SZOMBATHY v The Public Trustee as Executor of the estate of Margit Lidia SZOMBATHY (Dec)

[2002] WASC 89

SZOMBATHY -v- THE PUBLIC TRUSTEE as Executor of the estate of MARGIT LIDIA SZOMBATHY (DEC) & ORS [2002] WASC 89

Jurisdiction:	SUPREME COURT OF WESTERN AUSTRALIA	Citation No:	[2002] WASC 89
Case No:	CIV:1063/1998	Heard:	15-18 APRIL 2002
Coram:	MASTER BREDMEYER	Delivered:	22/04/02
No of pages:	11	Judgment Part:	1 of 1
Result:	Plaintiff ordered to pay 50 per cent of the defendants' costs after rejection of defendants' compromise offer
Category:	B
PDF Version

Parties:	LAJOS SZOMBATHY THE PUBLIC TRUSTEE as Executor of the estate of MARGIT LIDIA SZOMBATHY (DEC) ERZSIKE ILDIKO SZOMBATHY MARIKA ANIKO SZOMBATHY IBOLYA ENIKO SZOMBATHY MARGARET EMESE SZOMBATHY ANDRAS SZOMBATHY KATALIN SZOMBATHY
Catchwords:	Costs Inheritance action Plaintiff's claim succeeded Ordered a sum of money but less than that offered to him pre­trial Effect on costs
Legislation:	Inheritance (Family and Dependants Provision) Act 1972 (WA), s 14(6) Rules of the Supreme Court, O 24A r 10(5)
Case References:	Dobb v Hacket & Ors (1993) 10 WAR 532 Fisher & Anor v Fisher & Ors [2001] WASC 338 Kimberley v Butcher [2001] WASC 118 O'Brien v Trustees of WA Ltd & Anor [2000] WASC 33 Re De Feu (Dec) [1964] VR 420 Szombathy v The Public Trustee & Ors [2000] WASC 202 Fortron Automotive Treatments Pty Ltd v Eurotime Holdings Pty Ltd & Ors [2001] WASCA 384 Morgan v Johnson (1998) 44 NSWLR 578 Singer v Berghouse (1994) 181 CLR 201

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION : SZOMBATHY -v- THE PUBLIC TRUSTEE as Executor of the estate of MARGIT LIDIA SZOMBATHY (DEC) & ORS [2002] WASC 89 CORAM : MASTER BREDMEYER HEARD : 15-18 APRIL 2002 DELIVERED : 22 APRIL 2002 FILE NO/S : CIV 1063 of 1998 BETWEEN : LAJOS SZOMBATHY

Plaintiff

AND

THE PUBLIC TRUSTEE as Executor of the estate of MARGIT LIDIA SZOMBATHY (DEC)
First Defendant

ERZSIKE ILDIKO SZOMBATHY
MARIKA ANIKO SZOMBATHY
IBOLYA ENIKO SZOMBATHY
MARGARET EMESE SZOMBATHY
Second Defendants

ANDRAS SZOMBATHY
Third Defendant

KATALIN SZOMBATHY
Fourth Defendant

(Page 2)

Catchwords:

Costs - Inheritance action - Plaintiff's claim succeeded - Ordered a sum of money but less than that offered to him pre­trial - Effect on costs

Legislation:

Inheritance (Family and Dependants Provision) Act 1972 (WA), s 14(6)

Rules of the Supreme Court, O 24A r 10(5)

Result:

Plaintiff ordered to pay 50 per cent of the defendants' costs after rejection of defendants' compromise offer

Category: B

Representation:

Counsel:

Plaintiff : Mr J C Curthoys
First Defendant : No appearance
Second Defendants : No appearance
Third Defendant : Mr A J N Aristei
Fourth Defendant : Mr A J N Aristei

Solicitors:

Plaintiff : Stephen Browne Lawyers
First Defendant : No appearance
Second Defendants : Galic & Co
Third Defendant : Tolson & Co
Fourth Defendant : Tolson & Co

Case(s) referred to in judgment(s):

Dobb v Hacket & Ors (1993) 10 WAR 532
Fisher & Anor v Fisher & Ors [2001] WASC 338
Kimberley v Butcher [2001] WASC 118


(Page 3)

O'Brien v Trustees of WA Ltd & Anor [2000] WASC 33
Re De Feu (Dec) [1964] VR 420
Szombathy v The Public Trustee & Ors [2000] WASC 202

Case(s) also cited:

Fortron Automotive Treatments Pty Ltd v Eurotime Holdings Pty Ltd & Ors [2001] WASCA 384
Morgan v Johnson (1998) 44 NSWLR 578
Singer v Berghouse (1994) 181 CLR 201

(Page 4)

1 MASTER BREDMEYER: This is a reserved decision on costs in an action under the Inheritance (Family and Dependants Provision) Act 1972.

2 On 18 April 2002, after a four-day trial, I ordered the estate to pay $140,000 to the plaintiff in lieu of the provision made for him in the will. The plaintiff's application was opposed by the third and fourth defendants, the third defendant being the plaintiff's brother and the fourth defendant being that brother's daughter. The plaintiff's brother was the principal beneficiary under the will. At the conclusion of my reasons, counsel for the third and fourth defendants tendered an O 24A offer made by those defendants on 19 July 1999. That offer was to pay the plaintiff $155,000 and the plaintiff's taxed costs up to and including the day of acceptance of the offer, in settlement of the plaintiff's claim. The offer was open until 16 August 1999. The offer was not accepted. Counsel submitted that the estate should pay the plaintiff's party/party costs up to 16 August 1999, but thereafter the plaintiff should pay the third and fourth defendants' party/party costs.

3 The plaintiff's counsel submitted that the plaintiff's, and the third and fourth defendants', costs should come out of the estate, or - if that submission fails - that there should be no order for costs. Counsel submits that, even bearing his own costs, will have a severe impact on the plaintiff who is on a disability pension. Counsel said that the normal costs rules do not apply in an inheritance action which is essentially one for maintenance. The plaintiff's claim was a reasonable one, as can be seen by the fact that it succeeded. He said that the rejection of the O 24A offer should not have any costs sanction against the plaintiff. He referred me to Fisher & Anor v Fisher & Ors [2001] WASC 338.

4 The published reasons in that case do not give the costs orders or discuss the matter of costs. I have searched the orders made on the court file and they are instructive. There were two plaintiffs in that case, Brian and Kerry, a brother and sister, who were separately represented. Brian's claim succeeded and he got an order that his costs be taxed as in an action and be paid out of the estate. The claim of the second plaintiff, Kerry, failed and she got an order that there be no order as to costs. She had received, but ignored, an O 24A offer of $1,000. There was also no order as to costs of the defendants who opposed the claims of both plaintiffs. The costs order in relation to Kerry may seem a little unusual, in that costs did not follow the event. But there was a reason for that, as explained by McLure J in notes to her fiat:

(Page 5)

"That the second plaintiff would have had to have been made a party in any event [I interpolate that she was a beneficiary named in the will] and that the circumstances that she was successful in the exercise of jurisdiction but fell at the final hurdle in relation to the exercise of discretion means that in the circumstances I am going to order that there be no order as to costs in relation to the second plaintiff. I am going to make the same order in relation to the defendants. There will be no order in relation to the costs of the defendants."

5 As to costs generally in this jurisdiction, I quote from Dr Dickey's work "Family Provision After Death" at 184 - 185 (footnotes omitted):

"It is now well established that in family provision proceedings, an order for costs is at the discretion of the court. In many cases, the court may be disposed to making an order that all parties have their costs paid, usually on a solicitor-client basis, from the deceased's estate. However, whether the court makes an order for costs in favour of a particular party, and the quantum and basis of any order for costs, depends upon the circumstances of the case. Relevant factors that may be taken into account here include the following.

(a) In respect of a claim for costs by an applicant:


• the merits and reasonableness of his or her case (even though he or she may ultimately have been unsuccessful).

(b) In respect of a claim for costs by a beneficiary who is separately represented:

• the reasonableness of his or her being separately represented.

(c) In respect of a claim for costs by the deceased's personal representative:

• his or her conduct in the proceedings (including, in appropriate circumstances, whether his or her conduct justified intervention by a beneficiary to defend an entitlement).

(d) In respect of a claim for costs by any party:

(Page 6)

• the size of the estate;

• his or her conduct in the proceedings.

Instead of making an order for the payment of costs from the deceased's estate, the court may simply decline to make an order for costs, with the result that each party, or a particular party, must then bear his or her own costs. Alternatively, the court may order that an unsuccessful party pay the other side's costs. However, as proceedings for family provision are essentially proceedings for maintenance, it has been held that a court may properly decide not to make an order for costs against an unsuccessful applicant, even though this may otherwise be justifiable, if such an order will have a detrimental effect upon his or her financial position. Re De Feu (Dec) 1964 VR 420 at 428)."

6 In Re De Feu (Dec) [1964] VR 420, the plaintiff sued the deceased's widow, who had left the testator 10 years before his death and who was living in a de facto relationship with a man who was maintaining her. She was left out of the will. Her claim failed at the first hurdle; the deceased had not breached his moral duty to provide for her maintenance and support. The Judge's remarks on costs were made obiter before hearing submissions.

7 The relevant part of O 24A is r 10(5) which reads:

"Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim up to and including the day the offer was made, taxed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for his costs in respect of the claim thereafter, taxed on a party, and party basis."

8 I was referred to a number of cases on costs in inheritance actions. In Kimberley v Butcher [2001] WASC 118, Sanderson M ordered each party to pay their own costs. That was a small estate, consisting of a property in Dianella and approximately $80,000 in cash. The Master determined that adequate provision had been made for the plaintiff in the will. The plaintiff's claim failed. Prior to trial, the second defendants

(Page 7)

offered to settle the matter on payment of a sum of $1,000 to the plaintiff. The offer was made under O 24A. The offer was rejected. The second defendants argued that the plaintiff should be ordered to pay the defendants' costs after the date of this offer under O 24A r 10(5). Master Sanderson said at [7]:

"In my view that rule has no application to this situation. The rule is predicated on the basis that the plaintiff obtained judgment in the action. That has not happened in this case - the plaintiff's claim has failed. In any event, it is doubtful whether O 24A can override the provisions of s 14(6) of the Act."

9 Section 14(6) of the Inheritance (Family and Dependants Provision) Act 1972 reads:

"The court may make such order as to the costs of any proceeding under this Act as it deems just."

10 Master Sanderson may be right in his first point that O 24A r 10(5) only applies because the order refers to where the plaintiff obtains judgment on the claim which is not more favourable to him than the terms of the offer. That has not happened where the plaintiff's claim is dismissed. I am not so sure of his second point. It seems to me that O 24A r 10(5) and s 14(6) can coexist; ie, costs are generally within the discretion of the court in an inheritance action, but in the special circumstances set out in O 24A r 10(5) - that latter rule applies. That rule contains its own, in-built discretion "unless the Court otherwise orders".

11 Dobb v Hacket & Ors (1993) 10 WAR 532 is an example of a straightforward application of O 24A r 20(5) to an inheritance action where the plaintiff recovered at a trial less than the defendants' prior offer. In that case, on 3 August 1992, the defendants offered to settle on a certain basis which would have given the plaintiff $250,000. That offer was rejected. On 12 March 1993, the defendants offered to settle with the plaintiff on payment of the sum of $200,000, inclusive of costs. That offer was rejected also. After a trial in August 1993, the plaintiff obtained judgment for $150,800. Murray J said, and I am here quoting from the headnote:

"(4) The court should preserve in the minds of litigants, the conscious consideration that their behaviour may place them at risk as to costs if they refuse reasonable offers of settlement before trial.

(Page 8)

(5) The plaintiff had been shown to have behaved unreasonably in not accepting the offer made on 3 August 1992 by the fourth defendant's solicitors. The plaintiff would be entitled to her costs paid out of the estate up to and including 12 March 1993, but she should bear her own costs incurred thereafter.

(6) The plaintiff would be entitled to her own costs paid out of the estate up to and including 12 March 1993, but she should bear her own costs thereafter.

(7) The first defendant [the executor] would have his costs paid out of the estate.

(8) The second, third and fourth defendants would have their costs paid out of the estate so far as they were incurred up to and including 12 March 1993 and their costs incurred thereafter were to be paid by the plaintiff.

(9) All orders as to costs were to be taxed."

12 I was also referred to O'Brien v Trustees of WA Ltd & Anor [2000] WASC 33, a decision of my own. In that case, the plaintiff failed at the first stage of the two-stage process required of the court under s 6 of the Act. The trial was held in February 2000. In October 1999, the second defendant offered the plaintiff $7,500 inclusive of costs to settle the action. The offer remained open for a week, but was not accepted. At par [4] I said:

"The plaintiff failed in this case … nevertheless her claim was not hopeless and was argued competently. I do not think it just in a case like this to order all costs to be paid out of the estate. I consider it is more just that costs should at least, in some degree, follow the event. If there was no such rule in inheritance actions, there would be little disincentive against a plaintiff bringing a hopeless application. Moreover in this case the net estate was small about $69,000."

13 After referring then to the offer, I said, in summary, that the estate was small. The plaintiff needed to persuade the court that the provision for her in the will, which was nil, was inadequate. That task is harder where the estate is small than where it is large. Secondly, the length of time between the divorce settlement and the date of death was 24 years. The deceased's duty to provide for his ex-wife in his will (to whom he was

(Page 9)

paying maintenance under a court order) surely diminishes progressively over the years. Thirdly, in that 24 years, a significant event happened; namely, she got the old-aged pension which diminished the testator's moral duty to provide for her in his will. Then she rejected the offer made of $7,500. That was a reasonable offer. At the trial, her counsel argued that she should be given between $14,000 to $16,000. I ordered her to pay both the defendants' costs.

14 The offer made in the present case on 19 July 1999 was $155,000 plus costs to date. I interpret that offer as meaning that sum in lieu of the provision made in the will and not in addition to it. The plaintiff has recovered less than that: viz $140,000. In retrospect, the offer made was a very reasonable one. The rules contained in O 24A have a worthwhile objective - to encourage settlement of cases without the necessity of going to trial. The rules provide, in effect, that the party who rejects such an offer and does not do better in the court case, is normally penalised in costs. The rule does apply, and I think should apply, to inheritance actions. If this plaintiff had accepted that offer in 1999, he would have had his money sooner to enjoy and would have avoided the expense and emotional anguish of going through a four-day trial. It would have avoided the expense of the parties in having the properties and furniture, and vehicles valued in recent times, etcetera. The plaintiff would have avoided putting the defendants to the expense of defending the action. It is not a good argument for the plaintiff to say that the third and fourth defendants can have their costs out of the estate. The will gives specific devises of properties to various persons and then divided the residue one-quarter to the plaintiff and three-quarters to the third defendant. Under that provision, the plaintiff was due to get, as at the date of death, about $62,500. I gave him $140,000 in lieu of that provision in the will and ordered that the whole of the residue go to the third defendant. In the circumstances of that will, as affected by my order, the plaintiff's submission that the third and fourth defendants can get their costs out of the estate is, I consider, unfair on the third defendant. In some cases, such an order would mean that those defendants' costs would be met by a number of beneficiaries, each contributing a little towards those costs. But in this case, where Andras is the residuary beneficiary, an order that he gets his costs out of the estate means, in effect, that they come out of his pocket.

15 I consider O 24A r 10(5) applies in this jurisdiction, and should apply in this case. I consider the plaintiff was unwise in rejecting, in mid-1999, a reasonable offer of compromise. At the same time, there is some discretion in subr (5) in the words "unless the court otherwise

(Page 10)

orders" and I propose to give some mercy to the plaintiff. I do that because he is poorly off financially. The payment of costs will eat up a large part of the award. Prior to the death of the deceased, he had approximately one-quarter of the assets of his brother, Andras. He is on a disability pension, supplemented by a small income from the distribution of newspapers. Under the will of the deceased, Andras received real estate and some other benefits. That real estate is now worth $1,285,000. Given these factors, I propose to temper a little what I think would otherwise be an appropriate costs order.

16 Two sets of interrogatories were administered by the third defendant to the plaintiff, one dated 17 February and one 13 March 2000. They were administered by leave. Very few questions were answered. Most were objected to. The third defendant sought an order that the plaintiff do provide further and better answers. That application, which was contested, was heard by Sanderson M on 11 August 2000. On 22 August 2000, he dismissed the chamber summons with costs reserved. He published reasons in Szombathy v The Public Trustee & Ors [2000] WASC 202. He considered that the objections were well-founded. Although costs were reserved, I think it highly likely that they would have followed the event and that they would normally have gone against the third defendant.

17 Interrogatories should be used very sparingly in inheritance actions, and preferably not at all. I say that because the information needed in these actions, particularly on the financial position of the parties, should be set out in the affidavits and they should annexe supporting material, such as, for example, statements showing a bank balance, or a pension slip, or a valuation of a property. To seek to elicit that information by interrogatories, only adds to the costs. I appreciate that the interrogatories were administered with leave in this case, but, nevertheless, they achieved very little. Only a few of the questions were answered and, although the answers to both sets were tendered, those answers were of little significance in deciding the case. Answer 1 to the first set, which was tendered specifically, was useful. It revealed alterations to the plaintiff's certificate of title for his residence, an increase in the amount borrowed on mortgage, the current monthly mortgage repayments and an increase in his disability pension from that revealed in an earlier affidavit. All of these matters, however, were also stated in his updating affidavit of 11 April 2002 filed just prior to the commencement of the trial. The third defendant in question 9 in the first set of interrogatories asked the plaintiff about the annual net profits for the electrical business taken over by the plaintiff in 1977 or 1978 until the end of 1996. The plaintiff answered

(Page 11)

that he was trying to obtain copies of his tax returns and financial reports from the Australian Taxation Office and from his business accountants. Some of these tax returns were later obtained and were tendered to me. So, the interrogatory produced this useful information. Nevertheless, the same information could have been obtained by a request to the plaintiff's solicitors, by way of informal discovery, for production of the tax returns and for that reason I do not consider it was necessary to ask that interrogatory.

18 Given the overall lack of utility of the interrogatories, and given the ruling on the contested application of Sanderson M which went against the third defendant, and given my belief that interrogatories should be used sparingly, if at all, in this jurisdiction, I propose to order no order as to costs on the third defendant's interrogatories.

19 The costs orders will be:

(1) No order as to costs on the third defendant's interrogatories.

(2) Costs of the second defendants be paid out of the estate.

(3) The third and fourth defendants do pay the plaintiff's party/party costs from the commencement of the proceedings until 16 August 1999.

(4) The plaintiff do pay the third and fourth defendants' party/party costs from 16 August 1999 to judgment (including the application with respect to costs) on a 50 per cent basis, to be taxed.