overtaken’ proceedings.[28] On the facts of One.Tel, Burchett J awarded costs to the respondent. The approach of Burchett J has been approved by the Full Court of the Federal Court, [29] and has previously been cited in the Court of Appeal of New South Wales in support of the proposition that costs may be awarded where a judge is ‘satisfied that one party has had a substantial victory and another a substantial loss’.[30] More recently, however, in the context of discontinuance the Court of Appeal of New South Wales has emphasised analysis of the reasonableness of the parties’ conduct rather than relying upon the mere fact that a party may have achieved ‘practical success’.[31]
[26]Ibid.
[27]Ibid 552.
[28]Ibid 553–4.
[29]Chapman v Luminis Pty Ltd [2003] FCAFC 162 (8 August 2003).
[30]Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 (16 October 2003) [5] (‘Stack’).
[31]Ralph Lauren 57 Pty Lmited v Byron Shire Council [2014] NSWCA 107 (7 April 2014) [23].

Calderbank offers

In Hazeldene’s Chicken Farm[32] the Court of Appeal reviewed the principles relevant to Calderbank offers. Although the context of that case was an application for indemnity costs, the Court of Appeal endorsed the approach that an unreasonable rejection of a Calderbank offer will be a relevant factor in determining whether to depart from the ordinary rule as to costs.[33] In determining whether the rejection of an offer was unreasonable, regard should be had at least to the following:[34]
[32]Hazeldene’s Chicken Farm v VictorianWorkCover Authority (No 2) [2005] VSCA 298 (13 December 2005) (‘Hazeldene’s Chicken Farm’).
[33]Ibid [14].
[34]Ibid [25].

(a) the stage in the proceeding that 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 indemnity costs in the event of the offer.

Although Calderbank offers are drafted with reference to a matter proceeding to trial, the general principles identified in Hazeldene’s Chicken Farm remain relevant in circumstances where the proceeding has not been determined on the merits.[35] At the very least, they help to inform the ‘rubric’ of the reasonableness of the conduct of the parties.[36]
[35]Gunns Limited v Marr (No 4) [2007] VSC 91 (3 April 2007) [50]; Copping Refuse Disposal Site Joint Authority v Southern Beaches Conservation Society Inc (2016) 24 Tas R 166, 170; Stack [2003] NSWCA 302 (16 October 2003) [22]; Transfield Services (Australia) Pty Ltd v Gaha [2012] NSWSC 865 (3 August 2012) [28]; cf Collins v Military Rehabilitation & Compensation Commission [2005] 147 FCR 570, 579.
[36]See Stoneman v Bourne [2016] VSC 726 (2 December 2016) [22].

Costs in family provision litigation

The deceased died prior to 1 January 2015. Consequently, the Administration and Probate Act 1958 (Vic) prior to amendments made by the Justice Legislation Amendment (Succession and Surrogacy) Act 2014 is applicable, including subsections 97(6) and (7) as to costs:

97 Contents of order
.....
(6) Subject to subsection (7), the Court may make any order as to the costs of an application under section 91 that is, in the Court's opinion, just.
(7) If the Court is satisfied that an application for an order under section 91 has been made frivolously, vexatiously or with no reasonable prospect of success, the Court may order the costs of the application to be made against the applicant.

In Briggs v Mantz (No 2)[37] the Court reviewed those subsections, noting that s 97(7) does not restrict the general discretion afforded in s97(6). [38] Instead, it serves as a reminder to the Court and ‘would-be applicants whose claim to a moral entitlement are tenuous’.[39]
[37][2014] VSC 487 (3 October 2014).
[38]Ibid [19]–[21].
[39]Ibid [21] quoting Re Bull (No 2) [2006] VSC 226 (30 June 2006) [7].

Certain characteristics of family provision cases inform the Court’s discretion, including the existence of a fixed fund and that parties may be participating in the proceeding through no fault of their own. For example, a defendant executor is ordinarily indemnified out of the estate,[40] although the extent of this indemnity can vary with the reasonableness of that party’s conduct.[41] Similarly, the estate usually bears the costs of a successful plaintiff and, in the context of an unsuccessful plaintiff, there will generally be no order as to costs.[42]
[40]Renfrew v Birmingham [1937] VLR 180, 190; Krause v Sinclair [1983] 1 VR 73.
[41]Wang v D’Ambrosio [1999] NSWSC 227 (18 March 1999); Forsyth v Sinclair (No 2) (2010) 28 VR 635, 641.
[42]Briggs v Mantz (No 2) [2014] VSC 487 (3 October 2014) [25] citing Webb v Ryan (No 2) [2012] VSC 431 (20 September 2012).

At times however, an unsuccessful plaintiff may be ordered to pay the costs of the defendant,[43] or rarely, have their costs paid out of the estate.[44] In this regard, considerations include the size of the estate, the financial burden of any costs order and the reasonableness of the party’s actions.[45] Where a defendant beneficiary elects to join the proceeding, they do so with the risk that their costs, as additional to those of the defendant executor, will not be borne by the estate. As stated in Large v Higham (No 3)[46] with reference to the Family Provision Act 1982 (NSW): [47]

Family Provision Act proceedings are not a vehicle for persons with like interests to those directly involved as parties to participate in the proceeding on the basis that they will automatically be entitled to costs out of the estate; the estate does not automatically bankroll the legal costs of every party who wishes to be heard…

[43]Re Moerth (No 2) [2011] VSC 275 (22 June 2011) ; Carey v Robson (No 2) [2009] NSWSC 1199 (10 November 2009).

[44]Re Bull (No 2) [2006] VSC 226 (30 June 2006) [4] citing Singer v Berghouse (1993) 114 ALR 521, 522; Re Lack [1981] Qd R 112.

[45]See Re Moerth (No 2) [2011] VSC 275 (22 June 2011) [12]–[31].

[46][2010] NSWSC 681 (25 June 2010).

[47]Ibid [63].

Further, at times unsuccessful defendants have been ordered to pay the costs of plaintiffs and other defendants.[48] Relevant considerations reflect those identified in the context of unsuccessful plaintiffs.[49]
[48]Smith v Whittaker [2016] VSC 287 (26 May 2016); Large v Higham (No 3) [2010] NSWSC 681 (25 June 2010); Tapp v the Public Trustee (No 2) [2009] TASSC 62 (11 August 2009); Adkins v Adkins (No 2) [2009] TASSC 32 (22 May 2009); Woolnough v Public Trustee (No 2) [2005] TASSC 102 (24 August 2005); Morrison v Abbott [2012] NSWSC 320 (5 April 2012).
[49]Adkins v Adkins (No 2) [2009] TASSC 32 (22 May 2009) [10] citing Woolnough v Public Trustee (No 2) [2005] TASSC 102 (24 August 2005).

Ultimately, the general principles of costs in civil litigation still apply and the Court of Appeal’s comments in Forsyth v Sinclair (No 2)[50] remain pertinent: [51]

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 costs get out of proportion.

[50](2010) 28 VR 635.

[51]Ibid 642.

In light of the fixed fund and often emotive family circumstances, issues of proportionality and reaching settlement are heightened. In particular in relation to estates of modest value, reference has been made to the need for a ‘practical and reasonable approach’.[52] In Smith v Smith (No 2)[53] Hallen AsJ, as his Honour then was, commended parties to: [54]

… conduct negotiations frankly and openly, to try to resolve the proceedings, and if there are issues or concerns about an offer that has been made, to raise any issues at the first convenient opportunity with the offeror's solicitors, so that any ambiguities, or other concerns, can be resolved. The Court should be able to see that the parties have considered what is being offered in a sensible, practical, and commercial way.

[52]Whitington v Whitington (No 2) [2009] SASC 178 (26 June 2009) [33].

[53][2011] NSWSC 1105 (12 October 2011).

[54]Ibid [77].

The Court’s Practice Note No 7 of 2015 reflects such considerations, with express reference to the overarching obligations set out in Part 2.3 of the Civil Procedure Act 2010 and the Court’s expectation that the ‘resources of the estate and of the Court will not be used in a manner that is out of proportion to the size of the estate and the provision that may be made’.[55]
[55]Practice Note 7 of 2015, [8.1].

Finally, concerns as to proportionality have also been raised with reference to discovery. For example, in Blair v Blair,[56] when determining costs in relation to a subpoena to produce, Harper J stated: [57]

It cannot follow... that in every case the Court must examine to the last minute detail the financial resources of every beneficiary of every estate upon which a claim is made under Part IV of the Act. On the contrary, the Court should in my opinion make it clear to both the parties and their legal representatives that the mere commencement of proceedings under the Part does not carry with it a general and unrestricted licence (including the use of discovery and the power to subpoena documents) to delve into the affairs of actual or potential claimants or beneficiaries.

[56][2002] VSC 131 (23 April 2002).

[57]Ibid [2].

These comments were later referred to by Zammit AsJ, as her Honour then was, in IMO the will and estate of Vassilio Zurcas, deceased[58] as supporting the conclusion that ‘any order for discovery in a Part IV claim or in any civil litigation must balance the benefit the discovery may provide against the potential cost and delay to the litigation’.[59]
[58][2012] VSC 441 (16 October 2012).
[59]Ibid [45].

Consideration
Was the plaintiff’s conduct reasonable?

It was reasonable for Ms Dinsdale to commence the proceeding on behalf of the plaintiff. The plaintiff and deceased were married for 34 years in a close and loving relationship, and they lived in the family home together. The financial needs of the plaintiff at the time of the application were relatively substantial and were not assisted by the right of residence contained in the deceased’s will. The circumstances suggest that as a surviving spouse the plaintiff has the highest moral claim on the deceased’s estate and that the deceased had a responsibility to make proper provision for the plaintiff.[60] In Thompson v Thompson[61] the Court commented on the ‘growing problem’ of old age in the community and the associated need of supported accommodation, concluding that: [62]

The reason that a mere right of residence will usually be an unsatisfactory method of providing for the accommodation of a surviving spouse is that circumstances may compel the survivor to leave that residence.

[60]King v White (1992) 2 VR 417; Youn v Frank [2011] VSC 649 (16 December 2011).

[61][2015] VSC 706 (11 December 2015).

[62]Ibid [63].

Aside from brief references in the letters of Peter Falconer & Associates dated 8 May 2013 and 1 July 2015 seeking to resolve any outstanding issues with the second defendant, the correspondence does not disclose that the plaintiff attempted to negotiate with the second defendant again before commencing the proceeding. Given the stance of the second defendant in the letter of Champions Lawyers dated

8 July 2015, however, this failure is not unreasonable. That letter requested that all documentation relevant to the plaintiff’s assets, income, liabilities and expenditures be provided, or otherwise that the plaintiff either make the claim or ‘abandon any further thought of it.’

The Offer of 29 February 2016, extended to 1 April 2016 and made an open offer on 5 August 2016 was in clear terms, appropriately timed and represented genuine attempts at compromises and reasonable attempts on the plaintiff’s part to resolve the proceeding. Although there is no reference on the Offer as to the second defendant’s prospects of success, the Court of Appeal concluded in Hazeldene’s Chicken Farm that there is no general rule in this regard and the specificity required as to why the offer should be accepted depends upon the circumstances at the time that the offer was made.[63] In this case, the Offer was made immediately after mediation at a time when the asserted weaknesses of the second defendant’s case should have been apparent to the second defendant.
[63]Hazeldene’s Chicken Farm [2005] VSCA 298 (13 December 2005) [26]–[27].

Although the claim was reasonably commenced and offers were appropriately made, there was a degree of animosity between Ms Dinsdale and the second defendant. This is evident from the correspondence regarding control of the Trust, the CBA Trust account, ownership of 6 Barnes Street and who had access to the study at the family home. The second defendant approached the proceeding with a particularly adversarial stance to the issues, some of which had been identified over two years earlier, and an element of suspicion. In a number of respects, the conduct of the plaintiff perhaps exacerbated the level of distrust and disharmony between them, particularly:

(a) failing to refer to the existence of the Trust in the plaintiff’s position statement, albeit this omission that was rectified in the terms of the Offer;

(b) stating that the plaintiff did not have certain documents on 9 March 2016, then disclosing documents of the same category on 5 May 2016 once formal discovery processes had commenced;

(c) raising the lack of a third party discovery application as a ground to resist discovering Trust documents;

(d) generally disclosing additional documents after each further request, up until Ms Dinsdale’s affidavit of 13 July 2016;

(e) not discovering in Ms Dinsdale’s affidavit of 23 June 2016 the bank statements for the Walker Online Saver account and the Walker Progress Saver account;

(f) failing to resolve uncertainty as to the ‘Reginald Seng Hpa Saving Account’ in Ms Dinsdale’s affidavits of 23 June 2016 and 13 July 2016; and

(g) maintaining a lack of knowledge as to the transactions referred to paragraph 1(b) of the Orders.

In relation to point (f) above, the plaintiff initially stated in her affidavit of 23 June 2016 that the account in question was ‘one and the same’ as the Seng Hpa Progress Saver account. The related bank statements, however, reveal that the Seng Hpa Progress Saver account received periodic payments from an account described as the ‘Reginald Seng-Hp Save’. The Seng Hpa Pensioner Advantage account made periodic withdrawals to an account of the same description. While the bank statements discovered indicate that the withdrawals and deposits coincided, the reference to ‘Reginald Seng-Hp Save’ creates some uncertainty as to whether an additional account exists. This uncertainty was not resolved by Ms Dinsdale’s later affidavits with her last affidavit of 13 July 2016 stating that the Reginald Seng Hpa Saving Account was the Walker Online Saver account, and made no reference to the Seng Hpa Progress Saver.

In relation to point (g) above, it is clear that the Orders are referring to the payments made by the first defendant to the plaintiff in July 2012. It may be that Ms Dinsdale could not identify any ‘payments’ beyond those already identified in paragraph 1(a)(ii) of the Orders. That is a separate issue from comprehending the payments that are referred to in paragraph 1(b) of the orders.

However, it is unnecessary to be overly critical of such actions. Ms Dinsdale’s difficulties in locating documents must be noted and the plaintiff’s position as to the relevance of the discovered documents needs to be acknowledged. It is possible that a degree of conflict between the parties might have been avoided had documents been discovered in an easier manner, but the correspondence from the second defendant does not suggest a probability that that would have occurred.

Although the plaintiff’s conduct listed at [97] agitated matters, only the acts in points (e), (f) and (g) should be considered unreasonable, however, the impact of such unreasonableness is limited. The failure to disclose the Walker bank statements was rectified, and as to the confusion over paragraph 1(b) of the Orders, it appears that related bank statements were disclosed under differing paragraphs of the Orders. Further, the impact of the uncertainty surrounding the ‘Reginald Seng Hpa Saving Account’ is unclear as it was not an issue further pursued by the second defendant.

Specifically, the second defendant’s submission that the plaintiff’s conduct was in breach of ss 20, 22 and 26 of ‘the Act’ is rejected, if the limited reference in the submissions is to sections of the Civil Procedure Act 2010.

Was the first defendant’s conduct reasonable?

As the executor of the estate, the first defendant had a duty either to compromise the plaintiff’s claim or to seek to uphold the terms of the will.[64] Relevant considerations include whether there was a commercial benefit to anyone in upholding the will, and the extent to which upholding the will would benefit the beneficiaries.[65] The executor must exercise ‘a due sense of proportionality’.[66] As stated in Szlazko v Travini: [67]

executors in a small estate would be expected not to look under every bushel for evidence, but to put forward before the Court the essential material and to seek to compromise, if at all possible, in a way that would save both the plaintiff and the other beneficiaries' costs.

[64]ReLanfear (1940) 57 WN (NSW) 181, 183.

[65]Morrison v Abbott [2012] NSWSC 320 (5 April 2012) [75].

[66]Szlazko v Travini [2004] NSWSC 610 (7 July 2004) [11].

[67]Ibid.

On the facts and circumstances of the proceeding, it was reasonable for the first defendant to have conceded that further provision should be made available from the deceased’s estate. Correspondence indicates that such a concession was made as early as 1 July 2015. The plaintiff’s claim was relatively strong and was reasonable in not seeking an absolute interest in the deceased’s share of the family home. The estate is a small estate. The degree of conflict between the parties created a real risk that estate funds would be depleted to the detriment of all of the beneficiaries of the estate. As the first defendant was the plaintiff’s financial power of attorney until December 2015, she possessed some insight into the plaintiff’s financial resources. The first defendant’s position in seeking to compromising the claim was a reasonable and proportionate response.

The Offer and later open offer, made jointly with the plaintiff, were reasonable attempts to resolve the matter. Although by their terms the offers afforded the trustee of the deceased estate the power to apply funds toward ‘other ingoing or ongoing payments’, it was reasonable for the first defendant not to challenge that power. Indeed, such a course would have involved submissions questioning the first defendant’s own ability, as executor of the estate, to exercise the power prudently and impartially.

Some criticism of the first defendant’s conduct is justified for reasons similar to those raised in relation to the plaintiff. Though the first defendant sought to provide explanations in relation to relevant assets, it was only after formal discovery processes were initiated that certain documents were discovered. For example, in the first defendant’s affidavit of 5 May 2016, an explanation was provided as to the transfer of $100,000 that was held by the first defendant on the behalf of the deceased and the plaintiff. It was not until the first defendant’s further affidavit of 23 June 2016 that specific detail was provided and account statements disclosed. Additionally, it was only by letter of 14 July 2016 that it was stated that certain documents had been disposed of in a municipal bin.

Overall, however, the Court can readily conclude that the first defendant’s conduct was a reasonable and proportionate response to the plaintiff’s claim. The first defendant sought to minimise her involvement in the proceeding and on 1 July 2015, 8 February 2016 and 14 July 2016 reference was made to the expense involved in defending the claim.

Specifically, the second defendant’s submission that the first defendant should have avoided becoming ‘actively involved in the proceeding’ and submitted to any order of the court is untenable. The first defendant did not appear at the hearing on 15 December 2015 when the second defendant was added as a party to the proceeding. She participated in mediation on 23 February 2016 as she was required to do and thereafter her involvement in the proceeding was primarily as a consequence of the second defendant’s requests for documentation.

Was the second defendant’s conduct reasonable?

It was reasonable for the second defendant to be added as a defendant to the proceeding. Her information as to the value of the estate was incomplete, a settlement may have ultimately affected her share of the estate and the first defendant had conceded the plaintiff’s claim. The first defendant, who for a time was the plaintiff’s financial power of attorney, and Ms Dinsdale, who became the plaintiff’s limited administrator, had more information than the second defendant. The material before the court discloses that the plaintiff controlled assets in an indirect manner. For example, the first defendant deposed that the plaintiff opened a bank account in her name, from which the plaintiff then independently transferred funds. The directors of Tai Trading appear to have limited documentation as to how the Trust was operating. The second defendant had limited information as to the plaintiff’s assets and it was reasonable for her to seek further information as to those issues.

It was also reasonable for the second defendant to reject the Offer. Although the Offer was made after mediation, it was made at a time when the information was limited as to the Trust assets and the financial position of the plaintiff at the time of the deceased’s death. Further, a term of the Offer was to afford power to the trustee to apply funds toward ‘other ingoing or ongoing payments’ and there was uncertainty as to the quantum of such payments and whether there would be some refund on the death of the plaintiff. The uncertainties raised by the lack of information and power afforded to the trustee meant that the second defendant’s rejection of the Offer was reasonable.

However, in other respects, the conduct of the second defendant was unreasonable. First, the breadth of documents sought by the second defendant in the letter of 6 March 2016 was inappropriate. To use the language of Harper J, the second defendant did not have an ‘unrestricted licence’ to obtain any document relevant to the assets of the plaintiff over the previous eight years. The earlier letter of Champions Lawyers seeking an ‘affidavit as to assets, income, liabilities and expenditure’ as well as all documentation relevant to those issues reveals a fundamental misapprehension of the approach expected of parties in this jurisdiction.

It is acknowledged that by the time the summons was heard on 27 May 2016, the second defendant had narrowed her requests and specifically referred to bank account numbers. Additionally, the second defendant succeeded in obtaining orders for discovery. The Court is not, however, precluded from commenting upon the relevance of the documents sought.[68] For example, in Blair v Blair, when considering the costs of a third party subpoena, Harper J stated that there was ‘no reasonable prospect that the documents produced would have been of assistance’, even though the documents appeared to be within the scope of orders for discovery by a Master of the Court.[69] The scope of the discovery ordered on 27 May 2016, specifically relating to documents of the Trust as far back as 2006, included documents that were minimally relevant to the proceeding.
[68]Blair v Blair [2002] VSC 131 (23 April 2002).
[69]Ibid [7].

Secondly, the second defendant persisted with discovery in circumstances where the benefits to be gained were disproportionate to the costs involved and the size of the estate. The affidavit of Mr Champion affirmed 19 April 2016 identified a number of assets and cash sums associated with the plaintiff and the deceased, and it was not unreasonable to initially seek evidence in relation to these. It was, however, unreasonable to persist with discovery beyond the plaintiff’s affidavit dated 28 June 2016. The letter of Champions Lawyers dated 15 July 2016, for example, evinces an attempt to trace what happened to a sum of $128,393 in 2012. The first defendant had already conceded that the accounts in question were used at the direction of the plaintiff, who had also independently transferred money between the accounts. To seek to trace the sum would have led to further delay and expense and the benefit was negligible. While an aim of the second defendant may have been disclosing ‘hidden’ accounts, a practical line must be drawn in light of the costs involved and the size of the estate. Persisting with such requests only served to obfuscate the real issues in dispute and increase the costs of the litigation unnecessarily.

Thirdly, the second defendant’s contends that after ‘key relevant documents were disclosed’ she promptly made an offer to settle, presumably referring to the offer of 16 August 2016. The last documents sent to the second defendant, by letter dated 4 August 2016, were the re-copied Seng Hpa Pensioner Advantage bank statements from the plaintiff. Those bank statements had previously been disclosed to the second defendant on 19 May 2016, although with certain pages omitted due to a copying error. It was unreasonable for the second defendant to rely upon those documents, which contained a copying error that could have been identified and rectified from 19 May 2016, to suggest that an offer could not have been made earlier.

It is also relevant that the second defendant was seeking documents associated with: the Trust, in circumstances where she is a director of Tai Trading; the rental received from 6 Barnes Street, of which she is a registered proprietor and the sale of 44 Caithness Crescent, of which she was also a registered proprietor. As such, a proportion of the discovery process was directed toward locating documents which the second defendant should otherwise have been able to access and were sought in part such that she could identify her own assets for the purposes of her competing claim.

Furthermore, the correspondence of Champions Lawyers dated 15 July 2015 and 6 March 2016 indicated a stance of the second defendant whereby she would not enter into discussions in an attempt to resolve the proceeding until financial documents were provided. The second defendant took a particularly zealous and technical approach to the proceeding as also evidenced in correspondence, particularly that of 30 June 2016 and 15 July 2016, which was unreasonable.

Would the plaintiff almost certainly have succeeded at trial?

In view of ASTA Developments, it is rarely appropriate for a court to engage in a hypothetical trial or attempt to determine the merits of the proceeding for itself. This is particularly so where the hearing is yet to commence and the agreed facts are limited. Further, the affidavit of Mr Champion affirmed 19 April 2016 has been objected to as speculative, dispute surrounds the sum of money that the deceased inherited from her mother’s estate and the standard of living that the plaintiff and deceased enjoyed. The Court has the benefit of the position statements of all three parties, the discovered documents and the facts relied upon for the approval of compromise. This affords the opportunity, as in South Queensland Electricity Board v Australian Telecommunications Commission Qld,[70] to give some consideration to the relative merits of the claim.
[70][1989] FCA 15 (10 February 1989).

The plaintiff’s case asserted that the right of residence bequeathed to him was not adequate and proper provision and that further provision was required by way of a life interest in all of the assets of the estate, with the funds from such assets capable of being applied toward an accommodation bond or other ingoing or ongoing expenses associated with supported care. He had limited assets, and his financial needs were substantial, as set out in the Equity Trustees’ report.

The second defendant contended that the plaintiff’s assets exceeded those disclosed in his position statement, that the deceased did not fail to make adequate and proper provision for the plaintiff given the likelihood that assets of the Trust would be made available to him, and in the event that the plaintiff was not able to provide adequately for his proper maintenance and support, the assets of the Trust were available for that purpose. Additionally, the second defendant was said to have limited financial assets and resources.

Although it has been said that the outcome of family provision cases can be difficult to predict, the principles to apply are well-established. [71] While ultimately the issue will depend upon the circumstances of each case, even in matters where the surviving spouse has alternative assets, a right of residence is usually not considered to be adequate provision for a spouse and has still been supplemented with the right to substitute that interest for alternative accommodation,[72] or substituted for an absolute interest.[73] This is particularly so in modern times with people requiring assisted accommodation rather than remaining in the family home.
[71]Webb v Ryan (No 2) [2012] VSC 431 (20 September 2012) [37]; Briggs v Mantz (No 2) [2014] VSC 487 (3 October 2014) [47].
[72]Stojczyk v Kopycinzki [2006] NSWSC 589 (16 June 2006).
[73]Chatard v Bowen [2008] NSWSC 533 (2 June 2008).

Insofar as the second defendant identified specific assets and financial resources of the Trust and the plaintiff, there are difficulties that arise in such a defence to the plaintiff’s claim. Although identifying the assets and resources of a discretionary trust can be relevant in determining the financial resources potentially available to a beneficiary,[74] particularly evidence of any regular distributions made to that beneficiary, discretionary trust assets are not those of a beneficiary. It cannot be assumed that those assets will be available to provide for a beneficiary. The records disclosed for the Trust and Tai Trading did not disclose any substantial assets other than those conceded by the first defendant and no clear pattern of distribution in the plaintiff’s favour is evident.
[74]See Hedman v Frazer [2013] NSWSC 1915 (19 December 2013) [180]–[192].

The assets that the second defendant pointed to beyond those of the Trust, including the $106,253 purportedly received from the sale proceeds of 44 Caithness Crescent in 2009 and $128,393 held by the first defendant, must be viewed in the context of the right of residence devised to the plaintiff and his current needs, including the considerable amount required for an accommodation bond. Taking the available factual matters at their highest regarding the identified sums, the difficulties would have remained for the second defendant in persisting that the right of residence for the plaintiff was proper and adequate provision for him.

Finally, the identification by the second defendant of her financial resources was limited, however, during the proceeding a concession was made by the plaintiff that the second defendant had a beneficial interest in 6 Barnes Street. This would alter her initial position that she was in financial need but to what extent remains unknown.

Although the Court should hesitate to find that the plaintiff would ‘almost certainly have succeeded’, I am satisfied that the plaintiff’s case was particularly strong. The second defendant needed to uncover substantial additional assets or provide evidence as to her own significant needs in order to challenge the claim. As to the former, the process of discovery failed to disclose significant assets beyond those identified in the plaintiff’s position statement and, specifically, only approximately $7,000 in additional shares were disclosed.

The terms of settlement also indicate that the plaintiff largely succeeded with his claim, although it is recognised that the second defendant also had a degree of success. In contrast to the Offer, the terms of settlement do not give the trustees power to apply funds toward incoming or ongoing payments and it cannot be said the second defendant simply ‘surrendered’ in the manner evinced in One.Tel.

What does the overall justice of the case require?

The findings as to the conduct of the parties, and to a degree, the relative strength of the plaintiff’s claim, warrant departure from Lai Qin’s starting point that there be no order as to costs. Further, consideration must be given to the costs principles associated with family provision claims and recognition afforded to the finding that the rejection of the Offer was reasonable at that time.

In determining what is just in all the circumstances of this proceeding, it needs to be resolved whether the parties should have their costs paid out of the estate and, if so, whether any party should reimburse those costs to the estate.

The submission of the plaintiff and first defendant that costs should follow the event must be rejected as it is clear from Lai Qin that in the current circumstances, there has not been an ‘event’.

Should the parties have their costs paid out of the estate?

The total amount of the legal costs sought represent 47 per cent of the value of the estate disclosed for probate purposes. An order that the costs be paid out of the estate would almost halve the interests of the beneficiaries and issues of proportionality arise. In this regard, it is pertinent to note the remarks of Jones J in Underwood v Underwood: [75]

Every step taken in pursuit of, or in resistance to, a claim diminishes the value of the estate and leads to uncertainty as to the level of entitlement. A rash claim by one applicant can sometimes spark a defensive response by other applicants... over zealous responses by the executors or their legal representatives can seriously consume estate funds in ways not apparent to the applicants. Consequently, for every action and reaction in a proceeding of this kind some part of the costs is borne by the estate and its value is thereby diminished ....

[75]Underwood v Underwood [2009] QSC 107 (8 May 2009) [33].

The first defendant, in seeking to compromise the claim and have minimal involvement in the defence pursued by the second defendant, appeared most aware of such issues. While her conduct warranted some criticism, on the whole it was reasonable and there is no reason why the ordinary principles should not apply. As the executor and trustee of the estate, the first defendant is entitled to be indemnified for her reasonable costs from the estate. Indemnity is confined to expenses that are properly incurred.[76] Expenses and liabilities that are improperly incurred, such as acting beyond power, in bad faith or exercised power ‘with an absence of care and diligence that a person of ordinary prudence should exercise’ are not caught by the right of indemnity and shall be borne by the trustee personally.[77] The onus to prove that the trustees should not be indemnified rests with the party seeking to deny the right of indemnity to demonstrate that costs have been improperly incurred.[78]
[76]Dal Pont, Equity and Trusts in Australia (Lawbook Co, 5^th ed, 2011) 689–90. See also Dal Pont citing Turner v Hancock (1882) 20 Ch D 303, 305; Re Beddoe [1893] 1 Ch 547, 558; Nolan v Collie (2003) 7 VR 287, 303–10 (Ormiston JA): at 679.
[77]Ibid 679–80 citing Re O’Donogue [1998] 1 NZLR 116, 121; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566, 606; Nolan v Collie (2003) 7 VR 287.
[78]Ibid 306.

In respect of the plaintiff, the conduct of Ms Dinsdale in not immediately discovering all documents and the omission of the Trust on the plaintiff’s position statement perhaps exacerbated underlying conflicts and resulted in some delay. The specific conduct which has been found to be unreasonable, however, had limited direct impact on the costs and delay associated with the proceeding. In addition, the plaintiff’s case was strong, to a large degree the discovery process supported the plaintiff’s position regarding his assets and, by the terms of settlement the plaintiff succeeded in obtaining further provision from the estate of the deceased. If the plaintiff were to bear his own costs, his ability to meeting ongoing supported accommodation expenses would be lessened. In my view, it would be unjust if the estate did not bear the plaintiff’s reasonable costs.

The second defendant’s conduct raises greater issues of reasonableness and proportionality. Her interest in the deceased’s estate as estimated for probate purposes was valued at approximately $186,183. Her costs estimated at $55,623 may prima facie be justified on a commercial basis, however, it is in this context that the comments of Jones J as to ‘actions and reactions’ become pertinent. The second defendant’s conduct was unreasonable in the breadth of initial discovery sought, her persistence with discovery, and her suggestion that it was not until ‘key documents’ were discovered late in the process that a counter-offer could be made. Her conduct came at the expense of not only herself, but the other parties. In seeking to defend her interest in the estate of $186,183, if all costs are paid from the estate, then almost half of the estate will be diminished.

In addition, despite the relative strength of the plaintiff’s claim, the second defendant made a strategic decision to reject the Offer and seek to identify further assets of the plaintiff and the Trust. She remained steadfast that negotiations would not be entered into until documents were disclosed. Although the rejection of the Offer was not unreasonable, in circumstances where it was known to the second defendant that the plaintiff managed his assets and financial resources in an indirect manner, the rejection of the Offer and pursuit of discovery involved risks both that no further assets would be uncovered and that the costs of pursuing discovery would escalate. An alternative course was open to her whereby she could have entered into negotiations, particularly as to the term within the Offer surrounding the application of funds toward ‘other ingoing or ongoing expenses’. It would be unjust if the estate were to bear the entirety of the costs of her strategic decision, particularly in circumstances whereby:

(a) it was a risk that the first defendant and plaintiff, as the other parties interested in the estate, sought to avoid;

(b) the letter dated 24 November 2015 from Rigby Cooke in the prescribed form placed the second defendant on notice that she may not be awarded costs out of the estate if she was added as a defendant to the proceeding;

(c) the strength of the plaintiff’s claim should have been apparent to the second defendant at least in the immediate period after mediation;

(d) in certain regards the second defendant’s approach to discovery was unreasonable; and

(e) in the event, there was minimal difference between the plaintiff’s assets as disclosed in his position statement and those identified in the application for compromise.

In Smith v WhittakerI,[79] Derham AsJ noted that ‘in some circumstances, activism in litigation is rewarded. But in the case of a proceeding under Part IV, activism is a double edged sword’.[80] That case involved a defendant who had sought to be added as a party in a Part IV proceeding and vigorously opposed the claim before the matter was eventually compromised. On account of his conduct, the defendant was ordered to bear his own costs. Here, the second defendant’s approach to the proceeding can also be considered vigorous, particularly regarding discovery.
[79](2016) VSC 287 (26 May 2016).
[80]Ibid [48].

The Court is satisfied that it is unreasonable for the second defendant to now contend that her costs should be paid from the estate. The justice of the case requires that the second defendant should bear her own costs.

Should the second defendant reimburse the estate for the costs of the plaintiff and the first defendant?

Given the unreasonable conduct of the second defendant and the relative strength of the plaintiff’s claim, the issue arises as to whether the second defendant should reimburse the estate for the costs that the estate has borne of the plaintiff and first defendant.

There is limited relevant authority on point and such cases that deal with the issue are of limited application given that they were determined on the merits.

An example can be seen in Morrison v Abbott[81] where a family provision claim was compromised between the plaintiff and first defendant but subsequently opposed by a second defendant. After a contested hearing, Hallen AsJ, as his Honour then was, determined that the compromise should be approved. In circumstances where his Honour doubted the Court’s power to modify the compromise proposed and, additionally, where in effect the second defendant was seeking provision for unpaid child support, the second defendant was ordered to pay the costs of the plaintiff and first defendant.
[81][2012] NSWSC 320 (5 April 2012).

Another example can be seen in Woolnough v Public Trustee (No 2),[82] where the plaintiff was wholly successful in her claim for further provision from the small estate of her late husband. The claim was opposed by three beneficiaries who had filed affidavits raising allegations that subsequently were not relied upon and rejected a reasonable offer to settle. The plaintiff was in financial need and there was the potential for costs to deplete the entire estate. Blow J consequently ordered that the respondents pay 90 per cent of the plaintiff’s costs.
[82][2005] TASSC 102 (24 August 2005).

In Ploder v Garcea,[83] a family provision claim that settled save as to costs, as the relevant consent orders dismissed the plaintiff’s claim, Sackar J had to determine whether the usual costs order under r 42.19 of the Uniform Civil Procedure Rules 2005 (NSW) should apply. The starting point of that rule was that the plaintiff should pay the defendant’s costs. The plaintiff’s claim for further provision was based on his eligibility as the de facto partner of the deceased. The defendant, who was the executrix and sole beneficiary under the deceased’s will as well as the deceased’s mother, disputed the significance of the relationship between the plaintiff and deceased. In circumstances where the defendant put in issue a number of matters that ‘never should have seriously been contested’ and the settlement terms reached did not indicate that the plaintiff had simply surrendered, Sackar J determined that the defendant should pay the plaintiff’s costs. Of significance, however, was that at the time of discontinuance the proceeding had progressed through almost the entire hearing on the merits. Consequently, his Honour was prepared to make a number of findings as to fact.
[83][2013] NSWSC 1360 (19 September 2013).

In Jones v Jones,[84] McMeekin J considered an application for costs in the context of a family provision claim that the plaintiff had pursued for nearly ten years before discontinuing. In circumstances where the plaintiff was simply ‘leaving the field with the estate the winner’ and the defendant had made an earlier reasonable offer which was not accepted by the plaintiff, his Honour determined that it was appropriate for the plaintiff to reimburse the estate a proportion of the defendant’s costs.
[84][2012] QSC 342 (14 November 2012) (‘Jones v Jones’).

Notably, Jones v Jones and Ploder v Garcea, in addition to being applications to discontinue, also involved circumstances in which legal costs had depleted the entire estate.

Finally, although the context differs to this proceeding, the case of Walker v Walker[85] should be mentioned. It concerned the administration of an estate by two co-executors who were the sons of the deceased. A dispute existed over the value and location of certain jewellery, and alleged unpaid loans to one son, Jonathan, over a number of years prior to the death of the deceased. Some of the loans involved sums of $100,000 and $50,000. The other son, Stephen, sought non-specific yet detailed financial records from Jonathan, in what was described by Slattery J as ‘a blanket demand for everything’.[86] Although Jonathan provided certain explanations, cheque butts, receipts and excel spread-sheets, the dispute continued and eventually progressed to an application for removal of Stephen as executor. At a directions hearing, Stephen was ordered to identify the loans in question with specificity and Jonathan was ordered to respond to each in a tabular form. Once Jonathan responded to the queries in tabular form with explanations, the dispute over the loans, which had persisted for years, was resolved. In reviewing the reasonableness of the parties’ conduct, Slattery J commented: [87]

In my view Jonathan is somewhat to be criticized for not giving this information earlier in the tabular form that it was served pursuant to the Court’s directions. On the other hand his position is understandable and not unreasonable. He had asserted the effect of this information many times during the administration of the estate. He had reason to believe that Stephen actually already had some of the cheques in question, when he [Stephen] was requesting even more information. But in my view that conduct is far less significant than Stephen’s conduct in promoting the dispute between these parties, leading to the necessity for someone to bring proceedings.

[85][2016] NSWSC 92 (19 February 2016).

[86]Ibid [122].

[87]Ibid [134].

His Honour awarded costs partially in favour of Jonathan. Based upon the conduct of the parties, particularly Stephen’s approach toward the alleged loans and requests for associated documents, Stephen was ordered to pay two sevenths of Jonathan’s costs.

In the circumstances of this proceeding, the unreasonableness of the second defendant in the breadth of discovery sought, her persistence with discovery, her failure to enter into any settlement negotiations prior to 4 August 2016 and the fact that the process of discovery uncovered minimal assets beyond those disclosed in the Offer tend towards a finding that she should reimburse the estate.

These issues, however, should be balanced by a number of other factors, as follows:

(a) there has been no determination on the merits;

(b) the costs of the plaintiff and first defendant will not deplete the entire estate;

(c) the second defendant did not unreasonably reject the Offer;

(d) although the Court has found that the case of the plaintiff was substantially stronger than that of the second defendant, it is not possible without a trial to conclude that the plaintiff would ‘certainly have succeeded’;

(e) there is limited material before the Court as to the second defendant’s financial resources and the impact that any additional costs order would have upon her; and

(f) to a limited degree, the conduct of the plaintiff and first defendant in not discovering all relevant documents earlier in the proceeding exacerbated the suspicion of the second defendant and it is not clear whether the plaintiff’s final affidavit resolved all of the uncertainty surrounding the plaintiff’s bank accounts.

On balance, I am not persuaded that the overall justice of the case requires the second defendant to reimburse the estate for the costs of the plaintiff or first defendant.

What is the relevance of Mr Champion’s position of conflict?

The plaintiff and first defendant submit that Mr Champion was in a position of conflict which prevented him from giving independent advice to the second defendant and the second defendant’s unreasonableness in rejecting the Offer was exacerbated by her reliance on his partisan advice. They contend that Mr Champion led the second defendant to believe there were greater assets than those disclosed by the plaintiff. Although I have found that the rejection of the Offer was not unreasonable, it is necessary to comment upon Mr Champion’s role in the proceeding and whether the second defendant was misled as to some matters.

The applicable principles when a solicitor is acting in a position of conflict are well established. Specifically, the concern arises that a solicitor’s position of conflict will compromise his or her duties to the Court, which include the general duties of disclosure, not abusing the Court processes, not corrupting the administration of justice and conducting cases efficiently and expeditiously.[88] As stated by Mandie J in Grimwade v Meagher:[89]

Solicitors not only owe a duty to their clients to do the best for them but an overriding duty to the Court… As part of their professional responsibility, therefore, solicitors and counsel must ensure that they do not appear in a matter in which they have an actual or potential conflict of interest or where, by reason of their relationship with their client, their professional independence can be called into question…

I am primarily concerned in this case with the principle of protecting the integrity of the judicial process. That integrity is undermined if solicitors or counsel do not possess the objectivity and independence which their professional responsibilities and obligations to the Court require of them ...

[88]Brown v Guss (No 2) [2015] VSC 57 (8 April 2015) [154].

[89]Grimwade v Meagher [1995] 1 VR 446, 452.

Ordinarily such issues arise in relation to applications to restrain a lawyer from acting, or for costs against a lawyer in professional misconduct proceedings or in claims of breach of fiduciary duty.[90] In one instance in the Federal Magistrates’ Court, for example, a solicitor was restrained from acting for his parents on the basis that he had ‘a personal interest of the closest kind’ to his client.[91]
[90]See eg Guss v Law Institute of Australia [2006] VSCA 88 (21 April 2006); Brown v Guss (No 2) [2015] VSC 57 (8 April 2015); Woolley v Ritchie (1999) ANZ ConR 385; Italiano v Lake [2015] VSC 189 (5 May 2015); see also Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015, r 27.
[91]Temby v ChambersInvestment Planners Pty Ltd [2010] FMCA 783 (14 October 2010).

Concerns of conflict are heightened in circumstances where a solicitor not only has an interest in the proceeding beyond recovering their fees, but also gives evidence in the proceeding on substantive matters.[92] As noted in Blong Ume Nominees Pty Ltd v Semweb Nominees Pty Ltd,[93] a concern is that the solicitor, although ‘using best efforts to be impartial and objective, might adjust his or her evidence in a way to procure a result that suited his or her interests’.[94] Relevant additional interests that have been recognised include personal or reputational interests, financial interests, or a professional interest in a transaction that is the subject of the proceeding.[95] In Brown v Guss (No 2),[96] a probate proceeding in which a solicitor was acting on behalf of his son and where his daughter was also a material witness, the Court recognised that the solicitor had additional interests in the outcome of the proceeding in the form of a reputational interest and a greater financial benefit to his children.[97] In Italiano v Lake,[98] a solicitor in a Part IV proceeding was in a position of conflict as she was also the mother of the plaintiff and had sworn affidavits in the proceeding. In circumstances Rush J did not restrain the solicitor from acting as the size of the estate was small, the specific evidence of the solicitor was likely to be of limited significance, the plaintiff was impecunious and at risk of exacerbated mental health issues.
[92]Barrak Corporation Pty Ltd v Kara Group of Companies Pty Ltd [2012] NSWCA 395 (19 November 2014) [47]; Mitchell v Burrell [2008] NSWSC 772 (26 June 2008) [20].
[93][2013] SASC 180 (15 November 2013).
[94]Ibid [34].
[95]TJ Board & Sons v Castello [2008] VSC 91 (18 March 2008) [27].
[96][2015] VSC 57 (8 April 2015).
[97]Ibid [158].
[98][2015] VSC 189 (5 May 2015).

In this proceeding, Mr Champion is the domestic partner of the second defendant. He has a reputational interest in the proceeding and success in the case would also have enhanced the immediate financial position of the second defendant. Mr Champion affirmed numerous affidavits in the proceeding, with those dated 19 April 2016 and 25 May 2016, being of particular relevance to the substantive issues. Finally, Mr Champion was also personally involved in the transfer of a relevant sum of money. Mr Champion was clearly acting in a position of conflict and the risk existed that his duty to the court could be compromised.

Insofar as the plaintiff and first defendant submit that Mr Champion misled the second defendant, certain evidence raises a degree of doubt as to whom of Mr Champion and the second defendant were advancing the discovery issues. In his affidavit of 19 April 2016, for example, Mr Champion raised a number of issues as to the assets of the plaintiff and first defendant. The second defendant, in her short affidavit of 19 April 2016, simply referred to and relied upon the affidavit of Mr Champion. Further, in the letter of Champions Lawyers dated 30 June 2016 rather than the usual phrase ‘our client’, Mr Champion referred to the second defendant by name. Such issues, however, do not extend as far as the plaintiff and second defendant submit and the evidence does not support a finding that Mr Champion led the second to believe that there were more assets than those disclosed.

Should Mr Champion personally pay any of the costs of the plaintiff or the first defendant ?

The plaintiff and first defendant submit that Mr Champion is personally liable for their costs, relying upon r 63.23 of the Supreme Court (General Civil Procedure) Rules 2015.

Authority regarding the Court’s power to award costs against a lawyer under r 63.23, the inherent jurisdiction and the Civil Procedure Act 2010 was summarised by Dixon J in Dura (Australia) Constructions Pty Ltd v Hue Boutique Living Pty Ltd (No 5).[99] Relevantly, applicable principles identified by his Honour include:[100]

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.
…
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.

[99](2014) 48 VR 1.

[100]Ibid 22.

In accordance with such principles, r 63.23 expressly precludes the Court from making a costs order against a solicitor unless the solicitor is given a reasonable opportunity to be heard. Consequently, applications relying upon the rule are ordinarily brought by way of a summons. There is no reason to depart from such a requirement in this proceeding. The Court can embark upon an investigation into the conduct of a solicitor of its own motion and should not be reluctant to do so,[101] however, the circumstances do not justify such a course as, prima facie, the conduct of Mr Champion is not clear enough to justify the time and expense associated with such an investigation.
[101]Yara Australia Pty Ltd v Oswal (2013) 41 VR 302, 311.

Conclusions

The value of the estate in this proceeding is modest. In such circumstances, parties must take a reasonable and proportionate approach to any litigation, even in circumstances where assets are controlled via indirect means.

While it was reasonable for the second defendant to attempt to clarify the relevant assets of the plaintiff and the deceased, that clarification was subject to limits of reasonableness and proportionality. The second defendant’s conduct was unreasonable in relation to the breadth of discovery sought, her persistence with discovery and, given the outcome of the discovery, the expectation that her costs would be paid from the estate. This is particularly so in light of the strength of the plaintiff’s claim.

The conduct of the plaintiff and first defendant also warrants a degree of criticism. Disclosing documents in a staggered manner only served to raise doubts as to whether the plaintiff and first defendant were taking a ‘frank and open’ approach to discovery and amplified the distrust between the parties.

Had the parties, in particular, the second defendant, litigated in a more reasonable manner with the size of the estate directing their approach, costs claimed at almost half the value of the estate would have been avoided.

The plaintiff and the first defendant have filed affidavits setting out the details of their itemised costs of the proceeding. It is desirable that the parties now conclude the remaining issue of the quantum of those costs rather than incur the costs of a taxation. To that end, the parties will be given until 22 June 2017 to attempt to reach agreement on the quantum of those costs. If agreement cannot be reached, the orders set out in [7] above will be made in respect of the costs of the plaintiff and first defendant with provision for those costs to be taxed.

[2017] VSC 320

8 June 2017