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Costs orders in TFM proceedings

Feature Articles

Cite as: December 2011 85(12) LIJ, p.36

The regime governing costs in testator's family maintenance (TFM) litigation differs from that governing ordinary civil litigation both for plaintiffs, whether successful or not, and defendants. 

By Philip Barton

Over a decade ago Victorian TFM legislation was radically expanded by the amendment of s91 of the Administration and Probate Act 19581 to enable a court to order provision or further provision from an estate where there is a failure to make “adequate provision for the proper maintenance and support of a person for whom the deceased had responsibility to make provision”.

This expansion has yielded prolific litigation in the Supreme and County Courts. However, the costs regime applicable to such claims (Part IV claims) differs from other civil litigation. This article examines that regime primarily by reference to Victorian Supreme Court decisions since jurisdiction was expanded.

Costs in Part IV cases

In Bentley v Brennan; Re Bull (dec’d) (No 2) (Bentley)2 Byrne J explained how the Part IV costs regime differs from that in normal civil litigation.

First, his Honour noted there has been a strong judicial disposition in ordinary civil litigation to award costs in favour of the successful party on a party/party basis, even though the Supreme Court Act 1986 s24(1) provides:

“Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid”.

Secondly, however, s97 provides:

“(6) Subject to sub-section (7), the Court may make any order as to the costs of an application under s91 that is, in the Court’s opinion, just.

“(7) If the Court is satisfied that an application for an order under s91 has been made frivolously, vexatiously or with no reasonable prospect of success, the Court may order the costs of the application to be made against the applicant”.

His Honour noted that a statutory equivalent to s97(6) had existed in Victoria since 1906. And whether s97(6) contained an express contrary provision within the meaning of s24(1) or not, the fact was that costs orders in Part IV applications very often departed from the ordinary civil rule, both in the case of successful and unsuccessful plaintiffs and in the case of defendants. The re-conferral by s97(6) of a general discretion to make a just costs order was a legislative endorsement of this long line of authority.

Thirdly, his Honour noted, the fact that, in the ordinary course, an order for costs in Part IV cases might not be made against a plaintiff simply because the application had failed was supported by the fact that even where s97(7) applied the Court was merely empowered, not directed, to make a costs order against the plaintiff.

This restrictive interpretation of s97(7) is buttressed by its interpretation by McDonald J in Coombes v Ward (No 2),3 taking guidance from judicial formulations in other contexts and chiefly from an oft-quoted statement of Dixon J that “ . . . once it appears that there is a real question to be determined whether of fact or law and that the rights of the parties depend upon it, then it is not competent for the court to dismiss the action as frivolous and vexatious and an abuse of process”.4

Costs of a successful plaintiff

A successful plaintiff will often obtain an order for solicitor/client costs out of the estate,5 and indeed this has been described as the ordinary or usual order.6 However, in appropriate cases these costs will be reduced. Thus in Blair v Blair,7 which was a contest between brothers over their father’s estate, the plaintiff obtained an order for an increased legacy but only party/party costs because:

(a) otherwise, as there were only two beneficiaries and so no opportunity to spread the costs burden, the defendant would bear all the costs;

(b) neither party had been sufficiently flexible in settlement negotiations;

(c) of the plaintiff’s lack of dependence on his father and generally adequate means.

In Cangia v Cangia (No 2)8 the plaintiff obtained an order for only $30,000 of his solicitor/client costs of $62,359.50 due to the significant difference between relief sought and obtained; various adverse factual findings against him; and

“The court can and should in my view impose some limits on the level of costs sought to be imposed on small estates [the estate had net assets of about $360,000] in applications of this kind. There must be some proportionality imposed to avoid small estates being substantially consumed by legal costs in these kinds of proceeding”.9

And in Re Carn No 2 only party/party costs were awarded where the plaintiff only obtained a modest legacy.10

Costs where plaintiff unsuccessful

Although judges acknowledge that an unsuccessful plaintiff can obtain an order for costs out of the estate,11 even on a solicitor/client basis,12 a search of AustLII since 1998 reveals no such Victorian Supreme Court order13 and there are strong policy reasons against a principle that an unsuccessful plaintiff would, as a starting point, receive costs.14 Conversely, an unsuccessful plaintiff can also be subject to the normal civil order for costs.15 Recently, Gardiner AsJ ordered party/party costs against a plaintiff whose motivation for claiming was not need but primarily a desire to redress perceived unfairness, whose financial position was good, and whose claim was without reasonable prospects of success within the meaning of s97(7).16 But, as noted in the discussion of Bentley above,17 in the ordinary course, a costs order may not be made against a plaintiff simply because of failure. No order as to costs appears indeed to be the most common order in failed Part IV cases. It is instructive to note the factors in Bentley which yielded that outcome, namely: (1) having regard to the state of facts and law it could not confidently be said that the plaintiff should not have sued; (2) the plaintiff was impecunious; (3) the plaintiff, who enjoyed mutual affection or love with the deceased, would otherwise lose his modest benefit under the will; (4) maltreatment of the plaintiff by the deceased; (5) but on the other hand the estate had incurred cost by the plaintiff’s erroneous decision to commence the proceeding. In making such an order in the earlier case of Coombes v Ward (No 2)18 McDonald J balanced factor (2), supplemented by the plaintiff’s age and poor health, against factor (5), supplemented by the fact that virtually the only asset in the estate was the deceased’s home.

The normal defendant’s costs order

The normal order is the costs and expenses of the defendant of and incidental to the proceeding be paid and retained out of the estate, variously judicially equated with an indemnity19 or with solicitor/client20 costs, the latter however not being quite as generous as the former.21 It is submitted that indemnity costs are appropriate because of the basic right of a trustee to resort to and apply trust funds for the discharge of liabilities incurred in the authorised conduct of the trust.22

Even beneficiaries who become parties to the proceeding, and unsuccessfully defend the will, may receive their solicitor/client costs out of the estate,23 but if their involvement is unnecessary they will not obtain an order for costs or will only obtain limited costs.24

Appeals

Appeals to the Court of Appeal are uncommon, but the limited authority provides precedents for:

  • on a successful appeal, all costs out of the estate on a solicitor and client basis;25
  • on an unsuccessful appeal, the appellant obtaining half their solicitor/client costs, the reduction being due to the appeal being partly reasonable (whether the facts found by the trial judge gave rise to a moral duty) but also partly unreasonable (a hopeless challenge to those factual findings);26
  • on a hopeless appeal, the estate obtaining an order against the appellant for only party/party costs due to some extenuating circumstances.27

On the only appeal (to a single judge) against summary dismissal of a Part IV claim the successful appellant was awarded only party/party costs.28

Offers of settlement

The normal settlement mechanisms are available in Part IV proceedings. It is instructive to mention a case where an offer was effective and three where it was not. In In the matter of the will of G G Sitch (dec’d) (No 2)29 the plaintiff recovered provision of about $54,000. The defendant made a Calderbank offer on 12 July 2005, expressed to be open for seven days, amounting to about $71,000 with no order as to costs. On 21 July the defendant made an offer of compromise under O.26. The hearing was on 26 July. His Honour held the offer of compromise to be ineffective because “the Rules require a minimum period of 14 days in which to accept the offer and because the document was not served until 21 July 2005, the period for acceptance expired well after the conclusion of the hearing”.30

It appears, with respect, that his Honour may have been incorrect, because although the 14 days did expire after the hearing, judgment was not delivered until 11 August, and r26.03(4) does not appear to have precluded acceptance by 4 or 5 August. In any event the Calderbank offer was effective and the plaintiff was ordered to pay the estate’s costs after 19 July on a solicitor/client basis. His Honour disposed of the plaintiff’s main argument by holding that, the case having progressed so far, seven days was sufficient to consider the offer.

Blair v Blair31 is a reminder of the easily overlooked r78.05 which provides:

“Where a judgment directs an account of legacies, then, subject to any direction in the will or codicil or any order of the Court, interest shall be allowed on each legacy at the rate of 8 per cent per annum from the end of one year after the testator’s death”.

In that case the offer of compromise would have been effective if it had provided for payment of interest.

Coombes v Ward (No 2)32 exposes a curious consequence of the difference between the Part IV costs regime and the normal civil costs regime. A low offer of compromise was made to a plaintiff who subsequently failed. The offer would have been effective if the plaintiff had obtained a judgment not more favourable to him than the terms of the offer,33 but the plaintiff not having obtained judgment, this had not occurred. So, paradoxically, the offer would have been effective if the plaintiff had been more successful. This would not present a problem in normal civil litigation because a plaintiff who failed would generally be ordered to pay costs.

Of more general relevance is the recently decided Whitehead v State Trustees (No 2) where, although one plaintiff obtained judgment for a sum above his offer of compromise and the other for a sum above his Calderbank offer, the estate was held not to have acted unreasonably in not settling because it was legitimately entitled to defend the will and test the plaintiffs’ evidence and, due to unsold property, the value of the estate was unknown at trial.34

Offers of settlement – impermissible reference

In the recent Part IV case of Forsyth v Sinclair (No 2)35 points arose which, although of general application to civil litigation, are noteworthy because of the prevalence of mediation in Part IV cases. The relevant statutory provisions were:

  • s131(2)(h) of the Evidence Act 2008, which provided that the rule (contained in s131(1)) that evidence of a communication made between parties in dispute in connection with an attempt to negotiate a settlement of the dispute was inadmissible was inapplicable if “the communication or document is relevant to determining liability for costs”;
  • s24A of the Supreme Court Act 1986 which broadly provided that where the Court referred a proceeding to mediation, evidence was inadmissible of anything said or done at the mediation unless agreed otherwise in writing.

Following preliminary argument on costs, the respondent’s solicitors gave notice to the appellant’s solicitors of an intention to notify the court concerning something allegedly stated at a 2009 mediation concerning costs, and sought consent to this. This provoked written submissions by the appellant including that the proposed letter did reasonably accurately set forth what was stated save for two critical points; and mention of earlier demands and offers of settlement by the respondent, of Calderbank offers by the appellant and an account of some negotiations at a 2005 mediation. The respondent’s solicitors then wrote to the court as foreshadowed.

The Court of Appeal held that:

  • although s24A prevailed over s131(2)(h), the reference in the appellant’s supplementary submissions to what was allegedly said at the 2009 mediation amounted to an agreement in writing under s24A;
  • s24A prohibited reference to what had occurred at the 2005 mediation;
  • the Calderbank offers were irrelevant to appeal costs; and
  • the respondent’s settlement offers were made without prejudice and were irrelevant to appeal costs and so not rendered admissible by s131(2)(h).

Costs on applications for extension of time

The limited material is that on an unsuccessful application under s99 only the defendant’s costs being paid from the residuary estate,36 and on a successful application each party bearing its own costs.37

Conclusion

An early judicial formulation posited the duty of the court as being broadly to determine whether there had been breach of a moral duty by a just testator.38 However, when it comes to costs, even those not subject to such a breach are treated at least sensitively, if not indeed benevolently.



PHILIP BARTON is a Victorian barrister, practising in probate, property and commercial law.

The numbers in square brackets in the text refer to the paragraph numbers in the judgment.

1. Section numbers in the body of the article refer to this Act unless otherwise specified.

2. [2006] VSC 226 at [3]-[7].

3. [2002] VSC 84.

4. Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91.

5. Forsyth v Sinclair (No 2) [2010] VSCA 195 at [20].

6. Blair v Blair [2002] VSC 125 at [2]; In the matter of the will of GG Sitch (dec’d) (No. 2) (Sitch) [2005] VSC 383 at [2]; Whitehead v State Trustees (No 2) [2011] VSC 516 at [6].

7. Note 6 above.

8. [2008] VSC 556.

9. At [4].

10. [2011] VSC 275 at [52].

11. Sitch, note 6 above, at [2]; Bentley at [4]; Singer v Berghouse (1993) 114 ALR 521 at 522.

12. Harris v Bennett and O’Brien (No 2) [2002] VSC 163 at [12].

13. In the Tasmanian case of Morse v Morse [2003] TASSC 145, referred to in Wills Probate and Administration Service Victoria [38,050], the unsuccessful plaintiffs received costs broadly up to the date when they were held to be able to assess the case properly – at [7], [9].

14. Note 10 above, at [26].

15. Gapes v Haeberle [2003] VSC 461 at 35 (subject to argument, the executor’s costs be paid out of her share of the estate), Niehoff v Niehoff [1995] 2 VR 356 (albeit predating the 1997 amendment of s91).

16. Note 10 above, at [33], [34], [48].

17. See also Sitch, note 6 above, at [2]-[4], Singer at 522.

18. Note 3 above.

19. Bentley, note 2 above, at [3], [16]; Whitehead, note 6 above, at [6].

20. Sitch, note 6 above, at [2]; note 5 above at [20], [22].

21. Civil ProcedureVictoria (Butterworths), paras [63.02.190 and 195].

22. Jacobs’ Law of Trusts in Australia (7th edn), 2006, p565.

23. Note 5 above, at [20].

24. Wills Probate and Administration Service Victoria at [38,058].

25. Note 5 above, at [20].

26. Note 5 above, at [23]-[26].

27. Coombes v Ward [2004] VSCA 51 at [8], [15], [33].

28. Note 12 above.

29. Note 6 above.

30. Sitch, note 6 above, at [8].

31. [2002] VSC 125; [2004] VSCA 149.

32. Note 3 above.

33. Rule 26.08(3).

34. Whitehead, note 6 above, at [11], [12].

35. Note 5 above.

36. Fennessy v Fennessy [2002] VSC 66.

37. Sweeney v Sweeney [2000] VSC 514.

38. Re Allardice; Allardice v Allardice (1910) 29 NZLR 959 at 972-3.

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