Kozak v Matthews[2007] QSC 204

SUPREME COURT OF QUEENSLAND

[1] The applicant sought orders under Part 4 of the Succession Act 1981 for further provision for himself from the estate of Jacqueline Clare Messer late of 16 Windsor Way, Uraween, Queensland, who died on 20 February 2005.  On 22 February 2007 I made an order dismissing his application.  To allow the parties time to prepare submissions on costs that question was adjourned for consideration on 7 March 2007.  On that day Ms Armitage on behalf of the respondents handed me a written submission that the following orders for costs should be made:

1.That the applicant pay the respondents’ costs of and incidental to the application on the standard basis on the Supreme Court scale up to and including 28 June 2006;

2.That the applicant pay the respondents’ costs of and incidental to the application on the indemnity basis on the Supreme Court scale from 29 June 2004;  and

3.That the respondents otherwise be paid their costs of and incidental to the application out of the estate on the indemnity basis.

Ms Armitage submitted that as an alternative to the order no. 1 an order could be made that there be no order as to costs in favour of the applicant up to and including 28 June 2006.  In her oral submissions she conceded that it would be open to me to award no costs at all against the applicant and to make no order as to costs in his favour.

[2] On behalf of the respondents an affidavit sworn on 8 December 2006 by Mr David Lewis, solicitor and member of the firm acting for the respondents, was put before me.  The affidavit shows that on 13 June 2006 Mr Lewis served on the applicant a notice under Part 5 (rules 352-365, Offer to settle) of Chapter 9 (Ending proceedings early) of the Uniform Civil Procedure Rules 1999 in which the respondents offered to settle the applicant’s claim on the following bases:

1.Payment of $50,000 to the applicant from the assets of the estate in respect of his claim

2.Payment of $15,000 to the applicant from the assets of the estate for his costs.

The affidavit shows also that on 24 August 2006 Mr Lewis served a further notice under Part 5 of Chapter 9 in which the respondents offered to settle the applicant’s claim by paying him from the assets of the estate $70,000 and costs assessed on the standard basis.  Each offer was open for acceptance for fourteen days after service.  Both offers were refused. 

[3] On behalf of the applicant Ms Magee submitted that the applicant should have an order that his costs incurred until 27 June 2006 be paid out of the estate on the indemnity basis, and from that day on the standard basis.  As an alternative to the second order Ms Magee submitted that the applicant should be required to bear his own costs after 27 June 2006.

[4] Mr Lewis’s affidavit was put before me without objection, but there was some debate as to whether the provisions of Part 5 of Chapter 9 of the Uniform Civil Procedure Rules applied to this case.  There was first the question whether they apply at all to applications of this kind, and, secondly, if they do apply, whether the relevant rule, rule 361 (Costs if offer to settle by defendant), can apply to this case, in which the claimant has failed completely.  On behalf of the respondents Ms Armitage contended that although the offers were stated to have been made under the Uniform Civil Procedure Rules the better view is that they should be treated as ‘Calderbank’ offers:  see Calderbank v. Calderbank [1976] Fam. 93.  On behalf of the applicant Ms Magee did not concede that the offers should be treated as Calderbank offers and referred to the provision of rule 356 which provides that an offer to settle made under Part 5 of Chapter 9 is taken to be an offer made without prejudice.  It appears to me that the latter analysis would be artificial in this case since the evidence of the offers was placed before me without objection,  but in an event the expression ‘without prejudice’ in rule 356 refers I think to an offer made for the purpose of settling a dispute which should not be construed as an admission of liability.  Once the question of liability has been decided and the relief to be given determined the scheme of Part 5 indicates that the offer can be referred to.  Rule 357(2) impliedly supports that construction.  It provides that ‘[i]f an offer to settle is not accepted, no communication about the offer may be made to the court at the trial or hearing of the proceeding until all questions of liability and the relief to be given, other than costs, have been decided’.  I therefore reject the contention that the offers cannot be considered, but I accept Ms Armitage’s submission that they should be regarded as Calderbank offers rather than offers to which rule 361 applies because that rule proceeds on the premiss of partial success by a claimant, whereas this is a case of complete failure by a claimant.

[5] The general rule that applies to costs of litigation in civil matters is of course that costs follow the event, but it is well established that that rule does not necessarily apply in cases of this kind.  In Singer v. Berghouse (1993) 114 A.L.R. 521;  (1993) 67 A.L.J.R. 708, also a case of an unsuccessful family provision application, Gaudron J. said:

Family provision cases stand apart from cases in which costs follow the event.  Costs 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. (p. 522;  p. 709)

In Sherbourne Estate (No. 2):  Vanvalen v. Neaves (2005) 65 N.S.W.L.R. 268 Palmer J. said at p. 278 that the fact that a plaintiff has recovered judgment in an amount less than an offer to settlement contained in a Calderbank letter does not automatically warrant the making of an order that the plaintiff pay the defendant’s costs as from the date of refusal of the offer on an indemnity basis.  His Honour continued, ‘While that circumstance undoubtedly has weight, all of the facts and circumstances of the case must still be taken into account in the exercise of the court’s discretion as to costs’.  His Honour pointed out that a claim under the Family Provision Act 1982 (N.S.W.) 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.  In Powell v. Monteath [2006] Q.S.C. 46, Mackenzie J. referred to a series of Queensland cases (Re Bodman [1972] Qd. R. 281, Re Klease [1972] Q.W.N. 44, Re Lack [1981] Qd. R. 112, and Re Dallow [2006] Q.D.C. 3) in which applicants failed entirely in applications of this kind but had their costs paid out of the estate.  His Honour observed however that none of those cases involved the rejection of a Calderbank offer and continued, ‘All but Re Dallow are from a period where the emphasis on encouraging settlements and penalising failure to accept reasonable offers by a costs order was not as great’ (para. 6).  In paragraph 9 his Honour observed that the approach to costs ‘peculiar to this kind of case appears to still have some currency in a era when non-litigious resolution of matters and costs disincentives for failure to do so reasonably is given more prominence than in the past’ (para. 9).  See also the observations of Murray J. in Dobb v. Hackett (1993) 10 W.A.R. 532 at p. 540.

[6] On behalf of the respondents it was argued that the applicant’s rejection of the respondents’ offers was unreasonable and that bearing in mind the considerations referred to by Mackenzie J. I should make the orders they seek.  On behalf of the applicant it was argued that the size of the estate, the current financial position of the applicant, and the effect upon him of making an order for costs against him, or indeed of failing to make an order for costs in his favour, should lead to the conclusion that he should have the costs orders sought on his behalf.

[7] I think the respondents have a strong argument in favour of the orders they seek.  Giving full weight to the difficulties referred to by Palmer J. I nonetheless conclude that the applicant’s rejection of both offers was unreasonable – the rejection of the second offer more so than the rejection of the first.  Balancing those considerations and the desirability of encouraging compromise in matters of this kind are the considerations relied on on behalf of the applicant:  chiefly the size of the estate and the applicant’s financial position.  The size of the estate, however, must be seen in the context of the number of beneficiaries, five, entitled to consideration for the testatrix’s bounty.  The applicant’s current financial position is a strong factor in his favour, and it is not without relevance that should his legal advisers pursue him for their fees and he does not have a costs order in his favour he will be in serious financial difficulties.  The respondents on the other hand have been put to considerable expense and have had to endure delay in the administration of the deceased’s estate as a result of the applicant’s claim which I have determined was unmeritorious.  The cost and inconvenience brought about by this proceeding will not just be borne by the respondents but will be shared by all beneficiaries under the will unless an order for costs is made against the applicant.  Taking all of those factors into account, but mindful that the approach to costs favourable to applicants peculiar to this kind of case has persisted to the present time, I conclude that the applicant should not have any costs from the estate nor be ordered to pay any of the respondents’ costs.  The applicant has some argument for an order that the estate pay his costs up to the time when he rejected the first offer, but, against that, the respondents have a strong argument that he pay their costs and so costs should follow the event;  and the respondents have an even stronger argument that the applicant pay their costs after he rejected their offers.  Those two outcomes tend to cancel each other out on my assessment, although it must be said that the balance probably somewhat favours the applicant since it is reasonable to conclude that there were more costs incurred on both sides after the rejection of the first offer than before.

[8] The only order for costs will be that the respondents have their costs paid out of the estate on the indemnity basis.