Salmon v Osmond – a recent NSW Court of Appeal Case

This was an appeal in relation to a family provision application (FPA).  Mr Salmon, the deceased, was survived by his wife and seven children – one of whom, Michael, together with Esmae, the widow, received the majority benefit to enable them to remain on the land where they had always been.  Varying levels of benefit were left to four of the other six children. The estate was worth approximately $2,000,000. 

Four of the deceased’s children brought FPAs seeking additional provision out of the estate. Two of them discontinued their applications but the other two proceeded to trial. 

OUTCOME OF THE TRIAL

At trial, Donna (who received $10,000 under the will) was unsuccessful. The successful parties (the executors) had made offers of settlement to Donna which she rejected, which would usually mean they ought to get their costs.  However, the trial judge did not think the offers were reasonable and did not order Donna to pay their costs.

Kerryn did succeed at trial. In addition to the benefit she already received under the will (forgiveness of a debt of $14,000) she was awarded a further $200,000 out of the estate.

THE APPEAL

The executors appealed against the decisions and were very successful on appeal.

The appeal judges found that the trial judge had not given sufficient weight to Mr Salmon’s wishes expressed in his will.  Michael had, in effect, devoted himself to running the farm and deriving an income for his benefit and the farm was Esmae’s only source of income.  Mr Salmon had decided to keep the farm together as an integrated unit to allow this to occur.  Those interests had to be considered in determining whether Kerryn had been adequately provided for under the will.

They also found that, given the size of the estate, in order to give proper effect to the benefit to Michael in keeping the farm together, the award to Kerryn was disproportionately high.  It would result in part of the farm having to be sold.

Finally, the appeal judges found the trial judge was wrong to consider that adequate provision for Kerryn involved ensuring she could have her own home.  Having regard to Michael’s significant contribution to maintaining the farming enterprise and the absence of any contribution by Kerryn (other than helping her parents when she visited), this was not a case where a wise and just testator would ensure Kerryn needed to be provided enough to secure a home for herself.

Having regard to the circumstances of Kerryn as well as Esmae and Michael, the appeal judges ordered that further provision for Kerryn be reduced from $200,000 to $50,000.

WHO PAYS WHAT COSTS

The significance of this decision relates to how costs were ultimately awarded on appeal.

DONNA

On appeal, the judges considered that the first offer made by the executors ought reasonably to have been accepted by Donna.  Because Donna failed to do better than the offer at trial, the judges applied the usual costs rule and ordered that Donna pay the executors’ costs on the indemnity basis from the time of the refusal of the offer.  Further, because Donna was also unsuccessful in the appeal, the judges ordered that she pay 10% of the executors’ costs of the appeal.

So not only was Donna not successful in her claim she had to pay her own costs plus those of the executors relating to her claim.

KERRYN

Kerryn’s ultimate award was less than she had claimed. So, in effect she had not succeeded on her claim. The judges referred to the usual rule in litigation which is the unsuccessful party pays the costs of the successful party. However, the Court acknowledged that in FPA cases it can be appropriate for an unsuccessful applicant that there be no order as to costs or even that they get their costs out of the estate. 

In Kerryn’s case, the appeal judges thought no order as to costs was appropriate meaning Kerryn had to bear her own costs at trial but not pay the executors’ costs. However, costs of appeals are different, even in FPA matters. Unless the appeal court thinks some other result is more appropriate, costs should follow the event.  As Kerryn was  unsuccessful on appeal, she was ordered to pay 90% of the executors’ appeal costs.

 TAKE AWAY POINTS

  • Even if an applicant succeeds at first instance – beware an appeal by the unsuccessful party.
  • Even if an applicant succeeds to some extent – meeting the costs may make their position worse.
  • Courts are exercising their discretion more and more to penalize unsuccessful applicants on costs. The old days of thinking that everyone’s costs will come out of the estate are gone.
  • FPA applicants need to be realistic in their expectations.  Estates can only bear so much, especially smaller ones. The claims of the other parties and their contributions to building up the estate and that being recognized in the will need to be carefully taken into account.  Disappointed family members, although being recognized as deserving a greater proportion, might nevertheless not succeed in their applications particularly in small estates.
  • Potential FPA applicants need to obtain advice from experienced legal advisers in such situations.