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Monday, 01 July 2013
Hannah Kulaga discusses the Australian position of costs awards in family provision applications.

Following Gaudron J’s comment in Singer v Berghouse [1993] HCA 35 that ‘Family provision cases stand apart from cases in which costs follow the event,’ it was a well-established legal principle in Australia that the ‘overall justice of the case’ will determine costs awards in family provision applications.

It has been said that Singer opened the floodgates to unmeritorious claims by applicants who assumed, or were advised, that their costs position was protected and that, as a result, many small estates bore unnecessary and excessive litigation costs.

However, the Singer principle appears to be fading, with some states straying from its approach. As a result, there is now a divide between states and vast uncertainty as to appropriate costs awards following discontinued or unsuccessful applications.

Erosion

Victoria and New South Wales have been central to eroding Singer. As early as 2005, in Re Stitch [2005] VSC 383, Gillard J of the Victorian Supreme Court said: ‘The old rule… not to award costs against the plaintiff who failed, can no longer be accepted as a general proposition.’ Most recently, in Webb v Ryan [2012] VSC 431, Whelan J endorsed this: ‘The tendency to move towards the application of general costs principles… is a sound and sensible approach.’ As for New South Wales, Palmer J of the Supreme Court said in Carey v Robson [2009] NSWSC 1199 that the former practice has been ‘thoroughly discredited’.

New South Wales has specifically legislated to prohibit courts ordering all costs out of an estate in specific circumstances. While Victorian legislation provides that costs may be ordered against an unsuccessful applicant where the court is satisfied that an application was frivolous, vexatious or without reasonable prospects of success.

Standing firm

However, South Australia, Queensland and Tasmania have not been swayed from the Singer principles by their neighbouring states. In Bowyer v Wood [2007] SASC 327, after a review of relevant precedent, Debelle J of the South Australian Supreme Court stated: ‘There is a substantial body of consistent opinion as to the rules which ordinarily operate in relation to an unsuccessful application. The principles are that, generally speaking, there will be no order as to costs of an unsuccessful application.’ This approach was adopted by the Queensland Supreme Court in Jones v Jones [2012] QSC 342, with one qualification from McMeekin J: that more weight is now given to the expectation that parties will try to resolve disputes through alternative dispute resolution in Queensland.

One trend in all states is zero tolerance for applicants who make ill-considered rejections of reasonable settlement offers and ultimately are unsuccessful, discontinue their application or achieve a lesser outcome at trial. This will almost certainly weigh against an applicant when considering an appropriate costs award in light of the ‘overall justice of the case’. Good examples of this are the recent Victorian and Queensland cases of Webb, discussed above, and Dawson v Joyner [2012] QSC 24, in which the unsuccessful applicant was ordered to pay the estate’s costs on a standard basis up to the expiry of a formal offer of settlement and on an indemnity basis thereafter.

Points to take away

In keeping with the discretionary and unpredictable nature of family provision applications, there can be no certainty as to what costs awards will be made in any proceeding, nor any guaranteed costs protection for applicants.

Therefore, estate practitioners should be prudent when advising about possible costs in these matters. When advising an executor, practitioners should encourage appropriate offers of settlement in line with Calderbank v Calderbank or the relevant court rules as early as possible, and establish a trail of correspondence putting the applicant on notice of potential costs consequences. Practitioners acting for applicants should counsel carefully when considering reasonable offers of settlement and stress the consequences of rejection.

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Hannah Kulaga

Hannah Kulaga is a lawyer with Cooper Grace Ward.

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