Slack v Rogan; Palffy v Rogan (No. 2)
[2013] NSWSC 827
•11 June 2013
Supreme Court
New South Wales
Medium Neutral Citation: Slack v Rogan & Anor; Palffy v Rogan & Ors (No. 2) [2013] NSWSC 827 Hearing dates: 11 June 2013 Decision date: 11 June 2013 Jurisdiction: Equity Division Before: White J Decision: Refer to paras [19] and [20] of judgment.
Catchwords: PROCEDURE - costs - offer of compromise - application of r 42.15 of Uniform Civil Procedure Rules - whether court should order otherwise than provided for by r 42.15(2) - relevance of uncertainty as to incoming executor's consent to offer of compromise made by previous executor - relevance of difficulty of estimating value of claim for family provision and size of estate available for such claim Legislation Cited: Succession Act 2006
Civil Procedure Act 2005Cases Cited: Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521
Jvancich v Kennedy (No. 2) [2004] NSWCA 397
Re Sherborne Estate (No. 2) [2005] NSWSC 1003
Moussa v Moussa [2006] NSWSC 509
Carey v Robson (No. 2) [2009] NSWSC 1199
Harkness v Harkness (No. 2) [2012] NSWSC 35
Hillier v Sheather (1995) 36 NSWLR 414
South Eastern Area Health Service v King [2006] NSWCA 2
Vagg v McPhee (No. 2) [2012] NSWSC 187
Mather v Mather (No. 2) [2012] NSWSC 1264Category: Costs Parties: James Joseph Slack (Plaintiff 2011/247466; 3rd Defendant 2011/220317)
John Peter Palffy (Plaintiff 2011/220317)
Mark Campbell Rogan (1st Defendant)
Elizabeth Kate Rogan (2nd Defendant)Representation: Counsel:
J B Whittle SC with D Neggo (Plaintiff 2011/247466)
M Pesman (Plaintiff 2011/220317)
G McGrath (Defendants)
Solicitors:
Roden Solicitors (Plaintiff 2011/247466)
Aitken Wilson Lawyers (Plaintiff 2011/220317)
Staunton & Thompson (Defendants)
File Number(s): 2011/247466; 2011/220317
Judgment
HIS HONOUR: This judgment concerns the costs orders to be made in proceedings 2011/220317. In my reasons of 10 May 2013 I said prima facie the appropriate order was that Mr Slack, the third defendant, should pay Mr Palffy's costs out of the estate on the ordinary basis.
In related proceedings 2011/247466, I revoked the grant made to the first and second defendants on 18 May 2011 and ordered that probate be granted to Mr Slack with liberty to Mr Abigail to join in to apply for a grant. In proceedings 2011/ 220317 I ordered that Mr Slack be joined as the third defendant.
Mr Palffy seeks an order that his costs should be paid out of the estate. That order is opposed by Mr Slack on the basis of an offer of compromise made by the first and second defendants who were then the executors of the estate.
The offer of compromise was dated 20 April 2012 and served on 24 April 2012. The offer was that the claim of Mr Palffy be compromised by payment to him of a sum of $130,000. Had that offer been accepted Mr Palffy would have been entitled to that sum and would have been entitled to his costs assessed on the ordinary basis up to the time the offer was made. Mr Palffy did not accept the offer.
Accordingly, Mr Slack contends that pursuant to Pt 42, r 15 of the Uniform Civil Procedure Rules, Mr Palffy should be entitled to his costs assessed on the ordinary basis only up to 25 April 2012, and that Mr Palffy should pay the defendants' costs of his claim on the indemnity basis after that date. Ultimately, counsel for Mr Slack did not press for an order that the costs Mr Palffy should be ordered to pay pursuant to r 42.15(2)(b) should include the costs of the third defendant, Mr Slack. But he did seek an order that Mr Palffy pay to Mr Slack, who is now the executor (or at least entitled to be appointed as the executor) the costs of the previous executors in defending the proceedings from the time of the offer of compromise.
Other issues concerning the orders for costs that should be made as between Mr Slack on the one hand, and the first and second defendants on the other, were resolved during the course of submissions.
Counsel for Mr Palffy does not dispute that r 42.15 is applicable. Counsel submits that in determining whether the Court should order otherwise than provided for under r 42.15(2) the Court should have regard to the fact that costs of the family provision proceedings can also be ordered under s 99 of the Succession Act 2006 and that special principles can apply to the exercise of the general costs discretion in family provision proceedings. (See Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521 at 522; Jvancich v Kennedy (No. 2) [2004] NSWCA 397; Re Sherborne Estate (No. 2) [2005] NSWSC 1003; Moussa v Moussa [2006] NSWSC 509; Carey v Robson (No. 2) [2009] NSWSC 1199; Harkness v Harkness (No. 2) [2012] NSWSC 35 at [18].)
Counsel for Mr Palffy also points to the following matters. The offer of compromise was served about six weeks after an unsuccessful mediation. At the mediation the plaintiff and the first and second defendants reached a conditional agreement on the settlement of Mr Palffy's claim for a sum of $200,000 with no order as to costs. Mr Slack's consent to that agreement was required, but was not forthcoming.
The offer of compromise in the sum of $130,000 was served on 24 April 2012. The letter under cover of which the offer was sent did not refer to consent having been obtained from Mr Slack to that offer. I do not think that this is material to the exercise of the costs discretion or to the decision whether or not to make a contrary order under r 42.15(2).
Mr Palffy immediately rejected the offer of compromise because in his view it was inadequate. Had he been minded to accept the offer, but was uncertain as the whether or not Mr Slack's consent to the offer was required, he could have, and no doubt would have, sought clarification. He did not do so. In fact, Mr Slack had agreed to the first and second defendants making the offer of compromise. Had Mr Palffy asked, he would have been informed that Mr Slack agreed to the offer being made, but having regard to his view as to the inadequacy of the offer, this was not a relevant consideration. Nor is it relevant to the exercise of the costs discretion.
Another matter relied upon by counsel for Mr Palffy as to why there should be an "otherwise order" is that the provision ordered of $90,000 had regard to my assessment of the available estate after allowance for the parties' costs. Costs had substantially increased after April 2012. Counsel submitted that the extent by which the estate has been reduced by costs was not something that could have been reasonably foreseen by Mr Palffy, and had there not been a substantial reduction he could reasonably have expected to obtain a materially larger provision than he succeeded in obtaining.
However, it was not said for Mr Palffy that at the time he rejected the offer of compromise he was unaware that proceedings for the revocation of the grant had been brought by Mr Slack. He must have been aware that if that claim was not resolved, there was a serious risk that the estate available to meet his claim would be reduced, not only by the costs of the family provision proceedings brought by him and by Mr Slack, but also by the costs of the proceedings for revocation of the grant. No doubt he could not have accurately estimated the extent to which the available estate would be reduced by reason of costs being incurred by other parties. That was only one of the imponderables he faced in deciding whether or not to accept the offer of compromise.
The difficulty of accurately estimating the value of a claim for a family provision order is not a sufficient reason to depart from the prima facie position under r 42.15 (Hillier v Sheather (1995) 36 NSWLR 414 at 422-423; South Eastern Area Health Service v King [2006] NSWCA 2 at [83] and [84]; Vagg v McPhee (No. 2) [2012] NSWSC 187 at [16]-[22]; and Mather v Mather (No. 2) [2012] NSWSC 1264 at [9]-[17]).
The uncertainty of the size of estate available to meet a family provision claim was only one of the imponderables Mr Palffy faced. It is not a sufficient reason to depart from the prima facie position under the rule. Nor would it be a sufficient basis to depart from that prima facie position that Mr Palffy may have acted reasonably in not accepting the offer. In fact, I think the offer was a substantial one, even if the estate had not been further substantially depleted by reason of costs.
Mr Palffy's position was that he was simply not interested in the offer which, with costs, was valued by his solicitor at about $160,000. He had made his own offer of $210,000 inclusive of costs. The fact that he miscalculated, even if acting reasonably, is not a reason for departing from the prima facie position under the rule.
The offer of compromise was made by the first and second defendants when they were the executors.
The costs, which will be payable by Mr Palffy from 25 April 2012, will be payable to the third defendant, who has been, or is to be, appointed as executor in place of the first and second defendants. But I would not make an order which, in any event, could only be made under the general discretion under s 98 of the Civil Procedure Act 2005, or s 99 of the Succession Act 2006 for the payment of the third defendant's costs incurred in relation to Mr Palffy's proceedings. To do so would be to burden Mr Palffy with two sets of indemnity costs.
I have regard to the fact that it was counsel for Mr Slack who took up much of the running of the defence of Mr Palffy's claim during the hearing. However, the matters dealt with by counsel for Mr Slack were also relevant to Mr Slack's own family provision claim. Mr Slack is, however, entitled to his costs on the ordinary basis of opposing Mr Palffy's application for costs.
For these reasons I make the following orders in proceedings 2011/220317:
1. Order that the first and second defendants' costs of the proceedings, assessed on the indemnity basis, be paid by the third defendant out of the estate;
2. Order that order 1 does not extend to the costs of preparing the affidavits of Mark and Elizabeth Rogan dated 8 March 2013, in respect of which no order is made as to costs;
3. Order that the third defendant pay the plaintiff's costs of the proceedings up to and including 24 April 2012, assessed on the ordinary basis;
4. Order that the plaintiff pay to the third defendant the costs of the first and second defendants, assessed on the indemnity basis that were incurred by the first and second defendants from 25 April 2012, and note that such costs do not include the first and second defendants' costs of defending proceedings 2011/247466;
5. Order that the plaintiff pay the third defendant's costs, assessed on the ordinary basis, relating to the plaintiff's application for costs.
If I have not already ordered it, the exhibits in both matters can be dealt with in accordance with the Practice Note.
Decision last updated: 24 June 2013
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