The Estate of Edward Richard Johnston
[2015] NSWSC 1559
•15 October 2015
Supreme Court
New South Wales
- Amendment notes
Medium Neutral Citation: The Estate of Edward Richard Johnston [2015] NSWSC 1559 Hearing dates: 9 and 15 October 2015 Date of orders: 15 October 2015 Decision date: 15 October 2015 Jurisdiction: Equity Before: Rein J Decision: See [12]
Catchwords: EQUITY - Succession - Costs orders - Offer of compromise under the Uniform Civil Procedure Rules 2005 - Where offer accepted and no provision for costs - Whether there has been judgment in favour of the plaintiff Legislation Cited: Civil Procedure Act 2005 (NSW)
Supreme Court Act 1970 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)Cases Cited: The Owners Corporation Strata Plan No 74667; 74670 and 74662 v Auburn City Council [2015] NSWSC 86 Texts Cited: Nil Category: Costs Parties: Zenith Patricia Grant (First Plaintiff)
Anthony Kaye Johnston (Second Plaintiff)
James Edward Breck Johnston (Third Plaintiff)
Fay Hogan (First Defendant)
David Alan Johnston (Second Defendant)Representation: Counsel:
Solicitors:
T.A Alexis SC with J.B King (Plaintiffs)
M Tyson (Defendants)
Cole & Butler (Plaintiffs)
Burridge & Legg (Defendants)
File Number(s): 2014/309451 Publication restriction: nil
EX TEMPORE JUDGMENT
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This is an application for costs following acceptance of an offer of compromise by an offeree. The proceedings concern the estate of the late Edward Richard Johnston. The estate has a net worth of just under $3 million. The plaintiffs are the executors of the will of the testator. The defendants are siblings of the deceased. Under the will propounded by the plaintiffs, the defendants receive no benefit from the will. The defendants dispute that the deceased had the mental capacity to make the will made by him in December 2010, and they sought by way of cross‑claim an order that the estate be administered as on an intestacy. They filed a caveat in the probate registry in relation to their claims.
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The plaintiffs sent an offer of compromise to the defendants on 17 September 2015 as follows:
“OFFER OF COMPROMISE
This offer of compromise is made pursuant to r 20.26 of the Uniform Civil Procedure Rules 2005.
The plaintiffs offer to compromise the whole of the claims made by the plaintiffs and the defendants in proceeding 2014/309451 on the following basis:
1. Probate of the will of Mr. Edward Richard Johnston of "Glenayr", Boggabilla NSW, dated 6 November, 2010, be granted in solemn form to the plaintiffs.
2. Within 28 days of the grant in solemn form:
a. The plaintiffs pay the sum of $100,000 to the first defendant.
b. The plaintiffs pay the sum of $100,000 to the second defendant.
3. The defendants' cross-claim be dismissed.
This offer does not include an amount for costs and is not inclusive of costs.
This offer is open for acceptance until 5:00 p.m. on 1 October 2015.”
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Importantly, the offer provides for a payment to each of the defendants of $100,000. It also includes a term that there would be grant of the probate for the 2010 will in solemn form to the plaintiffs. It also provides the defendants' cross‑claim be dismissed.
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The defendants accepted the offer and there is now an issue between the parties as to what the consequences of that acceptance is. The defendants claim that they are entitled to the benefit of Rule 42.13(A) of the Uniform Civil Procedure Rules 2005 (NSW), which is in the following terms:
“42.13A Where offer accepted and no provision for costs
(1) This rule applies if the offer:
(a) is accepted by the offeree, and
(b) does not make provision for costs in respect of the claim.
(2) If the offer proposed a judgment in favour of the plaintiff in respect of the claim, the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim, assessed on the ordinary basis up to the time when the offer was made.
(3) If the offer proposed a judgment in favour of the defendant in respect of the claim (including a dismissal of a summons or a statement of claim), the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, assessed on the ordinary basis up to the time when the offer was made.”
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The defendants say that the rule applies because under subrule (1) what is required is acceptance by the offeree, and the absence of any provision in the offer for costs in the offer of compromise in respect of the claim. Both conditions are met here. The defendants say that subrule (3) applies because the offer proposed a judgment in their favour in respect of the claim.
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I should note that judgment is defined in the Civil Procedure Act 2005 (NSW) s 3 to include orders for payment of money and that definition is incorporated into the rules by a dictionary annexed to the rules and incorporated by Rule 1.2.
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Mr Alexis SC appears for the plaintiffs, and Mr Tyson of counsel appears for the defendants. Mr Alexis has provided written submissions this morning and has spoken to those submissions, and he contends that the offer which was accepted should be characterised as a mixed offer because there is a proposal for judgment in favour of the plaintiff, both as plaintiff and cross‑defendant, as well as a proposal for judgment in favour of the defendant. Accordingly he says the rules do not apply.
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He says that the defendants are permitted to make an application by virtue of s 98 of the Supreme Court Act 1970 (NSW), and that the Court does have a discretion to make orders for costs, although he says that in this case that discretion should not be exercised in favour of the defendants, and he refers to a decision of mine in The Owners Corporation Strata Plan No 74667; 74670 and 74662 v Auburn City Council [2015] NSWSC 86.
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I think that the problem with Mr Alexis's argument is that it does not really give due weight to what the offer, looked at as a whole, achieves or offers. It offers the payment of a not insubstantial sum to each of the defendants, which they would not be entitled to if the 2010 will were the will in force.
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One aspect of the matter which is relevant to this as well is that if they are offered and accept $100,000 each, as they have done, it would be necessary for the plaintiffs to obtain the grant of probate to validate their agreement to pay the respective amounts out of the estate to the defendants. As Mr Tyson pointed out, they also do need, as the executors, to obtain a grant of probate irrespective of any position of the defendants. Accordingly when one looks at the offer as a whole, as I think one needs to do and to its substantive effect, in my view the defendants have obtained a victory albeit not of huge proportions, but nevertheless a victory, which is reflected in the offer which was made to them and which they accepted.
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I accept Mr Tyson's point that to deny the defendants the benefit of reliance on the rule would involve an interpretation of the rule which would make it very narrow indeed, and which would discourage rather than encourage offers of compromise to be made and to be accepted. The whole regime of offers of compromise has been very carefully considered in an endeavour to encourage the resolution of cases rather than cases proceeding to final hearing if that can be avoided. Parties should understand that if the offer gives them a substantial benefit and they accept it they will obtain their costs (on the ordinary basis) of achieving that result. The rules have studiously sought to ensure that offers of compromise do not include specific amounts for costs because it tends to confuse and obscure the search for a settlement of the substantive claim and Mr Tyson’s approach is consistent with that underlying theme.
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I think that a realistic and substantive view of the offer is one that permits the defendants to rely on the offer, and in particular subrule (3), to obtain an order for costs, and I so order. The plaintiff should pay the costs of this application.
Amendments
21 October 2015 - Typographical correction
Decision last updated: 21 October 2015