Vella v Vella; Vella v Vella (No 2)

[2020] NSWSC 1032

Supreme Court

New South Wales

Medium Neutral Citation:

Vella v Vella; Vella v Vella (No 2) [2020] NSWSC 1032

Hearing dates:

On the papers

Date of orders:

6 August 2020

Decision date:

06 August 2020

Jurisdiction:

Equity - Family Provision List

Before:

Williams J

Decision:

In proceeding 2018/385260, the plaintiff’s costs are to be paid out of the estate of the late Laura Anna Delores Vella on the ordinary basis up to and including 24 July 2019 and on an indemnity basis from 25 July 2019 onwards. The defendant’s costs are to be paid out of the estate on an indemnity basis.

In proceeding 2018/369508, the plaintiff is to pay one third of the defendant’s costs on the ordinary basis. The balance of the defendant’s costs are to be paid out of the estate of the late Laura Anna Delores Vella on an indemnity basis. The Court makes no order as to the plaintiff’s costs, with the intention that the plaintiff will bear his own costs.

Catchwords:

COSTS – party/party – basis of quantification – Calderbank offers – offers of compromise – where parties to related family provision proceedings served multiple offers of compromise and Calderbank offers throughout the course of the proceeding – no offer accepted by the unsuccessful parties – where offers of compromise relied upon by the successful parties do not comply with Uniform Civil Procedure Rules 2005 (NSW) r 20.26 – where offers treated as Calderbank offers – whether unreasonable for unsuccessful parties not to accept offers

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 77 and 98

Succession Act 2006 (NSW), ss 59 and 99

Uniform Civil Procedure Rules 2005 (NSW), rr 20.26, 42.1 and 42.13A

Cases Cited:

Bartkus v Bartkus [2010] NSWSC 889

Calderbank v Calderbank [1975] 1 All ER 333

Carey v Robson [2009] NSWSC 1199

McCusker v Rutter [2010] NSWCA 318

Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392

Commonwealth of Australia vGretton [2008] NSWCA 117

Daniels v Hall (No 2) [2014] WASC 272

Detheridge v Detheridge [2019] NSWSC 183

Estate Vella [2020] NSWSC 421

Harkness v Harkness (No 2) [2012] NSWSC 35

Hinderry v Hinderry(No 2) [2016] NSWSC 1577

Megerditchian v Khatchadourian (No 2) [2020] NSWSC 112

Meres v Meres (No 2) [2017] NSWSC 523

Moussa v Moussa [2006] NSWSC 509

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Salmon v Osmond [2015] NSWCA 42

Singer v Berghouse (1993) 67 ALJR 708

Vella v Vella; Vella v Vella [2020] NSWSC 849

Category:

Costs

Parties:

In proceeding 2018/385260:
Sandra Vella (Plaintiff)
Vanessa Vella (Defendant)

In proceeding 2018/369508:
Vincent Tyronne Vella (Plaintiff)
Vanessa Vella (Defendant)

Representation:

In proceeding 2018/385260:
Counsel:
Ms K E Burke (Plaintiff)
Ms L M Clarke (Defendant)

Solicitors:
Chamberlains (Plaintiff)
Cunningham Legal (Defendant)

In proceeding 2018/369508:
Counsel:
Ms R Bianchi (Plaintiff)
Ms L M Clarke (Defendant)

Solicitors:
Armstrong Legal (Plaintiff)
Cunningham Legal (Defendant)

File Number(s):

2018/385260; 2018/396508

Publication restriction:

N/A

Judgment

1. On 2 July 2020, I published the principal judgment in these two related family provision proceedings (Vella v Vella; Vella v Vella [2020] NSWSC 849) (the Judgment). These reasons concern the question of costs of the two proceedings and assumes familiarity with the Judgment.

2. As in the Judgment, these reasons refer to the two plaintiffs and the defendant by their first names Vincent, Sandra and Vanessa. No disrespect is intended.

3. In summary, the Court ordered that Sandra be paid a lump sum of $150,000 for her education, maintenance and advancement in life out of the deceased’s estate. The Court ordered that Vincent’s claim for provision out of the deceased’s estate be dismissed.

4. As stated in the Judgment at [191], the parties indicated that they wished to be heard on the question of the costs. The Court made directions for the parties to file and serve written submissions, together with any affidavit evidence upon which they sought to rely, with a view that the question of costs be determined on the papers.

5. The Court has since received the written submissions of the parties. It has also received the following affidavit or documentary material from the parties:

1. the affidavit of Vanessa’s instructing solicitor affirmed on 20 July 2020; and

2. a bundle of correspondence provided by Sandra’s legal representatives, including two letters styled “Offer of Compromise” dated 24 July 2019 and 11 March 2020.

6. Order 4 of the orders made in proceeding 2018/385260 directed Vanessa to file and serve a notice of motion in the event that she sought to pursue the contention raised during the hearing to the effect that NSW Trustee and Guardian was not authorised to pay Sandra’s legal costs out of her protected estate in the absence of an order of the Court authorising that payment. No such notice of motion was filed by Vanessa within the time provided. Counsel for Vanessa confirmed in her written submissions in support of this application that she did not press that contention.

Offers of compromise and costs orders sought by the parties in proceeding 2018/385260 (Sandra’s proceeding)

Offers of compromise made in Sandra’s proceeding

7. On 9 May 2019, Sandra’s solicitor served a letter offering to compromise her claim against the deceased’s estate for $120,000 in addition to payment of her costs, which were then estimated to be $29,700.

8. On the same day, Vanessa’s former solicitor sent a letter by email to Sandra’s solicitor. The letter was expressed to be made “under the principles inCalderbank v Calderbank [1975] 1 All ER 333” and offered to compromise the proceeding on the following terms:

1. That pursuant to s 59 of the Succession Act 2006 (NSW), the Plaintiff of proceedings 2018/00385260 receive, by way of provision, out of the estate of Laura Anna Delores Vella (‘the deceased’) a lump sum of $70,000.

2.   That no interest is to be paid on the lump sum if it is paid within 42 days of the making of these orders; otherwise, interest is to paid on any unpaid part thereof, calculated at the rate prescribed by s 84A(3) of the Probate & Administration Act 1898 (NSW), from the 43rd day after the date of the making of these orders until the date of payment in full.

3.   That there be no order as costs to the intent that the Plaintiff will bear her own costs of the proceedings.

4.   That the Defendant’s costs, calculated on the indemnity basis, of the proceedings, be paid, or retained, as the case may be, out of the estate of the deceased.

9. The offer was expressed to be open for acceptance by Sandra for 28 days (that is, until 6 June 2019).

10. On 13 May 2019, Vanessa’s former solicitor served on Sandra’s solicitor an offer of compromise. The offer was expressed to be made in accordance with Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 20.26 and stated that the “closing date for acceptance of this offer is 28 days after the date on which this offer is made” (that is, on 10 June 2019). The terms of the offer provided for the following:

1.   Judgment for the plaintiff in the sum of $75,000;

2.   That there be no order as to costs with respect to the Plaintiffs costs;

3.   An order that the costs of the defendant be paid on an indemnity basis out of the estate of the late Estate of the Late Laura Anna Delores Vella.

11. On 22 May 2019, Sandra’s solicitor sent to Vanessa’s former solicitor a letter in which he formally rejected the offer of compromise served by Vanessa on 13 May 2019. In setting out his reasons for rejecting the offer, Sandra’s solicitor stated that the offer was “not in proper form in that it includes cost orders” and that the “proposed settlement sum would not be approved by the court, having regard to my client’s circumstances”.

12. In the same letter, Sandra’s solicitor made a further offer, expressed to be made “on the basis of the Calderbank principle”, pursuant to which it was stated that Sandra was willing to settle her claim for “not less then [sic] $115,00.00 [sic], plus costs, as agreed or assessed”. No time period was specified in which Vanessa could accept this offer, but it was stated that a further offer of compromise in identical form would be served by Sandra’s solicitor after the time had expired in respect of the offer of compromise served by Sandra’s solicitors on 9 May 2019.

13. On 29 May 2019, Vanessa’s former solicitors served on Sandra’s solicitor an offer of compromise. In the covering letter to that offer, Vanessa’s solicitor stated that Vanessa “rejects the Offer of Compromise and the Calderbank offer from the plaintiff”. I infer from the context in which this letter was sent that the offer of compromise and Calderbank offer referred to in this statement are the offer of compromise served on 9 May 2019 and the Calderbank offer served on 22 May 2019.

14. The enclosed offer of compromise by Vanessa was expressed to be made in accordance with UCPR r 20.26 and stated that the “closing date of acceptance of this offer is 28 days after the date on which this offer is made” (that is, 26 June 2019). The terms of the offer provided:

1.   Judgment for the plaintiff in the sum of $90,000;

2.   That there be no order as to costs with respect to the Plaintiffs costs;

3.   An order that the costs of the defendant be paid on an indemnity basis out of the estate of the late Estate of the Late Laura Delores Vella.

15. On 7 June 2019, Sandra’s solicitor sent a letter by email to Vanessa’s former solicitor in which he formally rejected Vanessa’s offer of compromise served on 29 May 2019 for the same reasons as those expressed in his letter to Vanessa’s solicitors dated 22 May 2019.

16. Attached to that email was a further offer of compromise by Sandra, which was expressed to be made in accordance with UCPR r 20.26 and was said to be “open for acceptance until 3 July 2019”. The offer provided that Sandra “resolve [her] claim” against the deceased’s estate “for $110,000.00, plus costs as agreed or assessed.”

17. Shortly after this letter and offer of compromise was served, Sandra’s solicitor sent a further letter by email on 11 June 2019 in which he stated that Sandra’s costs to the date of that letter were $27,500.00 inclusive of Counsel’s fees, all other disbursements, and GST.

18. On 20 June 2019, Vanessa’s former solicitor sent a letter by email to Sandra’s solicitor rejecting the offer of compromise served on 7 June 2019. The letter stated that Vanessa stood by the offer of compromise served on Sandra’s solicitor on 30 May 2019.

19. On 24 July 2019, Sandra’s solicitors served a letter enclosing another offer of compromise in the following terms:

1.   The Plaintiff offers to resolve his [sic] claim for $110,000.00.

2.   This offer is open for acceptance until 22 August 2019.

3. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005 (NSW).

20. The offer was silent as to costs. If the offer had been accepted, Sandra would have been entitled to an order that Vanessa pay Sandra’s costs on the ordinary basis up to the date of the offer: UCPR r 42.13A. The covering letter to the offer stated that Sandra’s costs were then $28,000 inclusive of GST, including counsel’s fees and all other disbursements.

21. On 19 August 2019, Vanessa (now self-represented) sent an email to Sandra’s solicitor in which she stated that she was no longer represented by her former solicitors. Attached to that email was another offer of compromise. The terms of that offer were as follows:

The defendant offers to compromise the whole of these proceedings on the following basis:

1.   Judgment for the plaintiff in the sum of $110,000;

2.   That there be no order as to costs with respect to the Plaintiff’s costs;

3.   An order that the costs of the defendant be paid on an indemnity basis out of the estate of the late Estate of the Late Laura Anna Delores Vella.

4.   The closing date for acceptance of this offer is 17 September 2019 which is 28 days after the date on which this offer is made; and

5. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005.

22. On 26 August 2019, Sandra’s solicitor sent an email in which he rejected Vanessa’s offer of compromise dated 19 August 2019. The email also restated the terms of the offer of compromise dated 24 July 2020 which offered to settle the proceeding for $110,000, plus costs. The offer was expressed to be made pursuant to the principles in Calderbank v Calderbank (supra).

23. Vanessa replied on 26 August 2019 rejecting the offer and stating that she would not be providing any counter offer.

24. On 11 March 2020, Sandra’s solicitor served another offer of compromise by email. In that offer, Sandra offered to resolve her claim for $110,000. The offer was expressed to be open for acceptance until 9 April 2020, as well as being made in accordance with UCPR r 20.26.

25. On 1 April 2020, Vanessa’s current solicitor served by email another offer of compromise. The terms of that offer were as follows:

1.   An order that the plaintiff receives by way of provision from the estate of the late Laura Anna Delores Vella a legacy of $115,000.

2.   An order that the plaintiff’s summons otherwise be dismissed.

3.   The offer of compromise is open for acceptance for a period of 20 days from the date of this offer.

4. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005.

26. This offer was subsequently withdrawn in circumstances described in detail by Lindsay J in Estate Vella [2020] NSWSC 421. In short, Vanessa had made the offer on the erroneous assumption that, if Sandra accepted the offer, Sandra would have to pay her own costs. As noted above, UCPR r 42.13A would in fact require Vanessa to pay Sandra’s costs on the ordinary basis up to the date of the offer if Sandra accepted the offer.

27. As summarised in the Judgment at [10], Sandra’s costs of the proceedings up to and including the conclusion of the hearing are $105,000 on an indemnity basis or $81,000 on the ordinary basis (all figures inclusive of GST). Vanessa’s costs of the proceedings up to and including the conclusion of the hearing are $59,573 on an indemnity basis and $41,701 on the ordinary basis (all figures inclusive of GST).

Costs orders sought by the parties in Sandra’s proceeding

28. Sandra seeks an order that her costs of the proceeding be paid out of the estate on the ordinary basis up to and including 24 July 2019 and on an indemnity basis thereafter. The outcome of the proceeding was more favourable to Sandra than the offer of compromise made by Sandra on 24 July 2019 and not accepted by Vanessa.

29. Vanessa seeks an order that Sandra’s costs be paid out of the estate on the ordinary basis, capped at the amount of $70,000. Vanessa also seeks an order precluding Sandra’s legal representatives from recovering any costs in excess of any such cap from Sandra’s protected estate.

30. As I understand it, it is common ground between the parties that Vanessa’s costs of Sandra’s proceeding should be ordered to be paid out the estate on an indemnity basis.

Offers of compromise and costs orders sought by the parties in proceeding 2018/369508 (Vincent’s proceeding)

Offers of compromise made in Vincent’s proceeding

31. On 13 May 2019, Vanessa’s former solicitors served an offer of compromise on Vincent’s solicitors. By that offer, Vanessa offered to compromise the whole of the proceeding on the basis that there be judgment for Vincent in the sum of $50,000, there be no order with respect to Vincent’s costs, and that Vanessa’s costs be paid on an indemnity basis out of the estate. The closing date for acceptance of the offer was expressed to be 28 days from 13 May 2019. The offer was expressed to be made in accordance with UCPR r 20.26.

32. On 7 June 2019, Vincent’s solicitor served on Vanessa’s former solicitor another offer of compromise. The offer stated that Vincent offered to compromise the proceedings on the basis that Vanessa pays to him the sum of $95,000 by way of provision from the estate, in addition to Vincent’s costs being paid out of the estate. The offer was expressed to be open for acceptance for a period of 28 days from the date of the offer, and stated that it was made in accordance with UCPR r 20.26. In the covering letter to the offer, Vincent’s solicitor stated that in the event that the offer does not comply with the rules of court, the letter would be relied upon on the basis of the principles expressed in Calderbank v Calderbank (supra).

33. On 19 June 2019, Vanessa’s former solicitor sent a letter to Vincent’s solicitor in which she rejected Vincent’s offer of compromise served on 7 June 2019. The letter went on to state that Vanessa offered to compromise the whole of the proceedings on the basis that there be judgment for Vincent in the sum of $60,000, that there be no order as to costs with respect to Vincent’s costs, and that Vanessa’s costs be paid out of the estate. The closing date for acceptance of the offer was stipulated to be 4 July 2019, which was 14 days after the date on which the offer was made. The offer was also expressed to be made in accordance with UCPR r 20.26.

34. On 11 September 2019, Vanessa (now self-represented) served by email another offer of compromise pursuant to which Vanessa offered to compromise the whole of the proceedings on the basis that there be judgment for Vincent in the sum of $60,000, that there be no order with respect to Vincent’s costs, and that Vanessa’s costs be paid out of the estate on an indemnity basis. The closing date for acceptance of the offer was expressed to be 9 October 2019 which was 28 days after the date on which the offer was made. The offer stated that it was made in accordance with UCPR r 20.26.

35. On 1 April 2020, Vanessa’s current solicitor served an offer of compromise in which Vanessa offered to compromise the proceeding on the following basis:

1.   An order that the plaintiff receive by way of provision from the Estate of the Late Laura Anna Delores Vella a legacy of $70,000;

2.   An order that the plaintiff’s summons otherwise be dismissed;

3.   This offer is open for acceptance for a period of 20 days from the date of this offer.

4. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005.

36. In Estate Vella [2020] NSWSC 421, Lindsay J recorded at [20] that Vincent had accepted this offer before Vanessa applied to the Court for orders granting leave to withdraw the offer. His Honour granted leave to Vanessa to withdraw the offer on 17 April 2020 and made a declaration that no contract for compromise of the proceeding had resulted from Vincent’s purported acceptance of the offer.

37. On 20 April 2020 (two days before the commencement of the hearing), Vincent’s solicitor served by cover of letter another offer of compromise. In that offer, Vincent agreed to compromise the whole of his claim against the estate on the follow basis:

1. Pursuant to s 59 of the Succession Act 2006 (NSW), the Defendant is to pay the Plaintiff the sum of $70,000 by way of provision from the estate of the late Laura Anna Delores Vella (“the Deceased”) in lieu of the legacy he receives under the will of the deceased.

2.   That the Plaintiff’s costs as agreed or assessed on the ordinary basis be met out of the estate of the Deceased.

3.   This offer is open for a period of 28 days from the date of this offer.

4. This offer of compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules.

38. As summarised in the Judgment at [10], Vincent’s costs of the proceedings up to and including the conclusion of the three day hearing are $112,000 on an indemnity basis or $80,000 on the ordinary basis. As noted in [27] above, Vanessa’s costs of the proceedings up to and including the conclusion of the hearing are $59,573 on an indemnity basis and $41,701 on the ordinary basis (all figures inclusive of GST).

Costs orders sought by the parties in Vincent’s proceeding

39. Vincent submitted that costs should not follow the event in all the circumstances of this case. He submitted that Vanessa’s costs should be paid out of the deceased estate on an indemnity basis whilst there should be no order as to his own costs (with the intention that he will bear his own costs).

40. Vanessa submitted that Vincent should be ordered to pay one third of her costs of the proceeding. I assume that Vanessa intended that, if such an order were made, the balance of her costs would be ordered to be paid out of the deceased estate on an indemnity basis.

41. It was not submitted on behalf of Vanessa that Vincent should be ordered to pay any part of her costs on an indemnity basis by reason of failure to accept any of her offers of settlement.

Costs orders in family provision proceedings

42. The relevant principles to be applied in relation to the question of costs in family provision matters have been helpfully summarised by Hallen J in Meres v Meres (No 2) [2017] NSWSC 523 at [35]-[38], citing his Honour’s earlier judgment in Hinderry v Hinderry (No 2) [2016] NSWSC 1577 at [50]–[64]. I gratefully adopt his Honour’s summary of those principles which enables me to set out the applicable principles that are pertinent to the present dispute succinctly.

43. Section 98 of the Civil Procedure Act 2005 (NSW) provides that costs are in the discretion of the Court, which has full power to decide who will pay costs to whom and to what extent, whether on the ordinary basis or on an indemnity basis.

44. This provision must be read alongside s 99(1) of the Succession Act 2006 (NSW) which empowers the Court to award costs in family provision proceedings to be paid out of the estate (or notional estate) as the Court thinks fit. Section 99(1) of the Succession Act confers on this Court an unfettered discretion as to when costs are to be paid out of the estate. However, as Hallen J said in Hinderry v Hinderry (No 2) (supra) at [54], the provision does not apply to costs as between party and party, but only as to when and how much costs are to be paid out of the estate.

45. In an appropriate case, the Court may also make an order capping the costs to be recovered by one party from the estate: see Detheridge v Detheridge [2019] NSWSC 183 at [174]-[177] and the authorities referred to therein.

46. While s 98 of the Civil Procedure Act confers a broad discretion on the Court to award costs, it is well known that this discretion must be exercised judicially and in accordance with established principles or legislative provisions which operate as a fetter on the exercise of the discretion: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65]. One such fetter on this discretion is UCPR r 42.1 which provides that costs are to follow the event unless it appears to the court that some other order should be made.

47. It has been said in a number of previous decisions that, in family provision proceedings, the Court may be more ready to depart from the usual rule in UCPR r 42.1: see, for example, Bartkus v Bartkus [2010] NSWSC 889 at [24], citing Moussa v Moussa [2006] NSWSC 509; Carey v Robson [2009] NSWSC 1199. In an oft-cited passage from Singer v Berghouse (1993) 67 ALJR 708, Gaudron J said (at 709, emphasis added):

“Family provision cases stand apart from cases in which costs follow the event. Leaving aside cases under the Act which, in s 33, makes special provision in that regard, costs in family provision cases generally depend on the overall justice of the case. It is not uncommon, in the case of unsuccessful applications, for no order to be made as to costs, particularly if it would have detrimental effect on the applicant’s financial position. And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate.”

48. In Chapple v Wilcox (2014) 87 NSWLR 646; [2014] NSWCA 392, Barrett JA (with whom Basten and Gleeson JJA agreed) explained (at [139]) the Court’s task when considering the “overall justice of the case” in the context of contemporary family provision litigation in New South Wales:

“Where the application for a family provision order is dismissed, the prima facie principle with respect to costs is as stated in rules 42.1 and 42.20(1) of the Uniform Civil Procedure Rules - that is, there should be an order that the unsuccessful plaintiff pay the defendant's costs. In Jvancich v Kennedy (No 2) [2004] NSWCA 397, Giles JA observed (with Handley JA and McColl JA agreeing) that, in circumstances of that kind, the "overall justice of the case" - the expression employed by Gaudron J in Singer v Berghouse - is "not remote from costs following the event". There is, of course, discretion to depart from the prima facie principle for good reason, even to the extent of ordering that the unsuccessful plaintiff's costs be paid out of the estate; and the court should apply the "liberality and discrimination" to which E M Heenan J referred.”

49. In the last sentence immediately above, Barrett JA was referring to the judgment of E M Heenan J in Daniels v Hall (No 2) [2014] WASC 272. After referring to the practice of the court declining to make costs orders against an unsuccessful family provision claimants as “leniency” which had a “long provenance”, his Honour said at [32]:

“… but it seems clear that, in more modern times, particularly with principles of modern case management, the tendency has been to move away from that position in favour of the more general principle of costs following the event but with attendant liberality and discrimination before adopting such a position in any particular case.”

50. In Salmon v Osmond [2015] NSWCA 42, Beazley P (with whom McColl and Gleeson JJA agreed) reaffirmed this modern approach. Her Honour said (at [174]):

“Nonetheless, the “overall justice of the case” referred to by Gaudron J is “not remote from costs following the event”: Jvancich v Kennedy (No 2) [2004] NSWCA 397. The only difference is that family provision cases call for additional “liberality and discrimination” in considering whether to exercise the discretion to override the usual rule: Chapple v Wilcox [2014] NSWCA 392 at [138]-[139].”

51. It is impossible to state exhaustively the circumstances in which the overall justice of the case will warrant a departure from the usual rule in UCPR r 42.1. Each case will turn on its particular facts. But there have been many decisions where the Court has made a different cost order. Some of those decisions are collected by Hallen AsJ (as his Honour then was) in Harkness v Harkness (No 2) [2012] NSWSC 35 at [18], as recited by his Honour in Meres v Meres (No 2) (supra) at [35]-[38] and Hinderry v Hinderry (No 2) (supra) at [50]–[64]. Those decisions show that the following factors may be relevant considerations in assessing the overall justice of the case:

• whether one party has engaged in unreasonable conduct in the commencement or maintenance of the proceedings which has resulted in the other party (or parties) to the proceeding incurring unnecessary costs;

• whether an applicant’s claim for provision out of an estate is frivolous, vexatious or made without reasonable prospects of success;

• whether an applicant’s claim, although unsuccessful, was otherwise reasonable, meritorious or borderline; and

• the relative size of the deceased estate.

52. In some cases, the financial position of an unsuccessful plaintiff may be a relevant consideration in favour of making no order as to the successful defendant’s costs. As Young JA said in McCusker v Rutter [2010] NSWCA 318 at [34]:

“Examples of situations where courts have thought no order should be made against an unsuccessful plaintiff are afforded by Sherborne Estate (No 2): Vanvalen v Neaves (2005) 65 NSWLR 268 per Palmer J and Moussa v Moussa [2006] NSWSC 509 per Barrett J. Whilst it is clearer in a case where if an order for costs is made against an unsuccessful plaintiff he or she will instantly become impecunious and so may be able to make a fresh application under the Act so that it is counter-productive to make an order as to costs against such a plaintiff, what Gaudron J said in Singer shows that it is not only in such cases that it may be inappropriate to make an order for costs against an unsuccessful plaintiff under the Act."

53. However, it is important to bear in mind that the mere fact that an adverse cost order will be significantly detrimental to an unsuccessful plaintiff’s financial position will not ordinarily supply a good reason to depart from the usual rule. In Chapple v Wilcox (supra), the respondent was unsuccessful in his claim for a family provision order. He submitted that if an adverse costs order were made against him, he would be instantly rendered impecunious (relying in part on what Young JA had said in McCusker v Rutter (supra) at [34]). This submission was rejected by the Court of Appeal. Barrett JA (with whom Gleeson JA agreed) said (at [141]):

“Generally speaking, of course, a litigant's financial position is irrelevant when it comes to the exercise of the costs discretion, particularly where that litigant is a plaintiff. Having subjected the defendant to court proceedings and lost, a plaintiff without means will generally not be able to resist a costs order just because he or she cannot pay. That general principle may be subject to some relaxation in family provision cases by application of "liberality and discrimination" - but only, I think, where the claim, although ultimately unsuccessful, had merit and involved a genuine question whether the scheme of testamentary benefaction in fact applying was, in the particular circumstances, one reflecting community standards. In Jvancich v Kennedy (No 2) (above), Giles JA recognized an analogy, as to costs, between family provision cases and probate proceedings. He noted that, in probate cases, departure from the rule that costs follow the event is often recognized as appropriate where the testator has been the cause of the litigation - where, for example, the will is ambiguous. In such cases, the costs of unsuccessfully opposing the executor may be ordered to be paid out of the estate. It may be said, in the same way, that if the testator has been the cause of family provision litigation by failing to make some disposition that he or she arguably should have made in accordance with community standards, the costs burden should fall on the estate, even if the ultimate decision of the court does not accommodate that disposition.”

Consideration and determination

Sandra’s proceeding

54. Applying the principles referred to above, I have concluded for the reasons below that the Court should make the order sought by Sandra that her costs be paid out of the estate on the ordinary basis up to and including 24 July 2019 and on an indemnity basis therefore.

55. In my view, Sandra’s offer made on 24 July 2019 did not strictly comply with the requirements of UCPR r 20.26 because it did not set out the proposed orders for disposal of Sandra’s claim. The offer simply stated: “The Plaintiff offers to resolve his [sic] claim for $110,000.” The offer did not set out the orders proposed under s 59 of the Succession Act or the orders proposed under s 77 of the Civil Procedure Act concerning the payment of the lump sum amount.

56. In written submissions dated 17 July 2020, Vanessa conceded that Sandra’s offers could be taken to have been made in accordance with the principles in Calderbank v Calderbank (supra) to the extent that they did not meet the requirements of UCPR r 20.26. Those principles are well-established. For a valid Calderbank offer to be a basis for indemnity costs, the offer must represent a genuine compromise which the recipient unreasonably failed to accept. All the relevant circumstances must be considered in determining whether it is appropriate to exercise the discretion to award indemnity costs. The onus is on the party making a Calderbank offer to satisfy the Court that it should exercise the costs discretion in its favour: see Commonwealth of Australia v Gretton [2008] NSWCA 117 at [44]-[46] and the authorities there referred to.

57. There can be no doubt that Sandra’s offer made on 24 July 2019 represented a genuine compromise. I did not understand Vanessa to contend otherwise in her written submissions.

58. In my view, Vanessa acted unreasonably in not accepting Sandra’s offer made on 24 July 2019 by consenting to orders that a lump provision in the amount of $110,000 be paid to the NSW Trustee and Guardian as manager of Sandra’s protected estate and an order for Sandra’s costs on the ordinary basis to be paid out the deceased estate.

59. As counsel for Sandra submitted in her written submissions dated 16 July 2020, at the time that Vanessa was considering the 24 July 2019 offer, she had available to her the evidence of Sandra’s disability, future needs and estimated costs of meeting those future needs in the form of the report of Mr Pringle dated 28 January 2019 (annexed to an affidavit of Mr Chandra filed on 6 February 2019). The orders made in Sandra’s favour following the contested hearing in April 2020 were based on Mr Pringle’s evidence, as updated by his further report dated 6 March 2020.

60. I acknowledge the submission made on behalf of Vanessa that Mr Pringle’s evidence in his report dated 28 January 2019 to the effect Sandra would require an amount of approximately $116,000 to meet her likely future needs was “untested”. That is always the case when a matter is settled before it proceeds to trial. It was also submitted on behalf of Vanessa that Mr Pringle’s evidence was “based on a best-case scenario”. This submission was not developed. I assume that it is essentially a repeat of the complaint made during the hearing that Mr Pringle’s reports were unsatisfactory because they identified possible future needs and did not set out detailed reasons for his estimates of the potential costs of those future needs. As I said in the Judgment at [178]-[181], those complaints have some merit but it is important to recognise that an assessment of future needs is an inherently uncertain exercise. This is particularly so in the case of Sandra because it is necessary to have regard to the possibilities concerning her future state of health (taking her existing disability and health problems as the starting point), the range of services that she may require in the future depending on her state of health and the myriad of possibilities concerning the extent to which those services may or may not be funded by government funding programs in the future. No expert report could remove these uncertainties, and Mr Pringle’s report of 28 January 2019 provided information that Vanessa should reasonably have taken into account in deciding upon her response to Sandra’s offer of 24 January 2019.

61. Indeed, it appears likely that Vanessa did take Mr Pringle’s report into account. Her response to Sandra’s offer of 24 July 2019 was to make a counter-offer on 19 August 2019 to settle Sandra’s proceeding for the same sum offered by Sandra - $110,000 – but on the basis that that there would be no order as to Sandra’s costs, so that Sandra would be left to pay her own costs. It is plain from the history of the offers of compromise outlined above that Vanessa steadfastly refused throughout the negotiations to pay any part of Sandra’s costs.

62. The amount of Sandra’s costs at the time of her offer made on 24 July 2019 was $28,000 (including GST). In my opinion, that was a modest amount having regard to the fact that Sandra’s preparation for the hearing up to that point had included putting on expert evidence from Mr Pringle. It was unreasonable, in my opinion, for Vanessa not to accept that this modest amount was a cost that Sandra had properly incurred in establishing the quantum of her claim in circumstances where, until late May 2019, Vanessa had valued Sandra’s claim at some $50,000 less than the amount for which Sandra had been offering to settle the proceeding. It was unreasonable for Vanessa to expect Sandra to bear all of those costs herself out of her modest savings which were then $80,000, which would have reduced the contingency fund otherwise available to Sandra to cope with the vicissitudes of life as a disabled, single person in the future.

63. It was submitted on behalf of Vanessa that it was not unreasonable for her to reject Sandra’s offer made on 24 July 2019 because Vanessa had to consider the needs of both Sandra and Vincent, and there was uncertainty surrounding whether the Court would approve a settlement of Sandra’s claim while Vincent’s claim remained unresolved. It was also submitted that there was a risk that, if Vincent did not agree with the settlement of Sandra’s claim, he may have joined Sandra as a defendant to his own proceeding as the holder of notional estate.

64. I reject these submissions. The value of the deceased estate, as agreed at the final hearing, was $758,558. As the executor, Vanessa would have known that the value of the estate was in the vicinity of this amount when she decided not to accept Sandra’s to resolve her claim for $110,000 and pay Sandra’s costs of approximately $28,000 from the estate. As revealed by the history of the offers of compromise in Vincent’s claim set out above, Vincent made an offer in June 2019 to compromise his claim for $95,000. There was no question that the estate had sufficient funds for Vanessa to compromise both claims if she had wished to do so, leaving significant funds remaining for Vanessa as the residual beneficiary (in circumstances where Vanessa ultimately elected not to rely on evidence of her own financial circumstances in the proceedings). Her ability to agree to a compromise of one claim was not dependent on the outcome of the negotiations (or, if negotiations failed) the proceeding in relation to the other claim. Settlement of Sandra’s claim by Vanessa accepting the offer of compromise made on 24 July 2019 would have left the estate with sufficient funds to pay any amount that may have been ordered by the Court in respect of Vincent’s claim, meaning that the risk of Vincent joining Sandra as a defendant to Vincent’s proceeding was remote.

65. As I have noted above, Vanessa submitted that Sandra’s costs should be paid out of the estate only on the ordinary basis and capped at the amount of $70,000 in order to ensure that they were proportionate to the size of the estate. It was submitted that the issue to be decided in Sandra’s proceeding was limited to the quantum of the order that should be made in her favour, as Vanessa had always conceded that some additional provision should be made for Sandra. It was also submitted that the nature and quantity of the documents filed in support of Sandra’s claim and the nature of the legal arguments were such that it is difficult to justify the costs that have been incurred.

66. I reject these submissions for the following reasons:

1. the question of quantum was hard fought by Vanessa. Sandra and her legal representatives cannot be criticized for preparing for a hard fight in relation to quantum;

2. nor can Sandra be criticized for serving the two reports of Mr Pringle. The suggestion implicit in Vanessa’s submissions that these reports were not costly is unfounded. There is simply no evidence before the Court as to the approximate costs of these reports;

3. it was also apparent from the numerous affidavits filed by Vanessa and from the amendments made to the statement of assets and liabilities of the estate during the course of the hearing that significant time was expended by the parties in ultimately reaching agreement about those assets and liabilities. That would also have added to Sandra’s legal costs; and

4. Vanessa prolonged the hearing, thereby increasing all parties’ legal costs, by raising issues (which had not been pleaded or otherwise notified to the NSW Trustee and Guardian) concerning whether the NSW Trustee and Guardian was authorised to pay Sandra’s legal costs out of her protected estate in the absence of an order of the Court authorising that payment. Vanessa was given the opportunity to pursue this issue with proper notice to the NSW Trustee and Guardian at the same time as making submissions about the costs orders to be made in this proceeding. Vanessa elected not to do so.

67. For those reasons, and the reasons given above concerning Vanessa’s rejection of Sandra’s offer made on 24 July 2019, there will be no order capping the amount of Sandra’s costs. It is therefore unnecessary to address Vanessa’s submissions that further orders should be made to prevent Sandra’s legal representatives from recovering any amount in excess of the cap from Sandra’s estate (subject to the NSW Trustee and Guardian’s decision whether to pay those legal costs from the estate).

Vincent’s proceeding

68. The basis on which Vanessa sought an order that Vincent pay one third of her costs was that Vincent’s approach to settlement negotiations had been unrealistic and unreasonable. It was submitted that this had not only resulted in the failure to settle Vincent’s claim, but had also precluded Vanessa from settling Sandra’s claim.

69. For the reasons given in [64] above, I reject the submission that Vincent’s conduct of the settlement negotiations concerning his own claim precluded or hindered Vanessa from settling Sandra’s claim.

70. However, I accept Vanessa’s submission that Vincent’s approach to the potential settlement of his own claim was unreasonable. In June and September 2019, Vincent had an opportunity to accept offers made by Vanessa which would have settled his claim for $60,000 on the basis that he pay his own costs. At that stage, Vincent’s costs would not have included the cost of final preparation for hearing or the costs of the three day hearing. The principal matters that resulted in the dismissal of Vincent’s claim – the nature of his relationship with the deceased, the deceased’s clear testamentary wishes expressed very shortly before her death, and the net assets and earning capacity of Vincent and his partner who provide mutual financial support to one another – must have been well known to Vincent. In my opinion, it was therefore unreasonable of Vincent not to accept those offers.

71. Vanessa’s offers of compromise made on 19 June 2019 and 12 September 2019 did not comply with UCPR r 20.26 because they were, in substance, offers to settle for a monetary sum to be paid to Vincent inclusive of Vincent’s costs. In addition, the 19 June 2019 offer was open for acceptance for a period of less than 28 days.

72. Nevertheless, they were genuine offers of compromise and Vincent’s unreasonable conduct in refusing them may be taken into account in the exercise of the costs discretion: Megerditchian v Khatchadourian (No 2) [2020] NSWSC 112 at [36].

73. However, as I have already noted above, Vanessa does not seek an order requiring Vincent to pay any part of her costs on an indemnity basis on the basis of Vincent’s failure to accept the offers. Rather, Vanessa seeks an order that, in addition to bearing his own costs, Vincent pays one third of her costs of the proceeding on the ordinary basis with the balance of Vanessa’s costs of Vincent’s proceeding to be paid out of the estate on an indemnity basis.

74. I have concluded that the order sought by Vanessa is the appropriate order to make in the exercise of the Court’s discretion, applying the principles summarised above and in all the circumstances of this case. The order takes into account that Vincent’s claim was unsuccessful and that he acted unreasonably in failing to accept the June and September 2019 settlement offers. At the same, the order recognises that:

1. Vincent’s claim was not frivolous or vexatious (I accept his submission to that effect);

2. Vincent will bear his own costs of a hearing which extended over three days because his claim was heard together with Sandra’s claim; and

3. Vanessa’s conduct of that hearing extended the hearing time, as I have referred to in [66] above (although some of those aspects of Vanessa’s conduct were directly relevant only to Sandra’s claim, they prolonged the time taken for the hearing of the two proceedings together).

75. For all of those reasons, I consider that departure from the usual rule that costs of follow the event is appropriate, but only to the extent that Vincent should be required to pay one third of Vanessa’s costs rather than the whole of her costs of his claim.

Costs of Vanessa’s application to withdraw offers of compromise

76. The orders made by Lindsay J on 17 April 2020 included an order that the costs of Vanessa’s application to withdraw the offers of compromise be the parties’ costs in the proceedings. The orders below as to the costs of Sandra’s proceeding and Vincent’s proceeding therefore include the costs of that application in each proceeding.

Conclusions and orders

77. For the reasons above, I make the following orders:

Orders in proceeding 2018/385260 (Sandra Vella)

1. Order that the plaintiff’s costs of the proceeding be paid out of the estate of the late Laura Anna Delores Vella (the Estate):

1. on the ordinary basis, in an amount agreed between the parties or assessed, up to and including 24 July 2019; and

2. on an indemnity basis, in an amount agreed between the parties or assessed, from 25 July 2019.

2. Order that the defendant’s costs of the proceeding be paid out of the Estate on an indemnity basis.

Orders in proceeding 2018/369508 (Vincent Vella)

1. Make no order as to the plaintiff’s costs of the proceeding, with the intention that the plaintiff will bear his own costs.

2. Order the plaintiff to pay one third of the defendant’s costs of the proceeding on the ordinary basis, in an amount agreed between the parties or assessed.

3. Order that the balance of the defendant’s costs of the proceeding be paid out of the estate of the late Laura Anna Delores Vella on an indemnity basis.

**********

Decision last updated: 06 August 2020