Sarant v Sarant (No 2)

On 26 November 2020, I published my reasons for determination of an application by the Plaintiff (George Sarant) for an order, pursuant to s 59 of the Succession Act 2006 (NSW) (the Act), for provision out of the estate of his wife, Elizabeth Randie Sarant (the deceased). The reasons for judgment bear the medium neutral citation, Sarant v Sarant [2020] NSWSC 1686 (the principal judgment).

I concluded that, at the time when the Court was considering the application, the deceased had not made adequate provision for George’s proper maintenance or advancement in life by her Will, and, at the time of the determination of George’s application, the order for provision out of the estate of the deceased ought to be made having regard to the facts known to the Court at the time. I shall set out the orders that were ultimately made.

As well as defending the proceedings, the Defendant executors (Maria-Lyn Sarant and Melissa Sarant), who are the children of George and the deceased, filed a Cross-Claim seeking an order for the appointment of trustees for sale of the property situated at Bronte, which property the deceased and George owned as tenants in common in equal shares. As will be read, in light of the conclusion in the family provision claim, although the Cross-Claim was dismissed, the approach to be taken by the parties as to when the property is to be sold may have to be determined, subsequently, by the parties.

At the request of the parties, made during the hearing, I did not deal with the costs of the proceedings in the principal judgment. At [67]–[68], I noted:

Then, at [376], I wrote:

Unsurprisingly, the parties did not reach agreement on either the form of orders (although some orders, substantially, were, ultimately, agreed) or how the burden of costs should be borne. In addition, there were no documents tendered, or matters raised “that may be relevant to that determination that could not be disclosed at the hearing”. Indeed, no evidence at all was read on the costs application.

On 15 December 2020, I heard argument on the form of orders and on the issue of costs. In accordance with another direction that had been made, each of senior counsel for George, and leading counsel for Maria-Lyn and Melissa, had provided the Court with written submissions on costs. Oral argument, therefore, was relatively brief.

Happily, following discussion and debate about the form of the orders, the legal representatives, later on the same day, provided me with an agreed version of the orders. Following some minor revisions, suggested by me, the legal representatives agreed on the final orders (other than costs), and on 16 December 2020, I made the following orders and notations, and these were entered into JusticeLink:

The parties are as far apart on the question of costs as they have been on just about every issue. Regrettably, despite the family context to the litigation, now determined, and the undesirability that it be inflamed further by the dispute as to costs, that is what has occurred.

Having read the written submissions on costs before coming onto the Bench, having heard the oral submissions, and because I was satisfied about what orders would do justice between the parties, I suggested to them that I could deal with the issue immediately, without detailed reasons. Only leading counsel for Maria-Lyn and Melissa requested reasons for the decision on costs. Once again, he maintained that “instructions” had prompted him to make that request.

Counsel was not mindful of what had been written by Maxwell P and Kellam JA in Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481 at 484 [12]; [2008] VSCA 212 at [12]:

These reasons deal with costs and should be read in the context of the principal judgment. Events and people are referred to in the same way as they were in the principal judgment.

Senior counsel for George submitted that the appropriate costs order was that there be no order as to George’s costs, to the intent that he would bear his own costs of the proceedings and that the order, in respect of Maria-Lyn’s and Melissa’s costs, should not be that those costs, calculated on the indemnity basis, be paid out of the estate, because of their conduct in defending the claim for a family provision order. He submitted that they should bear their own costs of the proceedings.

Counsel for Maria-Lyn and Melissa submitted that unless George was ordered to pay their costs, or some of their costs, they would have to bear those costs, immediately, out of the lump sum of $600,000, which may be paid by George on or before 16 March 2021. If the lump sum was not paid, they would have to raise funds to pay the balance of their costs pending the sale of the Bronte property.

Counsel for Maria-Lyn and Melissa also submitted:

(Ultimately, as stated earlier, an order was made, by agreement, that the estate debts would be paid by George.)

Counsel referred to the principal judgment at [365]:

Counsel then submitted:

Although he did not refer to the principal judgment, at [369], in his written submissions, he referred, in oral submissions, to that paragraph, where, I wrote:

I do not accept counsel’s submission. The paragraph relied upon was written in the context of the suggestion that “there are some matters that may be relevant to that determination that could not be disclosed at the hearing”. In the events that happened, there were none. This is hardly surprising bearing in mind the uncompromising approach to the litigation adopted by Maria-Lyn and Maria to which I referred in the principal judgment.

In addition, it is clear from the use of the words “may have to pay”, that the question of costs remained one yet to be decided. Every opportunity, once again, was given to the parties to attempt to reach an agreement on costs, without success.

It may be accepted that in respect of Maria-Lyn and Melissa, as the only executors and beneficiaries named in the deceased’s Will, the usual order for costs that could have been made was an order that their costs, calculated on the indemnity basis, would be paid out of the estate of the deceased, if those costs had been properly incurred in defending the estate from George’s application for provision. However, as the only beneficiaries, they would have then borne the burden of those costs out of the estate (after taking into account the provision made for George).

Presumably, it was this fact that prompted the submission that George should pay their costs.

It would be useful to provide a summary of only some matters that appear in the principal judgment. I shall not repeat the findings verbatim, but shall summarise some of the findings that I consider are relevant to the issue of costs:

None of the above findings ought to have come as any real surprise to the Defendants. Any reasonable, and proper, consideration of the evidence, overall, would have included those matters of fact. Moreover, in conducting the defence of the proceedings, the Defendants’ affidavits, in many respects, descended to irrelevant minutiae.

The Defendants’ estimated costs of the proceedings to the end of a two day case were $171,500 (of which $82,041 remains unpaid). The estimate, considering the above matters, and other matters, is far outside the range of costs seen by the Court for defendants up to the end of a two day case. It seems to demonstrate an over-vigorous defence of the proceedings, where the personal interests of Maria-Lyn and Melissa, and their animosity towards George, were given primary consideration and where their defence of George’s case should be regarded as adversary litigation.

As I emphasised at [38] of the principal judgment, there was no reasonable basis for the Defendants’ only submission that the Plaintiff was not entitled to any provision out of the deceased’s estate, or that the Bronte property should be sold, and that George should pay all of the costs of the proceedings.

It is to be noted that there is no evidence of either party having made any offers of settlement with a view to avoiding the litigation altogether, or to minimising the costs of litigation after it was commenced. Any offers that were made, about which the Court knows nothing, must have been considered to be irrelevant by the legal representatives, on the issue of costs.

The principles governing the exercise of the Court’s discretion as to costs are well known. Section 98(1) of the Civil Procedure Act 2005 (NSW) provides that subject to the rules of Court, and that, or any other, Act, costs are in the discretion of the Court. The subsection gives the Court full power to determine by whom, to whom, and to what extent, costs are to be paid. The discretion is broad but not unconfined. It is a judicial discretion to be exercised on a principled basis.

Section 98(6) provides that in the section, “costs” include “(a) the costs of the administration of any estate or trust”.

Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1 provides that costs should follow the event unless it appears to the Court that some other order should be made as to the whole, or any part of the costs.

Section 99(1) of the Act provides, relevantly:

The section provides for an unfettered discretion as to how the costs of the proceedings for a family provision order may be borne. However, that section does not apply to costs as between party and party, but rather to costs to be paid out of the estate: Blendell v Byrne; The Estate of Noeline Joan Blendell (No 2) [2019] NSWSC 798 at [71]; Smith v Moore (No 2) [2020] NSWSC 1640 at [9] (Williams J).

I wrote in the principal judgment at [57]:

The Court of Appeal (Macfarlan, Meagher and Leeming JJA) had occasion to revisit the principles applicable to costs in family provision cases in Haertsch v Whiteway (No 2) [2020] NSWCA 287. Their Honours considered at [5]-[7], [9], [11]:

True it is that, generally, a defendant in family provision proceedings, as executor, is not in the usual position of a private litigant defending his, or her, personal interests. As executor, the defendant has a duty to uphold the terms of the deceased’s Will and to represent the interests of the beneficiaries named thereunder. However, as Robb J recognised in Pang v Fong (No 2) [2014] NSWSC 1924 at [51], the circumstances of an executor, or executors, may range from “the case where the executor is entitled to the whole estate under the will, so that in a real way the executor defends the application in his or her own interests, to the case where the executor derives no benefit under the will”.

Another example might be when the defendants, as executors, have unreasonably conducted the litigation and the trial.

The present case provides a combination of those examples, where Maria-Lyn and Melissa were entitled to the whole of the deceased’s estate under her Will, had defended the proceedings entirely in their own interest, and had done so in a manner that seemed, in all the circumstances, to be unreasonable.

From all of the authorities, it is clear that the purpose of a costs order is to reach a fair and just result. The making of a costs order in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires: Gray v Richards (No 2) (2014) 315 ALR 1 at 2 [2]; [2014] HCA 47 at [2] (French CJ, Hayne, Bell, Gageler and Keane JJ).

All parties, in a claim for a family provision order should have regard to the significant costs consequences of the application. Not doing so is fraught with risk. Very few cases are “all or nothing cases”. Virtually all cases that are conducted to hearing demonstrate that each party has her, or his, own view of the merits, which are, more often than not, quite different.

Furthermore, parties should also be aware that “[g]enerally speaking … a litigant’s financial position is irrelevant when it comes to the exercise of the costs discretion”.

George, ultimately, was successful. His case had merit. It was not one that was frivolous, vexatious, or made without reasonable prospects of success. He established that the deceased’s Will did not make adequate provision for his proper maintenance, or advancement in life. The case was not one where the merit of his claim for a family provision was unknown, or incapable of careful evaluation. It ought to have been clear to Maria-Lyn and Melissa from the outset, or from very soon after the commencement of proceedings, that he might succeed in whole, or in part, and that the sale of the Bronte property could not be regarded as a certainty. The Cross-Claim was dismissed.

Of course, Melissa-Lyn and Maria, whilst executors, were also the sole beneficiaries. They were entitled to defend their own interests in the proceedings. However, they did so at a risk as to costs in the event that they were unsuccessful in opposing George’s claim in whole or in part.

Yet, the defence of George’s case should never have been conducted in the way that it was, with virtually no quarter being given. Even during final submissions, their counsel did not acknowledge that George was entitled to any family provision order. Long before, however, they had chosen the battleground on which the case was conducted.

Bearing in mind the numerous decisions on the issue of costs in family provision proceedings, some of which were identified at [60] of the principal judgment, and remembering that the jurisdiction to award costs is discretionary, the Court is entitled to assume that Maria-Lyn’s and Melissa’s legal representatives had provided them with necessary advice as to that risk, and, having received that advice, they chose to proceed in the manner in which they did.

If Maria-Lyn and Melissa assumed that their costs of the proceedings would, automatically, be met by George, even if he were successful, they had no reasonable basis for doing so in circumstances where they were defending their own interests. As with their defence of the proceedings, in the manner that they did, any such assumption lacked a reasonable foundation bearing in mind the claim that was being made and the circumstances to which I have referred.

This was a case where the words of Madden CJ, written as long ago as 1894 are brought to mind: “[t]hey were not fighting for the estate any more than if they were not executors at all”: Skrimshire v The Melbourne Benevolent Asylum (1894) 20 VLR 13 at 18. As sole executors and beneficiaries, they were unsuccessful in their opposition to George’s claim. Arguably, there is no reason why the usual practice as to costs would not apply, with the consequence that they could be ordered to bear their own costs. They may consider themselves to be fortunate that George did not seek an order that they should bear his costs.

Furthermore, the mere fact that the absence of a costs order in the form submitted by their counsel, in Maria-Lyn’s and Melissa’s favour, would lessen the quantum of their ultimate entitlement, because of the order for provision, is not a sufficient reason, of itself, to make such an order. Effectively, if an order for costs out of the estate had been made in other circumstances, that is precisely what would have occurred because they are the only beneficiaries.

They will be entitled to recoup all their costs, calculated on the indemnity basis, from their share of the proceeds of sale of the Bronte property, when it is sold.

Taking all relevant matters into account, and applying the principles referred to earlier, the overall justice of the case requires a different order to one requiring George to pay all of Maria-Lyn’s and Melissa’s costs. In circumstances where George was successful in obtaining an order for provision, albeit an order which was not in accordance with the principal submission made on his behalf, it would be quite unjust, to order that he should bear the burden of all of the costs of the proceedings that were incurred by Maria-Lyn and Melissa.

As stated earlier, he has accepted that he should bear his own costs of the proceedings which were estimated, calculated on the indemnity basis, to be $137,500 (of which he has paid $81,944). That is a significant concession on his part.

Yet, I must remember that had the case proceeded differently, and had George received the whole of the deceased’s interest in the Bronte property absolutely, he might have been ordered to pay some, or all, of the costs of the proceedings as there would have been no other estate out of which costs could have been paid. In order to continue living in the Bronte property, he may have been required to raise the funds necessary to pay his own costs and some, or all, of the costs of Maria-Lyn and Melissa. Of course, he would have been entitled to have their costs assessed.

A fair and just result, in my view, is that George should pay a part of Maria-Lyn’s and Melissa’s costs of the proceedings. Such an order would reflect the fact that George did not receive, by way of order, all that he sought.

Doing the best that I can, and bearing in mind their estimated costs, calculated on the indemnity basis, as well as the fact that they have already paid $89,459 of those costs, leaving an amount of about $82,000 to be paid, I am of the view that George should pay $40,000 on account of all of their costs. Otherwise, each party should bear his, or their, own costs of the proceedings.

This result will mean that each of Maria-Lyn and Melissa will have to bear $21,000 each out of the $600,000 if it is paid. I regard that as “about half of the lump sum of $600,000” if that amount is paid. If the amount of $600,000 is not paid, Maria-Lyn and Melissa will have to reach an agreement with their solicitors about costs, as the Bronte property may not be sold for three years. Again, that is a matter that they, and their legal representatives, ought to have considered.

The Court: