Talent v Talent (No 2)
[2020] ACTSC 294
•30 October 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Talent v Talent (No 2) |
Citation: | [2020] ACTSC 294 |
Hearing Dates: | Determined on the papers |
| Submissions last received: Decision Date: | 22 October 2020 30 October 2020 |
Before: | McWilliam AsJ |
Decision: | See [55] |
Catchwords: | COSTS – FAMILY PROVISION AND POSSESSION PROCEEDINGS – Where each party successful in obtaining relief – where settlement offers made equal to or better than the result after a fully contested hearing – whether a successful party’s conduct in rejecting offers made amounts to unreasonable conduct – whether costs should be borne personally |
Legislation Cited: | Family Provision Act 1969 (ACT) s 8 Court Procedure Rules 2006 (ACT) rr 1700, 1721, 1732, 1752 |
Cases Cited: | Calderbank v Calderbank [1975] 3 All ER 333 Cooper v Singh [2017] ACTCA 21 Tuggeranong Town Centre Pty Ltd v Brenda Hungerford Pty Limited (No 3) [2017] ACTSC 301; 325 FLR 436 |
Parties: | John James Talent (Plaintiff in SC 414 of 2019; Defendant in SC 557 of 2019) Nadia Joan Talent (Second Defendant in SC 414 of 2019; Plaintiff in SC 557 of 2019) |
Representation: | Counsel T Crispin (Plaintiff in SC 414 of 2019; Defendant in SC 557 of 2019) HL Donohue SC with D Moujalli (Second Defendant in SC 414 of 2019; Plaintiff in SC 557 of 2019) |
| Solicitors Ray Swift Moutrage & Associates (Plaintiff in SC 414 of 2019; Defendant in SC 557 of 2019) Gil-Jones Barker Solicitors (Second Defendant in SC 414 of 2019; Plaintiff in SC 557 of 2019) | |
File Numbers: | SC 414 of 2019 & SC 557 of 2019 |
McWilliam AsJ:
On 10 September 2020, the Court delivered judgment in respect of two separate proceedings arising in the context of the distribution of the estate of the late Joan Gwen Talent (the Estate): see Talent v Talent [2020] ACTSC 240. The parties, Nadia Talent (the Executor) and Mr John Talent, are the two surviving children of the deceased.
The first proceeding concerned an application by Mr Talent under s 8 of the Family Provision Act 1969 (ACT) for family provision out of the Estate (SC 414 of 2019) (the family provision proceedings). The second proceeding involved an application by the Executor for possession of a property located in the suburb of Ainslie (the Ainslie property), formerly owned by the deceased (SC 557 of 2019) (the possession proceedings).
The parties have made submissions as to the appropriate orders for costs in each of those proceedings and have agreed for the Court to determine the question on the papers.
Orders sought
In the family provision proceedings, Mr Talent was successful in obtaining an order for family provision. He now seeks the following orders:
a. The Estate is to pay his costs as agreed or assessed, on a party and party basis.
b. The Estate is to pay the Executor’s costs as agreed or assessed on a solicitor and client basis.
c. The Executor is to otherwise bear her own costs.
The Executor now seeks the following orders:
a. The plaintiff is to bear his own costs.
b. The Estate is to pay the Executor’s costs on an indemnity basis.
In the possession proceedings, the Executor was successful in obtaining an order for possession of the Ainslie property. She seeks orders that Mr Talent, the defendant in those proceedings, pay her costs on a party and party basis. Mr Talent seeks that there be no order as to costs.
Applicable principles
Under r 1721 of the Court Procedure Rules 2006 (ACT) (the Rules), the Court’s discretion with regard to the awarding of costs is wide and unconfined: Perisher Blue Pty Limited v Chubb Fire Safety Limited [2014] ACTCA 43 at [41]-[42]. The purpose of a costs order is to reach a fair and just result: Cooper v Singh [2017] ACTCA 21 at [14]-[16]. The making of a costs order in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires: Gray v Richards (No 2) [2014] HCA 47; 315 ALR 1 at [2].
However, the discretion must be exercised consistently with judicial principle: see Nelipa v Dr Robertson and Commonwealth of Australia [2009] ACTSC 16 (Nelipa) at [80]-[85] and the cases there-cited. Ordinarily, the party who has created the litigation and failed in it will be required to meet the costs of the other party: Nelipa at [86]; Latoudis v Casey (1990) 170 CLR 534 (Latoudis) at 567 per McHugh J, with the latter case cited by Crowe AJ in probate proceedings that also involved the present parties: see In the Estate of Joan Gwen Talent deceased [2019] ACTSC 261 at [13]-[14].
The discretion to refuse to award costs should not be exercised against the successful party except for a reason connected with the case: Latoudis at 567. One example of an exception is where there has been some delinquency on the part of a party, even the successful party, which may justify depriving that party of their costs, or even requiring them to pay the other party’s costs: Nelipa at [86].
Rejection of offers of settlement
In certain circumstances, the making of an offer of settlement may justify a departure from the usual approach that costs follow the event. These include circumstances when the resolution that was offered is more favourable to the recipient party than the ultimate outcome of the matter: Rural & General Insurance Broking Pty Limited (ACN 093483928) v Australian Prudential Regulation Authority [2009] ACTSC 67; 231 FLR 199 at [137]. An unreasonable rejection of an offer of settlement may disentitle a party to some or all of that party’s costs, or even require that party to pay the costs of the other party: Calderbank v Calderbank [1975] 3 All ER 333.
An approach frequently adopted is to ask whether there was a genuine offer of compromise; and if so, whether it was unreasonable for the offeree not to accept it, having regard to the circumstances of the case: Hulanicki v Walton (No 2) [2015] ACTCA 45 (Hulanicki) at [14]; Tuggeranong Town Centre Pty Ltd v Brenda Hungerford Pty Limited (No 3) [2017] ACTSC 301; 325 FLR 436 at [281] and the case there-cited.
As to the first question of whether there was an offer of compromise, the key criteria are:
(a) the correspondence relied upon must be either open correspondence or marked “without prejudice save as to costs” and thus be able to be tendered at any hearing or an application for costs;
(b) the offer in the letter must be a genuine compromise;
(c) the offer must be in clear and unambiguous terms and be a final offer, not subject to any further negotiation; and
(d) the letter must state expressly that, if the offer is not accepted, then a special order, such as for indemnity costs, will be sought.
Cases where these requirements have been discussed include: Pires v DibbsBarker Canberra Pty Limited [2014] ACTSC 283 at [97] and Financial Integrity Pty Ltd v Farmer (No 4) [2014] ACTSC 145 at [24]-[46].
The second question of the reasonableness of rejecting an offer genuinely made was discussed in Hulanicki at [14], citing Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; 13 VR 435 (Hazeldene’s Chicken Farm) at [25] with approval. The non-exhaustive considerations include:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree's prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; and
(f) whether the offer foreshadowed an application for indemnity costs (or other order) in the event of the offeree rejecting the offer.
An effective offer may be made before an action commences: Ofria v Cameron (No 2) [2008] NSWCA 242 at [27].
The costs component of an offer should ordinarily be isolated in a way that makes it clear and capable of proper assessment without a taxation or formal assessment of costs: Hillman v Box (No 5) [2014] ACTSC 150 at [30]. However, the Court’s discretion is not confined to considering only offers made exclusive of costs. An offer may be made “inclusive of costs”, and accepted as a genuine assessable compromise: DSE (Holdings) Pty Ltd v InterTAN Inc [2004] FCA 1251; 51 ACSR 555 at 557 and [12]-[13]; Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [5] per Beazley JA (as her Honour then was), at [135] per Basten JA.
Where an offer is made inclusive of costs, it may create difficulties if the Court is not readily able to determine the various components of an offer, so as to assess whether it was unreasonable not to accept it. The question is whether the offer is made in terms that enable the offeree to give proper consideration to it: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15at [13].
It is also important to remember that the Court assesses the offeree’s prospects of success not from the position of hindsight, but as at the date the offer was made (see Hazeldene’s Chicken Farm at [17]). A plaintiff or defendant may not have had an unreasonable view about a particular claim at the time the offer was made.
Costs where an estate is involved
Where an executor of an estate in involved, rule 1732(1) of the Rules is also relevant. It provides as follows:
Costs—trustee
(1) This rule applies to a party who sues or is sued as trustee.
(2) Unless the court otherwise orders—
(a) the party is entitled to have costs of the proceeding that are not paid by someone else paid out of the fund held by the trustee; and
(b) the costs must be assessed on a solicitor and client basis.
(3) However, the costs caused by an unsuccessful claim or unsuccessful resistance to any claim to any property must not be paid out of the fund, unless the court otherwise orders.
A trustee includes a personal representative of a deceased individual: r 1700.
The courts are particularly concerned to discourage delinquency or unreasonable conduct where the litigation involves the distribution of an estate or matters related to family provision out of an estate. In Forsyth v Sinclair (No 2) [2010] VSCA 195; (2010) 28 VR 635 the Court of Appeal in the Supreme Court of Victoria stated at [27] (citations omitted, emphasis added):
27 One final matter. Senior counsel for the respondent emphasised that the litigation costs have had and will have a substantial adverse impact on the amount of her successful claim. Regrettably, this is undoubtedly so. We consider that it is a matter of concern that in many family provision cases the amount available for distribution amongst the competing beneficiaries is significantly reduced by legal costs. Parties should not assume that litigation can be pursued safe in the belief that costs will always be paid out of the estate. Every effort should be made to resolve the dispute before the costs get out of proportion. However, it takes two to settle a dispute and unless sensible offers of settlement are made in a form which can be referred to subsequently, it is very difficult for the Court to allocate responsibility for the dispute not settling. All that can be done is to conclude that where costs have been incurred unreasonably, as here, they must be borne personally.
The force of the emphasised passage has been stated many times in other jurisdictions, an example of which is the recent decision of Hallen J in Keaton v Gumulak [2020] NSWSC 943 at [44] and the cases there-cited.
Costs in the family provision proceedings
Submissions of the Executor
The Executor tendered evidence of three offers of settlement which are relied upon as Calderbank offers, justifying a departure from the usual rule, discussed above. The offers were made in writing both before and during the litigation and are dated 15 April 2019 (the April Offer), 24 September 2019 (the September Offer), and 23 December 2019 (the December Offer).
The April Offer
The April Offer was made before proceedings were commenced. It estimated the value of the Estate as $1,900,000, including an estimated value of the Ainslie property of $1,300,000. The terms of the April Offer were as follows:
1. Mr Talent may remain in the Ainslie property rent-free for a period of 28 days after his acceptance of the offer.
2. Following the expiry of that period, Mr Talent may occupy the Ainslie property, if he wishes, for a further period not exceeding 2 calendar months, on payment of an occupation fee of $150 per week (which may be deducted from moneys payable under (6) below)
3. During the occupation period, Mr Talent is to maintain the house in good order and repair.
4. During the occupation period, Mr Talent is to allow access to the house from time to time upon two business days written notice so that any real estate agent or chosen valuer can attend and inspect, with access to all parts of the Ainslie property.
5. At the end of the occupation period, vacant possession is to be given, the house is to be in good order and repair and all vehicle and other property owned by Mr Talent is to be removed by him prior to vacating the property.
6. The Estate to pay to Mr Talent $500,000 inclusive of costs. Of that sum, $100,000 will be payable within 14 days of execution of a deed as provided at (8) and the balance upon settlement of the sale of the Ainslie house, or 9 August 2019, whichever is later and not before 7 days after vacant possession is given.
7. Mr Talent is to keep the Nepalese miniature painting.
8. The above terms to be embodied in a Deed, Mr Talent to give the Estate and the Executor a release from all claims including any claim under Family Provision Legislation.
The April Offer was to remain open until 10 May 2019 and expressly foreshadowed the potential for relying on the April Offer in making an application for indemnity costs in the event that the April Offer was rejected.
The September Offer
The September Offer was an open offer. The quantum of the offer was $733,560 plus costs. That amount was payable in instalments with a view to providing immediate accommodation for Mr Talent (that is, a sum of $20,000 was to be paid immediately) and then a further significant payment when the Ainslie property was sold.
The September Offer was made on the basis of a net distributable estate of $1,547,000 (as at 4 October 2019). By that stage, the Ainslie property had been recently valued; and at $1.1 million, it was lower in value than what had been estimated when the April Offer was made. By the time the September Offer was made, the legal costs incurred by the Executor were $125,000 (although this was the total legal costs incurred in administering the Estate and dealing with satellite litigation between the parties, not solely those incurred in respect of the family provision proceedings). If the family provision proceedings were to continue to a fully contested hearing, the Executor’s further legal costs were estimated to be $100,000 to $150,000. The possession proceedings had not commenced.
The September Offer included orders for finally resolving the family provision proceedings, to the effect that the proceedings be dismissed with no order as to costs, save in relation to a specific application which had already been heard by Justice Mossop earlier that month, with the costs yet to be determined. The proposal was for the parties to abide the terms of Justice Mossop’s order.
The September Offer required Mr Talent to enter into a deed of family arrangement attached to the offer. The proposed deed did no more than formally document the terms of the offer and include machinery provisions for giving effect to the terms of the offer, such as the timing of vacation and sale of the Ainslie property.
The September Offer was initially open for acceptance until 4 October 2019. At Mr Talent’s request, the offer was re-put and then extended so that in total, the offer was open until 6 November 2019.
Mr Talent’s affidavit evidence in the proceedings was served on 4 October 2019. He therefore knew the strength or weakness of his case before the September Offer expired because he had served his primary evidence. He also knew the value of the Estate and that the Executor was not contesting that provision should be made. He could readily form a view about the quantum of the offer. By the time costs were added in, the Executor had offered Mr Talent at least half the Estate, if not more.
The December Offer
The December Offer was for $500,000 less the costs already ordered to be paid by Mr Talent, but otherwise plus costs on a party and party basis. The offer was to resolve both the family provision proceedings and the possession proceedings, which had, by this stage, commenced.
The December Offer also referred Mr Talent to applicable authorities as to what constitutes adequate provision for an adult child and on the basis of those authorities, set out the Executor’s position that the terms of the offer were in fact more generous than what the Executor considered a court was likely to award. The explanation for making an offer in a quantum above what the Executor anticipated would be achieved by a fully contested hearing was as follows:
Having regard to the authorities, we do not consider that a Court is likely to award your client provision in the sum of $500,000. It is now offered by the Executor in an attempt to bring the litigation between the parties to an end. We note the observations of the Chief Justice at the conclusion of the directions hearing on 13 December 2019 that the parties should seek to avoid the value of the estate being further diminished by legal costs. It is in that spirit that this offer is made rather than by a more strict application of legal principle to an assessment of the quantum of your client’s claim.
The December Offer was open for acceptance until 31 January 2020.
The Executor submits that each offer far exceeded the result obtained by Mr Talent following a contested hearing, that it was unreasonable for Mr Talent to reject the offers, and that such conduct would ordinarily result in an order that Mr Talent pay the Executor’s costs.
However, the Executor appreciates that the practical effect of such a costs order would substantially deprive Mr Talent of the provision he sought in bringing the proceedings, and which he obtained. It was accepted that this may not be a fair and just result. Accordingly, the Executor instead submits that the appropriate order is that the plaintiff bear his own costs, and otherwise that the costs are paid out of the Estate on an indemnity basis.
Thus, the issue for determination is whether the Court should exercise the discretion in a manner that would have the effect of depriving a successful party of his costs.
Submissions of Mr Talent
Mr Talent says that costs should follow the event, with such costs generally being paid out of the Estate. He accepts that the Executor is also entitled to costs but distinguishes between whether those costs are to be paid on a solicitor and client basis or on an indemnity basis.
In that regard, Mr Talent draws attention to r 1752 of the Rules, which distinguishes between how costs are to be assessed, depending on whether the order is for solicitor and client costs or indemnity costs.
Mr Talent did not make submissions about the reasonableness or otherwise of rejecting the offers put by the Executor. He endorsed the position of the Executor to the extent that a costs order against Mr Talent would have the practical effect of depriving him of the provision made by the Court. Mr Talent submits that the logical extension of that submission is that requiring him to bear his own costs would similarly undermine the Orders of 10 September 2020.
Further arguments were made about the amount of costs or the reasonableness of the costs incurred by the Executor. Those submissions are directed to quantum and accordingly are best left for agreement or assessment. I will not express any view about the amount of costs that have been incurred for different parts of the litigation, so as to avoid prejudicing either the negotiations or any subsequent assessment.
Findings
It is abundantly clear that in the present case, the Executor made sensible offers of settlement with a view to avoiding litigation altogether, or to minimising the cost of litigation once it commenced. She did exactly what the authorities encouraged her to do (including this Court specifically, in the context of the litigation between these parties), namely to make every effort to resolve the dispute before the costs got out of proportion.
In particular, the Executor made the September Offer shortly after the family provision proceedings commenced. It was well over and above that which the evidence disclosed would be awarded to the plaintiff. This was not a case where the merit of Mr Talent’s claim for family provision was unknown or incapable of evaluation at the time the offer was made. The evidence confirms that the Executor consistently accepted that Mr Talent was entitled to family provision. The only question in dispute was the nature and quantum of that provision. Accordingly, the significant generosity displayed by his sister in making the September Offer is something that Mr Talent (assuming he was properly advised and there is nothing to suggest otherwise), should well have appreciated at the time of receiving and considering the offer.
The Executor also clearly communicated the costs and expenses and consequent decreasing value of the Estate each time an offer was made. There was more than sufficient time for Mr Talent to consider each offer. In particular, the September Offer was extended at Mr Talent’s request, leaving him more than a month to consider and accept it. The terms of the offers were detailed but clear, and again, the September Offer was made exclusive of costs, so there was no difficulty in Mr Talent understanding the true value of that offer. In my view, it is staggering that Mr Talent did not accept the September Offer and I am satisfied his conduct was unreasonable in that regard.
It is most regrettable that following the expiry of that offer, a significant portion of the Estate was then whittled away by the costs of litigation. This is a clear case where the attitude of Mr Talent in pursuing the proceedings to a final contested hearing has resulted in the unreasonable incurring of costs. Having regard to the authorities set out at [21] and [22] above, the principled exercise of the Court’s discretion in such circumstances is that he must bear his legal costs personally.
Turning to the costs of the Executor in the family provision proceedings. It is true that r 1752 of the Rules makes a distinction between solicitor-client costs and costs on an indemnity basis, and indeed, r 1732 provides for the costs incurred by a trustee to be assessed on a solicitor and client basis unless the court otherwise orders. However, Mr Talent’s submissions fail to take account of s 59(4) of the Trustee Act 1925 (ACT) (the Trustee Act), which provides that a trustee may reimburse herself, or pay or discharge out of the trust property, all expenses incurred in or about the execution of her trusts or powers. This means the Executor has an implied right (or power) of indemnity prescribed by statute. Section 4 of the Trustee Act defines ‘trust’ to include the duties of a legal representative of a dead person. As there is no suggestion that in defending the family provision proceedings, the Executor was doing anything other than acting in the ordinary course of her duties as trustee of the Estate, there is no reason to limit the Executor’s indemnity for those costs out of the Estate.
Costs in the possession proceedings
The Executor relies on her success in the possession proceedings in submitting that the usual rule should apply, namely that costs ought to follow the event.
Mr Talent submitted that the possession proceedings were wholly unnecessary, as he had only ever maintained a right to possession of the Ainslie property as interlocutory relief pending the outcome of his application for family provision. In those circumstances, while he does not seek costs, he objects to paying the Executor’s costs.
I am not satisfied there is any conduct on the part of the successful Executor that would warrant a departure from the usual order as to costs.
Having regard to the procedural history of the litigation between the parties, the submission that the possession proceedings were unnecessary should be rejected. The evidence before the Court confirms that throughout 2019, the Executor was attempting to realise the assets of the Estate for the purpose of final distribution. Mr Talent had refused to permit the Executor to take lawful possession of the Ainslie property. His ongoing occupation of the principal asset was preventing the Executor from fulfilling her obligations. Mr Talent lodged two caveats. The first was a seriously defective real property caveat which was set aside by Crowe AJ. The second was a caveat against distribution, the legal foundation for which was questionable but which became unnecessary in any event, as the Executor gave an undertaking not to distribute the Estate pending the determination of the family provision proceedings: In the Estate of Joan Gwen Talent deceased [2019] ACTSC 261.
Mr Talent then sought an injunction against the sale of the Ainslie property and an order permitting him to reside there until further order of the Court. The parties agreed consent orders which included the Executor undertaking not to commence ejectment proceedings for four weeks, making a formal offer to resolve the proceedings within four weeks: Talent v Official Trustee in Bankruptcy (No 2) [2019] ACTSC 287 at [2].
That formal offer was the September Offer. The possession proceedings were commenced on 8 November 2019, two days after the September Offer had expired. A notice to vacate the Ainslie property had been served on 9 October 2019. It also expired on 6 November 2019. Upon receipt of the notice, Mr Talent did not vacate the Ainslie property. Instead his response was to advertise the property for rental on a share basis: see Talent v Official Trustee in Bankruptcy & Anor (No 4) [2019] ACTSC 372 at [19].
In circumstances where there was an ongoing refusal to vacate, where attempts at settlement had failed, and there was an attempt by Mr Talent to sub-lease or sub-licence the Ainslie property when he had no legal title to do so, the Executor took a reasonable course in commencing proceedings seeking an order for possession. Contrary to Mr Talent’s submission, such proceedings could not have been brought by way of an application in the family provision proceedings, as they were for separate final relief. The possession proceedings were also necessary to guard against the potential for Mr Talent to fail in his claim for a life interest in the family provision proceedings but then to take no steps to vacate the Ainslie property in a timely manner or at all.
Accordingly, the Executor is entitled to her legal costs of the possession proceedings.
Orders
For the above reasons, the orders of the Court are as follows:
(1) In proceedings SC 557 of 2019, the defendant is to pay the costs of Nadia Talent in her capacity as Executor of the estate of the late Joan Gwen Talent (the Estate), on a party and party basis.
(2) In proceedings SC 414 of 2019:
a. the Executor’s costs are to be paid out of the Estate on an indemnity basis; and
b. the plaintiff is to bear his own costs.
| I certify that the preceding fifty-five [55] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam. Associate: Date: 30 October 2020 |
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