Pub­li­ca­tions

Bal­anc­ing costs and claims in fam­i­ly pro­vi­sion applications

Costs are an impor­tant con­sid­er­a­tion in all legal pro­ceed­ings. Deceased estate lit­i­ga­tion, how­ev­er, often involves lit­i­gants with mod­est means, and the asso­ci­at­ed finan­cial impli­ca­tions can there­fore be vast­ly dif­fer­ent to that of com­mer­cial dis­putes. Indeed, where a claim is made upon a small or mod­er­ate­ly sized estate, it may become more dif­fi­cult to jus­ti­fy the cost of litigation. 

In the con­text of fam­i­ly pro­vi­sion appli­ca­tions and by ref­er­ence to recent cas­es, this arti­cle will explore the impor­tant role of the Court in ensur­ing pro­por­tion­al­i­ty between the cost of lit­i­ga­tion and achiev­ing jus­tice for the involved parties. 

Fam­i­ly pro­vi­sion applications 

Fam­i­ly pro­vi­sion appli­ca­tions are often sought when an indi­vid­ual believes they were enti­tled to a share of, or a greater share in, a deceased person’s estate. These appli­ca­tions are lodged with the Supreme Court of New South Wales and are gov­erned by Part 3.2 of the Suc­ces­sion Act 2006 (NSW). Appli­cants are required to:

  1. demon­strate that they are an eli­gi­ble per­son” to apply for such an order; and 
  2. sat­is­fy the Court that ade­quate pro­vi­sion for the prop­er main­te­nance, edu­ca­tion or advance­ment in life” of the appli­cant has not been made by the will of the deceased person.

In access­ing these ele­ments, sec­tion 60 of the Suc­ces­sion Act pro­vides a non-exhaus­tive list of fac­tors which the Court may take into con­sid­er­a­tion. These include: 

  • the nature and dura­tion of the rela­tion­ship between the appli­cant and the deceased person;
  • the nature and extent of any oblig­a­tions or respon­si­bil­i­ties owed to the appli­cant by the deceased; 
  • the nature and extent of the deceased estate (includ­ing any prop­er­ty or notion­al estate);
  • the finan­cial resources (includ­ing earn­ing capac­i­ty) and (present and future) finan­cial needs of the applicant;
  • whether the appli­cant was being main­tained, either whol­ly or part­ly, by the deceased before their death; and 
  • evi­dence of the tes­ta­men­tary inten­tions of the deceased. 

Costs orders in fam­i­ly pro­vi­sion appli­ca­tions often dif­fer to that of oth­er mat­ters. Gen­er­al­ly, costs are award­ed against the unsuc­cess­ful par­ty. How­ev­er, Gau­dron J in Singer v Berghouse (1993) 114 ALR 521 observed that in fam­i­ly pro­vi­sion appli­ca­tions, costs large­ly depend upon achiev­ing jus­tice in the cir­cum­stances of the case. As such, Gau­dron J remarked (at 522): 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.” 

As it will be demon­strat­ed below, this form of cost order may in some sit­u­a­tions encour­age appli­cants to pur­sue expen­sive lit­i­ga­tion against com­par­a­tive­ly small estates. 

The prin­ci­ple of proportionality 

Over the past cou­ple of years, Courts have fre­quent­ly stressed the impor­tance of pro­por­tion­al­i­ty when it comes to the costs of deceased estate lit­i­ga­tion. That is, the costs of pur­su­ing legal pro­ceed­ings in fam­i­ly pro­vi­sion mat­ters should be com­men­su­rate with the val­ue of, and the size of the claim on, the estate of the deceased per­son. This prin­ci­ple is estab­lished more gen­er­al­ly by sec­tion 60 of the Civ­il Pro­ce­dure Act 2005 (NSW) which requires costs to be pro­por­tion­ate to the impor­tance and com­plex­i­ty of the sub­ject matter”. 

Pro­por­tion­al­i­ty is par­tic­u­lar­ly impor­tant where the val­ue of the estate is mod­est. As not­ed above, it is not uncom­mon for an unsuc­cess­ful appli­cant of a fam­i­ly pro­vi­sion appli­ca­tion to have a no costs order made against them, or alter­na­tive­ly, to have their legal costs paid out of the estate. While the estate may be com­par­a­tive­ly more finan­cial­ly capa­ble of ser­vic­ing those costs, it does ulti­mate­ly serve to reduce the val­ue of the estate remain­ing to be dis­trib­uted between the right­ful beneficiaries.

The fol­low­ing cas­es demon­strate the crit­i­cal role of the Court in uphold­ing the prin­ci­ple of pro­por­tion­al­i­ty in order to achieve fair­ness for all par­ties involved. 

Oslen v Oslen [2019] NSWSC 217 (Oslen)

In Oslen, the appli­cant was a 61-year-old solic­i­tor who made a fam­i­ly pro­vi­sion claim against the estate of his late father. The appli­cant had only lived with the deceased for the first 9 months of his life and, after the sep­a­ra­tion of his par­ents, only saw his father on rare occa­sions. The will of the deceased left the entire estate to the deceased’s sec­ond wife, and in the event that she pre­de­ceased him, his three chil­dren to his sec­ond wife. No allowance was made in favour of the applicant. 

In assess­ing this claim, Pem­broke J was crit­i­cal of the claimant for hav­ing lit­tle to no regard for the prin­ci­ple of pro­por­tion­al­i­ty. The legal costs of the pro­ceed­ings were said to be in the region of $125,000 which, when paid out of the estate, would reduce the val­ue of the estate to approx­i­mate­ly $140,000.

The applicant’s claim was ulti­mate­ly held unsuc­cess­ful on a num­ber of grounds, with Pem­broke J (at [48]) remark­ing that the mat­ter achieved noth­ing except unnec­es­sary cost and unwant­ed mis­ery and stress”. How­ev­er, as the estate was held to be com­par­a­tive­ly more finan­cial­ly able to absorb the costs than the appli­cant, no order as to costs was made.

Har­ris v Har­ris [2018] NSW­CA 334 (Har­ris)

Sim­i­lar­ly to the facts in Oslen, the appli­cant in Har­ris also made a fam­i­ly pro­vi­sion claim against the estate of his late father. The appli­cant suf­fered from a psy­chi­atric ill­ness and was depen­dent upon a dis­abil­i­ty sup­port pen­sion for income. He had not, how­ev­er, received any sub­stan­tial finan­cial sup­port from the deceased dur­ing the past decade. The will of the deceased left his entire estate to his wid­ow. Notably, the val­ue of the estate was less than $8,000. The notion­al estate was val­ued at approx­i­mate­ly $600,000, how­ev­er, the Court refrained from deter­min­ing whether the notion­al estate would be avail­able for dis­tri­b­u­tion in the event of a suc­cess­ful fam­i­ly pro­vi­sion order. 

At first instance, the judge dis­missed the appli­ca­tion for a fam­i­ly pro­vi­sion order. This was pri­mar­i­ly on the basis that the tes­ta­tor would not have been under an oblig­a­tion to pro­vide for his adult son giv­en that his wid­ow also held a valid and com­pet­ing claim to the estate. 

In uphold­ing the deci­sion of the judge at first instance, the NSW Court of Appeal ques­tioned the jus­ti­fi­ca­tion behind pur­su­ing a claim that was like­ly to incur dis­pro­por­tion­ate costs. Indeed, Bas­ten JA stat­ed (at [8]):

Assum­ing, favourably to the [appli­cant], that the poten­tial notion­al estate was val­ued at $600,000, the costs incurred at tri­al exceed­ed 20% of the total val­ue of the notion­al estate and were almost ten times the amount the pri­ma­ry judge would have award­ed, had she been mind­ed to make any award by way of pro­vi­sion from the estate.” 

In addi­tion, Bas­ten JA not­ed the role of the Court in poten­tial­ly encour­ag­ing appli­cants to pur­sue cost­ly claims against small­er sized estates. He observed (at [18]):

That the sur­viv­ing wife has had to expend a sig­nif­i­cant pro­por­tion of a mod­est estate, and one almost entire­ly com­prised of notion­al estate, in defend­ing these pro­ceed­ings sug­gests that the ben­e­fi­cial pro­vi­sions relat­ing to fam­i­ly pro­vi­sion can oper­ate unfair­ly. It is clear that a costs order in her favour will not allow her to recoup her legal expens­es. The Court’s will­ing­ness to enter­tain com­par­a­tive­ly expen­sive lit­i­ga­tion of this sort may well have encour­aged the pur­suit of such claims. Con­sid­er­a­tion should be giv­en in such cas­es to orders cap­ping the costs of both par­ties at an ear­ly stage of the pro­ceed­ings.” [Empha­sis added.]

Ulti­mate­ly, the appeal was dis­missed, and the appli­cant was ordered to pay the widow’s costs. Impor­tant­ly, how­ev­er, Bas­ten JA sug­gest­ed that in future mat­ters, leave to appeal should be required where the judge at first instance does not find a rea­son­ably arguable claim greater than $100,000. In this way, the Courts may be bet­ter able reg­u­late fam­i­ly pro­vi­sion appli­ca­tions in order to avoid the accru­al of dis­pro­por­tion­ate costs. 

Conclusion

Cost man­age­ment in fam­i­ly pro­vi­sion appli­ca­tions involves a del­i­cate bal­anc­ing act between meet­ing the com­pet­ing needs of the par­ties in a fair and just man­ner. The cas­es of Oslen and Har­ris demon­strate the impor­tant role the prin­ci­ple of pro­por­tion­al­i­ty plays in inform­ing the Court’s deci­sion in respect of costs. As Bas­ten JA in Har­ris sug­gest­ed, how­ev­er, addi­tion­al process­es may be need­ed to more effi­cient­ly reg­u­late those weak­er claims which are like­ly to incur dis­pro­por­tion­ate costs against small estates.