September 2007

Fixed Costs for Family Provision Act Claims

The Problem

The Chief Justice of the NSW Supreme Court has on a number of occasions made references to increasing legal costs in litigation and the need for lawyers to review the basis upon which they charge. He has suggested that lawyers need to reconsider whether time costing is the most appropriate way to conduct litigation for clients.

The general comments of the Chief Justice appear to be the basis for a pending change to the way legal costs are determined in Family Provision Act litigation. It is well known that such litigation can be expensive. The problem in family provision litigation has been that in a number of small estates the claimed legal costs have taken a large proportion of what is available for distribution in those estates. Also, in some larger estates there appears to have been a disproportionate expenditure on legal costs.

The Current Approach of the Court to the Problem

It is not uncommon for personal feelings to distort objectivity in family provision matters. Some claimants are unreasonably confident of a successful outcome. Some defendants fail to settle a matter that should reasonably be settled and so unnecessarily increase legal costs. Under the Civil Procedure Act 2005 (CPA) and the Uniform Civil Procedure Rules (UCPR), the Court has intervened to put "a brake on intemperate and disproportionately expensive conduct of proceedings".

The Court has taken into account the provisions of section 56 of the CPA. That section states that the overriding purpose of the CPA and UCPR in relation to civil proceedings is to "facilitate the just, quick and cheap resolution of the real issues in the proceedings". Failure by the parties and their legal representatives to assist the Court to achieve that purpose can be taken into account by the Court in exercising discretion with respect to legal costs. The Court has also taken into account the provisions of section 60 of the CPA. Under that section, the Court should ensure practice and procedure has the objective of resolving disputes between parties in such a way that their legal costs are "proportionate to the importance and complexity of the subject-matter in dispute".

The provisions of the CPA are supplemented by the UCPR. Rule 42.4 of the UCPR gives the Court the power to order maximum legal costs in the circumstances of a particular matter. Also, Supreme Court Practice Note SC Eq 1 alerted the profession to the possibility of a costs-capping order in a family provision matter where the estate is valued under $500,000.

The current approach of the Court has been to cap legal costs in family provision matters where the Court considers it appropriate to do so. Costs capping was the subject of decision in the case of Sherborne Estate (No. 2) [2005] NSWSC 1003 (10 October 2005). The Court has made orders capping legal costs in two recent family provision matters. The first case was Dalton v Paull (No. 2) [2007] NSWSC 803 where in a small estate of $207,444, the plaintiff's legal costs were capped at $25,000. The second case was Gill v Smith [2007] NSWSC 832 where there were three successful plaintiffs and the Court capped costs at $40,000.

Family Provision Act Costs Symposium on 18 September 2007

The Law Society's Elder Law and Succession Committee convened a symposium to discuss the problem of increasing legal costs in family provision matters. The panelists included Justice P Brereton, Associate Justices J McLaughlin and R Macready, the Public Trustee, Peter Whitehead, as well as barristers, lawyers and a costs assessor practising in the area.

The symposium discussed the problem and various ways to address it including prescriptive procedures and the possibility of fixed costs.

Prescriptive procedures

The Court will look to streamline and improve procedures in an endeavour to minimise legal costs. One option will be to prescribe the financial and other information that plaintiffs must provide in support of their claim.

The Future - Fixed Costs

The major future change, however, will be the likely introduction of a fixed maximum scale for legal costs for family provision matters. It appears that the Court may prescribe a scale for legal costs for small estates where the value of assets in the estate do not exceed a certain value. It was suggested that fixed scale legal costs would be appropriate for estates valued under $750,000. It is expected this change will happen and it is only a matter of time before it is introduced.

Authors: Gerard Basha & Philip Davis