Tchadovitch v Tchadovitch

[2010] NSWCA 316

New South Wales

Court of Appeal

CITATION:	Tchadovitch v Tchadovitch [2010] NSWCA 316
HEARING DATE(S):	19 October 2010
JUDGMENT DATE:	24 November 2010
JUDGMENT OF:	Allsop P at 1; Campbell JA at 6; Young JA at 94
DECISION:	(1) Appeal dismissed with costs. (2) Grant leave to cross-appeal, and dismiss the cross-appeal with cost. (3) Appellants’ Notice of Motion filed 30 September 2010 dismissed with costs. [The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]
CATCHWORDS:	SUCCESSION – Family provision and maintenance – principles upon which relief granted – appeal relating to quantum of award – process for calculating adequate provision – use of actuarial evidence in determining appropriate quantum of fund to secure an income for deceased’s wife – found that it was within the discretion of the trial judge to take into account expert evidence when parties both presumed such evidence – discussion of extent to which use of expert and actuarial evidence helpful in Family Provision Act matters – SUCCESSION – Family provision and maintenance – principles upon which relief granted – relevance of Todorovic v Waller to Family Provision Act matters – failure of trial judge to derive lump sum relying only on figures yielded by 3% discount tables not erroneous – SUCCESSION – Family provision and maintenance – obligation of executors to provide relevant information – PROCEDURE – costs – departing from the general rule – when indemnity costs available – whether rejection of Calderbank offer lower than final award sufficient to justify costs order on indemnity basis – rules relating to Calderbank different to rules relating to offers of compromise in UCPR – indemnity costs not available when Appellants did not act unreasonably by rejecting the offer – rejection reasonable when likely range of outcomes not clear at the time that the offer was made
LEGISLATION CITED:	Civil Liability Act 2002 Evidence Act 1995 Family Provision Act 1982 Succession Act 2006 Supreme Court Act 1970
CATEGORY:	Principal judgment
CASES CITED:	Armory v Delamirie (1722) 1 Stra 505; 93 ER 664 Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639 House v The King (1936) 55 CLR 499 In the Will of Lanfear (Deceased) (1940) 57 WN (NSW) 181 Jones v Dunkel (1959) 101 CLR 298 Lloyd Williams v Mayfield [2005] NSWCA 189; (2005) 63 NSWLR 1 Maviglia v Maviglia [1999] NSWCA 188 Mayfield v Lloyd Williams [2004] NSWSC 419 Multicon Engineering Pty Ltd v Federal Airports Corp (1996) 138 ALR 425 Municipal Council v Green [2004] NSWCA 341 Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003; (2005) 65 NSWLR 268 Singer v Berghouse (1994) 181 CLR 201 Stern v Sekers [2010] NSWSC 59 Tchadovitch v Tchadovitch [2009] NSWSC 1398 Tchadovitch v Tchadovitch [2009] NSWSC 1481 Todorovic v Waller (1981) 150 CLR 402 Vasiljev v Public Trustee [1974] 2 NSWLR 497
PARTIES:	George Tchadovitch (First Appellant/Cross Respondent) Boris Tchadovitch (Second Appellant/Cross Respondent) Sylvia Tchadovitch (Respondent/Cross Appellant)
FILE NUMBER(S):	CA 2008/280462
COUNSEL:	LJ Ellison SC; RD Wilson (Appellants/Cross Respondents) J Needham SC; V Culkoff (Respondent/Cross Appellant)
SOLICITORS:	Rosier Partners Lawyers (Appellants/Cross Respondents) S Klinger (Respondent/Cross Appellant)
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	4563/08
LOWER COURT JUDICIAL OFFICER:	Rein J
LOWER COURT DATE OF DECISION:	11 November 2009; 17 December 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	Tchadovitch v Tchadovitch [2009] NSWSC 1398; Tchadovitch v Tchadovitch [2009] NSWSC 1481

CA 2008/280462

ALLSOP P
CAMPBELL JA
YOUNG JA

24 November 2010

GEORGE TCHADOVITCH & ANOR v SYLVIA TCHADOVITCH

Judgment

1 ALLSOP P: I have had the considerable advantage of reading the reasons in draft of Campbell JA. I agree with them and with the orders proposed by his Honour.

2 I particularly wish to stress my agreement with his Honour’s comments on expert evidence.

3 Most disputes under the Family Provision Act 1982 (NSW) or Chapter 3 of the Succession Act 2006 (NSW) are between ordinary people who have the misfortune to disagree about the just and appropriate distribution of an estate of someone with whom they had a connection, generally of blood, love or friendship. Such proceedings should always be run by the parties and their legal practitioners with a keen eye to the minimisation of costs at all stages. To that end, paragraph 18 of Practice Note SC Eq 7 aims to limit costs by the use of certain kinds of evidence.

4 The unnecessary and often futile attempts at precision when predicting the future of the kind made by the experts here are almost certain to be costly and almost certain only to assist by setting broad parameters. The latter could almost always be achieved by shorter, more truncated general estimates, at vastly less cost.

5 There is also the difficulty, potentially going to admissibility of the evidence, of going well beyond the framework of life and life expectations of the testator.

:

Issues

7 In an application under the Family Provision Act 1982, the trial judge ordered that a lump sum of $1.925m be paid to a testator’s widow: Tchadovitch v Tchadovitch [2009] NSWSC 1398 (“the Principal Judgment”). In this appeal the Appellants submit that the trial judge erred in including in the award an amount of $1.2m as a fund for providing her with income.

8 The Respondent seeks leave to cross-appeal against the judge’s later decision that the Respondent receive the costs of the application on the ordinary basis, rather than on an indemnity basis: Tchadovitch v Tchadovitch [2009] NSWSC 1481 (“the Costs Judgment”).

The Testator’s Family Circumstances

9 Michael Tchadovitch (“the Testator”) died on 18 August 2008. His last will was made on 27 May 1995. Probate of it was granted to the executors named in the will, George and Boris (also known as Bob) Tchadovitch, who are the brothers of the Testator.

10 The only “eligible person” within the meaning of the Family Provision Act who survived the Testator was the Respondent, his widow. The Testator and the Respondent had never had children. In an affidavit of 24 March 2009 Boris Tchadovitch stated:

“We have been advised that our needs and financial position (or those of our family) is not relevant to the matter before the Court and accordingly have made no disclosure thereof. We admit we are both reasonably well off.”

11 The primary judge specifically found (at [34]) that the Testator had “no moral obligation to his brothers”.

The Value of the Estate

12 The judge did not make a definitive finding about the value of the estate. The Appellants had contended that the estate had a net value of approximately $2.7m. In addition to the assets that the Appellants accepted were part of the estate, the judge found that an amount of $523,533 was part of the estate. It comprised a debt owed to the Testator by Averala Pty Ltd, the trustee of the Tchadovitch Kogarah Trust. The Appellants contended that the Testator had forgiven that debt, or transferred it to them, but the judge was not persuaded that the debt had ceased to be owing to the Testator. Thus, on the judge’s findings the value of the estate was not less than $3.223m.

13 As well, the Testator owned at the time of his death shares in Tchadovitch Joinery Pty Ltd, a company through which the Testator and his two brothers had conducted a joinery business. The Appellants contended before the judge, on the basis of a balance sheet and profit and loss of the company, that the business, and hence the shares of the Testator, had a nil value. The judge did not accept that the shares in that company were worthless or had a nominal value. There was some evidence of some of the income of the company being obtained in cash and shared by the Testator and his brothers, and of the wives of the Testator and his brothers being listed as employees of the company when in fact they were not employees. That evidence led the judge to direct the Registrar in Equity to provide a copy of the Principal Judgment to the Australian Taxation Office. The judge made no finding about whether income of the company had been paid in cash, but he found that the wives were incorrectly listed as employees. The evidence did not enable the judge to ascertain the correct value of the shares.

14 An executor has a duty in an application under the Family Provision Act to place before the court all evidence which might have any bearing on the issues raised by the Applicant’s evidence or which might arise at the hearing: In the Will of Lanfear (Deceased) (1940) 57 WN (NSW) 181 at 183; Vasiljev v Public Trustee [1974] 2 NSWLR 497 at 503; Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639 at 654 per Kirby P, with whom Hope JA agreed. If this had been a case in which there was real doubt about whether the assets of the estate were sufficient to satisfy the needs of the widow then, given that the Appellants were the only other beneficiaries of the estate, that they had information about the affairs of the company by virtue of their position as directors and being actively involved in its day-to-day operations, and that they were in breach of their duty as executors by failing to produce the information, the judge may have been justified in proceeding on the basis that he would attribute to the shares the highest value that was reasonably open on the evidence: Armory v Delamirie (1722) 1 Stra 505; 93 ER 664; Jones v Dunkel (1959) 101 CLR 298. However, when the widow was the only person to whom the Testator owed a moral duty, and the estate was sufficiently large, even leaving aside the value of those shares, to meet her needs, there was no occasion for the judge to adopt that course.

15 The estate has a possible additional liability, connected with the evidence that the joinery company had been receiving income in cash and claiming some unwarranted tax deductions. As mentioned earlier, the trial judge directed that a copy of his reasons be provided to the Australian Taxation Office, so that it could consider whether further investigations were called for. Even if that action results in the estate being diminished, through an amended assessment of taxation being issued against it, the judge was in my view justified, particularly in the situation where no moral obligation was owed by the Testator to anyone other than his widow, in proceeding on the basis that the estate was sufficient to provide for her needs.

The Will

16 The dispositive provisions of the Testator’s will left the Respondent a house located in Bligh Park, and any life insurance policy insuring the Testator’s life. By the time of the Testator’s death the Bligh Park house, which had been the matrimonial home, had been sold, and the Testator and the Respondent were living elsewhere. There was a life insurance policy insuring the Testator’s life, which had a value of a little over $75,000. Thus, the total provision that the Testator made for his widow was of the order of $75,000. The residue of his estate was left to his brothers.

The Respondent’s Circumstances

17 The Testator was born in May 1958, and was aged 50 at the time of his death. The Respondent was born in mid 1965. She and the Testator were married in the first half of 1983, when she was aged 17. They had been married for 25 years at the time of the Testator’s death.

18 During the marriage, any home in which the Testator and the Respondent lived was in the name of the Testator, any car that was available for the Respondent to drive was owned by the Testator or a business entity with which he was associated, and they had no joint bank account. She had no credit card.

19 The Respondent has not trained for any skilled employment. In her youth she commenced a hairdressing apprenticeship but did not complete it. For the first 12 months of her married life she worked as a casual in the local Coles supermarket, but gave it up at her husband’s request. The judge found that “the testator encouraged her not to work other than for a small amount of time per week”. From about 1996 she was doing occasional casual work. From 1996 to 2006 she worked at a café for about 16 hours a week, earning first $13 per hour, then $15 per hour. From 2006 until the time of the Testator’s death she was working as a shop assistant, for 8 hours per week at $19 an hour. The records of the joinery company showed her as an employee being paid a wage, but in fact she received no wage from it. She kept and banked any tax refunds.

20 The judge found that she worked as homemaker, cook and cleaner, while the Testator worked long hours in the joinery business. They lived frugally. In consequence, the Testator was able to build up his assets.

21 At the time of the Testator’s death the Respondent had bank accounts containing approximately $28,000, and some jewellery of little monetary value. She had no other asset of any significance.

The Judge’s Order for Provision

22 At the trial the Appellants advanced a case that the Testator was not well disposed to the Respondent, and indeed was close to divorcing her. The judge found (at [15]):

“On the basis of the plaintiff's evidence and the evidence of those of her friends who saw the plaintiff and the testator together, and having regard to her unchallenged evidence that the testator never told her of his unhappiness, I have considerable doubt as to what his true feelings were, but whatever they were, there is no evidence that the plaintiff had done anything to deserve such a response from the testator.”

In light of that finding there was no occasion for the Respondent to receive any lesser provision than would have been appropriate if no suggestion had been made that the Testator was dissatisfied with the marriage.

23 There was no dispute from the Appellants in the court below that the will made inadequate provision for the Respondent. They contended that proper provision would be giving her an absolute devise of the home in which she was living at the time of the Testators death, which had a value of $450,000, together with a capital sum of $700,000.

24 By the time of the trial the Respondent did not wish to continue to live in the house in which she and the Testator had formerly lived. It was located in Richmond, and she wished to move to an area close to her mother and brother on the South Coast. The judge accepted that she wished to move and that her wish was reasonable.

25 The provision that the judge made was that, in lieu of the provision made for her under the will, she receive $1,925,000. The reasons for judgment explain that the judge arrived at the figure of $1,925,000 by adding the following amounts:

$600,000 for the Respondent to acquire a house, that amount to cover stamp duty, legal fees and furniture.

$25,000 for a car.

$100,000 as a fund for contingencies.

$1.2m as a fund to secure an income for the Respondent.

The only element of the award that the Appellants seek to overturn is the quantum of the fund to secure an income.

26 There is no Notice of Contention from the Respondent, arguing that, even if the fund to secure an income was of a size that could be reduced on appeal, the overall award was correct, because other elements had been underestimated.

The Evidence Relating to the Income Fund

27 The Respondent estimated certain of her monthly expenditure, which she itemised, at $3,000. However, that estimate did not include council rates, home maintenance, periodical replacement of furniture, furnishings and whitegoods, Foxtel or internet connection, car repair, any ill health or hospitalisation that she might suffer, or provision for anything other than modest holidays. She gave evidence that a more realistic estimate of her expenditure was $50,000 per annum.

28 She gave evidence that she would like to work part time until she was at least 50 years of age, subject to finding suitable employment, and subject to maintaining her good health.

29 Her evidence was that she had no experience in investment options or the Stock Exchange, and no experience in managing real estate. She was risk averse so far as investments were concerned.

30 At the hearing there was a diversity of evidence about the life expectancy of a woman of the Respondent’s age. An agreement was reached that she had a further life expectancy of 44 years. When questioned on the hearing of the appeal about the meaning of that agreement, Mr Ellison SC, counsel for the Appellants, accepted that the period of 44 years was to be regarded as a statistical average, not foreknowledge of how long the Respondent would actually live.

31 The judge had expert evidence from both sides about the amount of capital needed to produce an after tax income to the plaintiff of $3,000 per month, taking into account tax and inflation. The experts acted on the parties’ agreement that the Respondent had a life expectancy of 44 years. They agreed that the inflation rate that was appropriate to allow for the rest of the Respondent’s life was 4%, and that a 4% rate was also appropriate to apply to increase in earnings from employment for the rest of the Respondent’s working life. They also proceeded on the basis that there would be no change to taxation law for the rest of the Respondent’s life, apart from periodical adjustments in accordance with inflation of the taxable incomes at which different marginal tax rates were imposed – the effect of that assumption was that “bracket creep” would not occur.

32 Mr Shields, the expert for the Appellants, carried out his calculations on the basis that the Respondent would set up a superannuation fund, to which she would contribute any earnings that, if not contributed, would incur a marginal rate of tax greater than 15%. At present, a marginal rate of tax greater than 15% is applicable on taxable income of an individual that exceeds $37,000 per annum. Mr Shields assumed that the Respondent would be entitled to a pension from the superannuation fund after age 60. The expert called by the Respondent, Mr Crane, carried out calculations on the basis that the Respondent would not utilise a superannuation fund. These differing approaches of the experts generated different tax liabilities on the invested capital sum.

33 The experts, in reports exchanged before the hearing, had also made different assumptions about the rates of return that would be earned on the invested capital sum. Mr Shields had assumed the Respondent would invest in a fashion that earned franked dividends, which had a flow-on effect to his calculations of tax liabilities, while Mr Crane did not assume any investment in shares that earned franked dividends. In a joint report that they prepared towards the end of the trial, that became Exhibit D, they showed the results that would be achieved, on their respective assumptions, for investment returns of 4.5%, 5%, 5.5% and 6% (that return being net of tax if a superannuation fund was used).

34 The capital sums that they arrived at, on their respective assumptions, and for those different rates of return if the Respondent did not work at all, were:

6%	5.5%	5.0%	4.5%
Shields	1,050,561	1,157,971	1,281,920	1,425,469
Crane	1,288,500	1,397,000	1,520,000	1,659,020

35 Those experts also did calculations of the capital sums that would be needed on the assumption that the Respondent was working. They agreed in assuming that she would earn $6,000 gross per annum from working one day per week, $12,000 gross per annum from working two days per week, and $18,000 gross per annum from working three days per week. They agreed that her personal exertion earnings would increase at the rate of 4% per annum. However, they had a methodological disagreement about how the earnings from working would affect the capital sum that the Respondent received. Mr Shields assumed that any income derived by the Respondent from personal exertion would reduce the capital that the Respondent received from the estate. Mr Crane assumed that any income derived by the Respondent from personal exertion would be in addition to her entitlement of capital from the estate. He justified that assumption by reference to the various items of expenditure, totalling $3,000 per month, that the Respondent had listed excluding the various types of expenses that I have identified at [27] above.

36 Exhibit D included the following results of calculations:

Calculation 2 – 4.5% Investment Return
Working 1 days per week and 4.5% IR
Shields	1,348,989
Crane	1,659,000
Working 2 days per week and 4.5 IR
Shields	1,265,739
Crane	1,710,000
Working 3 days per week and 4.5% IR
Shields	1,184,297
Crane	1,760,000
Calculation 3 – 5.0% Investment Return
Working 1 days per week and 5% IR
Shields	1,211,313
Crane	1,522,000
Working 2 days per week and 5% IR
Shields	1,131,370
Crane	1,574,500
Working 3 days per week and 5% IR
Shields	1,052,860
Crane	1,623,500
Calculation 4 – 5.5% Investment Return
Working 1 days per week and 5.5% IR
Shields	1,092,852
Crane	1,404,000
Working 2 days per week and 5.5% IR
Shields	1,015,994
Crane	1,453,000
Working 3 days per week and 5.5% IR
Shields	940,266
Crane	1,502,000
Calculation 5 – 6% Investment Return
Working 1 days per week and 6% IR
Shields	990,643
Crane	1,297,000
Working 2 days per week and 6% IR
Shields	916,562
Crane	1,346,500
Working 3 days per week and 6% IR
Shields	844,016
Crane	1,393,500

37 The evidence included a publication of ASIC, that identified four different types of investment strategy:

Label

What it roughly means

Growth

Invests 70-80% in shares or property. Aims for higher returns over the long term and so risks higher losses in bad years.

Historically, these higher risk investments have earned the highest returns over the long term.

Balanced

Invests 60-70% in shares or property, the rest in fixed interests and cash. Aims for reasonable returns, but less than growth funds to reduce risk of losses in bad years.

Capital stable

Invests 60-70% in fixed interest and cash, although some invested in shares or property. Aims to reduce risk of loss and therefore accepts a lower return over the long term.

Your capital and earnings can still be reduced by losses on investments.

Historically, the more the fund invests in fixed interest and cash, the lower the returns over the longer term.

Capital guaranteed

By law, invests 100% in deposits with Australian deposit-taking institutions or in a ‘capital guaranteed’ life insurance policy. Guarantees your capital and accumulated earnings cannot be reduced by losses on investments.

Historically, this strategy has earned the lowest returns, only slightly better than inflation.

38 The evidence included another ASIC publication, that identified the range of returns, averaged over five and ten years, of Australian superannuation funds, after management costs, and categorised by reference to their investment strategy:

Growth	Balanced	Capital stable	Capital guaranteed
As at 30 June 2008
5 years	7.8 – 9.9%	6.8 – 9.2%	5.1 – 6.7%	4.4 – 4.8%
10 years	5.3 – 7.6%	4.9 – 7.3%	4.3 – 5.7%	4.1 – 5.4%
As at 30 June 2007
5 years	9.5 – 11.5%	8.2 – 10.8%	6.3 – 7.5%	4.7 – 5.3%
10 years	7.2 – 9.0%	6.3 – 8.6%	5.2 – 5.8%	4.8 – 5.2%
As at 30 June 2006
5 years	5.7 – 7.5%	5.1 – 7.4%	4.8 – 5.9%	3.7 – 4.3%
10 years	7.6 – 9.4%	6.8 – 9.3%	5.7 – 7.3%	4.2 – 5.9%
As at 30 June 2005
5 years	3.7 – 5.6%	3.6 – 5.3%	4.2 – 5.5%	3.7 – 4.4%
10 years	7.0 – 8.7%	6.5 – 8.8%	5.6 – 7.2%	5.1 – 5.8%
As at 30 June 2004
5 years	3.6 – 5.4%	3.0 – 5.3%	3.7 – 6.2%	3.8 – 5.2%
10 years	6.4 – 7.9%	6.2 – 8.0%	5.5 – 6.7%	4.9 – 5.7%

39 The evidence also included a report on average investment rates of return achieved by superannuation funds for the period ending 30 June 2009:

Latest Returns to 30 June 2009
Index Name	5 Year (% p.a)	7 Year (% p.a)	10 Year (% p.a)
SR25 High Growth (91-100) Index	2.81	3.88	4.05
SR50 Growth (77-90) Index	3.35	4.91	4.95
SR50 Balanced (60-76) index	4.24	4.97	5.4
SR25 Conservative Balanced (41-59) Index	3.85	5.47	5.31
SR50 Capital Stable (20-40) Index	4.33	5.06	4.81
SR25 Secure (0-19) Index	4.47	4.68	4.72


The Judge’s Reasoning

40 The judge first approached the quantification of a lump sum to provide the Respondent with income in the following way (at [22]-[25] of the Principal Judgment):

“22 So far as the lump sum is concerned, the defendants first contended that the court should simply award a lump sum without trying to endeavour precisely to assess what the plaintiff's needs are: see the approach of Windeyer J in Fisher v Thomson [2006] NSWSC 527. Approaching the matter in that way, and taking into account the following matters:
(1) that the plaintiff is a relatively young widow without any training or significant experience in the workplace, in some measure because the testator did not want her to work beyond a small amount of casual work, and noting that in her youth she did commence a hairdressing apprenticeship but did not complete it;
(2) that the plaintiff has made a significant contribution to the welfare of the testator as the homemaker and that it was accepted that the testator's contribution at home was minimal;
(3) that the plaintiff has helped the testator amass the wealth that he has amassed both through the acquisition of property and through the process of buying and selling homes of which she has been an integral part;
(4) it has been said that a court should not be niggardly in determining what provision should be made for a widow when there are no children or competing demands on the testator, and having regard to the decision of the New South Wales Court of Appeal in Golosky v Golosky (5 October 1993, unreported), cited in Wilson v Knight [2009] NSWSC 230 at [29] per Macready AsJ:
‘(d) A mere right of residence will usually be an unsatisfactory method of providing for a spouse’s accommodation to fulfil the foregoing normal presupposition. This is because a spouse may be compelled by sickness, age, urgent supervening necessity or otherwise, with good reason, to leave the residence. The spouse provided and will then be left without the kind of protection which is normally expected will be provided by a testator who is both wise and just. See Moore v Moore , Court of Appeal, unreported, 16 May 1984, per Hutley JA, 2;
(e) Considering what is “proper” and by inference what is “improper” as a provision in a will, it is appropriate to take into account all of the circumstances of the case including such matters as the nature and quality of the relationship between the testator and the claimant; the character and conduct of the claimant; the present and reasonably anticipated future needs of the claimant; the size and nature of the estate and of any relevant dispositions which may have reduced the estate available for distribution according to the will; the nature and relative strengths of the competing claims of testamentary recognition; and any contributions of the claimant to the property or to the welfare of the deceased. See Re Fulop Deceased (1987) 8 NSWLR 679 (SC); Churton v Christian and Ors (1988) 13 NSWLR 241 (CA), 252.’
In Hertzberg & Anor v Hertzberg [2003] NSWCA 311 Einstein J cited passages from two decisions of Powell J:
‘a widow in the position of the Plaintiff ought to be put in a position where she is mistress of her own life…’ [ Langtry v Campbell (Supreme Court of New South Wales, unreported, 7 March 1991)]
“I take the view -- which view, I believe, is supported by authorities -- that, in a case such as this, where the marriage of a deceased and his widow has been long and harmonious, where the widow has loyally supported her husband, and assisted him to build up, and maintain, his estate, the duty which the deceased owes to his widow can be no less than, to the extent which his assets permit him to achieve that result; first, to ensure that his widow be securely in her home for the rest of her life, and that if, either, that need arises, or, the whim strikes her, she have the capacity to change her home; second, that she have available to her in an income sufficient to enable her to live in a reasonable degree of comfort, and free from any financial worries ; and third, that she have available to her a fund to which she might resort in order to provide herself with such modest luxuries as she might choose, and which would provide her with a hedge against any unforeseen contingency or disaster that life might bring .” [ Elliott v Elliott (Supreme Court of New South Wales, unreported 18 May 1984) at 11]
23 Apart from that reference to "harmonious" (which the defendants dispute is the situation here) the words of Powell J seem to be apt in the present circumstances.
24 In the absence of any competing need on the part of the defendants, and indeed the fact that they received the testator's share in the joinery business and his one third interest in the trust known as the Tchadovitch Kogarah Trust, which consists mainly of real estate and has an approximate worth of $4.7 million, the size of the estate even without the $523,533 debt, points to the estate having ample means to ensure that the testator’s widow leads a dignified life in a home of her own. If the $523,533 debt was genuinely forgiven by the testator then the defendants have both received the benefits of that in addition to the Tchadovitch Kogarah Trust and TJPL.
25 In these circumstances, I would regard the sum of $1.2 million as a reasonable lump sum to provide for the plaintiff's maintenance, education and advancement in life over and above the provision of a home and a car, and I would allow a further $100,000 to allow for contingencies on the basis that the testator’s house would have to remain in the estate. The plaintiff has already received, as I have noted, $150,000 (that is, leaving aside the $50,000 for interim maintenance) from the estate so that would need to be deducted. That amount approximates to 60% of the estate with the Averela debt of $523,533 included and approximately 75% of the estate if the Averela debt is not included.”

41 It is notable that the Appellants criticise no part of the reasoning I have just set out. Yet it is that reasoning that provides the first means by which the judge arrived at a lump sum of $1.2m.

42 All of the criticism of the Appellants is directed to the balance of the judge’s reasoning concerning the lump sum ([26]-[32] of the Principal Judgment).

26 “Two other competing approaches were put by the parties. The plaintiff put forward actuarial evidence as to what lump sum amount would yield $3,000 a week [sic – clearly should be “month”]. The defendants put forward competing actuarial evidence and they also submitted an approach applying 3% tables, being the amount fixed by the High Court in Todorovic v Waller (1981) 150 CLR 402. This was an approach adopted by White J in Barbara Mayfield v Suzy Carolyn Lloyd-Williams [2004] NSWSC 419.
27 There was agreement that if the actuarial approach was the correct approach, 4% was the appropriate figure for inflation and productivity increases and that the plaintiff's life span was a further 44 years. There was agreement on what the figure would be, depending on the approach taken to certain matters which included, firstly, the appropriate investment return rate calculated on Exhibit D between 4.5% and 6%, and also whether the plaintiff working either no days per week or three days a week (or in between) was appropriate.
28 The figure based on 3% tables was calculated at approximately $888,000.
29 $1.2 million, if invested today at 5%, would yield an annual gross income of $60,000 before tax, which I think would produce an income sufficient to enable the plaintiff to live in a reasonable degree of comfort and free from financial worries.
30 In considering whether the $1.2 million is sufficient, I have had regard to the 3% figure yielding $888,000 and also had regard to the competing actuarial views. On the question of the actuarial views, I do not think that the defendants are required to provide a sum on the basis of the most conservative approach that a widow might take to investment, and I would regard what was described as the “capital stable” approach as the most appropriate. I have had regard to those figures to consider whether the $1.2 million arrived at is an appropriate figure or is overly generous or makes insufficient provision.
31 So far as employment is concerned, I accept that the plaintiff is capable of earning and could expect to obtain income of up to three days a week as a sales assistant in a store such as Katies, where she has worked previously, but I think the plaintiff should not be expected to work more than she has done for many years, and I do not think that there should be any significant deduction from the amount that she is to receive by reason of that, although it is a factor to take into account and I have done so.
32 Accordingly, I fix the amount of the lump sum at $1.2 million but I would note that, of that, $150,000 has already been received.”

Error in Not Relying on 3% Discount Tables?

43 The Appellants submit that the judge should have calculated the lump sum by using the 3% discount tables. Their submission on that topic is:

In the recent decision of Ward J in Stern v Sekers; Sekers v Sekers [2010] NSWSC 59 her Honour at paras 355-365 considered the authorities relevant to the application of the discount tables in the calculation of capital sums and concluded at para 365 that the application of the 3% tables represented a conservative approach which the community would expect in an application for provision by a severely disabled daughter. This approach was adopted by White J in Mayfield v Lloyd – Williams [[2004] NSWSC 419]. For the reasons enunciated by Ward J in Stern , ibid, it is this approach that the trial judge should have adopted. In the interests of comity and certainty, the courts ought adopt a common approach. This will not affect or diminish the exercise of a judge’s discretion when determining what provision is, in any case, adequate for the proper maintenance of an applicant. Apart from providing more certainty in decisions, such an approach would assist practitioners to advise about the settlement of claims. Had the primary judge adopted this approach he would have awarded the respondent a capital sum of $888,000.”

44 It is not as though the judge ignored the figure yielded by the 3% discount tables – he specifically said (at [30]) that he had regard to it. The substance of the submission of the Appellants is that he should have adopted that figure to the exclusion of all else. The benefits that the Appellants urge from adoption of the 3% discount tables, namely certainty of prediction of outcome, would not be achieved even by giving the 3% discount tables even a predominant weighting amongst other factors that the judge took into account.

45 Any appellate review of the quantum of an award under the Family Provision Act can succeed only if the appellant persuades the court that the standards for appellate review of a discretionary decision are met: Singer v Berghouse (1994) 181 CLR 201 at 211. I am not persuaded that the judge’s failure to derive the lump sum using only the 3% discount tables was an error of principle on his part, capable of correction in accordance with the standards governing appellate review of discretionary decisions: House v The King (1936) 55 CLR 499 at 504-5.

46 Evaluation of the Appellants’ submission calls for some consideration of why the 3% discount tables came to have (at least before section 14 Civil Liability Act 2002 required the adoption of a 5% discount rate in certain circumstances) the significant role that they had in assessing lump sums of damages. That in turn requires consideration of what Todorovic v Waller (1981) 150 CLR 402 decided.

47 It was a case about assessment of damages in tort for personal injuries. Its particular concern was how to assess the quantum of a lump sum that would provide compensation for the loss of earning capacity that an injured plaintiff had sustained in consequence of the tort, and the quantum of a lump sum that would enable the plaintiff to purchase the goods and services that would be needed from time to time to deal with the consequences of the injury. It proceeded on the basis that compensation required a lump sum that (in so far as it related to loss of earning capacity) would be sufficient to replace the loss of income that the plaintiff would be likely to sustain for the rest of his or her working life, but that would be likely to be depleted by the end of the plaintiff’s working life, and a lump sum that (in so far as it related to the cost of future goods and services) would be sufficient to pay for those goods and services, at the time as they were likely to be needed for the rest of the plaintiff's life, but be depleted by the time of the plaintiff ceasing to need those goods and services.

48 There is a mathematically certain way of ascertaining the sum of money paid now that, invested at x%, would enable a payment of $Y per week to be made (using both the income, and ultimately the capital of the fund) for a period of z years. Actuarial tables of the results of such calculations have been available for many years. They are called “discount tables”, and the assumed rate of earning of the fund, the x%, is referred to as the “discount rate”. The “3% discount tables” that the Appellants submit should as a matter of principle be adopted in Family Provision Act cases are tables that show that calculation, where x% is 3%.

49 In assessing a lump sum to be paid as damages for loss of earning capacity or to provide for the cost of future goods and services, there had been a diversity of opinion amongst judges before Todorovic about some aspects of the calculation. One contentious aspect had been how to attribute a rate of earnings to the lump sum (and thus what discount rate to apply, if rate of earnings were the only relevant matter). Another had been whether, and if so how, to take into account inflation. Inflation of earnings was likely to increase the earnings that the plaintiff would have received over the rest of his or her working life if he or she had not been injured, while inflation of costs was likely to increase the cost of the relevant goods and services from time to time, and the rate of increase in relevant wages would not necessarily be the same as the rate of increase in cost of relevant goods and services. Another contentious aspect had been whether, and if so how, to take into account that if a lump sum were invested the income earned by the lump sum would be liable to income tax.

50 In light of the very great difficulties in making any accurate predictions about the future rate of inflation, future scales of taxation, and future taxation rebates and deductions, the majority in Todorovic (Gibbs CJ, Mason, Aickin, Wilson and Brennan JJ) decided that the preferable approach to adopt was to discount the future payments at a rate that itself took into account the rate of income assumed to be earned by the fund, and also made allowance for notional tax on fund income and the effect of future inflation of wages and prices. Those factors were taken into account in quite a broad-brush way, as follows. If the rate of return likely to be earned on the lump sum was x% per annum, part of the income so earned would be absorbed by taxation. The effect of inflation is that if the income that a lump sum earns at x% this year is adequate to compensate for loss of wages at this year’s rates of pay or to buy goods or services at this year’s rates of charge, that same income will not be enough to perform those functions in future years. Each of these factors provides a reason for reducing the discount rate to something less than x%.

51 The rate that the majority in Todorovic fixed upon as the appropriate discount rate was 3%. That particular figure was chosen in the light of evidence and judicial notice about historical and then available rates of return on investments, taxation rates and inflation rates, and the manner in which those factors interacted. The majority decided that the 3% rate should be used, regardless of the individual tax situation of the particular plaintiff (see Todorovic at 424, 449, 460, 477).

52 When Todorovic decided on the 3% figure in 1981 interest rates of “at least 15%” were obtainable on secure investments (at 415), and the then expected inflation rate was 10% (at 445), though there had been inflation rates of 16-17% in 1974-1975 (at 446). Achievable interest rates on secure investments, and actual and expected inflation, are now quite different. There have also been some significant changes since 1981 in the income tax law that affects individuals.

53 The task of a court in assessing damages at common law is to provide fair compensation for a legal wrong. That measure of compensation must be fair to the defendant, as well as to the plaintiff. The task of a court in assessing the amount of provision that should be made for an “eligible person” under the Family Provision Act is to ascertain “such provision … as in the opinion of the court, ought, having regard to the circumstances at the time the order is made, to be made for the maintenance, education or advancement in life of the eligible person” (section 7). Some factors that the court must in some circumstances take into account, and others that it may take into account, are listed in section 9. However, the quantum of the provision is a matter for exercise of a judicial discretion, exercised bearing in mind the circumstances of the particular claimant. The principles on which the two types of award are made are not the same. Thus the method for calculating common law damages is not necessarily the method to use in arriving at a Family Provision Act award.

54 There are insurmountable difficulties in carrying out an accurate calculation of the amount that will make proper provision for certain needs of a person for the rest of their life. As well as the unpredictability of future inflation rates and taxation regimes that Todorovic allows for in an extremely broad-brush way, Family Provision Act claims concerning a claimant who is to be provided for for the rest of his or her life have an additional complexity arising from the uncertainty of the length of that person’s life. That dimension of uncertainty does not appear with quite the same acuteness in calculation of damages for personal injury, because the calculation for loss of earning capacity is made for a determinate period of time, up to the ordinary date of retirement of the plaintiff in question, with the prospect of earlier death being allowed for as one matter that goes into the deduction that is made for contingencies of life. In an estate that is large enough to satisfy all the claims upon it, it would be a significant detraction from the adequacy of the provision made for a widow that it left her at risk of not being properly provided for if she were to live for longer than the statistical average for a woman of her age.

55 Depending on the evidence and submissions made in a particular case, it can be part of the task for a judge fixing the quantum of a Family Provision Act award to make a judgment about whether, and if so to what extent, any discount table is of assistance in assessing the proper provision for the eligible person. At least until such time as a court has the benefit of argument that seeks to narrow the range of discount tables that might be used for that purpose, there is no reason of principle why the 3% tables should be treated as the bottom of the range of discount tables that are considered. In Todorovic, in the different economic conditions that then prevailed, Stephen and Murphy JJ were of the view that a nil discount should be applied in calculations of common law damages, and Mason J would have preferred to use the 2% tables, but agreed with use of the 3% tables for the sake of comity. Likewise it is part of the judge’s task to decide (if asked) whether, and if so to what extent, any actuarial calculations that are tailored to the individual circumstances of that claimant are helpful. In my view, there is no principle requiring that the 3% discount table always be used.

56 There is a world of difference between it perhaps sometimes being appropriate to calculate a lump sum for the purposes of the Family Provision Act by using the 3% discount tables, and it always being required as a matter of principle. Just as the nature and quantum of the provision that is made for an applicant under the Family Provision Act involves an exercise of judicial discretion, that is exercised in the light of the facts of the particular case and the evidence and submissions in the particular case, so the choice of the appropriate methodology to use in arriving at the quantum is a matter of judicial discretion, that is likewise exercised in the light of the facts of the particular case and the evidence and submissions in the particular case. In my view the Appellant's submission that adoption of the 3% discount tables as a common approach "will not affect or diminish the exercise of a judge's discretion when determining what provision is, in any case, adequate for the proper maintenance of an applicant" is wrong. In the present case it was within the scope of the discretion open to him for the judge to have regard (as he did) to the 3% tables, as one factor taken into account, but also within the scope of his discretion to award a sum different to that obtained from the use of the 3% tables.

57 There is another reason, more closely tied to the circumstances of the present case, why the judge made no error in failing to award the sum obtained from the 3% discount tables. The expert evidence in the present case proceeded on a different basis to that which Todorovic had decided was appropriate for the purpose of assessing lump sums in personal injuries litigation. In the present case, the experts had made assumptions about what the rate of increase of wages and prices would be, (matters said by two judges in Todorovic at 420 to be “unverifiable surmise and inadmissible") and had made calculations of the effect of income tax that were specific to the position of the Respondent. Those calculations were admitted without objection. In those circumstances, fundamental reasons why the majority in Todorovic had favoured the use of the 3% tables were absent.

58 The Appellant also relies on the decision of Ward J in Stern v Sekers [2010] NSWSC 59 at [355]-[365]. Those paragraphs in her Honour’s judgment include a helpful collection of previous decisions in which judges have adopted the 3% discount tables as the means of fixing a lump sum. Some of those cases are ones under the Family Provision Act. Her Honour noted, at [361] that in Mayfield v Lloyd-Williams [2004] NSWSC 419, the parties had agreed that it was appropriate to use a 3% discount rate, and that there was no suggestion, when the matter was determined on appeal by the Court of Appeal that this was inappropriate (Lloyd-Williams v Mayfield [2005] NSWCA 189; (2005) 63 NSWLR 1 at [23].) (White J records the parties’ agreement to use the 3% tables in Mayfield v Lloyd-Williams [2004] NSWSC 419 at [136].) Those are less than compelling reasons for using the 3% discount tables in cases where the parties do not agree it is appropriate to do so.

59 The particular choice that Ward J was required to make in Stern v Sekers was between the use of the 3% discount tables and the 5% discount tables for the purpose of calculating a lump sum appropriate to be awarded as provision for the needs of a severely disabled daughter. Her Honour decided to adopt the 3% tables, because “the community would expect a conservative approach to be taken in a case where the testator is looking at the proper provision for a severely disabled daughter”. Her Honour was not purporting to make any decision of principle, applicable to cases under the Family Provision Act generally, about the appropriateness of the 3% tables – she was resolving the particular choice between two discount tables that was presented to her by the evidence and submissions in the case she was deciding. I can find no “reasons enunciated by Ward J in Stern” that show that the trial judge in the present case made an error of principle in failing to apply the 3% discount tables.

60 Ward J’s review of previous authority left her “unable to find authority which would be conclusive on the issue as to which of the tables is most appropriate in the present circumstances.” The Appellant did not direct our attention to any authority that Ward J had not found, which decided that a particular discount table should be used in Family Provision Act cases. The effect of the submissions of the Appellants is that this case ought to provide such authority. I decline to do so.

Taking into Account an Irrelevant Factor?

61 The Appellants submit that the primary judge erred in taking account, at [29], of the fact that $1.2m, if invested today at 5%, would yield an annual gross income of $60,000 before tax. They submit, correctly, that the Respondent had never quantified her claim in terms of a need for a gross income of any particular amount. However there was evidence of the current income tax rates before the judge, which show that a gross income of $60,000 before tax results in an after tax income of somewhat less than $50,000 (tax on first $6,000 = $0, tax on next $31,000 at 15% = $4,650, tax on final $23,000 at 30% = $6,900, total $11,550). The gross income was not an irrelevant factor.

62 The exercise the judge was carrying out in [29] was quite a limited one. A wise and just husband would leave his wife, if he could afford it, in a situation where she would be adequately provided for immediately after his death, and also in the foreseeable future. In [29] the judge was doing no more than checking that the sum of $1.2m, that he had already arrived at in [25] would be adequate to meet one of those requirements, namely leaving her with adequate provision in the immediate short term.

Providing the Respondent with More than she Claimed to Need?

63 The Appellants submit that the Respondent’s case was that she needed $36,000 net per annum from the estate with a balance of $14,000 derived from her part time earnings, and that the judge, by looking at an income of $60,000 gross was over-providing for her even in accordance with her own case. In my view that is a mischaracterisation of the way the Respondent put her case. Rather, she asserted a clear need for $36,000 net per annum, but also submitted that there would be other expenses, that she had not included in her itemised list, that would need to be covered by her earnings, while she had earnings. While she estimated her total need for income at $50,000 net per annum, the judge at no time fixed his award as being one aimed at providing her with $50,000 net per annum in the long term.

Misapprehension of Effect of Respondent’s Earnings?

64 The Appellants submit that the judge also misapprehended the effect of the Respondent’s part time income on the calculation of the capital sum. The Appellants say the judge erred in [31] of the Principal Judgment.

65 I am not persuaded that [31] shows any error. The Appellants’ submissions proceed as though the judge had found that she would obtain income for up to three days a week. I do not agree that that is the finding he has made. The finding was: “[t]he plaintiff is capable of earning and could expect to obtain income of up to three days a week as a sales assistant in a store such as Katies, where she has worked previously, but I think the plaintiff should not be expected to work more than she has done for many years.” This is finding that she had the capacity to earn income for up to three days a week, but she should not be expected “to work more than she has done for many years”. The extent to which she has worked “for many years” is a maximum of 16 hours per week, and 8 hours per week in the two years immediately preceding the Testator’s death. In other words, the judge was saying that in his view proper provision should take into account that she had a certain capacity to earn, but that she could not be expected to utilise her full capacity to earn.

66 The judge’s conclusion that there should not be any significant deduction from the amount she is to receive by reason of her earnings needs to be seen in the light of his previous reference to the actuarial views. The actuarial calculations sought to ascertain the lump sum that was needed to provide the Respondent with $36,000 per annum after tax. The judge found that a “capital stable” approach to investment was most appropriate (a finding not appealed against). That finding has the effect, in the context of the evidence, that it is historical returns in the range 4.3% to 7.3% that have actually been achieved by Australian superannuation funds (taking the 10 year averages as being more appropriate to the circumstances of the Respondent than any shorter period) and that are the most appropriate of the actuarial calculations to take into account in forming a judgment about the quantum of a lump sum provision. As the wise and just husband would err on the side of caution, seeking to make adequate provision for his widow even if rates of return were in the future not as great as had historically been achieved, a figure towards the lower end of that range, though not necessarily at the bottom, would provide some check on the adequacy of the provision for the widow. That suggests that, of the various rates of return that the experts performed calculations concerning, greater weight should be given to the figures for the 5% return and the 4.5% return than to the figures for the 6% and the 5.5% return. Even calculations based on those rates of return would need to be approached with considerable caution, because of the near impossibility of predicting future rates of return on investment over the several decades that the Respondent was likely to live.

67 The actuarial calculations are unassailable, as exercises in mathematics. But as a guide to how the future will actually unfold they are no stronger or more persuasive than the assumptions that they made. Notwithstanding that the experts agreed on a 4% inflation rate for both wages and prices, and that tax rates would remain as they now are for the remainder of the Respondent’s life, and proceeded as though it was clear the Respondent would not live longer than 44 years, one cannot but be conscious that those assumptions might not be borne out.

68 In light of those matters, and that the parties had both presented the case to the judge on the basis that the actuarial calculations were relevant, the judge made no error in taking them into account in deciding whether the $1.2m figure was appropriate, without that being an overriding factor in his judgment. The methodology he followed, where he arrived at the $1.2m figure, and in effect then used the actuarial calculations as a check on it, was not inappropriate, even if other methodologies would also have been open to him.

69 I said earlier that the judge’s remark that there should not be any significant deduction from the amount the Respondent was to receive by reason of her work income needs to be seen against the background of this actuarial evidence. As well as giving greater weight to the calculations relating to the 4.5% and 5% investment return than to the calculations for the 5.5% and 6% investment return, it would be appropriate to take into account the different methodologies that the experts adopted concerning the effect that the personal exertion income of the Respondent would have on the capital sum. The weight given by the judge to those respective methodologies would be affected by the undoubted fact that the Respondent’s listing of expenditure of $3,000 per month did not include all the items she would actually need to purchase, and that the items not included in the list totalling $3000 are by no means insignificant. It would take into account the judge’s finding that the Respondent should not be expected to work more than she has done for many years (which would have the consequence of ruling out the figures concerning working three days per week).

70 When the experts’ calculations are considered in the light of those matters, they do not show that the figure of $1.2m is wrong. Of the experts’ figures for the lump sum that would be needed if the Respondent did not work at all, all of Mr Crane’s figures, and those of Mr Shields relating to a 4.5% and 5% return exceed $1.2m. Further, because on all of Mr Crane’s figures, and on all bar one of Mr Shields’ figures for working one or two days per week, with an investment return of 4.5% or 5%, a figure greater than $1.2m is shown, the judge was well justified in saying that he did not think there should be any significant deduction from an amount of $1.2m by reason of her income from personal exertion.

71 The judgment appealed from was given ex tempore, at the conclusion of a four-day hearing. The judgment appealed from was given in circumstances where the significance of the various actuarial figures had been the subject of cross-examination and detailed submissions. The judge was justified in saying that he had taken the figures into account, without further analysis or explanation of the way in which he had taken them into account. Given the nature of the actuarial calculations, and (to put it at its lowest) the less than secure nature of the assumptions on which they were based, precision concerning them was impossible. Particularly concerning a claimant who was likely to have decades to live, they could not be anything more than a check or guide. That is how the judge used them. As Mason P said in Maviglia v Maviglia [1999] NSWCA 188 at [1], an ex tempore judgment should not be picked over.

72 For these reasons, all the Appellant’s attacks on the decision below fail.

73 I would not want my finding that it was within the discretion of the trial judge in the present case to take into account the expert evidence, to be taken as encouragement for parties in Family Provision Act cases to provide expert evidence of the type that was provided here. Presumably it would be of little assistance in many such cases because the assets were insufficient to meet all claims. In the present case, a sufficient reason why the judge was justified in taking it into account was that both parties conducted the case on the basis that such evidence was appropriate for him to consider.

74 There is no issue before us concerning the admissibility of such reports, but such an issue might arise in future cases. It might arise at the level of whether the assumptions were adequately established, or at the level of whether a ground for exclusion under section 135 Evidence Act 1995 was made out. Alternatively, if admitted, a question might arise about whether cross-examination should be limited. There are some other matters of potential concern besides admissibility. One is that, many testators manage to write wills that make proper provision for their family without calling on an actuary or accountant to help them do so. When the Act enables the Court to make proper provision for eligible people when a testator has failed to do so, it is far from clear that the Court ought to do so using a type of factual material that a testator is unlikely to have used. Another is that it would be a matter of concern if the costs of Family Provision Act cases were increased through regular use of such reports. The effect of these matters can be left for future decision.

The Cross Appeal

75 On 28 May 2009 the Respondent made a settlement offer to the Appellants, in the form of a Calderbank offer. It offered to settle her claim on the basis that she receive an absolute devise of the matrimonial home, an absolute devise [sic] of the motor vehicle she was then driving, a legacy of $1.3m, and her costs. The offer was expressed to remain open for a period of 14 days.

76 The probate affidavit of the executors valued the matrimonial home at $450,000, and the motor vehicle at $9,000. Thus, the value of the Respondents’ offer was $1.759m, plus costs.

77 By letter dated 1 June 2009 the solicitors for the Appellants rejected it. In the course of so doing, they said:

“… we are advised that the amount offered in the offer of compromise would constitute a, or a near-record verdict in a Family Provision claim. There is no case, so we understand, which establishes a principle that your client is entitled to a benefit based upon actuarial computation, or a guaranteed level of income during the balance of her life, nor any which establishes principles from which it may be divined that a verdict in excess of $1.5 million (which is the effect of our client’s offer) is the appropriate provision for a widow in your client’s position. Certainly, if your client were to achieve such a result, it would no doubt provide rich grounds of appeal which our clients have already indicated they would employ . Notwithstanding what some may see as your bluster concerning the advice you may have received from counsel, our clients believe – on the basis of equally soundly sourced advice – that your client will have trouble achieving a verdict of the magnitude offered in the offer of compromise much less one now put.” ( Orange 62 ) (Bold identifies passages the Respondent particularly relies on.)

78 In the same letter, the solicitors for the Appellants indicated that they would oppose any application by the Respondent to put on further evidence. Their reasons included:

“You say that there is no prejudice to our clients. Of course there is prejudice: firstly, we have said many times that the baseless assertions that assets have not been disclosed were established as such with our client’s last affidavit and this is crystal clear from any reasonable reading of the material. Spending time trying to establish otherwise in the face of the incontrovertible is simply a waste of time and money. Secondly, your threat in earlier correspondence to investigate the worth of Tchadovitch Joinery Pty Limited will no doubt lead to a waste of a great deal of our clients’ time and put them to much effort. This could have been done with the filing of your primary evidence since your client knew the value put on that asset by our clients for the purpose of probate. Then, of course, the ultimate cost of what might be called your evidentiary kite-flying may in fact be borne by our clients who are the residuary beneficiaries.” (Bold identifies passages the Respondent particularly relies on.)

79 The Respondent applied to the judge for an order for indemnity costs, on the basis that the award ultimately made by the judge was significantly more favourable to the Respondent than the offer had been. In the Costs Judgment, the judge rejected that application. His reasons for doing so (at [22]-[23]) were:

“There is no dispute that the offer contained in the letter was less than the result that has been obtained by the plaintiff in the proceedings. However, the rules in relation to Calderbank letters are different to offers of compromise made under the Uniform Civil Procedure Rules in that for a party to succeed in obtaining an indemnity costs order based on a Calderbank letter, it is necessary to show that it was unreasonable for the recipient of the offer to have rejected it: see Leichhardt Municipal Council v Green [2004] NSWCA 341 at [55]-[57] per Santow JA (with whom Bryson JA and Stein AJA agreed), where these issues are discussed.
Although the plaintiff has done considerably better than the offer, it is not a case in which there is any obvious figure that might be arrived at and I do not think that it is established that the defendants acted unreasonably by not accepting that offer. Accordingly I refuse the application for indemnity costs based on the Calderbank letter. The plaintiff’s costs, assessed on the usual basis, should be paid out of the estate.”

80 The Respondent has sought leave to appeal against that part of the Costs Judgment (if such leave be necessary), and a reversal of the judge’s decision denying an order for indemnity costs. The Respondent’s submissions recognise that in Leichhardt Municipal Council v Green [2004] NSWCA 341 this Court questioned the decision of Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corp (1996) 138 ALR 425 which had expressed the view that unreasonableness was prima facie found in the failure by an offeree to accept an offer which was not bettered on judgment: at [56].

81 However, in Leichhardt v Green this Court also said, at [57]:

“… [a]n instance would be peremptorily dismissing an offer of compromise (however small) such that an inference can be drawn that no bona fide consideration was given to early settlement of the claim …”

82 The Respondent points to the extreme promptitude with which the Appellants rejected the offer. When one bears in mind not only the dates of the making of the offer and its rejection, but also the fact that a weekend intervened, the offer was rejected on the business day after it was made. As well, the Respondent points to the vigorous, combative and determined language of the terms in which the offer was rejected.

83 The Respondent also points to the way that, notwithstanding the confident manner in which the Respondent’s contention that assets had not been disclosed was rejected as “baseless” and further investigation a waste of time, the judge found that there had been inadequate disclosure of assets, by reason of the loan of $523,533 still being on foot, and the Testator’s shares in Tchadovitch Joinery Pty Ltd having a value greater than the nominal value the Appellants had put on them.

84 For these reasons, the Respondent submits that the judge should have inferred that the offer was not given bona fide consideration.

85 I do not agree that the judge should have drawn any such inference. By the time the offer was made the litigation had been on foot for some time – it had been commenced by summons filed on 4 September 2008 – and substantially all of the lay evidence had been put into affidavit form. Both parties had counsel engaged, and had received advice from counsel about the likely quantum. The Appellants were in a position to give the offer a prompt and fairly well informed consideration.

86 In the course of argument of the appeal I asked Senior Counsel for the Respondent whether the solicitor for the Appellants was wrong in asserting that an award of the size contemplated by the offer made in the Calderbank letter would be a record or a near record. She was unable to say that he was wrong. The significance of this response lies not so much in whether an award of that size would actually be a “near record”, but in the fact that counsel deeply experienced in this field of litigation was not in a position to refute one of the reasons given for rejection of the offer.

87 A relevant consideration, in deciding whether rejection of the offer was unreasonable, is that none of the expert evidence was available when the offer was made. The first affidavit of an expert, that of Mr Crane, was sworn on 10 June 2009. It was not until the hearing was underway that the respective experts agreed on calculations, in the document that ultimately became Exhibit D.

88 The width of discretion available to a trial judge in fixing the quantum of an appropriate award under the Family Provision Act is one of the strengths of the Respondent’s position concerning the appeal. Ironically, that self-same factor is a significant weakness in the Respondent’s position concerning the cross-appeal: cf Sherborne Estate (No 2); Vanvalen v Neaves [2005] NSWSC 1003; (2005) 65 NSWLR 268 at [56]-[58] per Palmer J. The likely outcome or range of outcomes of the litigation was not, at the time the offer was made, so clear that it was unreasonable for the Appellants to reject the offer.

89 No attention was paid in argument to whether leave was needed for the cross-appeal. Section 101(2)(c) Supreme Court Act 1970 requires leave before there is an appeal to the Court of Appeal “as to costs only which are in the discretion of the Court”. We were referred to no authority on whether that provision catches an intended cross-appeal concerning no topic other than costs, in a situation where an appeal concerning the substantive merits of a decision has already been brought without leave being necessary. Both parties have had the opportunity to put all the argument they would wish to put concerning the proposed cross-appeal. In that situation, the pragmatic course to adopt is to grant leave to appeal if leave be necessary, but to dismiss the cross-appeal with costs.

Notice of Motion for Supplementary Evidence

90 The Appellants filed a Notice of Motion on 30 September 2010 seeking leave to adduce further evidence on the hearing of the appeal. The evidence they wished to adduce was an affidavit from the executors that purported to state the present position of the estate.

91 Such an affidavit might be appropriate to be read in the circumstance that this Court decided that the judge had erred in exercising his discretion, and it was necessary for this Court to re-exercise the discretion. However, in circumstances where I am of the view that no error has been shown in the judge’s exercise of his discretion, no occasion arises for the evidence to be read. In that circumstance, it is unnecessary for the Court to deal with a problem that would arise from the affidavit, in that it still attributes no value to the Testator’s shares in Tchadovitch Joinery Pty Ltd, and ignores the judge’s finding that the debt of $523,533 remained an asset of the estate.

92 The Respondent filed in court, and sought to read, an affidavit that updated her circumstances. For the same reason as it is not appropriate to read the affidavit of the executors, it is not appropriate to read the supplementary affidavit of the Respondent.

Orders

93 I propose the following orders:

(1) Appeal dismissed with costs.

(2) Grant leave to cross-appeal, and dismiss the cross-appeal with cost.

(3) Appellants’ Notice of Motion filed 30 September 2010 dismissed with costs.

: I agree with Campbell JA and with the additional comments of Allsop P.

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