Maynard v Maynard (No 2)

In the principal judgment in these proceedings, delivered on 14 December 2018, I dismissed the plaintiff’s claim for family provision relief against the defendant, who is the widow of the deceased and the executor of his estate: Maynard v Maynard [2018] NSWSC 1961.

As was the case in the principal judgment, to avoid confusion I will refer to persons by their given names.

I held at [210] that the defendant, Josephine, was entitled to an order that the plaintiff, Marcelle, pay her costs on the ordinary basis.

As requested by Josephine, I gave her the opportunity to make an application that Marcelle pay her costs on a different basis, and Josephine has applied for a special order for costs on the ground that Marcelle did not accept an offer of compromise dated 19 December 2017.

Josephine seeks the following order in lieu of the proposed order for costs set out in the primary judgment.

The offer of compromise, which was dated 19 December 2017, stated:

Marcelle accepted that the offer was an offer of compromise for the purposes of Uniform Civil Procedure Rules 2005 (NSW) (UCPR) Part 20 Division 4, and that Marcelle did not accept the offer.

She also accepted that UCPR rule 42.15A applies, as she did not accept Josephine’s offer, and the effect of the dismissal of her claim meant that the judgment was no less favourable to Josephine than if the offer of compromise had been accepted. The rule provides:

The effect of the application of this rule is that Josephine will be entitled to the special costs order that she seeks unless the Court orders otherwise.

Marcelle submitted, and Josephine accepted, that it would provide a proper basis for the Court to order otherwise if Marcelle establishes that the offer of compromise did not involve a real element of compromise.

As did Kunc J in the recent decision of Beech v Squire (No 2) [2018] NSWSC 605, I respectfully accept that the relevant principles are as stated in Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391, as extracted by his Honour at [15] (equivalent principles apply to proceedings at first instance where the offer of compromise is made under UCPR rule 20.26):

The question whether the offer of compromise in this case contained a sufficient element of compromise must be answered as at the date of the offer, 19 December 2017, without the benefit of knowledge that this Court has subsequently dismissed Marcelle’s claim or the basis for that dismissal.

The Court was informed that by the date of the offer of compromise, Marcelle was aware of the size of the estate and the circumstances relevant to the two competing claimants, being Josephine and Somaya. All of the primary affidavits had been served. There was a Court appointed mediation on 1 September 2017, and also a judicial settlement conference that was attended by the parties on 11 December 2017. The Court does not know what happened at the mediation or the settlement conference, save that they did not lead to a settlement. It should be accepted, however, that at the date the offer of compromise was served Marcelle and her legal representatives had a full basis for assessing the relative strength of the parties’ cases.

However, the offer of compromise was a ‘walk away offer’ of sorts. It required Marcelle to capitulate on the basis that she would have to pay her own costs but not the costs of Josephine. However, as Josephine would be indemnified for her costs out of the deceased’s estate, as an equal one-third beneficiary in the estate, Marcelle would effectively bear one third of Josephine’s costs. That costs arrangement was proper and conventional for an executor in Josephine’s position, but it shows how the offer of compromise was in practical terms worse for Marcelle than the standard ‘walk away offer’ where the plaintiff’s claim is dismissed and each party bears their own costs.

In my view, in the present case, the offer contained in the offer of compromise did not contain an adequate element of compromise, so that it will be proper for the Court to make a costs order otherwise than in accordance with UCPR rule 42.15A.

I do not consider Marcelle’s case to have approached something of the character of being frivolous or vexatious or, speaking more generally, that its prospects of success as at 19 December 2017 were so limited as to make it of real advantage to Marcelle to have been given the opportunity to walk away on the terms offered.

To the extent that an applicant’s needs are of relevance to their entitlement to family provision relief, Marcelle’s circumstances were relatively desperate. In a purely objective sense, the deceased did not make adequate provision for Marcelle (although relative to the limited size of the estate, the Court ultimately found that the provision was not inadequate). By the time of the offer of compromise, Marcelle would already have incurred significant legal costs. The present was not a case where the Court has found against Marcelle on a basis that should have been recognised by Marcelle and her legal representative as demonstrating that her case was very likely to fail. Marcelle did fail, but that was because submissions that were reasonably available to her were not accepted. I refer in particular to Marcelle’s reliance on the fact that Josephine’s financial circumstances were much worse than they needed to be because Josephine had expended relatively large sums for the benefit of her family in circumstances that would at least support a reasonable argument that she had not acted prudently. There was also evidence led by both parties for and against the proposition that the other had acted badly towards the deceased. As it happened, I found at [115] that the Court did not have a sound basis for deciding these issues on the evidence. I observed that the truth may lie somewhere in the middle between the events as recounted by each of the parties. The present was a case in which, deprived of hindsight, Marcelle and her legal advisers had a proper basis for hoping as at the date of the offer of compromise that the Court would ultimately find in Marcelle’s favour. Marcelle’s needs were such that were it not for the limited nature of the deceased’s estate, she may well have succeeded in obtaining some extra provision.

In Harkness v Harkness (No 2) [2012] NSWSC 35, Hallen AsJ (as his Honour then was) stated the principles that he considered ought to be applied in determining whether an applicant for family provision relief whose claim is dismissed should be ordered to pay the defendant’s costs, as follows:

Albeit not directly, these considerations have some bearing on the question of whether the Court should regard the offer of compromise as having a sufficient element of compromise. In the present case, notwithstanding Marcelle’s very limited financial circumstances, I decided that she should at least pay Josephine’s costs on the ordinary basis because all of the beneficiaries were financially needy, the estate was not large, the deceased had been generous to Marcelle by dividing his estate equally between his wife and his two daughters, and importantly that he had made his will very shortly before his death in circumstances where he had grounds for fearing that he would not live much longer. In these circumstances, Marcelle and her legal advisers should have realised that, notwithstanding her need, there was not a real basis for depriving the other beneficiaries.

However, when it comes to consider whether Marcelle should have abandoned her case on 19 December 2017, it must be borne in mind, as the now Family Provision List Judge observed, that “Proceedings for a family provision order involve elements of judgment and discretion beyond those at work in most inter partes litigation”. There is some truth in the proposition that the outcome of such applications is likely in many cases to be less predictable than in many other civil proceedings. Furthermore, there are cases where the Court does not apply the rule that costs follow the event. In Harkness v Harkness (No 2) his Honour made an order that the defendant’s costs be paid out of the estate on the indemnity basis, but he did not make any other costs order.

At least in the circumstances of the present case, I am satisfied that Marcelle had sufficiently good prospects of achieving some additional family provision by pursuing her claim, to require that for any offer to have involved a real element of compromise, some amount of money would need to have been provided. It is not necessary to decide how much that offer would have had to have been, but it may be that an amount as low as $25,000-$30,000 would have been adequate. It is sufficient to say that, given Marcelle’s circumstances and her prospects, the ‘walk away offer’ that was made did not provide any real compromise.

Accordingly, the costs order that I will make is: