GET ADVICE EARLY ABOUT WHAT COSTS YOU MIGHT BE FACING WHEN YOU MAKE A FAMILY PROVISION CLAIM
GOING TO COURT TO CHALLENGE A WILL SHOULD ONLY BE COMMENCED AFTER CAREFUL EVALUATIONS OF THE COSTS CONSEQUENCES
GOING TO COURT IS EXPENSIVE
The average amount of costs is about 20% of the value of the estate and the proportion is greater when the estate is small (under $500,000). As an example: an estate worth approximately $3 million had costs close to $300,000 (10%); whereas an estate worth approximately $800,000 had costs close to $240,00 which is approximately 30% of the estate.
An estate’s value is often significantly reduced by legal costs leaving less to share among beneficiaries and courts are increasingly taking action when an estate is could be consumed in costs.
EVEN IF YOU WIN, YOU WILL PROBABLY STILL HAVE TO PAY SOME COSTS YOURSELF
If you win you would normally get costs calculated on an “ordinary’ basis: this means the estate pays around 60-70% of the solicitor/client costs and you have to pay the gap from your provision from the estate or from your own personal resources.
IF YOU LOSE IT IS UNLIKELY THAT YOUR COSTS WILL COME OUT OF THE ESTATE
It is now much more common than it previously was for an unsuccessful applicant to be ordered to pay not only their own costs but also those of the other party.
Grant v Grant (No. 3) [2021] NSWSC provides an example: the court considered that the defendants should have known (and should have been properly advised) that they had no chance of success. They not only had to pay their own costs but also 100% of the costs of the other party.
NO WIN/NO FEE (CONDITIONAL COSTS) AGREEMENTS
Check the agreement. You may have to pay disbursements (that is the fees for all services required in connection with a legal matter {such as court fees} apart from solicitor's fees), and out-of-pocket expenses. You may have to pay these regardless of the outcome of the case. This extra amount can be up to 25 per cent of the costs.
In Olsen v Olsen [2019] NSWSC the court stated: “There have been many decisions in recent years dismissing claims by adult sons and daughters. Many of these cases … are conducted on a speculative basis pursuant to a conditional costs agreement. Such cases sometimes unnecessarily fuel the expectations of claimants, ultimately causing more hardship and heartache. Too often they waste the resources of the court and the money of the litigants.”
BE EXTRA CAUTIOUS IF THE ESTATE IS SMALL
The diminutive size and nature of such estates often means that little will be left in the estate after costs have been deducted. Too often applicants are faced with this harsh reality. In these cases courts can make costs orders limiting the costs that are to be borne by the estate so that there is something left for beneficiaries. In an unsuccessful claim the court can order that the applicant pay their own costs and those of the other party.
In Wengdal v Rawnsley [2019] NSWSC the court said:
“The …(applicant)… was well aware that… the value of the estate was small. She persisted with her claim, which at the hearing was one for about one half of the value of the estate (before the deduction of costs). This was not a reasonable position to adopt when she must have known the value of the estate and the competing financial circumstances of the Defendant. For these reasons, I concluded that…she… should pay… (her own and)… the Defendant’s costs, calculated on the ordinary basis.”
GET ADVICE EARLY ABOUT WHAT COSTS YOU MIGHT BE FACING WHEN YOU MAKE A FAMILY PROVISION CLAIM