Reed v Smith (No 2)[2022] QSC 229

SUPREME COURT OF QUEENSLAND

A trial of a separate question

1. [1]
   On 19 August 2022, I delivered reasons and made an order in relation to a separate question.  The order dismissed the plaintiffs’ claim for a declaration as contained in paragraph 1 of the prayer for relief to the Further Amended Statement of Claim.
2. [2]
   The relevant background to the trial of the separate question is set out in Reed v Smith [2022] QSC 173 at [1] – [6].  In these reasons I have adopted defined terms and names from that earlier decision.
3. [3]
   The separate question involved the following ultimate issues:

   1. (a)
      Were the 2001 wills mutual wills in the sense that they were subject to the testamentary agreement alleged by the plaintiffs? This issue directed attention to whether it could be inferred that Gordon and Dawn had agreed:

      1. (i)
         not to revoke their 2001 wills without the knowledge or consent of the other; and

      1. (ii)
         that they would enjoy the full ownership of the assets and property of each of them, whether held jointly or severally, during each of their lifetimes subject to a limitation that neither of them could make a substantial inter vivos gift or settlement so as to defeat their promise not to revoke their 2001 wills without the knowledge or consent of the other.
   2. (b)
      If the 2001 wills were subject to the testamentary agreement contended for by the plaintiffs, was it appropriate to make the declaration sought by the plaintiffs?
4. [4]
   In relation to the first ultimate issue, I relevantly found that the plaintiffs (Tim and Marian) had failed to prove the alleged testamentary agreement.^[1] 
5. [5]
   I considered the second ultimate issue notwithstanding that the plaintiffs had failed to prove the alleged testamentary agreement.  If the testamentary agreement had been established, Dawn died leaving her 2001 will unrevoked. In those hypothetical circumstances, absent Dawn’s knowledge or consent, Gordon would have been regarded in equity as under an obligation to give effect to the terms of his corresponding 2001 will.  Gordon’s 2001 will would have remained revocable and might have been revoked. His 2016 will would have been a valid testamentary disposition, but his estate would have been held subject to a constructive trust for the benefit of the beneficiaries under the 2001 will.^[2]
6. [6]
   To obtain the declaratory relief, the plaintiffs were required to prove, on the balance of probabilities, that:

   1. (a)
      Gordon did not advise Dawn that he was preparing his 2016 will and was revoking the testamentary agreement; or
   2. (b)
      Dawn at the material time did not have testamentary capacity so that she could provide instructions, if she wished, for a new will to be prepared for her.
7. [7]
   Relevantly, there was no evidence as to whether Gordon told Dawn anything about the 2016 will. I found that the plaintiffs had failed to prove that:

   1. (a)
      Gordon did not tell Dawn about his 2016 will;^[3] and
   2. (b)
      Dawn lost testamentary capacity between mid-2010 and 21 January 2016.^[4] 

Evidence relied upon in respect of costs

8. [8]
   Janet relied upon an affidavit of her solicitor which was directed to two issues, the making of an offer of settlement dated 18 December 2020 (“the offer”) and Tim’s knowledge, at or around the time of the offer, of the net value of Gordon’s estate.
9. [9]
   By letter dated 23 November 2020, Janet’s solicitor provided Tim’s solicitor with a schedule of the assets and liabilities of the estate.  That schedule advised that the net value of the estate at that point in time was $514,421.38.
10. [10]
    The offer was in the following terms:

“    OFFER TO SETTLE

1. TAKE NOTICE that the Defendant hereby offers to settle these proceedings on the following terms and conditions in accordance with Chapter 9 Part 5 of the Uniform Civil Procedure Rules.
2. This offer remains open for acceptance for fourteen (14) days from the date of service upon you.
3. The Defendant offers to settle this action on the basis of a payment to the Plaintiff of the sum of THREE HUNDRED THOUSAND DOLLARS ($300,000.00) plus the Plaintiff’s costs of and incidental to this action to be agreed or assessed on a standard basis which is in full satisfaction of the cause of action in respect of which the Plaintiff claims and is conditional upon the Plaintiff indemnifying and keeping indemnified the Defendant as against any claim that may be brought against the Defendant or the estate of Gordon Best Wright by Marian Ellen Reed.
4. This offer to settle remains open for acceptance for fourteen (14) days from the date of service.  Acceptance of this offer is to be communicated in writing to the solicitors for the Defendant.
5. Payment of the said sum of THREE HUNDRED THOUSAND DOLLARS ($300,000.00) is to be made within twenty-one (21) days of the Defendant’s receipt of acceptance of the offer by the Plaintiff and is to be paid into the Plaintiff’s solicitors trust account.”

11. [11]
    Tim and Marian relied upon an affidavit of their solicitor which established that on 21 December 2020, well after the proceeding commenced, Tim was first provided with access to the records kept and maintained by the nursing home that cared for Dawn. Until that point in time, they had received emails from Gordon which relevantly described Dawn’s deteriorating mental state.

The parties’ proposed orders and arguments

12. [12]
    Against that outcome of the trial of the separate question and the evidence relied upon in relation to costs, the parties have provided written submissions as to further orders and costs. 
13. [13]
    Janet seeks orders to the effect that:

    1. (a)
       judgment be entered in her favour;
    2. (b)
       her costs be assessed on the indemnity basis and paid out of the estate;
    3. (c)
       Tim pays her costs of and incidental to the proceeding up to and including 18 December 2020 on the standard basis;
    4. (d)
       Tim pays her costs from and including 19 December 2020 to be assessed on the indemnity basis; and
    5. (e)
       Marian pays her costs from and including 12 November 2021 (the date on which an application for Marian’s joinder as second plaintiff was filed) to be assessed on the standard basis.
14. [14]
    Tim and Marian seek orders to the effect that:

    1. (a)
       the balance of the application filed 12 November 2021 be dismissed;
    2. (b)
       judgment be entered in Janet’s favour;
    3. (c)
       Janet’s costs be assessed on the indemnity basis and paid out of the estate;
    4. (d)
       otherwise, there be no order as to costs.
15. [15]
    As will be apparent, there was no real dispute between the parties that Janet was entitled to judgement and an order that her costs be paid out of the estate on an indemnity basis. The real issue concerned what other form of costs orders, if any, ought be made.
16. [16]
    In terms of the outcome of the trial of the separate question, it is not in dispute that Janet won the event. She submitted that the starting point was that costs should follow the event.  She also sought to rely upon the offer as an offer that engaged the principles in Calderbank v Calderbank^[5] or as otherwise being relevant to the Court’s general discretion as to costs.
17. [17]
    Tim and Marian characterised the context of the proceeding as an “estate matter”. In this suggested context, they sought to bring their conduct of the litigation within what they submitted were settled exceptions to the general rule that costs follow the event. Relevantly they submitted that the exceptional circumstances were that Gordon was to be regarded as having caused the litigation and the circumstances led reasonably to an investigation in regard to the subject wills.
18. [18]
    No party placed any reliance upon r 700A of the Uniform Civil Procedure Rules 1999 (Qld) (‘UCPR’).

Consideration

19. [19]
    The first issue concerns the effect of the offer under the Rules.
20. [20]
    Rule 361 of the UCPR provides as follows:

“(1) This rule applies if—

1. (a)
   the defendant makes an offer that is not accepted by the plaintiff and the plaintiff does not obtain an order that is more favourable to the plaintiff than the offer; and

2. (b)
   the court is satisfied that the defendant was at all material times willing and able to carry out what was proposed in the offer.

3. (2)
   Unless a party shows another order for costs is appropriate in the circumstances, the court must—

1. (a)
   order the defendant to pay the plaintiff’s costs, calculated on the standard basis, up to and including the day of service of the offer; and

2. (b)
   order the plaintiff to pay the defendant’s costs, calculated on the standard basis, after the day of service of the offer.

3. (3)
   However, if the defendant’s offer is served on the first day or a later day of the trial or hearing of the proceeding then, unless the court otherwise orders—

1. (a)
   the plaintiff is entitled to costs on the standard basis to the opening of the court on the next day of the trial; and

2. (b)
   the defendant is entitled to the defendant’s costs incurred after the opening of the court on that day on the indemnity basis.

3. (4)
   If the defendant makes more than 1 offer satisfying subrule (1), the first of those offers is taken to be the only offer for this rule.”

21. [21]
    Janet’s submissions on costs oscillated.  Initially, she submitted to the effect that the offer did not engage r 361 of the UCPR but had relevance as a Calderbank offer and to the exercise of the Court’s general discretion as to costs.^[6]  That initial submission was made on the basis that r 361 “prescribes orders if an offer to settle by a defendant is not accepted by a plaintiff and the plaintiff obtains a judgment that is not more favourable to the plaintiff than the offer to settle.  The [UCPR is] silent in circumstances where the plaintiff’s claim fails in its entirety and the defendant has made an offer to settle”.^[7]  Tim and Marian accepted that initial position as correct.^[8] The position was not however correct as it did not reflect the language of r 361.  Rule 361(1) of the UCPR relevantly uses the language “…the plaintiff does not obtain an order that is more favourable to the plaintiff than the offer”.  The rule no longer uses the language “…the plaintiff obtains a judgment no less favourable than the offer”.  The latter language was relied upon by Chesterman J in Emanuel Management Pty Ltd (in liquidation) v Foster’s Brewing Group Ltd^[9] in concluding that the then rule had no application in that case where the plaintiff had not obtained a judgment.  In Wiggins Island Coal Export Terminal Pty Ltd v Civil Mining & Construction Pty Ltd,^[10] Holmes CJ noted that the comparison called for by r 361 is no longer whether the plaintiff has obtained “…a judgment… not more favourable… than the offer to settle”, but whether the plaintiff has failed to obtain a more favourable order.
22. [22]
    By her further written submissions, Janet relevantly submitted that the offer was one to which r 361 could be applied.^[11] Those submissions said that it was appropriate to undergo “…the assessment under r 361(1) in determining whether the plaintiffs did not obtain an order that is more favourable to the plaintiffs than the offer.  Clearly, the plaintiffs did not do so”.^[12] 
23. [23]
    Two matters may be observed about the offer. First, the offer, as made, extended to compromising Janet’s then existing claim to probate in respect of the 2016 will.  Janet later amended her defence and counter claim on 28 January 2022, relevantly, to delete the probate claim. Secondly, the offer was notably expressed to be “conditional upon the plaintiff indemnifying and keeping indemnified [Janet] as against any claim that may be brought against [Janet] or the estate of [Gordon] by [Marian]”.  Marian ultimately was joined to the proceeding as a second plaintiff.  Whilst Tim has been wholly unsuccessful in the proceeding, as a result of the judgment, he has not assumed the burden of indemnifying Janet, and keeping her indemnified, against any claim that may be brought against Janet or Gordon’s estate by Marian. There was no evidence before me as to the nature and extent of any possible claim or claims that Marian might have had or has against Janet or Gordon’s estate. Further, there was no evidence as to whether Tim was or should have been aware of the nature and extent of any such claims. I am not prepared to speculate about these matters. I note that the indemnity was expressed in the widest terms to include against any claim that may be brought against Janet or Gordon’s estate by Marian. In the circumstances, essentially because of the uncertainty attendant upon the nature and extent of the postulated indemnity, I am not able to undertake a comparison between the nature and extent of the advantages, and any disadvantages, arising from the orders in this case with the situation that would have been obtained had the offer been accepted.^[13] I have been unable to conclude that the outcome of this proceeding reflects an outcome whereby Tim failed to obtain an order that was more favourable to him than the offer. As a further consequence of this uncertainty, I have also been unable to discern whether it was appropriate for Tim to decline to assume the burden of the indemnity.
24. [24]
    What is clear is that the offer was made under Chapter 9 part 5 of the UCPR (which contains r 361) and conveyed no indication that it was intended to be relied upon for any other purpose.  In those circumstances, the offer does not fall to be considered as a Calderbank offer.^[14] Aside from how it might be deployed under the UCPR, the first plaintiff was entitled to regard the offer as “having no force at all” and as not being effective for any other purpose.^[15]
25. [25]
    In probate proceedings, the usual rule that costs follow the event is applicable^[16] but there are established exceptions to that rule, namely where the testator has been the effective cause of the litigation or where the circumstances are such as to afford reasonable grounds for opposing the will.^[17] The approach in probate cases has been explained by reference to the inquisitorial exercise conducted by the ecclesiastical courts and the Probate Division where the court had to be satisfied of the validity of the will before it might be admitted to probate.^[18] In Collins v Marinovich & Ors,^[19] Ryan J was careful to limit the established exceptions to probate litigation as distinct from litigation which was inter partes litigation between beneficiaries.
26. [26]
    In Shovelar v Lane,^[20] Ward LJ observed of litigation involving an allegation of mutual wills:

“The effect of mutual wills upon the distribution of the estate under a later will which is admitted to probate is a matter for the Chancery Division applying the law of trusts; it is not a matter of probate law in practice.  The nature of that litigation is not inquisitorial: it is adversarial and, not infrequently, very adversarial as the two families disunited by death battle for their perceived true inheritance. …It may be unfortunate that the two sides of the family have locked horns in battle with no quarter given.  In my judgment the judge was entitled to find, indeed right to find, that ‘the contention between the parties was not unlike any other hostile litigation and not such that would enable the court to move away from the general rule [that costs follow the event]’.”

27. [27]
    The present proceedings were not probate proceedings. At the heart of this litigation was the allegation made by Tim and Marian that Dawn and Gordon had made the testamentary agreement. The testamentary agreement was alleged to give rise to the plaintiffs’ entitlement to a remedy.^[21]  This litigation took on the character of inter partes litigation between beneficiaries and was fundamentally adversarial. The litigation appears to have been motivated by Tim’s beliefs that a great deception had been perpetrated on him^[22] and that the wealth of Gordon and Dawn represented his family’s wealth.^[23]
28. [28]
    In my consideration the proper exercise of my discretion as to costs is to follow the ordinary rule that costs should follow the event. 

Orders

29. [29]
    In the circumstances the orders that I make are as follows:

1. The balance of the application filed 12 November 2021 is dismissed.
2. Judgment for the defendant on the amended claim filed 17 January 2022.
3. The defendant’s costs of and incidental to the proceeding be assessed on the indemnity basis and paid out of the estate.
4. The first plaintiff pay the defendant’s costs of and incidental to the proceedings to be assessed on the standard basis.
5. The second plaintiff pay the defendant’s costs of and incidental to the proceeding from and including 12 November 2021 to be assessed on the standard basis.