Family provision claims often place executors in a difficult position: they must defend the estate while potentially facing personal costs consequences if they unreasonably reject settlement offers. A recent NSW Supreme Court decision, EL-BAYEH v EL-BAYEH (NO 2) [2025] NSWSC 1177, provides important guidance on when refusing a settlement offer can result in indemnity costs orders.

The Case Background

This matter involved a family provision claim under section 59 of the Succession Act 2006 (NSW). After a trial, the Court ordered that the plaintiff receive $1,450,000 from the estate. However, the real issue arose when the Court considered the costs implications of settlement offers made before trial.

The plaintiff had made two settlement offers:

• An offer on 8 August 2025 to accept $1,350,000
• A subsequent offer on 19 August 2025 to accept $1,450,000

Both offers were rejected by the defendant executor, leading to a contested trial. Following the trial judgment awarding $1,450,000, the plaintiff sought indemnity costs from the date of the first offer.

Why Indemnity Costs Matter

In civil litigation, the usual rule is that unsuccessful parties pay costs on the “ordinary basis” – typically around 60-70% of actual legal costs. However, indemnity costs can recover up to 100% of reasonable costs incurred. This represents a significant financial difference, particularly in complex estate litigation.

Under Rule 42.14 of the Uniform Civil Procedure Rules 2005 (NSW), if a party rejects a settlement offer and then fails to achieve a more favourable outcome at trial, they may be ordered to pay the other party’s costs on an indemnity basis from the date of the offer.

The Court’s Analysis

The Court carefully considered whether the defendant’s rejection of the 8 August offer was unreasonable. The Court examined several key factors:

1. Reasonableness of the Offer

The Court found that the 8 August offer of $1,350,000 was objectively reasonable. Critically, this was $100,000 less than what the plaintiff ultimately received at trial. The offer represented a genuine compromise and provided the defendant with a clear opportunity to resolve the matter on favourable terms.

2. Sufficient Time for Consideration

The defendant argued that seven days’ notice was insufficient to properly consider the offer, particularly given estate illiquidity issues. The Court rejected this argument, noting that:

• The parties had been engaged in settlement negotiations for months
• The defendant was legally represented throughout
• The defendant had previously made counter-offers on similarly short timeframes
• The case was trial-ready and evidence had been exchanged

3. Estate Executor’s Position

The defendant sought to argue that, as executor, they were entitled to defend the estate’s interests. While the Court acknowledged this role, it held that being an executor does not provide immunity from costs consequences when refusing reasonable offers. An executor must still act reasonably in conducting litigation on behalf of the estate.

4. Claims of Unnecessary Costs

The defendant contended that the plaintiff’s conduct during trial – including allegations of fraud that were ultimately not pressed – caused unnecessary costs. The Court found this argument unconvincing, noting that the evidence was read into the record and remained relevant to the issues at hand.

Key Takeaways for Executors and Beneficiaries

This decision reinforces several important principles for anyone involved in family provision disputes:

For Executors:

1. Assess settlement offers objectively – Your role as executor requires careful consideration of reasonable offers, not automatic rejection
2. Act reasonably – The executor’s duty to defend the estate does not override the obligation to litigate reasonably
3. Consider the evidence carefully – By the time offers are made close to trial, you should have a clear understanding of the case’s strengths and weaknesses
4. Understand the costs risks – Rejecting a reasonable offer can expose the estate (and potentially you personally) to significant indemnity costs

For Claimants:

1. Make realistic offers – Offers must be reasonable and represent genuine compromise
2. Provide adequate notice – While seven days was sufficient here, ensure offers allow reasonable consideration time
3. Document everything – Maintain clear records of all settlement negotiations
4. Time your offers strategically – Offers made when evidence has been exchanged and trial is imminent carry significant weight

For Estate Practitioners:

1. Advise clients about Calderbank offers – Properly structured settlement offers are powerful litigation tools
2. Assess offers objectively – Help executor clients understand the real risks and benefits of proceeding to trial
3. Consider estate liquidity early – Illiquidity arguments are rarely successful if raised late in proceedings

The Broader Context

Family provision claims under the Succession Act already place estates under financial pressure. When combined with indemnity costs orders, the financial impact can be substantial. This case demonstrates that courts will not hesitate to award indemnity costs where a party unreasonably rejects a settlement offer, even when that party is acting as executor.

The decision serves as a reminder that the Civil Procedure Act’s objectives of just, quick, and cheap resolution of disputes apply equally to estate litigation. Courts encourage parties to engage meaningfully in settlement negotiations and will use costs orders as a mechanism to discourage unreasonable litigation conduct.

Practical Steps Forward

If you’re involved in a family provision claim, whether as executor, beneficiary, or claimant:

• Engage in genuine settlement negotiations throughout the proceedings
• Carefully assess any offers received with proper legal advice
• Consider the strength of the evidence objectively, not emotionally
• Understand the potential costs consequences of proceeding to trial
• Document all settlement discussions thoroughly

How CML Lawyers Can Help

Family provision claims involve complex legal, financial, and emotional considerations. At CML Lawyers, we have extensive experience in estate litigation and can provide strategic advice on:

• Pursuing or defending family provision claims
• Assessing the merits of settlement offers
• Negotiating favorable outcomes
• Managing costs risks throughout litigation
• Executor duties and responsibilities

Our team understands that every estate dispute is unique, involving not just legal issues but family dynamics and emotional considerations. We work to achieve practical, cost-effective solutions that protect our clients’ interests while minimising the financial and personal toll of litigation.

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For advice on family provision claims or estate litigation matters, contact CML Lawyers:

📍 Sydney CBD | Cowra NSW
📞 6342 1000 – Zoe Bagnall
🌐 cml.com.au

This article is for general information purposes only and does not constitute legal advice. For advice specific to your circumstances, please contact CML Lawyers.