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- Unreported Judgment
Menzies v Menzies (No 2) QDC 268
DISTRICT COURT OF QUEENSLAND
Menzies & Anor v Menzies (No 2)  QDC 268
ROBYN LEIGH MENZIES
GLENN DONALD MENZIES
SHELLY GAYE MENZIES as Executor of the Estate of the Late Donald Menzies
BD No 4064 of 2016
Originating application – Further Orders
District Court at Brisbane
20 December 2019
On the papers
SUCCESSION – FAMILY PROVISION – ORDERS AND OTHER PROCEDURAL MATTERS – COSTS – GENERALLY – where the estate is modest – where offers to settle were made – whether costs should follow the event or some other order should be made – whether costs of both parties should be capped or fixed
Uniform Civil Procedure Rules 1999, r 352, r 360, r 681,
r 687, r 700A
Baker v Baker (No 2)  QDC 140
A Fraser for the applicants
Bennett Carroll Lawyers for the applicants
- I delivered judgment in the application for family provision on 4 December 2019.
- The applicants succeeded in the application. In lieu of the entire estate being provided to the respondent, Shelly Gaye Menzies, I ordered that the residue of the estate be distributed as follows:
- (a)To each of the applicants, Robyn Leigh Menzies and Glenn Donald Menzies– 20%;
- (b)To Shelly Gaye Menzies – 60%.
- The orders made included directions for the filing of submissions on costs.
- As recorded in the reasons, as at the date of trial, the quantum of the estate was found to be approximately $815,000.00. At the time of the trial, the applicants’ legal costs at the end of trial were estimated to be $181,277.30, and the respondent’s legal costs were estimated to be $107,244.48.
- In making submissions on costs on behalf of the applicants, Mr Fraser referred to two offers of compromise made by the applicants which were not accepted by the respondent. It was submitted that, on any view, the applicants had been successful in obtaining an order for provision that substantially exceeded the quantum of the second offer made on 5 July 2018 (the Second Offer).
- The Second Offer was stated to be in accordance with Chapter 9, Part 5 of the Uniform Civil Procedure Rules 1999 (UCPR). It was open for 14 days and the substantive terms were that:
- (a)Robyn receive 17.5% of the net proceeds of the sale of the property;
- (b)Glenn receive 7.5% of the net proceeds of the sale of the property (a total of 25% of the net sale proceeds); and
- (c)$76,000.00 be paid to the applicants for costs.
- Counsel for the applicants submitted that the court should make an order for costs in the following terms:
- (a)The applicants’ costs up to 5 July 2018 be paid on an indemnity basis from the estate;
- (b)The applicants’ costs from 5 July 2018 be paid on an indemnity basis by the respondent personally (and not reimbursed from the estate);
- (c)The respondent’s costs incurred after 5 July 2018 not be reimbursed from the estate.
- It was submitted that such an order should be made for the reason that a reasonable person in the respondent’s position, having regard to the fiduciary duty owed to the estate, would have accepted the offer and the imprudent refusal, whether made under rule 360 or otherwise, justified the making of an indemnity costs order.
- It was submitted that the offer was made several months after the parties had filed their substantive affidavits and that estate was not large, so legal costs would have a significant impact upon the estate, and the applicants’ respective positions as deposed in the affidavits warranted an award for provision. The respondent did not even respond to the settlement offer and, it was submitted, did not make any attempt to compromise by making a written offer in an amount that could be considered to constitute a genuine attempt to resolve the matter.
- It was submitted that in those circumstances, and noting rule 700A(c) of the UCPR, the court should give effect to the Second Offer in a material way; not to punish the respondent but so as to ensure the consequences of her actions are not visited upon the applicants by reduction in the quantum of the estate to which they are entitled.
- In support of the quantum of costs, it was submitted the position taken by the respondent resulted in various matters being contested. It was further said that the very different personal and financial positions of the applicants meant each had to be addressed separately and, on that basis, it was said that the applicants’ legal costs of approximately $181,277.30, as contrasted to the respondent’s legal costs of approximately $107,244.48, are not disproportionate.
- Counsel for the respondent acknowledged that the Second Offer was relevant to the question of costs. However, it was submitted that the terms of Chapter 9, Part 5 of the UCPR, and in particular rule 352, do not apply in these circumstances as the present application was not started by way of a claim and the issues had never been defined by pleadings.
- It was accepted by Mr Ivessa that the offer should nevertheless be considered by the court as an informal offer. It was acknowledged that an unbeaten informal offer may warrant a departure from the usual costs basis if it was unreasonably refused. It was submitted that it could not be said that the applicants were bound to succeed and that the mere defence of the application was unreasonable.
- Further it was submitted that the respondent had made two genuine offers to compromise the proceedings on 7 March 2017 and 6 February 2019. It was submitted that the fact that these offers were not more favourable than the judgment does not rob them of the character of offers made in a genuine attempt to settle the matter.
- In making his submissions, counsel for the respondent distinguished the circumstances of this case to the case of Baker v Baker (No 2)  QDC 140. In particular, it was submitted that McGill SC DCJ’s comments that respondents in family provision applications “cannot expect to approach litigation on the basis that as personal representative they will have an entitlement to all of their costs on the indemnity basis out of the estate, regardless of how the litigation is conducted”, must be viewed in the context of that case. It was submitted that the circumstances of this case do not warrant an order requiring the respondent in her personal capacity to pay part of the costs of the applicants or the costs of responding to the application.
- In terms of the quantum of costs, it was submitted that the applicants’ costs are high and that the quantum appears at least in part explained by their filing of unnecessary evidence and the taking of unnecessary steps. In particular, reference was made to three affidavits which were not tendered and 10 subpoenas for witnesses who were not called. It was submitted that the issue could be dealt with by awarding the applicants their costs on an indemnity basis but so as to cap the costs at an amount of $120,000.00 in total.
- It was submitted that in framing an overall order the court should take into account the needs of the applicants and also the respondent. Reference was made to the statements made in the reasons as to the financial position of each of the parties.
- It was submitted that an appropriate order would be one that did not disturb the respondent’s entitlement to reimbursement of her costs in full and that the applicants costs be paid from the estate on an indemnity basis either capped at an amount of $120,000 or with a direction that in conducting a costs assessment, the costs of any work done that was not necessary to the case presented at trial not be allowed.
- In submissions in reply, counsel for the applicants took issue with the submission that Chapter 9 Part 5 of the UCPR did not apply. It was submitted that whilst the proceedings were commenced by originating application, a direction had been made for other documents defining the issues to be filed and served. It was submitted that as the applicants had obtained an outcome more favourable than the Second Offer, the consequence of rule 360 was that the court must order that the respondent pay the applicant’s costs calculated on the indemnity basis unless the respondent showed another order for costs is appropriate in the circumstances.
- It was submitted by Mr Fraser that there was no basis in which to restrict the quantum of the applicants’ costs arbitrarily to an amount of $120,000.00.
Analysis of Legal Position
- The Court is given a broad discretion in its determination of costs. Rule 681(1) of the UCPR 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.
- In relation to a proceeding under the Succession Act 1981 (Qld), Part 4 (Family Provision), rule 700A(2) of the UCPR provides that:
Without limiting the court’s discretion under these rules to make an order about costs in relation to all or part of the proceeding, the court may, in determining an order for costs, take into account the following matters—
- the value of the property the subject of the proceeding and, in particular, the value of the property about which there is a disputed entitlement;
- whether costs have been increased because of any one or more of the following—
- noncompliance with these rules;
- noncompliance with a practice direction;
- the litigation of unmeritorious issues;
- failure to make, promptly or at all, appropriate concessions or admissions;
- giving unwarranted attention to minor or peripheral issues;
- an offer of settlement made by a party to the proceeding.
- Under rule 687 of the UCPR, the court may, amongst other things, fix the costs.
- Chapter 9, Part 5 of the UCPR deals with Offers to Settle. It entitles a party to a “proceeding” to serve on another party an offer to settle one or more of the claims in the proceeding on the conditions specified in the offer. Rule 352 defines “proceeding” to mean a proceeding:
- started by claim; or
- in which the court has made an order under rule 14 ordering the proceeding to continue as if started by claim; or
- started by originating application if an order or direction has been made for pleadings, or other documents defining the issues, to be filed and served.
- Rule 360(1) provides:
- the plaintiff makes an offer that is not accepted by the defendant and the plaintiff obtains an order no less favourable than the offer; and
- the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer;
the court must order the defendant to pay the plaintiff’s costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances.
- The provisions of the rules regarding formal offers to settle apply to proceedings started by an originating application provided “an order or direction has been made for pleadings or other documents defining the issues to be filed or served”. Ordinarily, it might be considered that an order for the filing and serving of documents defining the issues would be intended to refer to the filing and serving of a list of issues; as is sometimes done in the commercial cause jurisdiction.
- In the case of family provision applications, there is a specific requirement under the relevant Practice Direction to file and serve affidavits. The Practice Direction requires that the court make an order for directions including for the filing and service of affidavits and for undertaking dispute resolution. The affidavits will contain the evidence to be relied upon by the applicant in support of the application for provision. The Practice Direction details the material to be covered by the respondent in any affidavit material in reply.
- It may be a consequence of the exchange of affidavits that the issues in dispute are narrowed but the affidavits are not intended to replace pleadings, and cannot be said to be a statement of issues.
- Further, unlike other proceedings, the offer can never result in the proceedings being fully compromised. Any compromise reached between the parties must still be sanctioned by the court.
- This view is supported by the need for the reference in r 700A to offers to settle. Rule 700A clearly requires the court to consider any offers in the making of an order as to costs. That rule is not restricted in its operation to formal offers under the rules.
- The consequence is that, in my view, rule 360 does not have any application to these proceedings. It is rule 700A that is relevant.
- The system of offers to settle is designed to encourage parties to compromise their claims and reduce the impact of legal costs on their entitlement. This is particularly important in the family provision jurisdiction given the fact that some estates are quite small and can easily be consumed by legal costs.
- The significance of the offer to settle is reinforced in this case by the fact that the respondent did not, as evidenced by her low offers, engage in the process of compromising the proceedings and was really defending her personal position; rather than acting in the interests of the estate.
- The consequence is that the respondent should have to bear her own costs after the date of the offer. Until that date it would be reasonable for the cost to be paid out of the estate, as Mr Fraser on behalf of the applicants has proposed.
- Whether the respondent should also have to bear the costs of the applicants herself after the date of the offer, rather than being indemnified from the estate, is more complicated. The reality is that such an order would significantly diminish the amount payable to the respondent from the estate.
- The effect of such an order would significantly worsen if an order were made that the whole of the applicants’ asserted costs be either paid from the estate or by the respondent.
- One way of dealing with this issue is either to cap the costs to be paid as a result of any assessment or to fix them. The disadvantage of capping the costs is that it would require an assessment. Any assessment would further diminish the size of the estate. The parties have provided both sworn and unsworn evidence about the costs they have incurred. In the circumstances, a proper exercise of discretion is to fix the costs based on that evidence.
- At the time of the offer, it may be inferred that the applicants’ costs were $76,000; or in any event that was the amount which the applicants were prepared to accept for costs at that time. At that time it was said that the substance of the evidence had already been filed. A mediation had occurred and failed.
- Somehow between the date of the offer and the end of the trial, the costs of the applicants have more than doubled. Mr Ivessa criticised some aspects of the conduct of the application. The applicants’ counsel essentially responded that this was a matter for the costs assessor.
- The total figure is substantially in excess of the costs said to have been spent by the respondent. Indeed, Mr Ivessa says that the respondent has spent only $35,748.00 since the offer. It is difficult to see how the fact that the applicants were two people, rather than one, would require such disproportionate expenditure on legal costs.
- In those circumstances, the appropriate course appears to be to fix, as was proposed by counsel for the respondent, the legal costs of the applicants for which they should receive indemnity. It would be appropriate for the costs up to the date of the offer, for which they should be indemnified out of the estate, to be fixed at $76,000.00, being the amount sought for legal costs in the offer.
- In the period subsequent to the offer, their costs should be fixed at $45,000.00, which makes an appropriate allowance for any additional expenditure associated with there being two applicants.
- Given the respondent’s disengagement in any approach to compromise, it is appropriate that the costs after the date of the offer be borne by the respondent personally. The fixing of the costs will reduce the impact that such an approach has on the quantum ultimately received by the respondent.
- Accordingly, the orders to be made by the court are:
- The applicants’ costs up to 5 July 2018 be paid from the estate fixed in the amount of $76,000.00;
- The applicants’ costs incurred after 5 July 2018 be paid from the estate fixed in the amount of $45,000.00;
- The respondent’s costs up to 5 July 2018 be paid from the estate fixed in the amount of $71,496.00;
- The respondent’s costs incurred after 5 July 2018 not be reimbursed from the estate.
- Published Case Name:
Menzies & Anor v Menzies (No 2)
- Shortened Case Name:
Menzies v Menzies (No 2)
 QDC 268
20 Dec 2019