In most legal proceedings in the civil jurisdiction, the principle that ‘costs follow the event’ applies – meaning the winning party will have their legal costs paid by the unsuccessful party to the dispute. But in family provision applications (FPAs), where an eligible person has sought adequate provision be made for them from a deceased person’s estate, this principle does not apply. Instead, the issue of legal costs is at the discretion of the Court.
This difference was summarised in the leading High Court case of Singer v Berghouse (1993) 114 ALR 521, where it was stated that ‘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’.
Because the consideration of costs in an FPA is a discretionary exercise, it can be hard to predict an outcome based on decided cases. Some of the factors taken into account by the Court include the financial effect of a costs order on a party to the dispute, whether the FPA is a reasonable claim, and the conduct of the parties in resolving the claim.
It is a common misconception of both executors and those bringing an FPA that the estate will meet the legal costs of all parties to the dispute, but this is not the case. As mentioned above, costs are at the discretion of the Court. In this article we’ll look in more depth at how costs are decided in FPAs.
Queensland cases dealing with costs in FPAs
Most FPAs are resolved through a negotiated settlement or a mediation process prior to reaching Court, with costs incurred by the parties agreed upon as part of the settlement. If the matter does proceed to trial, the Court can order that the applicant’s costs be paid from the estate or that the applicant personally pay their costs associated with bringing the FPA. In most cases, the Executor’s legal fees are paid by the Estate as the Executor is entitled to be indemnified by the Estate for their reasonable expenses incurred in acting as Executor.
Some recent Queensland cases have indicated that parties involved in FPAs should not assume that the Applicant’s legal costs will be met from the estate of the deceased. Further, the Executor’s right of indemnity from the Estate for the Executor’s legal fees is not always secure. The conduct of the parties is a very relevant consideration to the issue of costs, as highlighted by the below cases.
Collett v Knox [2010] QSC 132
An FPA was made by the de facto spouse of the deceased, who had lived with the deceased for 34 years and sought a life interest in the deceased’s property. In response, the Estate’s Executors claimed the applicant was not the deceased’s de facto spouse but was instead a boarder at the property. The Executors maintained that whatever the outcome of the proceedings, the property would need to be sold to meet the Estate’s legal costs of about $70,000.
In deciding the applicant was in fact the deceased’s de facto spouse and granting him a life interest in the deceased’s property, the Court ordered the Executors’ costs be limited to $10,000 out of the Estate, deferred until the applicant’s life interest in the property came to an end. This left the Executors with substantial legal costs which they had to meet personally. In handing down this decision, Justice McMeekin made clear the conduct of the Executors was a factor in the costs decision: ‘I do not conceive that executors in the position of those here are entitled to hide behind their appointment and claim that they have no choice but to litigate as hard as they can, incurring whatever expense they desire, and for their opponent to do the same, in an effort to defeat his claim and preserve their own.’
Baker v Baker (No.2) [2019] QDC140
In this case Justice McGill referred to Rule 700A of the Uniform Civil Procedure Rules 1999 and stated ‘the whole point of Rule 700A was to bury the idea that parties could engage in litigation under the Succession Act 1981 s 41, on the assumption that everybody’s costs on an indemnity basis would be paid out of the estate, more or less regardless of the outcome’.
Rule 700A states:
(2) Without limiting the court’s discretion under these rules to make an order about costs in relation to all or part of the proceeding, the court may, in determining an order for costs, take into account the following matters—
(a) the value of the property the subject of the proceeding and, in particular, the value of the property about which there is a disputed entitlement;
(b) whether costs have been increased because of any one or more of the following—
(i) noncompliance with these rules;
(ii) noncompliance with a practice direction;
(iii) the litigation of unmeritorious issues;
(iv) failure to make, promptly or at all, appropriate concessions or admissions;
(v) giving unwarranted attention to minor or peripheral issues;
(c) an offer of settlement made by a party to the proceeding.
Justice McGill commented that the conduct of both parties to the litigation was at times inefficient and non-compliant with court rules, the respondents’ affidavits had breached the relevant Practice Direction and were inappropriate and contained irrelevant and repetitive material. He said, ‘I think it is important that family provision applications, if they do come to be litigated, be litigated efficiently and that costs be kept to a minimum, particularly in small estates.’
The Executors’ costs, therefore, were awarded on a ‘standard basis’, rather than an indemnity basis, from the Estate. Generally speaking, costs ordered on a standard basis allow the party to recover some but not all of their legal fees.
Underwood v Underwood [2009] QSC 107
In this case there were multiple applicants, and the total legal costs were disproportionate to the size of the Estate. The various costs orders for each applicant reflected the unreasonable conduct of not accepting reasonable settlement offers throughout the matter, as follows:
- One successful applicant (Peta), was ordered to pay some of the Executor’s legal fees because she had rejected a reasonable offer;
- Two (2) unsuccessful applicants (Derek and Scott), also had to pay some of the Executor’s legal fees;
- Finally, a fourth applicant (Annette), had her costs paid by the estate up until the date of a reasonable offer, which she had rejected, and she had to contribute to the Executor’s costs after the date of that offer.
Costs issues to consider before making an FPA
There are serious and complex considerations involving costs for a potential FPA applicant to take into account before they decide to bring an FPA.
Firstly, the size of the estate and the likely provision from it must be carefully considered against the possible legal costs that could be incurred. Next, an applicant should act reasonably and in good faith in regard to their conduct in the matter and in relation to making and responding to settlement offers through pre-trial mediation and up to and including the trial. Applicants should seek professional legal advice about their position to ensure they minimise the risk of adverse cost outcomes at each stage of the matter.
Discuss FPA costs with our wills and estate specialists
At Delaney & Delaney our estate litigation experts can help explain the issues involved in an FPA, including the issues of costs, whether you are an Executor responding to a family provision application or an applicant wishing to make a family provision application. This can be a complex area of law but we have a proven track record of achieving positive outcomes for our clients in estate litigation matters.