Edgar v Public Trustee for the Northern Territory & Anor [2011] NTSC 21

PARTIES:                                         Edgar, John Young

                                                         v

                                                         Public Trustee for the Northern Territory

                                                         and

                                                         Edgar, Florita

TITLE OF COURT:                           SUPREME COURT OF THE NORTHERN TERRITORY

JURISDICTION:                               SUPREME COURT OF THE TERRITORY EXERCISING TERRITORY JURISDICTION

FILE NO:                                          104 of 2008 (20822793)

DELIVERED:                                   18 March 2011

HEARING DATES:                           14 March 2011

JUDGMENT OF:                              KELLY J

CATCHWORDS:

Williams’, Civil Procedure Victoria

Family Provision Act (NT)
Supreme Court Rules, Rule 26.08

Lacey & Anor v Public Trustee for the Northern Territory & Anor [2010] NTSC 01; Singer v Berghouse [1993] 114 ALR 52; followed

Bowyer v Wood [2007] 99 SASR 190; Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 426; considered
Colgate Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225; Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; Sherbourne Estate (No 2): Vanvalen v Neaves (2005) 65 NSWLR 268; cited

REPRESENTATION:

Counsel:
    Plaintiff:                                      A Young
    First Defendant:                           C O’Connor
    Second Defendant:                        J Stewart

Solicitors:
    Plaintiff:                                      Ward Keller
    First Defendant:                           Solicitor for the Northern Territory
    Second Defendant:                        Davison Legal Barristers & Solicitors

Judgment category classification:    C
Judgment ID Number:                       KEL11006
Number of pages:                             10


IN THE SUPREME COURT
OF THE NORTHERN TERRITORY
OF AUSTRALIA
AT DARWIN

Edgar v Public Trustee for the Northern Territory & Anor [2011] NTSC 21
No. 104 of 2008 (20822793)

 

                                                     BETWEEN:

                                                     JOHN YOUNG EDGAR
                                                         Plaintiff

                                                     AND:

                                                     PUBLIC TRUSTEE FOR THE NORTHERN TERRITORY
                                                         First Defendant

                                                     AND:

                                                     FLORITA EDGAR
                                                         Second Defendant

CORAM:     KELLY J

REASONS FOR JUDGMENT

(Delivered 18 March 2011)

Lawrence Edgar died in 2008.  In his will he left a legacy of $15,000.00 to his son John, the plaintiff in these proceedings, and the residue of his estate to the second defendant, his widow Florita Edgar.
John made application in this proceeding seeking an order under the Family Provision Act that adequate provision be made out of the estate for his proper maintenance, education and advancement.  That application was unsuccessful.
The proceeding was defended by Forita.  The first defendant, the Public Trustee as executor and trustee, did not take an active part in the proceeding, save for one matter, which is mentioned below.
Forita has now made application for an order that John pay her costs of the proceeding. 
Florita served two offers of compromise on John.  The first of these was served on 29 July 2010.  It offered a payment of $100,000.00 from the estate inclusive of the legacy of $15,000.00 (i.e. an additional $85,000.00) plus his costs of the proceeding to be taxed on an indemnity basis and paid out of the estate.  The offer was open for acceptance for 21 days after the date of service (i.e. until 19 August 2010).  John did not accept that offer. 
The second offer, served on 19 October 2010, offered John 35% of the nett estate after payment of debts, funeral and testamentary expenses, including costs of the proceeding.  Those costs of the proceeding were to include John’s costs to be taxed on an indemnity basis and paid out of the estate.  That offer was open for acceptance within 15 days (i.e. until 3 November 2010).  John did not accept that offer either.   
On the basis of those offers (more particularly the first offer), Florita is seeking an order that John pay her costs to be taxed on a standard basis until 19 August 2010, and on an indemnity basis thereafter.
John resists Florita’s application and seeks an order that his costs be paid out of the estate. 

Principles

In normal circumstances, as a general rule, costs follow in the event.  However, different considerations apply to applications under the Family Provision Act.  In Singer v Berghouse, Gaudron J said, in considering equivalent New South Wales legislation:
“Family provision cases stand apart from cases in which costs follow the event.  …[C]osts in family provision cases generally depend on the overall justice of the case.  It is not uncommon, in the case of unsuccessful applications, for no order to be made as to costs, particularly if it would have a detrimental effect on the applicant’s financial position.  And there may even be circumstances in which it is appropriate for an unsuccessful party to have his or her costs paid out of the estate.”
The plaintiff also relied on the decision of the Full Court of the Supreme Court of South Australia in Bowyer v Wood in which Debelle J (with whom Nyland and Anderson JJ both agreed) reviewed the authorities and concluded:
“The principles are that, generally speaking, there will be no order as to costs of an unsuccessful application.  The court may in its discretion make an order in favour of an unsuccessful applicant who makes a reasonable application founded on a moral claim or obligation.  While it is unnecessary to decide the issue in this case, the cases also suggest that the court may in its discretion order an unsuccessful applicant to pay costs where the claim was frivolous or vexatious or made with no reasonable prospects of success or where the applicant has been guilty of some improper conduct in the course of the proceedings.”
Counsel for the plaintiff relied on this formulation of the relevant principles to submit that there is a reasonably high bar for a successful defendant to a Family Provision Act application who is seeking costs against an unsuccessful plaintiff.  I do not accept that there is such a high bar to an application for costs by a successful defendant.  As I said in Lacey & Anor v Public Trustee for the Northern Territory & Anor:
“I do not take Bowyer v Wood to be authority for the proposition that the Court may only award costs against an unsuccessful applicant where the claim was frivolous or vexatious or made with no reasonable prospects of success.  The Court has an unfettered discretion on the question of costs (which must be exercised judicially) and, as Gaudron J said in Singer v Berghouse, “[C]osts in family provision cases depend on the overall justice of the case”.” (footnote omitted)
Various policy reasons have been advanced for the different starting point when considering the question of costs in Family Provision Act applications including:
“… a perceived desirability of minimising post-litigation conflict in family disputes, the availability in some cases of a significant fund the use of which could alleviate hardship on a losing party, and the circumstance that in some cases the decision was a marginal discretionary decision on which reasonable minds could differ.”
Had it not been for the offer of compromise I would have considered this to be a case in which, in all the circumstances, it would have been just to make no order for costs against the plaintiff, John.  I do not consider it would have been a case where the Court’s discretion should have been exercised to order payment of the unsuccessful plaintiff’s costs out of the modest estate left by the deceased to his widow, Florita.
I now have to consider the effect of the first offer of compromise dated 29 July 2010, expressed to have been served in accordance with Part II of Order 26 of the Supreme Court Rules

Principles

Rule 26.08 sets out the consequences where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment not less favourable than the terms of the offer; and the costs consequences where an offer of compromise is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains a judgment on the claim (i.e. he is successful to some degree) not more favourable than the terms of the offer.   The onus is on the party who failed to accept what turned out to be a more favourable offer, to show why the costs consequences prescribed by the Rules should not follow, and those prescribed costs consequences are not easily displaced.
There is nothing in Rule 26.08 which covers the present circumstance, namely where an offer of compromise has been served by a defendant, and the plaintiff was wholly unsuccessful.  In these circumstances the parties are agreed that I should treat the offer of compromise served under the rules as though it were a Calderbank offer.  
It is well established that “an imprudent refusal of an offer of compromise” may lead to an award of indemnity costs.   However, an informal, or Calderbank offer does not carry the same costs presumption as an offer under the Rules.  When the court is determining whether to exercise its discretion to award indemnity costs following failure to accept a Calderbank offer, in ordinary litigation, the critical question is whether the failure to accept the offer of compromise was unreasonable in the circumstances.
Similarly, in Family Provision Act applications, an important consideration (though not the only consideration) in determining the costs consequences which should flow from a Calderbank offer, is whether it was unreasonable of the party receiving the offer not to accept it in the circumstances.  Undoubtedly, the Court must take into account when considering this issue that, as noted in Sherbourne Estate (No 2): Vanvalen v Neaves :
“…a claim under the Family Provision Act 1982 (NSW) is not quantifiable by the parties’ legal advisers prior to judgment with anything like the prescience possible in a claim for a liquidated sum such as a contract debt, or even in a claim for unliquidated damages for personal injury or for future economic loss.”
That is one of the policy reasons for the starting position in Family Provision Act applications that ordinarily no order for costs will be made and it must also be borne in mind in considering whether a plaintiff’s failure to accept an offer of compromise should be characterised as unreasonable in the circumstances.  Whether or not a plaintiff can establish an entitlement to some provision from the estate and, if so, how much, are matters upon which reasonable minds may differ.
Having said that, in my view it was unreasonable for the plaintiff not to accept the first offer of $100,000.00 plus his costs on an indemnity basis.  The sole assets in the estate were the proceeds of sale of a house belonging to Lawrence’s sister of just over $350,000.00, the proceeds of sale of his modest Acacia Hills property of around $190,000.00, and a few additional odds and ends.  From that would have to be deducted the Public Trustee’s costs in administering the estate and, more significantly, the costs of the present proceeding.  Under the first offer, (and indeed the second offer) all parties’ costs, including the plaintiff’s, were to be paid from the estate on an indemnity basis.  The plaintiff’s position is that all of those costs should be paid by the estate in any event.  I have been told from the bar table by counsel for John, without demur by counsel for Florita, that Florita’s costs have amounted to approximately $150,000.00.  Even if John’s costs are only half that, that is still a substantial sum to be deducted from a relatively small estate.  In rejecting the offer of compromise, John effectively forced the matter on to trial expecting $200,000.00 odd to be paid out in costs, and then for him to receive more than $100,000.00 from what was left.  Given the very modest size of the estate (and comparing his own and Florita’s circumstances) that seems to me to have been a wholly unreasonable position to have adopted.
Were this not a Family Provision Act matter I would have been of the opinion that an order for indemnity costs should be made against John for the period from 19 August 2010.  However, as this is a Family Provision Act matter I must consider other relevant factors, including the effect of such an order on John’s financial circumstances.   
John has only relatively modest assets himself.  He has a house worth, I am told, approximately $300,000.00, superannuation of $73,000.00, a van which he uses for work and which he is paying off, and other sundry assets of minimal value.  He is able to work only part time because he is looking after his invalid wife.  Both she and he are in receipt of pensions.
In those circumstances, while I am of the view that the unreasonable failure to accept the offer of compromise should have costs consequences, it seems to me that an order for indemnity costs runs the risk of having an unduly onerous detrimental effect on John’s financial position.
I also need to take into account the fact that some of the time during the trial was taken up with matters that turned out to be not strictly relevant to the family provision application and which led to an application being made by the Public Trustee for a protection order over Florita’s estate under the Aged and Infirm Persons’ Property Act.  It does not seem to me that justice requires that John pay Florita’s costs of that application or of that part of the hearing time at the trial dedicated to those issues.
I have looked at the transcript of the trial which runs to 171 pages.  Matters directly relevant to the protection order alone (including discussions with counsel, my questioning of witnesses in relation to Florita’s ability to manage her affairs, the likelihood of undue influence by Mr Tanonef and breaches of duty by Mr Tanonef as Florita’s attorney, and the Public Trustee’s application for interim orders) took up 26 pages of transcript.  A further 31 pages were directed to matters which were relevant to both the proceeding and the protection order, chiefly cross examination of Florita and Mr Tanonef by counsel for the plaintiff, Mr Young.  These are properly costs of the proceeding: if counsel for the plaintiff did not consider these matters relevant to his client’s case he would not have cross examined the witnesses about them.  However, if one accepts that this cross examination was more drawn out than it might otherwise have been because of the protection order issues, then, on a rough estimate, approximately 20% of the trial time was taken up with issues related to the protection order.
In my view, the overall justice of the case requires the following costs orders to be made:

  1. Other than the costs orders made by consent for the payment of the costs of the first and second defendants out of the estate, there be no order as to costs of the plaintiff’s application up to and including 19 August 2010.
  2. The plaintiff is to pay 80% of the second defendant’s costs of the trial to be agreed or taxed on the standard basis.
  3. The plaintiff is otherwise to pay the second defendant’s costs of and incidental to the proceeding (including any reserved costs) from 20 August 2010.

[1993] 114 ALR 521 at 522.

[2007] 99 SASR 190 at 210-211.

[2010] NTSC 01.

Nicholls v Hall [2007] NSWCA 356 at [87].

See cases cited in Williams’, Civil Procedure Victoria [I26.08.30] at 3613.

This approach was followed by Rolfe J in Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 in which he said: “It seems to me anomalous that there is no provision whereby a defendant, which is totally successful, is placed in the same position as a plaintiff, which is wholly successful”.

Colgate Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 per Sheppard J at 233.

Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298 (13 December 2005) at [23].

(2005) 65 NSWLR 268 at 278.