Page v Page [No 2]

1. [1]

   HIS HONOUR: In this matter, I delivered reasons for judgment on 6 September 2016, the medium neutral citation of which is Page v Page [2016] NSWSC 1218 (“the principal judgment”). Events and people are referred to in these reasons in the same way as they were in the principal judgment. These reasons should be read with the principal judgment.

2. [2]

   In the principal judgment, I determined that the Summons should be dismissed because Warren was not an eligible person within the meaning of that term in s 57(1)(e) of the Act and, that even if I were wrong, and he was an eligible person, there were no factors warranting the making of his application.

3. [3]

   At the request of the parties, I did not deal with the costs of the proceedings in the principal judgment. When I published the principal judgment, I stood the proceeding over until 19 September 2016, for the hearing on costs, allowing a short time, in the hope that the parties might reach an agreement on that issue. Unsurprisingly, no agreement was reached by them.

4. [4]

   The differing positions that each adopted at the costs hearing were stark. Warren sought orders that:

5. [5]

   Patricia sought orders that:

6. [6]

   I stress, because it was raised during oral submissions, I am not dealing, in this judgment, with the quantum of Patricia’s costs. I refer to my remarks regarding the quantum of the parties’ costs in the principal judgment. I am only dealing with the question whether Warren should pay Patricia’s costs of the proceedings, and, if so, upon what basis.

The Evidence on Costs

1. [7]

   On the argument about costs, Patricia relied upon an Offer of Compromise (a copy of which is Ex. C6) which had been served on 6 November 2015, and a Calderbank offer (a copy of which is Ex. C7), made on the same date, and in the same terms, each of which provided:

2. [8]

   She also relied upon a letter dated 14 March 2016 (a copy of which is Ex. C8 on the costs argument) from her solicitors to the Plaintiff’s solicitors relating to the value of the estate and notional estate.

3. [9]

   There did not seem to be any dispute that the Offer of Compromise was one that had been made in accordance with Uniform Civil Procedure Rules (“UCPR”), rule 20.26(3)(a)(ii). That rule enables an offer to be made in accordance with the UCPR that proposes a judgment in favour of the defendant with a term of the offer that the defendant will pay to the plaintiff a specified sum in respect of the plaintiff’s costs.

4. [10]

   As stated, the Calderbank offer was in the same terms. The UCPR does not provide for, or refer to, any form of Calderbank offer, or any terms that such an offer should, or should not, include. It was accepted that the offer was a Calderbank offer, which is a written offer made without prejudice except as to costs that does not comply with the relevant rules of court relating to the making of offers of compromise.

5. [11]

   I shall refer to the two offers made on behalf of Patricia as “the offer”.

6. [12]

   There is no evidence of a response by, or on behalf of, Warren, to the offer. (Although there was a reference by counsel to a counter-offer having been made, the correspondence containing such a counter-offer was not tendered on the application.)

7. [13]

   On the costs argument, Warren relied upon the following documents:

8. [14]

   Before proceeding further, I should mention that Warren commenced the proceedings by Summons filed on 23 February 2015. Warren relied upon only two affidavits served prior to 7 November 2015, being his affidavit of 20 February 2015 and his mother’s affidavit of 20 May 2015. All of the other affidavits upon which he relied at the hearing, were made, and served, in, or after, December 2015.

9. [15]

   On the other hand, seven of the affidavits relied upon by Patricia were served prior to November 2015. Only a few, which included updating affidavits and an affidavit of costs to the completion of the hearing, were served thereafter. It follows that much of Patricia’s case was made known to Warren prior to the making of the offer.

The Submissions

1. [16]

   I received from each of the legal representatives, an outline of submissions and a copy of the documents upon which she and he, respectively, relied in support of the costs orders sought. I have read the submissions carefully and they will remain with the papers.

2. [17]

   Patricia submitted that she had obtained an order or judgment on Warren’s claim that was no less favourable to her than the terms of the Offer of Compromise. This meant that she was entitled to an order against Warren for her costs in respect of the claim, such costs to be assessed on the ordinary basis, up to the time from which the defendant became entitled to costs under paragraph (b) of UCPR rule 42.15A(2), and an order against Warren for her costs in respect of the claim, assessed on an indemnity basis, from the beginning of the day following the day on which the offer was made.

3. [18]

   Patricia also submitted that same result would follow from the non-acceptance of the Calderbank offer.

4. [19]

   She submitted that each offer made contained a significant compromise as to an amount to be paid to Warren by way of his costs. Each offer did not invite capitulation because Warren would have been better off had the offer been accepted, even though the offer would not have resulted in any provision out of the estate or notional estate being made for Warren.

5. [20]

   Patricia submitted that there were no discretionary reasons why the Court should “otherwise order”.

6. [21]

   At the outset, I note that, at all relevant times, Warren had experienced legal practitioners acting on his behalf. Since there is no evidence that they did not do so, I consider that it is more likely than not, they would have explained to him the costs consequences of obtaining a result less favourable than the offer made. No doubt, they would have also explained his risk as to costs if the proceedings were dismissed.

7. [22]

   Warren submitted that, whilst Patricia had obtained an order or judgment on the claim that was "no less favourable to the Defendant in the terms of the offer", the presumption in favour of indemnity costs should be displaced because the offer did not involve any real compromise, since he would receive nothing; was not a genuine attempt to reach a negotiated settlement; was designed to trigger a costs application; and was, in essence, an offer to capitulate. Counsel described it as “almost a cynical offer”: T6.22 – T6.24.

8. [23]

   Counsel submitted that it was not unreasonable for Warren to reject the offer and that:

9. [24]

   Warren went on to submit that it was inconsistent with her evidence that Patricia, in acknowledging that both she and the deceased wanted to help Warren, would wish to worsen his already poor financial circumstances, following the deceased’s death, and “drive him to bankruptcy”, with the burden of a costs order.

10. [25]

    Then, Warren relied upon his financial and material circumstances. He said that his assets were currently valued at $335,000 and his liabilities were estimated to be $150,000. He was reliant on pensions from the Department of Veterans Affairs, NSW Fire Brigade and Centrelink.

11. [26]

    Reliance was placed on what I had written in Stojanovski v Stojovski [2016] NSWSC 976 at [265]:

12. [27]

    (Of course, in the principal judgment, I had not taken into account Warren’s financial position in dismissing his application. I was not required to deal with the question whether, at the time when the Court was considering the application, adequate provision for the proper maintenance, education or advancement in life of Warren had not been made by the Will of the deceased: s 59(1)(c) of the Act.)

13. [28]

    Warren relied upon the fact that neither Patricia, nor any of her three children, had advanced her and his financial and material circumstances during the proceedings. He said that the Court “can infer that any order for provision or an order providing for payment of the Plaintiff’s costs, would not have affected her overall financial position”. He went on to submit that it followed that she did not need the compensation, in the form of a costs order, to be made against Warren.

14. [29]

    (I do not accept this submission because what I wrote on this topic at [44] and [45] of the principal judgment related to their interests as competing financial claimants upon the bounty of the deceased.)

15. [30]

    Warren did not make any submission that the letter accompanying the offer did not set out the basis for Patricia’s contention that Warren should accept the compromise – for example, because his case was extremely weak or because if it failed, he had no reasonable prospects of achieving a result that was more favourable than that which was being offered.

16. [31]

    Had such a submission been made, I would have referred to what Redlich J wrote in Aljade and Malaysian Kuwaiti Investment Co SDN BHD (MKIC) v Oversea-Chinese Banking Corp Ltd (OCBC) [2004] VSC 351 at [87], that:

17. [32]

    This passage was recently referred to, with approval, by the Court of Appeal in Victoria in Marriner v Australian Super Developments Pty Ltd [2016] VSCA 141 at [235].

The Law

1. [33]

   There was really no dispute on the principles that apply.

2. [34]

   The Civil Procedure Act 2005 (NSW), s 98(1), provides that, subject to the rules of Court, and that, or any other, Act, costs are in the discretion of the Court. The discretion extends to the costs of all proceedings whatsoever, including the costs of the administration of any estate, or trust, and the Court has full power to determine by whom, to whom, and to what extent, costs are to be paid. It is a judicial discretion to be exercised on a principled basis.

3. [35]

   Section 98(4) of the Civil Procedure Act provides:

4. [36]

   It is clear that the discretion to award costs is unconfined or “absolute and unfettered”: Latoudis v Casey (1990) 170 CLR 534; [1990] HCA 59 at 557 (Dawson J). However, it must be exercised judicially, that is, according to relevant considerations, and taking account of the contextual features and facts of the litigation.

5. [37]

   The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77, at 79.

6. [38]

   As was noted (albeit in another context), in Kazar (Liquidator) v Kargarian; In the Matter of Frontier Architects Pty Ltd (In Liq) [2011] FCAFC 136 at [9] (by Greenwood and Rares JJ):

7. [39]

   The UCPR rule 42.1 provides that costs 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. The “event” is generally taken to be the practical outcome of the proceedings.

8. [40]

   The rule provides that the discretion to award costs, ordinarily, will require an order that the successful party’s costs will be paid by the unsuccessful party. The power to “make any order as to costs” enables the Court, in an appropriate case, to depart from the general rule if it would be unjust to apply it. Thus, there is flexibility in determining questions of costs. Again, the rule extends to the costs in any proceedings.

9. [41]

   UCPR rule 42.2 provides:

10. [42]

    UCPR rule 42.20(1) provides that if the Court makes an order for the dismissal of proceedings, then, 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. [43]

    Ultimately, the Civil Procedure Act and the UCPR require the Court to make such costs order as it thinks just in the particular circumstances of the case: Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343 at [10].

12. [44]

    In Overton Investments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (2001) 113 LGERA 439; [2001] NSWCA 137 at [72], Stein JA observed (Powell JA and Ipp AJA agreeing) that the Court is entitled to “look realistically at the litigation, the issues, the way it was conducted and the result, in order to assess who really succeeded and to what extent”.

13. [45]

    Black J, in In the matter of Employ (No 96) Pty Ltd (in liquidation) [2013] NSWSC 456 at [7], commented:

14. [46]

    The Act does not contain any relevant provision to which s 98(4) of the Civil Procedure Act 2005 (NSW) would be subject. However, s 99 of the Act provides:

15. [47]

    No longer is there any difference between categories of eligible persons, as there was in s 33(3) of the Family Provision Act 1982 (NSW). The direction in s 33(2) of the former Act that “[t]he Court shall not order” the payment of costs out of the estate “in respect of an application in relation to a deceased person made by an eligible person who is such a person by reason only of” the fact that they fell within a certain category, is not repeated.

16. [48]

    Rather, it is clear that the section in the Act also provides for an unfettered discretion as to how the costs of the proceedings may be borne. Importantly, the section relates to the payment of costs out of the estate or notional estate or both. It does not appear to relate to how costs may be borne otherwise.

17. [49]

    I dealt with the general principles in Harkness v Harkness (No 2) [2012] NSWSC 35, at [17]-[18], in relation to costs, generally, in a claim for a family provision order, in circumstances where there has been no offer of compromise or Calderbank offer served. I shall not repeat all of what I wrote in that case. However, several parts of what I wrote, at [18], are relevant because of the oral submissions made on behalf of Warren:

18. [50]

    Basten JA in the Court of Appeal in Chapple v Wilcox [2014] NSWCA 392 at [27], expressed a similar view:

19. [51]

    In relation to a claim for a family provision order in which an offer of compromise has been served, Kunc J set out the relevant principles in Bates v Cooke (No 2) [2014] NSWSC 1322 at [20] – [33]. (An appeal from his Honour’s principal judgment was dismissed with costs: Bates v Cooke [2015] NSWCA 278).

20. [52]

    At [33], his Honour wrote:

21. [53]

    I respectfully agree.

22. [54]

    In relation to a claim for a family provision order in which a Calderbank offer has been served, I dealt with the principles in Walsh v Walsh (No 2) [2013] NSWSC 1281, so far as they relate to reliance upon a Calderbank offer, at [39]–[56]. I shall not repeat all of what I wrote there.

23. [55]

    Essentially, a Calderbank offer does not attract the same cost consequences as a formal offer of compromise made under the UCPR. Its presence does not yield any presumption of a costs order outside the normal rules. In an appropriate case, the existence of a Calderbank offer may influence, but not govern, the exercise of discretion supporting a different order as to costs. It enables the Court to consider whether it should exercise its discretion to make a costs order other than as provided by the UCPR rule 42.1 and rule 42.2. Nor does the making of a more favourable Calderbank offer appear to be determinative of what kind of (more favourable) costs order (or order other than the usual) should be made: In the matter of Cheal Industries Pty Ltd - Fitzpatrick v Cheal [2012] NSWSC 932 at [54] (Ward J, as her Honour then was).

24. [56]

    Even where it is held that a Calderbank offer should have been accepted, and the offeree achieves a result as, or less, favourable than the offer at the trial, there is no automatic consequence. What must be considered is the reasonableness of the offeree’s rejection or non-acceptance of that offer, a matter to be determined having regard to the circumstances at the time that the offer fell to be considered. The question is whether, in all the circumstances, the failure to accept the offer warrants departure from the ordinary rule as to costs.

25. [57]

    In Evans v Braddock (No 2) [2015] NSWSC 518, I added, at [50]:

26. [58]

    (Counsel submitted that the offer made was made only for the purpose of triggering a costs consequence. I do not accept that submission, but even if that were so, if the Court finds the offer to have been a reasonable one, that it has the effect of triggering a costs consequence does not mean that the Court should regard it as having been made for a non-genuine purpose.

27. [59]

    What Santow JA (with whom Bryson JA and Stein AJA agreed) had written in Leichhardt Municipal Council v Green [2004] NSWCA 341 was that a Calderbank offer that has no real element of compromise in it, which is designed merely to trigger costs sanctions, will not be treated as a genuine offer of compromise. That is not the case here as the offer did not signify an acceptance by Warren of the ordinary cost consequences that would follow the dismissal of the proceedings. In my view, the offer to pay $50,000 on account of Warren’s costs was a reasonably generous and sufficient offer for it not to be ignored in relation to an application for indemnity costs.)

28. [60]

    I should note that in Stewart v Atco Controls Pty Ltd (in liq) (No 2) (2014) 252 CLR 331; [2014] HCA 31, the appellants, who were successful in the High Court, had made a Calderbank offer before the hearing of the appeal (to which they were, at that stage, the respondents) in the intermediate appellate court. The High Court, at [4], observed:

29. [61]

    It is clear that the High Court did not decide whether reasonableness is a factor which militates against the making of an indemnity costs order. The Court concluded that the costs of the Court of Appeal proceedings be paid on the indemnity basis.

Determination

1. [62]

   There can be little doubt, in my view, that the terms of the offer made by Patricia were clear and precise; were a legitimate attempt to resolve the proceedings; and were capable of acceptance. Upon the basis that Warren’s claim was dismissed, Patricia would forego any order for costs against Warren, and, in fact, would pay, $50,000 on account of his costs. That it did not provide for Warren, by way of a lump sum order under the Act, is beside the point and does not mean that it was not a genuine offer.

2. [63]

   At the time of the making of the offer, no doubt, Patricia’s costs were reasonably large, although the estimate of those costs, then, is not in evidence (although I have referred to the number of affidavits served by the date of the offer). Similarly, Warren’s costs, at that time, are not known (although I have referred to the number of affidavits served by the date of the offer). However, this is not a case where the offer was made by Patricia at a time when most of the costs had already been incurred by Warren and at a time when the matter had been set down for a hearing.

3. [64]

   I am satisfied that permitting 28 days from the making of the offer to accept it, in all the circumstances of this case, allowed Warren a reasonable amount of time to consider, and reflect upon, whether to accept the offer.

4. [65]

   Finally, the offer foreshadowed an application for an indemnity costs order in the event of Warren rejecting it, or it having lapsed through effluxion of time. As a result of Warren rejecting the offer (or it expiring through effluxion of time), Patricia was required to further defend the proceedings at greater cost.

5. [66]

   The offer was made about 10 months after the commencement of the proceedings, and, if accepted, would have avoided the need for the parties to incur substantial legal costs in relation to the hearing. It was also made in circumstances where Patricia was not only protecting her own position but was seeking to uphold the terms of a Will, for the benefit of herself and her children who were the chosen objects of the deceased’s bounty.

6. [67]

   It follows that Warren’s submission regarding the offer not being a genuine attempt to negotiate a settlement should be rejected.

7. [68]

   Ultimately, then, I must decide whether there are reasons to “otherwise order”, with the result that Warren would not have to pay the costs of Patricia that have been sought, or if not those precise costs, her costs otherwise.

8. [69]

   In reaching my decision on costs, I acknowledge that this was a novel and unusual claim by a sibling of the deceased in circumstances where there was an allegation of sexual abuse.

9. [70]

   I have considered, again, the principal judgment. It is difficult to find any merit in Warren’s submissions. In this regard, I note, particularly, that:

10. [71]

    I note, also, that there is no evidence of any offer made by Warren to resolve the proceedings, or even any written, or other, response to the offer made on behalf of Patricia. That might suggest, although I do not know, “the peremptory dismissal of an offer of compromise such that an inference could be drawn that no bona fide consideration had been given by the plaintiff to early settlement of the claim”: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61, at [21].

11. [72]

    Some additional support for such a suggestion might be taken from the fact of the conditional costs agreement that Warren had entered into with his solicitors. That Warren had done so meant that if he were unsuccessful, he was not at risk as to his own costs. Patricia, as the legal representative of the deceased’s estate, did not have that luxury and the estate is responsible for her costs.

12. [73]

    It might be said, therefore, that for Warren to reject a clear offer by Patricia to forego the estate’s costs and to pay $50,000 on account of his costs, and, instead, to pursue his case to its ultimate conclusion was unreasonable and would not justify an “otherwise” order.

13. [74]

    In any event, at the time Patricia made the offer, Warren must have known of his own financial circumstances and that there was no certainty, if he was unsuccessful, that he would not be ordered to pay Patricia’s costs. He was, after all, represented by experienced counsel and solicitors. In these circumstances, any financial difficulties Warren might face as a result of a costs order against him is of limited relevance and results from his own conduct. That Warren was emotionally invested in bringing and maintaining the proceedings is not a matter that can, or should, be given undue weight in determining the question of how the burden of costs is to be borne.

14. [75]

    Yet, there are two aspects of the matter that have given me cause to pause. The first is part of the conversation referred to, by Patricia, in [114] of the principal judgment.

15. [76]

    The second is the evidence of Patricia, at T177, that the deceased did say a number of times, after the allegations were made by Warren, to him, in Patricia’s presence, "I'll look after you".

16. [77]

    It is clear that the making of any costs order in favour of Patricia would result in significant detriment to Warren’s financial circumstances.

17. [78]

    On this aspect it is necessary to note that the conversations referred to were in an entirely different context and may not now be important. However, that the deceased appears to have wished to assist Warren is a relevant consideration in determining the justice of the case.

18. [79]

    Ultimately, I have come to the view that Patricia should not be deprived of the costs incurred in successfully defending the proceedings brought by Warren. To order otherwise would not provide a just outcome, particularly in circumstances where Warren brought the proceedings comfortably knowing that if he was unsuccessful, he would not incur any costs of his own. An order that would result in a plaintiff not being liable for a defendant’s costs in circumstances that exist in this type of case (a conditional costs agreement and offer of compromise/Calderbank offer) would result in a plaintiff having little incentive to make an appropriate decision about the prospects of success of his, or her, case, or give serious consideration to the terms of an offer made by a defendant to resolve the proceedings.

19. [80]

    Yet, it seems to me that the two matters to which I have referred above, which gave me cause to pause, go to the basis upon which Patricia’s costs should be calculated, rather than to whether Warren should pay those costs.

20. [81]

    In my view, bearing in mind all of the matters in the case, and in the exercise of my discretion, I have come to the view that Warren should pay Patricia’s costs, calculated on the ordinary basis, of the proceedings, and I so order. Those costs should include the costs of this application for costs. Insofar as the Defendant’s costs are not paid by the Plaintiff, her costs calculated on the indemnity basis should be paid out of the estate of the deceased. I make no order as to Warren’s costs.