Whitington v Whitington (No 2) - [2009] SASC 178

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
WHITINGTON v WHITINGTON & ANOR (NO 2)
[2009] SASC 178
Judgment of The Honourable Justice White
26 June 2009
PROCEDURE - COSTS
Following a trial which decided a series of claims regarding a deceased estate, the parties to the action applied for various orders as to costs.
Whether r 76 of the Supreme Court Rules 1987, which governs the costs of a Court conducted mediation, should extend to the costs incurred by the parties in the period between two attempts at mediation - only those costs which related to one or other of the mediations will form part of the a costs order made in respect of the mediations.
Whether the first defendant should pay the plaintiff's costs of and incidental to an appeal he lodged against an order of a Master of this Court when the orders made at trial reflected the order of the Master - first defendant to pay the plaintiff's costs of and incidental to the appeal.
Whether each party should recover their costs from the estate from the plaintiff's successful claim under the Inheritance (Family Provision) Act 1972 (SA) (IFP Act) - whether the plaintiff should pay the defendants' costs of her successful IFP Act claim - whether, having regard to the size of the estate, less than full costs should be awarded - no basis found upon which plaintiff should pay costs of defendants - all parties to recover from the estate their costs of and incidental to the plaintiff's IFP Act claim - due to the size of the estate, these costs to be party/party costs only.
Whether the estate should pay the costs of the defendants' unusccessful IFP Act claims - as defendants' IFP Act claims abandoned, estate should not pay these costs - no order made as to costs of defendants' IFP Act claims.
Whether defendants should pay to the estate the costs it incurred in defending allegations and claims made by the defendants against the estate - whether defendants raised issues unnecessarily - whether conduct of defendants in pursuing claims until the eve of trial caused the estate to incur unnecessary costs - conduct of defendants caused the estate to incur additional costs - defendants to pay estate for costs incurred in defending the allegations and claims they raised.
Inheritance (Family Provision) Act 1972 (SA) s 9; Administration and Probate Act 1919 (SA) s 51; Supreme Court Act 1935 (SA) s 65; Supreme Court Rules 1987 r 52, r 76; Trustee Act 1936 (SA) s 35, referred to.
Whitington v Whitington & Anor [2009] SASC 142; Parente v Parente & Porter (1982) 29 SASR 310; Re McCaffrey (1982) 29 SASR 582; Bowyer v Wood (2007) 99 SASR 190, applied.

WHITINGTON v WHITINGTON & ANOR (NO 2)
[2009] SASC 178
Civil

WHITE J: On 21 May 2009, I delivered judgment on the plaintiff’s application under the Inheritance (Family Provision) Act 1972 (SA) (IFP Act).[1] I found that the late Philip Henry Whitington (Philip) had made inadequate provision for the maintenance of the plaintiff (his widow) and directed that his estate’s half interest in a property at Glenelg be sold. I ordered that 60.8 per cent of the net proceeds, after discharge of the estate’s liabilities, be paid to the plaintiff with the balance to be paid to the first defendant (Philip’s elder son, Timothy).
[1] Whitington v Whitington & Anor [2009] SASC 142.
Since then I have heard the parties as to the formal orders which should be made, and as to costs. This decision concerns the question of costs.
The costs issues in this action are significant. On the first day of trial I was informed that the total costs incurred by the plaintiff in relation to this litigation were of the order of $125,000, and that the total costs incurred by the defendants were of the order of $100,000. Costs of this order are quite disproportionate to the size of Philip’s estate. The total costs of the parties exceeds the agreed net value of Philip’s estate at the time of his death on 23 April 2001 ($202,547). Even allowing for the increase in the net value of the estate which is attributable to the increase since Philip’s death in the value of the Glenelg property, the costs incurred by the parties are disproportionate to the amounts at stake in the litigation.
Background
In order to provide some context to the issues concerning costs, it is necessary to outline the background to the proceedings.
Philip died on 23 April 2001. The plaintiff was granted probate of his will on 13 February 2004.
Philip intended to provide for the plaintiff by giving her a life interest (terminable in the event of her remarriage) in his half interest in the Glenelg property with the intention that the plaintiff could continue to reside in it. On the death or remarriage of the plaintiff, the interest in this property was to pass to Timothy. As I found in my reasons of 21 May 2009, there were two difficulties with that bequest. First, the estate’s liabilities well exceeded its liquid assets, with the consequence that the plaintiff could discharge those liabilities only by selling the estate’s interest in the Glenelg property. Secondly, the fact that Philip owned only one half of the Glenelg property meant that he could not pass to the plaintiff a right to exclusive possession or occupation of it.
In 2004, the plaintiff proposed selling the estate’s interest in the Glenelg property with a view to discharging the estate’s liabilities and with a view to acquiring more suitable accommodation. In relation to the sale of the property in order to discharge debts, the plaintiff was proposing to exercise the powers vested in her as executor by s 51(1) of the Administration and Probate Act 1919 (SA) (APA). The defendants were opposed to a sale of the property as it had been held in the Whitington family for over 100 years. Timothy lodged a caveat on the estate’s title to the Glenelg property, forbidding the registration of any dealing with the estate’s interest unless such dealing was made subject to the interest he had in the property arising under Philip’s will.
The plaintiff commenced these proceedings on 12 September 2005, seeking an order for the removal of Timothy’s caveat. Prior to the commencement of these proceedings, the Commonwealth Bank had commenced proceedings against the estate to enforce the payment to it of a liability incurred by Philip during his lifetime.
The plaintiff’s application for the removal of the caveat was successful. On 8 February 2006, a Master of this Court made orders directing the Registrar General to remove the caveat and, to the extent that it was necessary to do so, conferred power on the plaintiff under s 51 of the APA to sell the estate’s interest in the Glenelg property, subject to a condition that, after paying the costs of sale and discharging the estate’s liability to the Commonwealth Bank, the net proceeds of sale be paid into the Suitors’ Fund to abide the further order of this Court. Subsequently, the Master ordered that the costs incurred by both the plaintiff and Timothy relating to the plaintiff’s application should be paid from the estate as an expense of the administration.
Timothy filed an appeal against the orders made by the Master. However, the appeal did not proceed to a hearing. On 12 April 2006, upon Timothy giving an undertaking as to damages, Sulan J made orders staying the execution of the orders made by the Master, staying the hearing of the appeal, directing that the action proceed on pleadings, and directing that Timothy have the carriage of the action.
On 8 May 2006, Timothy filed a Statement of Claim. He alleged that the proceeds of Philip’s superannuation policies which had been paid to the plaintiff in her personal capacity were an asset of the estate. Timothy alleged, in the alternative, that the plaintiff had made material misrepresentations to his brother Edward and him resulting in them foregoing the chance to have some or all of the superannuation monies paid to them. Timothy also alleged that the plaintiff wrongly claimed to be a creditor of Philip’s estate; that, in various respects, the plaintiff had failed to administer Philip’s estate properly; that the plaintiff had failed to pay the outgoings on the Glenelg property as required by Philip’s will, and that she had thereby renounced her interest in the life estate granted to her by the will; and that Philip’s will could not, as a matter of construction, pass to the plaintiff a life interest in his one half share in the Glenelg property. Finally, Timothy disputed the plaintiff’s entitlement to sell the estate’s interest in the Glenelg property in order to realise monies which could be used to pay the estate’s debts.
On 22 May 2006, the plaintiff filed a Defence to Timothy’s Statement of Claim, in effect denying the allegations made against her.
Sulan J originally contemplated a trial of the action commencing on 19 July 2006. For reasons which are not clear to me, the trial did not then proceed. The parties then resolved on mediation. Sulan J was appointed as the mediator[2] and a mediation was conducted on 31 October 2006. That mediation did not achieve a settlement.
[2] Supreme Court Act 1935 (SA) s 65; Supreme Court Rules 1987 r 76.
Between 31 October 2006 and 9 November 2007, Sulan J conducted a number of directions hearings. It is not clear what occurred at those directions hearings as, on 18 December 2007, Sulan J directed that the transcripts of the proceedings at each of those directions hearings, together with the documents filed by the parties in relation to those hearings, should be sealed and not opened without the order of a Judge. It is, however, apparent that Sulan J conducted a further mediation on 15 November 2007 and 18 December 2007, again without a settlement of the action being reached.
Shortly after the conclusion of the second mediation, the plaintiff applied for, and was granted, leave to amend her Defence so as to add a Counterclaim seeking provision under the IFP Act. Timothy was also given leave to amend his Statement of Claim. His brother Edward was added as a defendant. The defendants’ Amended Statement of Claim made a new allegation that the plaintiff had breached her fiduciary duties as executor of Philip’s estate. In addition, each of Timothy and Edward made claims under the IFP Act.
Timothy’s and Edward’s defence to the plaintiff’s counterclaim denied her entitlement to an order under the IFP Act.
These were the pleadings upon which the matter proceeded to trial on 2 March 2009. The parties provided a statement of agreed facts in order to facilitate the conduct of the trial.
The Costs of the Mediations
This action is governed by the Supreme Court Rules 1987 (the 1987 Rules). Accordingly, r 76.03 applies. It provides:
76.03A mediation may be conducted at any stage of an action in accordance with the following provisions:
…
Costs of Mediation to be Costs in the Cause
(f)Unless otherwise agreed or ordered by the Court, the costs of the mediation shall be borne by each party and shall not be recoverable as costs of the action.
Although there is an inconsistency between the heading to r 76.03(f) and the content of that subrule, it is clear enough that, in the absence of an order by the Court or agreement to the contrary by the parties, the costs of a mediation conducted under r 76 are to be borne by each party and are not to be recoverable as costs in the action.
The parties were agreed that each should bear their own costs in respect of the mediations of 31 October 2006, 15 November 2007 and 18 December 2007. The defendants contended, in addition, that the parties should bear their own costs in respect of all attendances before Sulan J in the period from 14 September 2006 to 18 December 2007 inclusive and in respect of all documents filed in the Court in the period from 30 October 2006 to 15 November 2007 inclusive. I see no reason to make the additional order proposed by the defendants. It will be a matter for the Master carrying out the costs adjudication to determine whether the attendances and documents referred to formed part of the mediations conducted before Sulan J. If they did, then they will be subject to the order for costs of the mediation which I will make (which will accord with r 76.03(f)). If they do not, the costs of and incidental to those attendances and documents will be recoverable only if they are the subject of some other costs order.
Administration of the Estate
It was common ground that the plaintiff is entitled, pursuant to s 35(2) of the Trustee Act 1936 (SA), to recover from the estate the costs incurred by her in administering the estate.
The Appeal from the Orders of Judge Withers
By the order made by Sulan J on 12 April 2006, the costs of the appeal and of the orders and directions made by him on that day were reserved to the trial Judge. The plaintiff submitted that Timothy should pay her costs of and incidental to that appeal. Timothy opposed that order.
In my opinion, it is appropriate that Timothy pay the plaintiff’s costs in relation to the appeal and in relation to the directions made on 12 April 2006. The costs should be paid to the plaintiff in her capacity as executor. It is inappropriate to attempt a differentiation between the costs incurred by the plaintiff in relation to the appeal in her capacity as executor, creditor and beneficiary of the estate.
There are two reasons why I consider it appropriate for Timothy to pay those costs. First, Timothy’s grounds of appeal raised several of the matters which were subsequently pleaded by him in the Statement of Claim filed on 8 May 2006. Timothy effectively abandoned those claims by not pursuing them at trial. Secondly, the effect of the orders made on 21 May 2009 after the trial is substantially similar to the orders made by the Master on 8 February 2008, namely, removal of the caveat, sale of the Glenelg property and payment into Court of the net proceeds to abide a further order of the Court. Even if, as Timothy submitted, the appeal was “subsumed” by the subsequent mediation conducted before Sulan J, it did involve the incurring of costs by the estate. Sulan J obviously intended that the final determination of the issues between the parties should be a relevant matter in the determination of the costs of the appeal. In that respect, Timothy has failed and in my opinion, he should pay the costs of the appeal and of the directions made on 12 April 2006.
The Plaintiff’s IFP Act Claim
The plaintiff sought an order that both she and the defendants be entitled to recover from the estate the costs, on a solicitor/client basis, of her IFP Act claim. Although an order to this effect might be thought to be beneficial to both the plaintiff and to the defendants, it was opposed by the defendants. They submitted that the costs incurred by all parties prior to 18 December 2007 should be paid by the estate on a party/party basis but that the plaintiff should pay the costs they incurred after 18 December 2007.
18 December 2007 was the date upon which the second mediation conducted by Sulan J concluded. There is no reason to differentiate between the costs incurred by the parties in relation to the plaintiff’s IFP Act claim before and after 18 December 2007. The plaintiff had not even made her application at that date (it was made by the Counterclaim filed on 30 May 2008).
I am also satisfied that there is no basis upon which the Court could appropriately order the plaintiff (a successful applicant for provision under the IFP Act) to pay the costs of those who, until the eve of trial, opposed her application. The defendants indicated their opposition to the plaintiff’s IFP Act claim by their Defence to her Counterclaim. They did not point to any Rules of Court offer, nor to any Calderbank correspondence which may have indicated that the plaintiff pursued her claim unreasonably. It was on the eve of trial that the defendants conceded that it was appropriate for an order to be made in favour of the plaintiff under the IFP Act.
The defendants referred to evidence that they had been willing to make a payment of monies to the plaintiff. However, the documentation to which they referred related to attempts by the defendants to “buy out” the plaintiff generally from the estate, and not to any resolution of her IFP Act claim. Further, although the parties had reached in principle agreement, their arrangement did not proceed to settlement because of the defendants’ inability to raise the necessary finance.
I am satisfied that the principal submissions of the defendants concerning the costs of the plaintiff’s IFP Act claim should not be accepted. The defendants submitted in the alternative that any order for the costs of the plaintiff’s IFP Act claim should be made on the basis of party/party costs only.
By s 9(8) of the IFP Act, the Court may make such order as to the costs of the proceedings as it considers just. It is common for the costs of a successful applicant under the IFP Act to be awarded on a solicitor/client basis.[3] However, the Court’s usual discretion must be exercised and, amongst other things, account may be taken of the size of the estate, the successful applicant’s conduct in the litigation, and the effect of an order on a solicitor/client basis on any residuary beneficiary.
[3] Parente v Parente & Porter (1982) 29 SASR 310 at 315; Re McCaffrey (1982) 29 SASR 582 at 591-2.
On several occasions during the costs argument, and in their written outline of submissions, the defendants foreshadowed a submission to the effect that the plaintiff had acted unreasonably in the litigation by not accepting reasonable proposals for settlement made by them. They pressed the tender, against objection by the plaintiff, of an affidavit setting out some of the background negotiations between the parties. However, at the end of the defendants’ submissions, no submission to the foreshadowed effect had been made. I pointed this out to counsel for the defendants who then said, “I can’t pursue that”. There is therefore no reason to order only party/party costs because of the plaintiff’s persistence with her IFP Act claim despite reasonable settlement proposals from the defendants.
I am, however, concerned about the size of the estate. Without meaning any disrespect, I consider that the estate of Philip can reasonably be described as modest. The parties have incurred costs in their disputation about the estate which are wholly out of proportion to the value of the estate. This Court has previously expressed its concern about circumstances such as these. Practice Direction 27 made under the 1987 Rules provides:
Costs in Estate Matters
The Judges are concerned at the relatively high costs which are being run up in litigation involving estates, particularly where there are a number of separately represented parties. In the past the Court has often as a matter of course tended to allow costs as between solicitor and client on the full Supreme Court scale to all parties out of the estate. Practitioners are reminded that the Court will exercise its general discretion as to costs under Rule 101.01 as appropriate in the circumstances of a particular case, but having particular regard to:
1. ordering costs against parties who have not succeeded;
2.ordering costs in the light of whatever offers have been made under Rules 40 and 41;
3.not giving full costs to separately represented parties where they could have properly been jointly represented;
4. awarding less than full costs where the amount in issue is relatively small.
The Master drew the attention of the parties to this Practice Direction in February 2006. It is to be observed that Practice Direction 27 refers expressly to the possibility that the Court may award less than full costs when the amount in issue is relatively small.

In my opinion, effect should be given to the warning contained in Practice Direction 27 in the present case. Although the plaintiff was forced to come to Court to obtain an order, she could have contributed to a saving of the costs by not advancing her claim to be authorised to invest the proceeds of sale of the Glenelg property in alternative accommodation, or her alternative claim that she be given a life interest in the fund constituted by the sale proceeds. These claims were made at the trial and were rejected. In the end, the plaintiff’s pursuit of these claims was the major point of difference between the parties. It is especially important that those engaged in disputation about relatively small estates take a practical and reasonable approach to the resolution of their disputes.
Accordingly, I consider it appropriate that the parties be enabled to recover from the estate the costs incurred by each which are of, and incidental to, the Counterclaim filed on 30 May 2008. Those costs are to be recoverable on a party/party basis only.
The Defence of the Defendants’ Claims
The plaintiff sought orders that the defendants should pay to the estate the costs which she incurred in defending the allegations and claims made in Timothy’s Statement of Claim filed on 8 May 2006 and in the Amended Statement of Claim filed by both Timothy and Edward on 26 May 2008 (with Timothy to pay the costs of the former, and both Timothy and Edward the costs of the latter). The plaintiff did not, however, seek an order to the effect that either Timothy or Edward should pay to the estate the costs of their own (abandoned) IFP Act claims.
The defendants submitted that these costs should be paid by the estate.
I summarised earlier in these reasons the nature of the claims made by Timothy and Edward. It is not necessary to repeat that summary. The defendants abandoned all but one of these claims on, or very shortly before, the eve of trial and abandoned the last of the claims part way through the first day of trial. The defendants said that they did so because they now recognised that, even if they succeeded with their allegations, it would only serve to emphasise that Philip’s will failed to make proper provision for the plaintiff. If that be so, it should have been obvious to the defendants, at least from the time that the plaintiff filed her IFP Act claim, that that would be the effect. In those circumstances it is difficult to see why it would be reasonable for the estate to be put to the expense of defending the claims.
The defendants’ counsel hinted, from time to time, that some claims had been made for the purpose of providing a basis for negotiating positions. When asked how the continued pursuit of the claims made in the defendants’ Statement of Claim could be justified, the defendants’ counsel responded:
In amongst what I’ll call the normal argy bargy of litigation the parties were establishing contest points, those things which are give and take. And although the Court may not approve of the process, often those issues are reflected in pleadings.
The defendants’ counsel accepted that a party who raises issues unnecessarily, thereby causing costs to be incurred, will ordinarily be required to bear the costs of that issue. He submitted, however, that it was appropriate for the defendants to raise the issues which they subsequently abandoned in order to provide “a basis upon which the Court could exercise jurisdiction to resolve all issues”. I am unable to follow that reasoning.
In my opinion, the conduct of Timothy, in particular, in raising and pursuing issues before the Master in early 2006, in pursuing the appeal, and in pursuing until the eve of the trial allegations concerning the conduct of the plaintiff, which allegations were subsequently abandoned, has contributed considerably to the extent of the costs incurred in relation to Philip’s estate. If there had been a formal withdrawal or discontinuance of the claims under r 52 of the 1987 Rules, it seems inevitable that the defendants would have been required to pay the plaintiff’s costs.
Even though this is an “estate” matter, as the defendants’ counsel emphasised, it is appropriate, in my opinion, that the defendants should pay to the estate the costs which the plaintiff incurred in defending those claims. There will be an order that Timothy pay to the estate the costs incurred by the plaintiff to 25 May 2008 in defending the Statement of Claim filed on 8 May 2006 and an order that Timothy and Edward jointly pay to the estate the costs incurred by the plaintiff in defending the allegations made in the Amended Statement of Claim filed on 26 May 2008 (other than the costs associated with the defence of the respective IFP Act claims of Timothy and Edward).
I have ordered that the costs be paid to the estate, as I do not consider it practical to attempt a differentiation between those claims which concerned the plaintiff as executor, and those which concerned her as creditor or beneficiary.
The Costs of the Defendants’ IFP Act Claim
The plaintiff does not seek any order with respect to the costs of the defendants’ IFP Act claims. The defendants seek an order that they should recover the costs of their claims from the estate.
There are circumstances in which it is appropriate for an order for the costs of unsuccessful applicants to be paid from an estate.[4] An order to that effect may be appropriate in circumstances in which it can be seen that the applicant has acted reasonably.
[4] Bowyer v Wood [2007] SASC 327 at [64]-[69]: (2007) 99 SASR 190 at 208-10.
It is not possible for me to reach a conclusion to that effect in the present case. The fact of the matter is that the defendants’ IFP Act claims were abandoned and the Court has not been required to consider them at all. Further, the defendants’ written submissions indicated that their claims were advanced as “an ambit claim”.
I consider that there should be no order as to the costs of the defendants’ own IFP Act claims.
Conclusion
In summary, for the reasons given above, the orders as to costs are these:
1.The first defendant is to pay to the estate the costs of and incidental to his appeal against the orders made by the Master on 8 February 2006 and 16 February 2006 and of and incidental to the directions made by Sulan J on 12 April 2006;
2.The first defendant is to pay to the estate the costs incurred by the plaintiff to 25 May 2008 in defending the allegations and claims made in the Statement of Claim filed on 8 May 2006;
3.The first and second defendants are to pay to the estate the costs incurred by the plaintiff in defending the allegations and claims made in the Amended Statement of Claim filed on 26 May 2008, other than the costs of defending their respective claims under the IFP Act;
4.The costs of all parties of and incidental to the plaintiff’s claim for provision under the IFP Act made in the Counterclaim filed on 30 May 2008 are to be taxed or agreed on a party/party basis and paid by the estate;
5.The parties are to bear their own costs of the mediations held on 31 October 2006, 15 November 2007 and 18 December 2007;
6.The plaintiff’s costs as executor of the estate of and incidental to obtaining Probate and administering the estate are to be taxed or agreed as between solicitor and client and paid out of the estate;
7.I make no order with respect to the costs of the defendants’ own IFP Act claims;
8.I will hear from the defendants as to whether any order for contribution as between themselves is appropriate;
9.Order No 2 made by Sulan J on 18 December 2007 is amended so as to permit the documents sealed up under that order to be opened by an order of a Judge or Master.
I will hear the parties as to costs.