Patterson v Scott

1. [1]

   HIS HONOUR: The Plaintiff sought leave to discontinue these proceedings, in which he claimed a family provision order out of the estate of Harold James Mearns (“the deceased”), because it has been established, by the use of parentage testing procedures, prior to any substantive hearing, that he is not a child of the deceased, and, therefore, not an eligible person within the meaning of s 57(1)(c) of the Succession Act 2006 (NSW) (“the Act”). (He accepted that he does not fall into any other category of eligibility under s 57 of the Act.)

2. [2]

   The Defendant is the daughter of the deceased, the executrix to whom Probate of the deceased’s Will was granted on 12 May 2015, and the sole beneficiary of the whole of the deceased’s estate. She submitted that the Plaintiff’s proceedings should be dismissed rather than discontinued.

3. [3]

   Other than this somewhat sterile debate regarding discontinuance or dismissal (about which neither counsel made any relevant submissions), the only matter outstanding is how the burden of the costs of the proceedings should be borne.

4. [4]

   The Plaintiff sought an order, in the unusual circumstances of this case, that his costs of the proceedings ought to be paid out of the estate. The Defendant sought an order that her costs, calculated on the indemnity basis, should be paid by the Plaintiff.

5. [5]

   At the hearing of the costs application, each party relied upon the affidavits served in the substantive proceedings, not to prove the truth of the contents, but to provide the contextual background in which the application for costs was to be determined.

6. [6]

   In addition, on the costs application, the Plaintiff relied upon his affidavit affirmed on 27 September 2016 (annexing a copy of a Death Certificate of the deceased in which he was identified as a child of the deceased and in which the Defendant is shown as the Informant), as well as on an affidavit of Mr J K McDuff, solicitor, affirmed 6 October 2016. I shall include relevant documents annexed to that affidavit as part of the narrative set out below.

7. [7]

   On the costs application, the Defendant relied upon an affidavit of Ms M Boemi, one of the principals of the firm of solicitors, with the conduct and carriage of the matter on her behalf. I shall also include relevant documents annexed to that affidavit as part of the narrative set out below.

8. [8]

   In addition, the Defendant relied upon the usual costs rules as well as what is said to be the Plaintiff’s unreasonable refusal, on 5 August 2015, of an offer of settlement made by her a few days earlier, for $65,800. I shall refer to these in more detail later in these reasons.

9. [9]

   Following the reading of the evidence, and the making of submissions, I indicated the orders that I proposed to make and said that I would publish my reasons in respect of the application for costs. Then, counsel for the Defendant tendered some further correspondence which went to the costs of the hearing of the costs application. Counsel for the Plaintiff accepted that it was appropriate to order the Plaintiff to pay the costs of the Defendant of the application for costs from 14 September 2016. I shall make that order also. What follows are the reasons for the orders made.

Factual Background

1. [10]

   It is necessary to set out a summary of the factual context in which the claim for the costs made by each party arises.

2. [11]

   The deceased died on 27 December 2014.

3. [12]

   By Summons filed on 23 October 2015, the Plaintiff sought orders that provision be made for him out of the estate and notional estate of the deceased.

4. [13]

   In his affidavit affirmed on 21 October 2015, he stated, amongst other things, that he was the son of the deceased and that he was born in June 1961.

5. [14]

   The Defendant’s affidavit in reply to the Plaintiff’s affidavit in chief is one sworn on 22 January 2016. In this affidavit, she did not dispute that the Plaintiff was the deceased’s son, stating that she did not consider their relationship to be “very close”.

6. [15]

   In her affidavit sworn on 25 February 2016, being the affidavit required by Practice Note SC Eq 7, Paragraph 9.1, the Defendant annexed a copy of the Inventory of Property attached to, and placed inside, the Probate, which revealed that, at the date of the deceased’s death, his estate had an estimated, or disclosed, value of $658,033. (One may draw the inference that it was this figure that prompted the Defendant’s offer of $65,800, or 10 per cent of the gross value of the estate.)

7. [16]

   The Defendant also disclosed that, after payment of certain identified debts, funeral and testamentary expenses, the then value of the deceased’s estate was $652,679. The estate was said to consist of cash ($644,361) and shares in a public company.

8. [17]

   Despite having not disputed the relationship of parent and child, the Defendant did not identify the Plaintiff as a person who was, or who could be, an eligible person.

9. [18]

   I shall not further rehearse the contents of the substantive affidavits that were filed by each party regarding the relationship of the deceased and the Plaintiff, but it seems clear from the evidence that there was some relationship between them and according to the affidavit of each party, that the deceased seemed to have accepted that the Plaintiff was his child.

10. [19]

    I observe that there is no evidence to suggest the deceased sought to ascertain, by scientific testing, or otherwise, whether the Plaintiff was, in fact, his child.

11. [20]

    It is next necessary to set out the history of the dispute between the Defendant and the Plaintiff about eligibility. Each of the solicitors has disclosed in his, and her affidavit, respectively, some of the correspondence that preceded, and immediately followed, the commencement of the proceedings by the Plaintiff. (I shall not state to whose affidavit the correspondence is annexed, but shall simply refer to the contents of the correspondence.)

12. [21]

    The first letter disclosed is one dated 9 April 2015, from the Plaintiff’s solicitors to the Defendant’s solicitors, in which a request was made for a copy of the Will and “Statement of Assets and Liabilities of the estate”. A reference is made to the “Succession Amendment (Family Provision) Act 2008 (NSW)”.

13. [22]

    (There was next in time, email correspondence directly between the parties to which I shall later refer.)

14. [23]

    The first letter was followed by a letter dated 31 July 2015, from the Plaintiff’s solicitors to the Defendant’s solicitors, stating that “we are about to finalise a detailed affidavit in relation to our client’s claim for the executor’s consideration”. A request was also made for a copy of the Probate (if it had been granted).

15. [24]

    The Defendant’s solicitors sent to the Plaintiff’s solicitors a copy of the Probate under cover of letter dated 6 August 2015.

16. [25]

    The next letter disclosed is one dated 12 August 2015, addressed to the Plaintiff’s solicitors, in which the Defendant’s solicitors wrote, stating “our client would like [the Plaintiff] to confirm he is the son of the deceased” and asked whether “… your client willing to partake in a DNA test?” (The “previous correspondence” referred to in this letter is not in evidence so it is not known when the issue of paternity was first raised by the Defendant.)

17. [26]

    What prompted the Defendant’s request is not disclosed in the evidence.

18. [27]

    The letter in response from the Plaintiff’s solicitors, which is dated 25 August 2015, included the following passage:

19. [28]

    Some other correspondence passed between the legal representatives, which correspondence, again, is not disclosed, but in a letter dated 22 September 2015, the Defendant’s solicitors requested agreement as to mediation and the date when mediation might take place.

20. [29]

    The next letter referred to is a letter, dated 8 October 2015, from the Defendant’s solicitors to the Plaintiff’s solicitors, in which the following passage appears:

21. [30]

    There was then a letter dated 15 October 2015, in which the Plaintiff’s solicitors referred to a number of legal “authorities in relation to DNA testing” and wrote:

22. [31]

    This letter prompted a response dated 9 November 2015, in which the Defendant challenged the conclusion set out above and continued “to press for” the Plaintiff to submit to a DNA test. A threat was again made that if he refused, “we are instructed to seek an order for same”.

23. [32]

    The Plaintiff, thereafter, appeared to reconsider his position, and his solicitors sought to clarify the method by which such testing could occur. In a letter dated 11 November 2015, the Plaintiff’s solicitors suggested that “there is some doubt as to whether a DNA test is available given the deceased is no longer available for testing purposes”.

24. [33]

    In a letter dated 18 November 2015, the Defendant’s solicitors set out what was described as “a sibling analysis”. In this letter, it was confirmed that the Defendant’s mother was prepared to participate.

25. [34]

    However, in a letter dated 25 November 2015, the Plaintiff’s solicitors challenged what was set out in the letter, stating:

26. [35]

    In a letter dated 26 November 2015, the Defendant’s solicitors stated that they had been instructed to press for DNA testing and would do so when the matter was first before the Court.

27. [36]

    The matter came before Brereton J on 27 November 2015 and his Honour made directions, by consent, regarding the service of affidavits and the disclosure of financial information. (It is not suggested that the need for DNA testing was foreshadowed to his Honour on the first return date of the Summons.)

28. [37]

    Finally, under cover of a letter dated 2 February 2016, the Defendant’s solicitors provided a document, from DNA Bioservices, an accredited laboratory, detailing three recommended DNA tests. The solicitors confirmed that the Defendant and her mother and, perhaps, a paternal uncle, would participate in the testing procedure.

29. [38]

    Again, the Defendant’s solicitors threatened that if consent to participate in the testing was not forthcoming “…we are instructed to file a Notice of Motion seeking an order for same”.

30. [39]

    When the matter came before me, on 26 February 2016, I noted that there was a dispute as to the eligibility of the Plaintiff and that DNA testing was being carried out by agreement between the parties. I stood the proceedings over for further directions on Friday, 15 April 2016.

31. [40]

    On two occasions thereafter, the Court, having been informed that the DNA testing being carried out by the agreement of the parties had not been completed, adjourned the matter, by orders made in Chambers, until 12 August 2016. On that date, the Court was informed that DNA testing was now being carried out “on a different third party” and that a report would be available within 3 weeks. (Counsel could not identify the third party to whom reference had been made, but thought, perhaps, it was the deceased’s brother, the paternal uncle of the Defendant, who had consented to participating.)

32. [41]

    The matter was stood over for further directions on Friday, 16 September 2016.

33. [42]

    By the adjourned date, the DNA testing report had been completed, had been provided to the parties and, apparently, had established that the deceased was excluded as the father of the Plaintiff.

34. [43]

    The matter was listed for a costs argument today, with directions for the service of evidence in support of the costs argument and an outline of submissions. (I shall return to some correspondence that passed between the solicitors following the receipt of the DNA test results later in these reasons.)

35. [44]

    It is next necessary to refer to the email correspondence which had resulted in an offer being made by the Defendant prior to the commencement of the proceedings, upon which offer reliance is placed.

36. [45]

    The email chain starts with an email dated 28 July 2015 from the Defendant to the Plaintiff in which she states that she is:

37. [46]

    Later on the same day, the Plaintiff responded:

38. [47]

    The Defendant responded that “we seem misaligned on our ideas of a figure” but wrote that she was still keen to resolve any proceedings.

39. [48]

    By email of 30 July 2015, headed “Without prejudice save as to costs”, the Defendant stated that as executor, she was “mindful of Dad’s wishes”, that she wished to resolve the matter and in an effort to do so offered to pay the Plaintiff $65,800.

40. [49]

    In his response dated 5 August 2015, the Plaintiff responded that he did “not feel that the last offer is just” and rejected the offer. He suggested that they proceed to mediation as quickly as possible. Thereafter, the correspondence in evidence is the correspondence between the solicitors to which reference has been made.

The Submissions

1. [50]

   The submissions in support of the orders the Plaintiff proposed were (omitting the reference to footnotes and correcting a typographical error as to one date):

2. [51]

   Counsel for the Defendant submitted:

3. [52]

   Importantly, this is not a case in which the Defendant submitted that, at the time of the offer being made, the Plaintiff, properly advised, should have known he had no chance of success. When a litigant presses on, where on proper consideration his case should have been seen to be hopeless, that is one of the circumstances that justify the making of a special costs order.

The Legislative Framework

1. [53]

   I have discussed the legislative framework that is relevant in a number of cases. I shall repeat some of what I have said for the benefit of the parties.

2. [54]

   Under s 98 of the Civil Procedure Act 2005, the court has a wide discretionary power to make orders for costs.

3. [55]

   In the instant case, the Plaintiff seeks leave to discontinue the proceedings. The Uniform Civil Procedure Rules 2005 (‘UCPR’), rule 12.1, provides:

4. [56]

   So far as is relevant, UCPR, rule 42.19, provides:

5. [57]

   It can be seen that the rule stated immediately above applies to proceedings that are discontinued either by consent, or pursuant to the leave of the Court.

6. [58]

   Potentially, if the Plaintiff were granted leave to discontinue, he could commence fresh proceedings over the same subject matter, subject, of course, to seeking an order extending the time for the making of the claim, and establishing eligibility on some other ground. It is highly unlikely, in all the circumstances of the case, he would do so.

7. [59]

   UCPR rule 29.9 provides:

8. [60]

   The Plaintiff does not suggest that an order for provision in his favour could ever be made in the circumstances as now established. Whilst there has not been an application by notice of motion for dismissal, there appears to be no dispute that the proceedings should be brought to an end.

9. [61]

   A dismissal would also preserve the Plaintiff’s ability to commence fresh proceedings. Section 91 of the Civil Procedure Act 2005 (NSW) provides that dismissal does not, subject to the terms on which any order for dismissal was made, prevent the plaintiff from bringing fresh proceedings, or claiming the same relief in fresh proceedings. Again, it is highly unlikely, that, in all the circumstances of the case, the Plaintiff would again commence proceedings.

10. [62]

    If the proceedings are dismissed, as sought by the Defendant, UCPR rule 42.20(1) provides that unless the Court orders otherwise, the plaintiff must pay the defendant’s costs of the proceedings to the extent to which they have been dismissed.

11. [63]

    In either event, the order could be made by granting leave to the Plaintiff to discontinue, or by dismissing the proceedings, upon terms that he will not, without the leave of the Court, make any further application for relief out of the estate or notional estate of the deceased.

12. [64]

    Neither party made any submissions concerning the difference between discontinuing the proceedings and dismissing the application or the consequences of one or other order. The issue was only raised in relation to costs and as has been written, whether, in this case, the proceedings are discontinued, or dismissed, the Plaintiff must bear the Defendant’s costs, unless the Court otherwise orders.

13. [65]

    It was accepted by counsel for the Plaintiff that it is for the Plaintiff, in either instance, to satisfy the Court that the costs of the Defendant should not be paid by him.

14. [66]

    The following general principles may be regarded as relevant in determining who is to bear the burden of costs in a case where the proceedings are discontinued, or dismissed, prior to any substantive hearing on the merits:

15. [67]

    That brings me then to the offer which was rejected by the Plaintiff and the relevant principles. Clearly, this offer is, or could be, a relevant fact on the issue of costs.

16. [68]

    I have recently dealt with the principles that apply in circumstances where an offer of compromise or Calderbank offer is made in Page v Page (No 2) [2016] NSWSC 1323. Obviously, the existence of a Calderbank offer may influence, but not govern, the exercise of discretion supporting a different order as to costs. I wrote, at [56]:

17. [69]

    It is also a factor, sometimes a strong factor, to be taken into account in determining whether an indemnity costs order should be made: Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331; [2014] HCA 31, at [4].

18. [70]

    The fact that the offer was made prior to the commencement of the litigation, and at a time when vital information going to the threshold of eligibility was not necessarily available is relevant: Vale v Eggins (No 2) [2007] NSWCA 12. Nor were many of the matters going to the determination of the Plaintiff’s proceedings, otherwise available. For example, at the time of the offer, the financial position of each of the parties had not been disclosed.

19. [71]

    The Plaintiff submitted that he should not now be subjected to a costs order when the case significantly changed after the date of the offer.

Determination

1. [72]

   Almost 50 years ago, Lord Denning MR in JT Stratford & Son Ltd v Lindley (No 2) [1969] 1 WLR 1547, at 1553, put the issue this way:

2. [73]

   To the extent that the Defendant submits it, I am by no means persuaded that the commencement of the proceedings by the Plaintiff was unreasonable. There seems to have been an acceptance, by the deceased, that the Plaintiff was his child, and by the Defendant that he was her step-brother.

3. [74]

   Also, as I have written, there is no evidence, read on the application for costs that the deceased sought DNA testing, which, of course, he could have done. This is a circumstance relevant to the reasonableness, or otherwise, of the Plaintiff in commencing the proceedings. It is also relevant to the reasonableness of the Defendant’s request for DNA testing.

4. [75]

   I also note what is, sometimes, considered to be an analogy between family provision cases and probate proceedings. In Jvancich v Kennedy (No 2) [2004] NSWCA 397, Giles JA observed (with Handley JA and McColl JA agreeing), that in probate cases, departure from the rule that costs follow the event is often recognised as appropriate where the testator has been the cause of the litigation.

5. [76]

   In this case, it could be said that the deceased did not discourage the Plaintiff believing what he had been told about his paternity, and, indeed, the deceased treated him as his son. It is arguable, in the same way, that if the deceased had been the cause of family provision litigation, the costs burden should fall on the estate, even if the proceedings are a result of testing that did not occur until after the deceased’s death.

6. [77]

   Secondly, the making of the offer to resolve the proceedings before the commencement of any proceedings, but after the threat of proceedings, may be taken into account. It demonstrates that the Defendant plainly thought that there was some merit to the threatened application. The offer was for a sum equivalent to 10 per cent of the estimated, or known, value of the estate at the date of the deceased’s death.

7. [78]

   Yet, the amount offered may have been regarded by the Defendant as a commercial one considering the likely costs that would be incurred, and the time that would be spent in litigation, if the matter proceeded to a contested hearing. One can well understand the Defendant, acting responsibly and considering a reasonable approach to family provision litigation, might consider making such an offer.

8. [79]

   However, in the chain of email correspondence, there was no suggestion that the Plaintiff was not an eligible person. To the contrary, there was a repeated reference to “Dad” or “Dad’s Will”. It was only after the offer was made and rejected that the essential character of the Defendant’s case changed and the question of paternity was raised. I have earlier referred to the Death Certificate of the deceased in which the Defendant identified the Plaintiff as a child of the deceased.

9. [80]

   In all the circumstances of this case, I cannot be satisfied that the refusal of the offer, when made, was imprudent or unreasonable in all the circumstances. Too much was unknown at the time of the offer.

10. [81]

    I have carefully considered the correspondence which followed the request made by the Defendant requiring DNA testing. This was not an unreasonable request if the Defendant had legitimate doubts (which, in the event, proved correct).

11. [82]

    My disquiet relates to whether there was a reasonable basis for such doubts at the time of the first request (when there is nothing in the evidence going to that question) or whether it simply followed what the Defendant regarded as a rather extravagant offer from the Plaintiff. (The fact that the DNA test proved that the Plaintiff was not the son does not allay my concerns on this aspect. Nor could counsel explain, on the evidence, the basis of the Defendant’s doubts )

12. [83]

    It took some 6 months for the Plaintiff to agree to submit to DNA testing. Initially, he rejected the request outright, but then, it would appear, upon the basis of not understanding how the form of testing proposed would determine the issue.

13. [84]

    Once a detailed explanation of the tests, as well as the result that would be established by them, was provided, the Plaintiff agreed. There is no suggestion that following agreement, he did not co-operate, thereafter, in the testing process.

14. [85]

    Also, it is to be noted that there was only one directions hearing prior to the Plaintiff agreeing to participate. At that, only consensual directions were made to enable the matter to proceed by the filing of the formal evidence although the Defendant’s solicitors threatened seeking an order for parentage testing.

15. [86]

    I have considered the Plaintiff’s submission regarding his financial and material circumstances. Whilst, generally speaking, a litigant's financial position is irrelevant when it comes to the exercise of the costs discretion, particularly where that litigant is a plaintiff, in some circumstances, “that general principle may be subject to some relaxation in family provision cases by application of ‘liberality and discrimination’’’ Chapple v Wilcox [2014] NSWCA 392, at [141].

16. [87]

    In claims for a family provision order, an applicant’s financial circumstances may be a relevant consideration, particularly if an order for costs is made against him he "will instantly become impecunious": McCusker v Rutter [2010] NSWCA 318, Young JA at [34] and the cases there cited.

17. [88]

    All that is said in the submissions is that the Plaintiff “would be required to further mortgage his home in order to obtain the funds necessary to meet a costs order against him”.

18. [89]

    In my view, bearing in mind all of the matters in the case, and in the exercise of my discretion, I came to the view that I should grant leave to the Plaintiff to discontinue the proceedings upon the basis stated, and that I should make no order for the costs of either party to the intent that each will bear his, and her, own costs, respectively, of the proceedings. (There is no point making an order for the Defendant’s costs to be paid out of the estate, as she is the sole beneficiary named in the Will.)

19. [90]

    In the circumstances, the Court ordered that leave be granted to the Plaintiff to discontinue the proceedings, upon terms that he will not, without the leave of the Court, make any further application for a family provision order out of the estate or notional estate of the deceased.

20. [91]

    As stated, following the orders proposed to be made, counsel for the Defendant tendered a series of letters passing between the legal representatives following receipt of the DNA test result. Importantly, in a “without prejudice” letter dated 13 September 2016 from the Defendant’s solicitors to the Plaintiff’s solicitors, it was proposed that “your client discontinue the proceedings and that each party pay their [sic] own costs”. The letter did not state that if the offer was not accepted the letter would be tendered to seek an order for costs calculated on the indemnity basis. (However, the Plaintiff clearly regarded it is a Calderbank offer.)

21. [92]

    The proposal made by the Defendant’s solicitors was rejected in a letter of the same date, the Plaintiff’s solicitors stating that the Court should be informed that “there will be an argument as to costs and the matter be listed for a costs argument”. The Plaintiff’s solicitors repeated that the Plaintiff’s costs should be paid out of the estate. This was a forensic decision made by the Plaintiff and it has resulted in additional costs being incurred.

22. [93]

    In my view, and as conceded by his counsel, the Plaintiff should bear the costs of the Defendant from 14 September 2016. Clearly, he has not achieved a result more favourable to him than the offer made, whilst the Defendant has had to incur the costs of the costs application. The Defendant’s offer was made at a time when the costs argument had not been set down for hearing, and when costs had not been determined; if accepted, it would have enabled the matter to be determined expeditiously, and without further substantial costs being incurred; the offer was clearly one involving a genuine element of compromise on the part of the Defendant; the Plaintiff’s prospects of success on the question of costs were difficult to predict but he was faced with rules that required the Court to make an “otherwise order”; the terms of the offer made were clear and precise; and when the offer was made, the Plaintiff had all necessary information and knowledge of the facts in order to assess the offer.

23. [94]

    It seems to me that, at the time, knowing that he could not proceed with his claim, it was both imprudent and unreasonable for the Plaintiff to not accept the Defendant’s offer to resolve the issue of the costs of the proceedings.

24. [95]

    Therefore, the Court ordered the Plaintiff to pay the Defendant’s costs from 14 September 2016; otherwise, it made no order as to the costs of either party, to the intent that each will bear his, and her, own costs, respectively, of the proceedings.