DW v RW (No 2)[2013] QDC 189

DISTRICT COURT OF QUEENSLAND

Introduction

1. [1]
   On 19 July 2013 I delivered the decision in DW v RW [2013] QDC 163 in which I ordered that provision be made for the proper maintenance and support of DW out of the estate of JW by payment of a lump sum of $50,000.

2. [2]
   The Respondent offered to settle the matter by the payment of $8,000 plus costs on 13 November 2012.

3. [3]
   The Applicant offered to settle the matter by receipt of $120,000 plus costs of $32,000 on 20 November 2012.

4. [4]
   The estate on the evidence lead at trial was worth some $323,000. I do note from the material that as at November 2012 excluding the Respondent’s legal costs for the family provision claim the net value of the estate was about $375,000.

5. [5]
   The Applicant’s costs are said to be $105,203.95 (see Affidavit of Ms McNamara sworn 7 August 2013) and the Respondent’s costs- $60,000 excluding mediator’s fees (see [8] of the Respondent’s submissions). However I note that at the trial the Respondent said that his costs were $75,000 (T1-66.15).

6. [6]
   I sought written submissions from the parties as to the costs.

7. [7]
   I have taken into account the submissions of both parties and the affidavits of Ms. McNamara in reaching my decision.

8. [8]
   It is convenient first to deal with the Respondent’s submissions.

Respondent’s submissions

9. [9]
   The Respondent relying on Gaudron J in Singer v Berghouse [1993] HCA 35; (1993) 114 ALR 521; (1993) 67 ALJR 708 submits that family provision cases stand apart from cases in which costs follow the event. Costs in such a case depend on the overall justice of the case.

10. [10]
    The Respondent pointed to that which was said by McMeekin J in Manly v Public Trustee [2007] QSC 388 at [114] where His Honour noted that the costs (amounting to $180,000) were out of proportion to the work and difficulty involved in the case. His Honour also noted that there was little point to litigation in modest estates.    

11. [11]
    The Respondent submits that neither party had “beaten” an offer made under the UCPR or pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586.

12. [12]
    The Respondent submits that whilst the Applicant was successful in obtaining an order for further provision and is prima facie entitled to have an order for costs, it is submitted that the costs should not be assessed on an indemnity basis but rather on the standard basis. It is further submitted that this is an appropriate case for the court to fix or cap the applicant’s costs.

13. [13]
    The Respondent submits that the reasons for not making an order as to costs on an indemnity basis are:

1. (a)
   The Applicant’s costs are out of proportion to the work and difficulty involved in the case;
2. (b)
   The estate is a small one such that the awarding of costs on an indemnity basis would significantly erode what estate is left for the beneficiary (beneficiaries); and
3. (c)
   The indication given by the court during the course of the trial that costs may only be awarded on the standard basis.

14. [14]
    The Respondent submits that the sum of $100,000 claimed by the Applicant is excessive. The Respondent points out that the Applicant only filed three affidavits deposed to by the Applicant and one affidavit by his wife. The Applicant and his wife were the only witnesses called in the Applicant’s case.

15. [15]
    It is further submitted that the Respondent’s costs up to and including the trial totalled about $60,000 (excluding mediator’s fees). It is submitted that far more evidence was led by way of affidavit and witnesses in the Respondent’s case than that in the Applicant’s.

16. [16]
    The Respondent relies on Sherborne Estate (No. 2) (Vanvalen v Neaves) (2005) 65 NSWLR 268 where Palmer J referred to the importance of proportionality of costs.

17. [17]
    The Respondent also relies on Manly v The Public Trustee of Queensland [2007] QSC 388 (the decision on costs being [2008] QSC 47).

18. [18]
    It is submitted that ignoring the Applicant’s costs the estate is only $323,000. The applicant’s costs on an indemnity basis would represent almost one third of the estate and two times the amount of the provision that has been ordered.

19. [19]
    It is further submitted that should the Applicant be awarded his costs on the indemnity basis the combined effect of the award for further provision of costs will represent almost half of the estate. It is relevant that the court has found that the beneficiary JW should receive “the lion’s share” of the estate.

20. [20]
    It is further submitted that the court indicated on day two of the trial (T2-13.30-47) that the court had a discretion to award costs on a standard basis.

21. [21]
    It is submitted that r 687(2) of the rules provides scope for the court to make orders regarding costs in particular to fix costs. Judges of the Supreme Court of Queensland have fixed or capped costs in family provision applications (Underwood v Underwood [2009] QSC 107 per Jones J and Jones v Jones [2012] QSC 342 per McMeekin J).

22. [22]
    A number of other decisions have been referred to as well (Carroll v Cowburn [2003] NSWSC 248; Foster v Lisle [2003] NSWSC 1243; Collett v Knox [2010] QSC 132; Gill v Smith [2007] NSWSC 832.

23. [23]
    It is further submitted that the Respondent should have his costs paid from the estate on an indemnity basis.

Applicant’s submissions

24. [24]
    The Applicant accepts the court retains the discretion to either award costs on a standard basis, or to cap costs. The usual rule is that the successful Applicant gets an order that his costs be paid out of the estate on an indemnity basis.

25. [25]
    It is submitted that it would be to punish the successful Applicant to only award costs on the standard basis.

26. [26]
    The Applicant submits that executors have a duty to consider the impact of costs on an estate (see Underwood v Sheppard [2010] QCA 76).  

27. [27]
    It is submitted that in applications in small estates, early settlement is encouraged (see Re Dallow [2006] QDC 3).

28. [28]
    The Respondent made an offer of $8,000 plus indemnity costs in November 2012 and repeated on 28 November 2012 after mediation. It is submitted that the offer was a paltry one. The Applicant offered to settle the case for $120,000 plus costs fixed at $32,000 at a time when the estate was worth about $350,000. If it had been accepted then $200,000 would have been left for Josephine.

29. [29]
    It is also submitted that a relevant matter to be taken into account is the Applicant’s offer noted that he would not bring an application in SW’s estate (see Balnaves v Smith [2012] QSC 408).

30. [30]
    It is submitted that whilst the Applicant did not beat his offer it was relevant to the question of costs. It is submitted that the costs sought are not unreasonable for a four day trial. The Applicant’s solicitors did not engage counsel for the mediation, the Applicant’s solicitor prepared the brief for the mediator and the trial booklets.

31. [31]
    Whilst the Applicant had fewer witnesses than the Respondent the affidavit material was much more extensive than the Respondent’s material who submitted it would be unfair to the Applicant to either award him costs on a standard basis or to cap his costs.

32. [32]
    It is submitted that as DW has already paid his costs it would be unfair to cap them or award them on a standard basis.

Consideration

33. [33]
    Rule 681(1) provides:

“Costs of a proceeding, including an application in a proceeding, are in the discretion of the court but follow the event, unless the court orders otherwise.”

34. [34]
    Rule 687 provides:

“(1) If, under these rules or an order of the court, a party is entitled to costs, the costs are to be assessed costs.

2. (2)
   However, instead of assessed costs, the court may order a party to pay another party –

1. (a)
   A specified part or percentage of the assessed costs; or

2. (b)
   Assess costs to or from a specified stage of the proceedings; or

3. (c)
   An amount for costs fixed by the court; or

4. (d)
   An amount for costs to be decided in the way the court directs.”

35. [35]
    Rule 700 provides:

“(1)This rule applies to a party who sues or is sued as a trustee.

3. (2)
    Unless the court otherwise orders, the party is entitled to have costs of the proceeding, that are not paid by someone else, paid out of the fund held by the trustee.”

36. [36]
    Further rule 704 provides:

“If a party who sues or is sued as a trustee is entitled to be paid costs out of a fund held by the trustee, a cost assessor must assess the costs on the indemnity basis, unless the court orders otherwise.”

37. [37]
    It is clear there is a wide discretion on the issue of costs and each case depends on its own facts.

38. [38]
    In Carroll v Cowburn [2003] NSWSC 248 Young CJ in Eq observed at [36] that practically speaking the court has little control over costs in family provision matters. His Honour considered a general guideline might be to cap costs at the amount of the legacy received although his Honour declined to cap costs in that case.

39. [39]
    In Vanvalen and Anor v Neaves and Anor (2005) 65 NSWLR 268 at 278 Palmer J noted the difficulties in assessing cases of this type.

40. [40]
    In Gill v Smith [2007] NSWSC 832 the Plaintiffs received legacies of $100,000 each with costs capped at $40,000.

41. [41]
    In Manly v The Public Trustee of Queensland (No 2) [2008] QSC 47 the beneficiaries received costs on the standard basis. As noted earlier His Honour described the costs of $75,000 for the applicant and $80,000 to $90,000 for the beneficiaries being out of proportion to the work and difficulty involved (the estate was worth $380,000.) 

42. [42]
    In Underwood v Underwood [2009] QSC 107 Jones J fixed quantum of the costs.

43. [43]
    In Jones v Jones [2012] QSC 342 where costs were said to be $430,000 McMeekin J ordered costs be fixed at $185,000.

44. [44]
    I also note that whilst costs are truly discretionary, the discretion must be exercised judicially (see Oshlack v Richmond River Council (1998) 193 CLR 72.)  

Determination

45. [45]
    I have taken into account the submissions made by the parties in reaching my decision.

46. [46]
    In this case on a number of occasions I indicated that the parties should resolve the matter.

47. [47]
    At T1-4.28-40 I said:

“Can I just tell counsel that I’ve had the opportunity of reading the material in this matter and it’s entirely a matter for the parties as to what they wish to do, but these disputes are expensive disputes and if it runs the full distance, this trial, there will be additional costs, one party or parties may have an outcome which is not – they don’t desire.  So, it’s always good, even during a trial for the parties to continue discussing the matter to avoid an unpleasant result for whichever party’s concerned.  So can I ask counsel to pass that on to the parties.  I am happy to adjourn early this afternoon for discussions to continue if the parties wish to do so, but I thought it opportune at the commencement of the trial.  I understand both counsel will appreciate what I’m saying in that regard.”

48. [48]
    At T1-66.12 I said:

“Can I indicate I’ve heard the evidence and I’ve noted the cost estimates from one side are $94,000 and your side Mr Deaves of $75,000.  The estate here is not a great estate.  If it goes the full distance, it may take the rest of the week.  That’s why I urge the parties to consider their differences because no-one will, potentially, without this dispute and I suggest that the parties discuss the matter and attempt to resolve it and put aside their differences.  It would be in the interests of everyone I feel for the case to be resolved.  I’m not indicating a view anyway at the moment.  I’ve only heard one side of the story.  I’ve got to hear the other side.  I’ve got to read all of the material, so I don’t have a view one way or the other about the case at the moment.  I’ll give leave Ms Brewer to you to discuss such matters with your client although he’s under cross-examination … .”

49. [49]
    At T2-13 the court was informed in front of the parties that the court could make an order for costs on a standard basis- it was completely within the discretion of the court.

50. [50]
    At T2- 106.45:

“The other thing is I’ve obviously now heard the evidence or the substantial evidence of both sides.  I’ve seen, and as I say, I don’t have a concluded view about the matter, the strength and weaknesses of both sides having heard DW and RW give evidence, so I would encourage the parties to consider talking after we adjourn tonight.”

51. [51]
    It seems on the material that my suggestions were ignored. The matter proceeded to a four day trial.

52. [52]
    The evidence in the trial revealed that excluding costs the estate was worth some $323,000 (although as noted earlier as at November 2012 excluding the Respondent’s costs it was worth about $375,000.)

53. [53]
    This is a relatively small estate by today’s standards. Bearing in mind the size of the estate and the proportion of the claimed costs, the fact that both parties ignored my suggestion to settle the matter, and the wide discretion I have on the question of costs it seems to me that this is a case where the costs of each side should be capped.

54. [54]
    The trial lasted for four days. Assuming preparation for three days and a rate of $6,600 for junior counsel and solicitor per day the total sum would be $46,200 for each side.

55. [55]
    Then considering the affidavit material, the instructions necessary and involvement in the mediation it seems difficult to see that the parties should have spent more than 9 days each in such preparation. This would total $29,700 (assuming $3,300 per day). It would have probably been less.

56. [56]
    Of course there is the cost of the mediator to be considered. I would not expect this to have been more than $2,000 per side.

57. [57]
    I note that the Applicant has informed the court that counsel was not engaged until the trial.

58. [58]
    In my view the costs should be capped at $80,000 for each side.

59. [59]
    The Applicant submits that he had to pay for airfares and accommodation. That was his choice. He could have engaged local solicitors and counsel. In any event if the Respondent’s cost estimate is correct the Applicant will receive more money for costs than the Respondent.

60. [60]
    My determination sees that $160,000 (at most) will come from the estate of $375,000. This is still a significant amount in proportion to the size of the estate (42%) but certainly less than would otherwise be the case.

61. [61]
    I note the Respondent submits that his costs are some $60,000, so it is probably unnecessary to determine whether or not all of the Respondent’s costs should be awarded on an indemnity basis or not. (Although as I have noted above it was said that the Respondent’s costs were $75,000.)

62. [62]
    However, in case it is necessary, in light of the fact that the offer by the Respondent was low; in light of the fact that the Respondent did not accept the intimation to attempt to settle the matter; taking into account the size of the estate and in light of my findings that not all relevant books of account have been produced (see [299] of the judgment) I would order that the Respondent’s costs also be capped at $80,000.

63. [63]
    It should not be seen that this case is a precedent for the quantum of costs in such a dispute. It will be borne in mind that this case did involve a detailed examination into the partnership affairs of the parties and others over a period of time. In a straight forward family provision application I would have thought costs would be less.

64. [64]
    I order:

1. That the Respondent’s costs of and incidental to the proceedings be assessed on an indemnity basis but are to be capped at $80,000.
2. The costs referred to in paragraph 1 be paid out of the estate of JW.
3. The Applicant’s costs of and incidental to the proceedings be assessed on an indemnity basis but are to be capped at $80,000.
4. The costs referred to in paragraph 3 be paid out of the estate of JW.
5. The parties have liberty to apply.