Watton v MacTaggart (No 2)

1. [1]

   HONOUR: On 11 September 2020, I published my reasons for determination of an application by the plaintiff (Jannette Dorothy Watton) for an order pursuant to s 59 of the Succession Act 2006 (NSW) (Succession Act) for provision out of the estate and/or notional estate of her deceased father, the late Ronald Bruce MacTaggart (the deceased) (see Watton v MacTaggart [2020] NSWSC 1233 (the principal judgment)). I here use the same abbreviations set out in the principal judgment.

2. [2]

   I concluded that, at the time of the determination of Jannette’s application, the deceased did not make proper provision for her under his Will and I concluded that the appropriate provision that should be made is for Jannette, in lieu of the 1/38th share of the residue of the estate for which provision is made in the Will, to receive a pecuniary legacy of $300,000 (a sum which the defendant (David MacTaggart) in written submissions subsequently filed as to costs describes as “manifestly excessive”). I made orders to that effect and providing for how the burden of such provision was to be borne.

3. [3]

   In my principal judgment, I noted (see at [246]) that, as to costs, David had indicated in the course of submissions that he wished to be heard on costs, indicating that a number of offers of compromise had been made under the Uniform Civil Procedure Rules 2005 (NSW). I accommodated that course and directed that written submissions on costs be provided by the parties within seven days, with a view to dealing with that issue on the papers. That then led to a request by Jannette for further time to respond to the submissions filed by David and to a request by David for further time to respond to those reply submissions.

4. [4]

   For reasons that will become apparent in due course, relevantly, at [247] of the principal judgment, I had also made the following observation:

5. [5]

   I have considered the respective sets of submissions on costs, which I summarise below.

David’s submissions on costs

1. [6]

   David seeks a special costs order on the basis of an offer of compromise made on 22 August 2019 pursuant to r 20.26 of the UCPR. In support of that application, David filed an affidavit sworn by his solicitor, Mr Timothy Roy Young, on 18 September 2020.

2. [7]

   The particular costs orders sought by David are as follows:

3. [8]

   It is convenient, therefore, next to consider that offer of compromise.

4. [9]

   The relevant offer (which Jannette does not dispute complied with r 20.26 of the UCPR) (the Offer of Compromise) was served by email on 22 August 2019 (some nine months before the trial). It was expressed to be open until 20 September 2019, or for 30 days, whichever was the longer period; and hence lapsed on 21 September 2019.

5. [10]

   The Offer of Compromise provided for total provision of $320,000 to be paid to Jannette, to compromise the whole of the proceedings (with, as outlined in due course, provision for Janette’s costs as agreed or assessed on the ordinary basis to be paid out of the estate and David’s costs to be paid out of the estate on the indemnity basis).

6. [11]

   Pausing here, I interpose to observe that there seems some incongruity in it here being suggested that the provision ordered in favour of Jannette is “manifestly excessive” given that provision ordered is almost exactly that which was offered to compromise the claim. Indeed, it might be expected that the Offer of Compromise that was made in the present case was prepared having regard to the rationale underlying such offers, that being explained in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 (at 724) as including:

7. [12]

   I note that the Court of Appeal in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 reiterated the public policy objectives of special costs orders (Basten JA, with whom McColl and Campbell JJA agreed, referring at [6] to the objects underlying the Offer of Compromise procedures under the then court rules as identified above).

8. [13]

   Again, one might therefore have expected that the Offer of Compromise reflected what was regarded as a reasonable offer to settle the proceedings, not a “manifestly excessive” offer to attract particular costs consequences. In any event, be that as it may, I return to the submissions made by David in the present case.

9. [14]

   The Offer of Compromise provided, relevantly, that:

10. [15]

    As adverted to (at [10] above), the Offer of Compromise also made reference to the costs being paid out of a specified fund (see r 20.26(3)(c) of the UCPR, which provides that an offer made under that rule may propose that the costs as agreed or assessed on the ordinary basis or on the indemnity basis will be met out of a specified estate, notional estate or fund identified in the offer), in that [4] of the Offer of Compromise provided that the legacies which the Will provided to the named 17 grandchildren and great grandchildren of the deceased be charged equally with the payment of the legacy to Jannette. In this context, reference is made by David what was said in McDonald v O’Connor (No 2) [2019] NSWSC 344 (McDonald v O’Connor (No 2)) (at [24] per Hallen J).

11. [16]

    The without prejudice covering email with which the Offer of Compromise was served, set out the reason why it was said that Jannette should accept the offer, namely that it was reasonable having regard to:

12. [17]

    In that email, reference was also made to observations of Hallen J as to the effect that parties should not assume that this type of litigation can be pursued, safe in the belief that costs will be paid out of the estate (his Honour citing Carey v Robson (No 2) [2009] NSWSC 1199; and see also Forsyth v Sinclair (No 2) [2020] VSCA 195) and that it was much more common than previously that an unsuccessful applicant be ordered to pay the defendant’s costs and be disallowed his or her own costs (though, of course, in the present case, Jannette was not an unsuccessful applicant). The passage there cited by David also referred to a discredited practice of advising potential applicants to make claims “however tenuous” on the estate on the basis that even if the applicant failed it was very likely that the applicant would get his or her costs out of the estate (again, however, it cannot here reasonably be said that Jannette’s claim, which ultimately succeeded, was no more than tenuous – whatever the dim view David or his legal representatives may have taken as to its prospects).

13. [18]

    As to the present case, it is said, for David, that the amount of provision provided for in the Offer of Compromise is around 7% higher than the amount of provision ultimately ordered in Jannette’s favour, but that, as at the time that the offer was made, the offer was significantly more generous than the which has now been awarded. This is said to be because the provision awarded by the Court has been set by reference to the value of the estate, calculated in accordance with the agreed value of the Tennyson Point Property, which was $2,425,000, whereas the Offer of Compromise was formulated on the basis of the valuation served on 21 May 2019 (which was not put in issue by Jannette at any time before the offer lapsed – referring to Mr Young’s affidavit at [8]), and that valuation placed the value of the Tennyson Point Property at between $2,000,000 and $2,100,000 (meaning that the uncontested value of the estate at the time the offer was made was between $325,000 to $425,000 less than the value considered by the Court in making the order for provision and thereby, if I understand the submission correctly, the offer was, relative to the value of the estate, relatively more generous than Jannette’s ultimate success in the litigation).

14. [19]

    It is also noted that the timetable for payment in the Offer of Compromise would have resulted in Jannette receiving substantial amounts in 2019 and the balance of the provision in either August or September 2020, whereas, as a result of her rejection of that offer, she will not receive the judgment sum until at least 16 October 2020.

15. [20]

    David points out that, at the time that the Offer of Compromise was made and then lapsed, Jannette had not served any medical evidence at all “much less any evidence to corroborate the abuse allegations made in her primary affidavit, so as to dispel any allegation of recent invention”.

16. [21]

    As was also pointed out in the course of the substantive proceedings, it is noted that if Jannette had not brought a claim then she could have expected to receive provision in the amount of $67,515.47 from the Estate. Thus, it is submitted that there could be no suggestion that the Offer of Compromise, which provided for provision of $320,000 was not a genuine offer of settlement. It is noted that the Offer of Compromise was expressed to be made in accordance with r 20.26 of the UCPR.

17. [22]

    In addition to the preceding, David also points to the following other offers, on which he says he relies both generally and, in particular, to the extent that there is any dispute or irregularity with respect to the Offer of Compromise. (Since there is no dispute as to the conformity of the Offer of Compromise with the rules, David can here only be relying on these other offers “generally” and, for obvious reasons, they are not material to a consideration of the reasonableness or otherwise of non-acceptance of the Offer of Compromise itself.)

18. [23]

    First, an offer made in accordance with the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333 (Calderbank), made on 16 August 2019 of $310,000 (plus $40,000 in costs) and expressed to be open for 14 days (see Annexure B to Mr Young’s affidavit).

19. [24]

    Second, a “verbal” offer made on 24 April 2020 of $300,000 payable within 14 days of final orders being made, plus costs as agreed or assessed (see Mr Young’s affidavit at [19]).

20. [25]

    Third, a further offer made under the UCPR on 30 April 2020 in the amount of $300,000, plus costs on the ordinary basis, as agreed or assessed, to be paid out of the estate (to which I will refer as the Second UCPR Offer). The Second UCPR Offer was expressed to close on 5 May 2020, as it was made only 17 days before the commencement of the trial. It is submitted that this was a reasonable timeframe in the circumstances, given that, inter alia, the pre-trial timetable required the parties to complete a large volume of work by 8 May 2020 (the costs of which the defendant hoped both parties could avoid incurring, as outlined in the cover letter to the offer – see Annexure I to Mr Young’s affidavit).

21. [26]

    Fourth, an “oral” offer on or about 15 May 2020 of $330,000, plus costs agreed or assessed (see Mr Young’s affidavit at [28]).

22. [27]

    I note that r 42.15 of the UCPR applies if an offer of compromise in compliance with r 20.26 is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim no more favourable to the plaintiff than the terms of the offer. It provides, specifically, that:

23. [28]

    David here notes that r 42.15 creates a presumption that costs orders will be made that are contrary to the general rule that costs follow the event, but that this presumption can be overridden by the Court’s discretion to “order otherwise”.

24. [29]

    David points to authority (not in the context of family provision proceedings) to the effect that the fact that the cost consequences provided for in r 42.15 of the UCPR would significantly reduce the judgment sum is not a proper consideration to be taken into account when deciding whether or not to exercise the discretion to “order otherwise”. In this connection, David cites Azar v Kathirgamalingan [2012] NSWCA 429 (Azar), where Campbell JA (at [214], and with whom McColl JA at [1] and Basten JA at [14]-[16] agreed) said:

25. [30]

    In Dalma Formwork (Australia) Pty Ltd v Maricic (No 3) [2008] NSWCA 29 (Dalma), Giles JA (with whom McClellan CJ at CL agreed at [43]) said (at [18]):

26. [31]

    His Honour went on (see at [22]) to endorse comments made by Handley JA in Houatchanthara v Bednarszyk (Court of Appeal (NSW), 14 October 1996, unrep) (in relation to a similar District Court rule) that, “general factors which apply in most, if not all cases, such as hardship, and difficulty in forecasting the result of the trial cannot support an exercise of the discretion in favour of the unsuccessful party”.

27. [32]

    Campbell JA said in Dalma (at [24]):

28. [33]

    David says that the onus here rests on Jannette (in resisting the operation of r 42.15 of the UCPR) to explain why the Offer of Compromise or the Second UCPR Offer, which were equally or more favourable to her than the judgment, were rejected, noting that a failure to provide such an explanation may be fatal to the Court exercising its discretion to “order otherwise”. In Azar Campbell JA said (at [220]-[221]):

29. [34]

    Further, David says that the onus is on Jannette to persuade the Court to make an “otherwise order” and that there are proper reasons for doing so, which generally only arise in “exceptional circumstances”, here referring to Leach v The Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391, where McColl JA (with whom Gleeson JA and Sackville AJA agreed) said (at [45]-[47]):

30. [35]

    David says that the nature of the proceedings (being a claim for family provision) is not of itself a reason “otherwise [to] order, pointing to authorities where r 42.15A has been applied in family provision proceedings (Rogers v Rogers [2018] NSWSC 1982 per Hallen J; Philpott v Pantos [2018] NSWSC 852 at [206] per Hallen J; Bezjak v Wyatt (No 2) [2018] NSWSC 232 per Hallen J; Milosevska v Milosevski [2019] NSWSC 711 per Hallen J; Harris v Carter [2020] NSWSC 196 per Hallen J; and McDonald v O’Connor (No 2), where r 42.15 was recently considered by Hallen J.

31. [36]

    It is noted that in McDonald v O’Connor (No 2), where Hallen J awarded the plaintiff a lump sum of $45,000, the defendant had made an offer under the UCPR to compromise the proceedings for a lump sum of $50,001. The plaintiff in that case had severe disabilities and her net asset position was $18,000. His Honour found that, at the time the offer was made, the defendant had not served all of her written evidence in opposition to the plaintiff’s claim and the nature and value of the estate was unclear (with some blame being directed at the defendant at [50]) and in those circumstances his Honour said (at [53]):

32. [37]

    David here says that the circumstances on which his Honour relied in McDonald v O’Connor (No 2) to order “otherwise” (i.e., otherwise than as r 42.15 provides) do not apply in this case and can be distinguished. In particular, it is said that in the present case, at the time the Offer of Compromise was made, the evidence had closed and the matter was due to be (and was) listed for trial the day after the offer was made and the value of the estate was not in dispute.

33. [38]

    David maintains that there are no circumstances which would justify the Court to depart from the order provided for under the rules. It is said that, from the day the Offer of Compromise was made (it will be recalled, on 22 August 2019, which was the day before the matter was listed for trial and the plaintiff incurred further disbursements such as a hearing allocation fee), “notionally the real cause and occasion of the litigation was the attitude adopted by [Jannette]”.

34. [39]

    It is submitted that, had Jannette accepted the Offer of Compromise, she would have achieved a better result, and the vast majority of the “very significant” costs which have been incurred by both parties in preparation for the hearing and during the hearing itself would have been avoided. Furthermore, reference is made to the stress placed on David, who had a heart attack a few months before the trial (the inference apparently here being urged is that the heart attack was caused or contributed to by that stress – although on what evidence such an inference is said to arise is not clear). David submits that it is only fair and reasonable that Jannette should bear the costs incurred because of her failure to accept the Offer of Compromise. It is said that both parties were put to very significant further costs as a result of her non-acceptance of the Offer of Compromise and that Jannette’s conduct in not only rejecting the Offer of Compromise, but failing even to respond to it, was unreasonable.

35. [40]

    David poses, rhetorically, the question as to why the other beneficiaries of the estate (whose representative, the executor, it is said “tried time and again” to settle the proceedings, for amounts which were in excess of or equal to the provision ordered by the Court) should be saddled with the costs which were incurred because of Jannette’s unreasonable conduct in failing to accept the Offer of Compromise. (Pausing here, it was David’s submission at the hearing, as noted in the principal judgment, that any further provision in favour of Jannette should be borne by the “silent” beneficiaries (to the extent that it was suggested there would be appellable error if the burden of any such provision were to be placed on him, which on one view has an element of inconsistency with the above submission – as does the Offer of Compromise itself in that it provides for the burden of the offer to fall on the beneficiaries.)

36. [41]

    Again, reference is made to the observations of Hallen J in recent cases, including McDonald v O’Connor (No 2) (at [42]) and Meres v Meres [2017] NSWSC 523 (at [47]) to the effect that, as stated in Meres v Meres:

37. [42]

    David also makes various submissions in relation to the precise calculations to be undertaken in the exercise of the costs discretion. It is convenient here to excerpt various components of those submissions.

38. [43]

    In response to the observation that I had made at [247] of the principal judgment (set out above), it is submitted for David that:

39. [44]

    I interpose to note that, In reply submissions, David makes clear that no allegation of apprehension of bias is here being raised; so it is not necessary to address the principles applicable where there is any such allegation.

40. [45]

    It is noted that, if r 42.15 of the UCPR applies, then only those party/party costs incurred by Jannette before 23 August 2019 should be deducted from the net distributable estate (as those are the only costs that the estate will be ordered to pay) and, similarly, David’s indemnity costs incurred after 23 August 2019 should not be deducted from the net distributable estate, as Jannette will be ordered to pay them, not the estate.

41. [46]

    David goes on to submit that:

Jannette’s submissions on costs

1. [47]

   In support of her case as to costs, Jannette reads the affidavit of her solicitor, Mr James Isabella, sworn 24 September 2020.

2. [48]

   Jannette’s overall position is that the usual costs order should apply, namely that her costs of the proceedings on the ordinary basis be paid out of the estate of the deceased. However, Jannette also seeks an order that David pay the plaintiff’s costs of the last day of the hearing on the indemnity basis (for reasons to which I will shortly come).

3. [49]

   As adverted to above, Jannette accepts that the Offer of Compromise served on 22 August 2019 satisfies the formal requirements of r 20.26 of the UCPR; and that she did not accept that offer. She also accepts that, by virtue of the terms of the Offer of Compromise, she obtained a judgment no more favourable than that offered by the defendant and she accepts that non-acceptance of the Offer of Compromise relevantly engages r 42.15 of the UCPR; that the defendant will be entitled to the special costs order that he seeks unless the Court orders otherwise; and that she carries the onus of satisfying the Court as to why the presumption applicable in r 42.15 ought not to apply such that the Court should otherwise order.

4. [50]

   Insofar as David suggests that Janette must demonstrate “exceptional circumstances” before the Court would otherwise order under r.42.15 of the UCPR (relying upon the observations of McColl JA in Commissioner of Taxation v Moodie [2014] NSWCA 59; (2014) 282 FLR 453 at [64]), Jannette says that those observations were germane to the approach to be adopted in the circumstances of that particular case and were not observations expressed as a matter of principle applicable or apposite to each case where the Court is asked to exercise its discretion and otherwise order. In this connection, reference is made to what was said by Kunc J in Bates v Cooke (No 2) [2014] NSWSC 1322 (at [19]):

5. [51]

   Janette maintains that the observations of his Honour are apposite to the circumstances of this matter to the effect that what she is required to demonstrate are circumstances, without any qualification, justifying the Court ordering otherwise than as provided for under the special costs regime.

6. [52]

   It is noted that a party seeking to displace the special costs order rule is required to demonstrate to the Court’s satisfaction a rational basis for the displacement. It is said that the issue must be considered in the light of circumstances at the time that the offer was made and “not with the benefit of hindsight”; and that, in seeking to displace the special costs order rule, a party may identify features such as the material disclosed in the proceedings at the time the offer was made, whether the offer was genuine and contained a sufficient element of compromise and the terms of the offer.

7. [53]

   Furthermore, Jannette takes issue with the proposition that the Offer of Compromise was formulated on the basis of the valuation prepared by Bresic Whitney and dated 15 May 2019 (see Annexure A to Mr Young’s affidavit). Jannette says that the market appraisal of 15 May 2019 was provided to her at mediation which occurred on 22 May 2019 (referring to Mr Isabella’s affidavit at [3]). It is said that Jannette did not convey to David at mediation or any other time during the course of the proceedings her acceptance of that market appraisal (referring to the principal judgment at [10] and Annexure G to the affidavit of Timothy Young filed 18 September 2020). (I am obviously not in a position to comment on what may or may not have occurred at mediation.)

8. [54]

   Jannette maintains that it is disingenuous (and, indeed, wrong) for David to submit that at the relevant time (22 August 2019) the value of the estate’s real property was between $2,000,000 and $2,100,000 and was “uncontested”. It is noted that, on 7 May 2019, David filed evidence as to the value of the estate’s assets, where he provided evidence as to the estate’s position and stated the value of the Tennyson Point Property was $2,500,000 and that there were cash reserves of $237,527.90 (and that the net distributable estate was $2,715,527.90 allowing for the defendant’s costs of $22,000). Jannette says that David did not alter his position or file or serve further evidence as to the positon of the estate’s gross or distributable value until 6 April 2020 when he stated that the value of the Tennyson Point Property was $2,050,000 (then relying on the market appraisal of Bresic Whitney dated 15 May 2019). It is said that the fact that Jannette did not agree with the market appraisal is evident from the letter from her solicitor to the defendant’s solicitor (referring to Annexure G to Mr Young’s affidavit).

9. [55]

   Jannette contends that the letter dated 22 August 2019 (referring to Annexure C to Mr Young’s affidavit) did not provide information as to David’s position with respect to the value of the net distributable estate by way of explaining to Jannette the rationale on which the Offer of Compromise had been formulated (cf the assertion at [8] of the solicitor’s affidavit that the offer was formulated on a value of $2,000,000 to $2,100,00 million). It is said that no such explanation or information was provided to Jannette and that, during the time in which the Offer of Compromise remained open for acceptance, Jannette was entitled to assume that the net distributable position of the estate was as stated by the plaintiff (being $2,715,527.90 and based on the material disclosed by David in his affidavit of 7 May 2019).

10. [56]

    It is also noted that the terms of the Offer of Compromise were conditional on Jannette agreeing to a timetable for the payment of the provision ($320,000), with payment in full not being effected for a period for 12 months from the date of orders being made. Complaint is made that David provided no explanation as to why he would or could not pay the offered provision within the usual time of 28 days from the date the orders took effect.

11. [57]

    Jannette says that, as at August 2019, David had not fulfilled his executorial duty in gathering in the assets of the estate by selling the real estate (pointing to the evidence at trial that David considered he ought to have been given a life interest in the property). It is noted that the only other estate asset was the cash of $237,528 and that the remaining seventeen residuary beneficiaries were also entitled to have their legacies paid.

12. [58]

    Jannette says that it is usual when an order is made for a plaintiff’s provision pursuant to s 59 of the Succession Act to specify that the provision be paid out of the estate of the deceased. It is noted that the terms of the Offer of Compromise provided merely for the offered amount to be paid to Jannette over a period of 12 months and that David did not identify nor stipulate the source from which Jannette could expect to have the offered amount paid. It is said that there was no suggestion from David that he was prepared to contribute his own moneys.

13. [59]

    It is submitted that, given that the Tennyson Point Property had not been sold or even listed for sale when the Offer of Compromise was made, and with the only other asset being those cash deposits to which I have referred, it would have been clear to anyone that the estate was not in a position to pay the offered amount to Jannette. It is said that it was purely speculative that Jannette would be paid in full within 12 months, “presumably based on funds hopefully becoming available either to the estate or some other unidentified source by the end of the 12 months”.

14. [60]

    Jannette submits that an offeree is entitled to be provided by the offeror with sufficient information of the basis on which an offer is put so that the offeree is able to appraise the rationale of the offer and make an informed decision as to whether it is in his/her best interest to accept the terms of the offer.

15. [61]

    Jannette points to the authorities that make clear that whether or not an offer of compromise is a genuine offer or not depends on an assessment of all of the circumstances of the case at that time. It is submitted that an analysis of the Offer of Compromise is that, whist it was capable of acceptance, its terms were both conditional (i.e., to accept the offered amount and agree to a timetable for payment) and speculative (in that there was no identified source from which Jannette could reasonably expect the provision to be paid and when). Thus, it is said that the Offer of Compromise was not in any real sense a proper offer of compromise, rather that it was merely an offer to induce Jannette to bring an end to the proceedings and trigger the costs consequences under the rules on a non-acceptance of the offer.

16. [62]

    It is submitted that, in carrying out the evaluative task, weighing up all of the matters, the overall justice points against the application of the rules that Jannette should pay David’s costs upon the basis as provided in r 42.15 of the UCPR or otherwise.

17. [63]

    As to the other offers to which David points, it is noted that with respect to the Calderbank offer dated 16 August 2019, there is no presumption that a party rejecting, or not accepting, a Calderbank offer should pay the offeror’s costs on an indemnity basis. Rather, the Court is required to approach the rejection of such an offer as a matter to which it should have regard when considering whether to order costs, whether it be on the ordinary or indemnity basis. The critical question in carrying out the exercise is, it is submitted, to determine whether, in all of the circumstances. it was unreasonable for the offeree to reject or not accept the offer. It is said that, in determining the issue of unreasonableness, whilst it is neither possible nor desirable exhaustively to list the relevant circumstances, a court should ordinarily have regard at least to the following matters: (a) the stage of the proceedings at which the offer was received; (b) the time allowed to the offeree to consider the offer; (c) the extent of the compromise offered; (d) the offeree’s prospects of success, assessed at the date of the offer; (e) the clarity with which the terms of the offer were expressed; and (f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.

18. [64]

    Jannette maintains (for the reasons set out above) that it was not unreasonable for her not to accept the Calderbank offer of 16 August 2019. As to the “verbal offers” that it is asserted were made by the defendant’s solicitor to the plaintiff’s solicitor, it is said that in view of the dispute as to what was discussed during various telephone discussions, and particularly in view of the statement by the plaintiff’s solicitor that he conducted his discussions with the defendant’s solicitor on an informal and without prejudice basis, these should not be considered.

19. [65]

    As to the Second UCPR Offer served on Jannette on 30 April 2020, it is said that this appears to have been made by David consequent to telephone discussions between the parties’ solicitors during which, on either account, the “real sticking point” was settlement at a fixed amount on account of Jannette’s costs or costs as assessed or agreed, the latter course necessarily involving each party incurring further costs if no agreement could be reached and the assessment process proceed.

20. [66]

    It is noted that the accompanying letter to the Second UCPR Offer stated that the offered legacy of $300,000 (an increase on a previous offer of $250,000 made on 6 April 2010, but less than the offer of $320,000 made in Offer of Compromise of 16 August 2019) was the “maximum amount of money that can be paid to your client within 14 days of the Court making final orders in this matter”. It is said that the driving force behind the Second UCPR Offer was not dependent on an assessment of all of the circumstances of the case at that time but rather on what money David could find to pay Jannette within 14 days, noting that David had still to sell the real estate and the cash reserves of the estate were about $207,588 (referring to the principal judgment at [12]).

21. [67]

    Jannette points out that the same letter advises that “we otherwise reiterate the matters set out in our last offer…” and it is said that it is entirely unclear whether that reference is to an offer of compromise served on Jannette on 6 April 2020 offering a provision of $250,000 and payment of Jannette’s costs as assessed or agreed or an offer contained in email dated 6 May 2020 (see Annexure J to Mr Young’s affidavit) of provision of $250,000 and costs fixed at $60,000.

22. [68]

    It is said that, while the offered provision contained within the Second UCPR Offer is identical to the provision awarded to Jannette, it is not one upon which weight would be placed because, based on David’s earlier offers of 6 April and 6 May 2020, it did not suggest an element of compromise. It is said that the provision contained within each of the offers was either $250,000 or $300,000 ($20,000 less than the Offer of Compromise of August 2019). Jannette reiterates that the offered provision by David was determined by what funds the defendant could find to pay her. It is noted that Mr Young has deposed that David was “unable to accept” Jannette’s offer of provision of $350,000 made on 15 April 2020, not because he did not consider it “within the range” of what Jannette could be awarded, but on the basis there were insufficient cash funds in the estate.

23. [69]

    It is submitted that the offers made by David do not suggest, and it could not be contended by him, that Jannette’s case was without merit.

24. [70]

    In carrying out the evaluative task, weighing up all of the matters, it is thus Jannette’s position that the overall justice points against the application of the rules that Jannette should pay David’s costs upon the basis as provided in r 42.15 of the UCPR or otherwise.

25. [71]

    As adverted to above, Jannette also raises an issue as to the costs of the last day of the hearing (27 May 2020) and seeks an order that the defendant pay her costs of the last day of the hearing.

26. [72]

    Jannette says, in this regard, that: the hearing had been listed for three days; the evidence was completed prior to the lunch adjournment on the third day when David closed his case; closing submissions were to commence after the lunch adjournment; and that then, without leave or an application to re-open his case, David’s Counsel sought to tender a Sales History Report dated 20 May 2020. It is said that a considerable amount of time was spent in argument over the tender of that report (which was ultimately being admitted and marked Ex-14).

27. [73]

    More specifically, complaint is made that David provided no explanation as to why evidence going to support what was said to be a crucial part of his case (namely, that Jannette would have had the benefit of an “an extraordinary capital gain” had she retained the Glossodia Property) had not been obtained and filed in the usual way or adduced into evidence earlier in the proceedings. It is said that there was no explanation as to why it had been left to the very last minute to obtain the report. It is noted that (as observed at [102] and [103] of the principal judgment), the Sales History Report failed to satisfy the expert evidence test. Further, it is said that, notwithstanding the considerable time that the Sales History Report occupied, no weight was accorded to it.

28. [74]

    It is said that, had it not been for the time spent on the Sales History Report, it is likely each party’s closing oral submissions could have been completed within the afternoon of the third hearing day. However, in the events that transpired, the hearing was adjourned to 27 May 2020 because there was insufficient time for David to make oral closing submissions. Then, when the hearing resumed on 27 May 2020, David’s Counsel provided “some 30 odd pages” of closing written submissions which had not been prepared for the last of the allocated hearing dates. It is suggested that there is room to surmise whether David’s Counsel was ready to make oral closing submissions on the last of the allocated hearing days.

29. [75]

    By reason of what Jannette says was an unnecessary adjournment caused solely by David not having put on the evidence he wanted at the proper time and without proper explanation for that failure, Jannette says that she incurred a further day’s costs and, hence, the application now made in that regard.

David’s submissions in reply

1. [76]

   Not surprisingly, perhaps, given the way in which the hearing (if not the litigation as a whole) was to my observation conducted, David then sought leave (which I granted) to file submissions in reply to those of Jannette (no doubt incurring further costs). Those reply submissions addressed, in substance, two issues: first, the submission by Jannette that David should pay her costs of the last day of the hearing on 27 May 2020 on an indemnity basis (which, as it transpires, were unnecessary having regard to the view I have formed on that issue); and, second, Jannette’s submissions as to the Offer of Compromise.

2. [77]

   The first of those issues, being the visitation of costs of the last day of the hearing, can be disposed of relatively quickly.

3. [78]

   It appears that David (I assume by his legal advisers) has undertaken an exercise of reviewing the transcript records of the hearing in order to support his submission that, even if there had been no time spent on the Sales History Report, closing submissions would not have been completed on the third day of the hearing. In this regard, it is noted that, at the conclusion of the argument in relation to the Sales History Report, Counsel for Jannette made an application for the costs thrown away “for the last hour” to be paid by David (referring to T 233.37-39) and that the Court sat late on the third hearing day in any event (referring to T 254.4).

4. [79]

   I do not propose here to enter into unedifying debate as to why it was that the hearing was not able to be completed within the three days listed or (as David has calculated) how much additional hearing time would have been required had there been no argument about the Sales History Report (since I am not, in any event, persuaded that it is appropriate to apportion the costs in the way suggested). All I will say here is that the unfortunate reality (with which all parties, and the Court, had to cope as best they could) was that there were technological and other constraints imposed by reference to the global pandemic which had affected the way in which the hearing was conducted. Those constraints were not assisted by the last minute evidence adduced from both sides; nor by the extensive complaints (largely from David’s side) as to procedural and evidentiary matters, which occupied valuable hearing time to little avail. Focus on the just, quick and cheap resolution of the real issues in dispute was sadly lacking at times throughout the hearing.

5. [80]

   As to the second of the issues raised in reply, David emphasises that he made no claim of his own for further provision out of his father’s estate and, hence, it cannot be said that he at any time made a claim to a life estate in the Tennyson Point Property. I interpose to note that I do not understand there to be a dispute as to this (though it begs the question as to why David thought fit, in his affidavit filed on 30 May 2019, to make the observation at [19] that he did not understand why his father did not leave him a life estate). It appears that David is here taking issue as to the submissions made by Jannette in relation to delay in, or uncertainty as to, the sale of the Tennyson Point Property (that being the main asset of the estate).

6. [81]

   David also here points to [26] and [27] of his affidavit, in which there is reference to the stress caused by the knowledge that the home would have to be sold (and to the fact that he later suffered a heart attack in early 2020).

7. [82]

   As to the value of the Tennyson Point Property, David points out that Jannette’s own evidence establishes that, on 22 May 2019, she was provided with a copy of the appraisal which placed the value of the Tennyson Point Property at around $2,100,000 (referring to Annexure A to Mr Isabella’s affidavit). (It is noted, though this seems here beside the point, that, on 3 July 2019, Jannette did not take the opportunity to include a competing appraisal in her affidavit of that date.)

8. [83]

   David says that the evidence served by Jannette does not establish whether she was provided with a copy of the Offer of Compromise, or whether it was (and the ramifications of a refusal of that offer were) discussed with her. Insofar as Jannette complains that the basis upon which the offer was made was unclear, including the relevant market appraisal of the Tennyson Point Property and the availability of the funds which would be used to pay the plaintiff, David says that there is no explanation as to why Jannette did not avail herself of the procedure provided for in r 20.26(4) of the UCPR (by giving notice within 14 days of receiving the Offer of Compromise that she was unable to assess the reasonableness of the offer because of a lack of particulars or documents).

9. [84]

   David argues that Jannette did not act reasonably by failing to accept the offer because she took the view that “it would have been clear to anyone that the estate was not in a position to pay the offered amount to [her]” (referring to Janette’s submissions, in this respect). It is submitted that “most people would not question the ability of an Estate with cash reserves of $237,000 and a substantial real property asset, to be able to pay the amount offered within the 12 month time frame provided for in the UCPR Offer” and that Jannette’s conduct in refusing to accept the offer on this basis was clearly unreasonable. (Pausing here, it is an exercise in pure speculation to engage with this submission, i.e. as to what “most people” might think. What is relevant to consider is the reasonableness or otherwise of Jannette’s failure to accept the relevant offer(s), taking into account all of the circumstances at the time. Insofar as an explanation is now sought to be put forward in her submissions as to this, based on an uncertainty as to the ability of the estate to meet the terms of the offer, that too appears to be little more than speculation – the relevant point is that none of this appears to have been raised at the time as the basis for Jannette not accepting the offer(s).)

10. [85]

    As to other matters raised in Jannette’s submissions, it is noted that the cover letter to the Second UCPR Offer, which was (as noted above) served on 30 April 2020, could not have referred to an email dated 6 May 2020 (since it pre-dated it) and that, to suggest that the Second UCPR Offer was not accepted because Jannette was confused as to whether it referred to an email which was sent six days after it was served, suggests that Jannette acted unreasonably in rejecting it.

Determination

1. [86]

   As I have noted, there is no dispute as to the Offer of Compromise not being compliant with the rules provided for such offers in the UCPR. Nor is it suggested that it did not contain a genuine element of compromise. (There is an issue raised in that regard as to the Second UCPR Offer but I do not accept that it did not contain a genuine element of compromise – that being something not to be tested as against earlier offers.)

2. [87]

   In sum, the trigger to enliven a special costs order by reference to the non-acceptance of the Offer of Compromise is whether the order or judgment obtained by Jannette on her claim is “no more favourable” to Jannette than the terms of the offer (see r 42.15 of the UCPR).

3. [88]

   In simple monetary terms, the provision ordered for Jannette on her claim was $300,000 compared with the offer contained in the Offer of Compromise of $320,000 and, therefore, the judgment sum was less favourable than the amount in the Offer of Compromise. However, under the terms of the offer, Jannette was not to receive the whole of that amount until the expiry of 12 months from the date of the making of final orders (as opposed to the outcome under the judgment of an order enforceable within a much shorter period of time).

4. [89]

   Insofar as David in his submissions calculates the value of the offer by reference to the value of the estate (about which there was dispute but which was ultimately the subject of agreement at the hearing), I place less weight on this. The issue is not the percentage value of the estate that was comprised by the offer as compared to the provision made under the judgment. Rather, to my mind, what is to be compared is the judgment against the Offer of Compromise (not the percentage of the estate that the provision represents, a matter that could not have been certain as at the date of the Offer of Compromise because it had neither been agreed nor determined). Again, I observe that what Jannette obtained by way of provision was very close to the amount of the offer made in the Offer of Compromise (and the same as that in the Second UCPR Offer). Moreover, the Offer of Compromise included costs on the ordinary basis out of the estate (which aligns with the order for costs that I had envisaged in the judgment).

5. [90]

   Therefore, the judgment obtained was no more favourable to Janette than the Offer of Compromise made by David (and, indeed, was no more favourable than the Second UCPR Offer, though it is unnecessary having regard to the earlier offer to consider either that offer or other informal settlement offers that were made).

6. [91]

   The question then is as to whether there is a reason to order otherwise than as would be the effect if the special costs order for which r 42.15 of the UCPR provides were to apply. In that regard, I consider that the matters raised by Jannette as to the circumstances of the offer (noting, again, the uncertainty professed by her as to how the funds to meet a judgment would be obtained, for example) do not of themselves make it reasonable for her to have rejected the Offer of Compromise (although the timing of payments under the Offer of Compromise is a relevant factor in such a decision). More specifically, not only does there not seem to have been any enquiry as to the issue now raised as to the source of the settlement funds, but also I do not see that there is ultimately any real difference: both then and now either the Tennyson Point Property will have to be refinanced or the property will have to be sold. Indeed, acceptance of the Offer of Compromise would have given rise to an enforceable judgment just as the making of orders at the conclusion of the contested hearing has done. Having said that, I can accept that, in the circumstances prevailing at the time, those matters identified by Jannette may understandably have been operating on her mind such that, in the exercise of the costs discretion, they would be of some relevance.

7. [92]

   Therefore, one balances an offer based on acceptance of the Offer of Compromise under which there was a staggered timetable for the payment of the provision over twelve months as against a judgment for provision with the usual time of 28 days from the date the orders take effect, but after the cost of a contested hearing.

8. [93]

   True it is that complaint may be made as to whether there was fulfilment by the executor of gathering in the assets of the estate by selling the real estate, but it must be remembered that indemnity costs orders are compensatory not punitive (see Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11).

9. [94]

   I have referred above to the cases in which the rationale for special costs orders has been considered. I that context, I note also what was said by Beazley JA (as Her Excellency then was) in Commonwealth v Gretton [2008] NSWCA 117.

10. [95]

    In my opinion, what is relevant in the present case is the fact that there was very little difference (relatively speaking) between the Offer of Compromise and the final outcome of the litigation. In Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 (Elite) (albeit a case concerning a Calderbank or informal offer of compromise), where a question arose as to the consequences which should flow from the making of an “inclusive of costs” Calderbank offer, McColl JA noted (see from [100]) the line of authority, commencing with Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97, in relation to offers expressed to be inclusive of costs, considering cases where the importance of isolating the costs component in such a way which is clear and capable of proper assessment independently of the principal claim. In Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 25 NSWLR 349, for example, there was a difficulty (where there was an offer expressed to be inclusive of costs). McColl JA in Elite (at 104) observed that this meant that it was not possible to determine whether the outcome of proceedings was more or less favourable than the offer. McColl JA also pointed (see at [111]) to the practical difficulties that may be posed when the court comes to consider the reasonableness or otherwise of the offeree’s conduct in not accepting an offer. In the present case, such an issue does not arise because the Offer of Compromise included as a separate component a provision for costs that accords with the general (though not invariable) rule in cases of this kind. However, those observations are not inapt in circumstances where the value of the estate had not been determined and there was room for doubt as to how any settlement would ultimately be funded.

11. [96]

    Overall, in circumstances where the offer of provision under the Offer of Compromise was effectively “line ball” with the outcome of the judgment (slightly better in monetary terms but with a delay in the receipt of payments in tranches) and where it appears, from the communications that David has himself put in issue, that the question of costs was a matter of concern to Jannette and (at least at a later point) could not satisfactorily be resolved between the legal representatives, I consider that there is a proper basis on which to make an order otherwise than as provided for by r 42.15(2) of the UCPR.

12. [97]

    I am fortified in this conclusion having in mind that my assessment of the amount for provision was (as I adverted to in the principal judgment) premised on there being a costs order of the usual kind (i.e., that what Jannette would receive by way of provision would be a net amount less only any shortfall between the actual solicitor/client costs).

13. [98]

    In that regard, as I understand it, what David is now putting forward is the proposition that there be, in effect, an adjustment of the judgment sum such that the provision for Janette be revised to a sum referable to a percentage (12.3%) of a revised net distributable estate of $2,517,178 (that revision being achieved by adjusting the amount to be deducted from the estate in respect of his indemnity costs – instead of $68,000, only $23,000 – being those indemnity costs payable prior to 23 August 2019) and a deduction in the amount recoverable out of the estate in respect of Jannette’s party/party costs (i.e., instead of $75,000 a figure of around $25,410, being those party/party costs incurred before 23 August 2019 based on the estimated indemnity costs to the mediation held on 21 May 2020, as deposed to in the affidavit of Mr James Isabella sworn 11 March 2019). On David’s calculations this would mean that the provision for the plaintiff might be revised to $309,613 (but, as I understand it, there would be a cap on the amount of recoverable costs out of the estate – both in respect of Jannette’s costs and in respect of David’s costs). Jannette did not directly address that proposition in her submissions on costs.

14. [99]

    I consider that the appropriate course in the present case is to leave the provision in the amount as ordered and simply to cap the party/party costs recoverable by Jannette out of the estate at an amount that reflects the fact that the estate would otherwise bear a greater proportion of costs than it would have done had the Offer of Compromise been accepted, and to do so without entering into the calculation and adjustment exercise here proffered by David. In that regard, I would cap the recoverable costs of Jannette out of the estate at $50,000. I accept that this will mean that the effective provision for Jannette (absent any agreement with her legal representatives to forego the balance) will be reduced by around $25,000, but I consider that this promotes the public policy objectives of the special costs orders. I also bear in mind that this is not a case of the kind considered by Hallen J (and others) where the claim made by Jannette did not succeed and could be said to be spurious or tenuous.

15. [100]

    As to the costs of David, as executor, I see no reason to limit his indemnity for those costs out of the estate.

16. [101]

    Finally, as to the submission by Jannette that David should pay her costs of the last half day of the hearing because of the late application to tender the Sales History Report, I am not persuaded that it is appropriate to embark upon an apportionment of costs in that way. True it is that there are cases where it may be appropriate to award costs of a separate issue (see, for example, Pacific General Securities Ltd v Soliman & Sons Pty Ltd [2006] NSWSC 724, where Brereton J (as his Honour then was) cited (at [10]) Waterman v Gerling Australia Insurance Co Ltd (Costs) [2005] NSWSC 1111). However, to my mind, here it cannot be said that the application to re-open and tender the Sales History Report was a clearly defined and separate issue (on which the otherwise successful party failed) which had occupied a significant part of the trial (whether by way of evidence or argument) (see also Yazgi v Permanent Custodian Ltd (No 2) [2007] NSWCA 306 at [24]).

17. [102]

    The circumstances in which apportionment of costs as between different issues may be appropriate arise where, in respect of one or more issues, the successful party has “unfairly, improperly, or unnecessarily increased the costs” (see, for example, Waddell J, as his Honour then was, in Windsurfing International Incorporated v Petit (1987) AIPC 90-441); where the bulk of the time has been taken on an issue on which the unsuccessful party had succeeded (see, for example, Mahoney JA in Waters v PC Henderson (Aust) Pty Ltd (Court of Appeal (NSW), 6 July 1994, unrep) (Waters); Toohey J in Hughes v Western Australian Cricket Assn (1986) ATPR 40-748); or where a particular issue or group of issues is clearly dominant or separable (Mahoney JA in Waters; McColl JA in Elite). None of those instances is applicable in the present case. Moreover, there was fault on both sides in respect of the manner in which evidence was adduced late and as to the taking of evidentiary objections which occupied court time.

Orders

1. [103]

   For the preceding reasons, I make the following orders:

   1. (1)

      The plaintiff have her costs of the proceedings on the ordinary basis out of the estate, such costs capped at $50,000.

   2. (2)

      The defendant’s costs be borne out of the estate on the indemnity basis.

2. [104]

   Otherwise, no further order is necessary and this will now dispose of the proceedings.