In some family provision matters, the estate’s assets are insufficient to meet the Court’s assessment for further provision. In such instances, in New South Wales, the Succession Act 2006 (NSW) allows the court to issue an order designating specific property as notional estate, allowing it to be treated as part of the deceased’s estate for the family provision claim, including property already distributed and never technically part of the estate.
The Court must carefully balance the potential interference with the expectations of beneficiaries against the justice and merits of the claim. In cases where the estate has been fully distributed under the Will, section 79 of the Act applies. When nothing is left following the Court’s order for further provision, it is prompted to consider the deceased’s property as a notional estate. The Court must thoroughly evaluate the statutory safeguards in sections 87–89. It must be satisfied that it is fair and necessary. This ensures the designation of part of that property as notional estate to achieve a just outcome.
The matter
In Oates v Oates [2025] NSWSC 548, Aaron Oates (the plaintiff) sought provision for maintenance, education support, and life advancement from the deceased’s estate. The deceased died intestate on October 3, 2022. Jan Oates, the defendant, is the deceased’s widow and the plaintiff’s stepmother. Brereton J considered viewing assets outside the deceased’s modest estate of just $3,443.62 as a notional estate for a family provision claim.
The plaintiff identified two assets:
- the deceased’s joint tenancy interest in the Bateau Bay home (shared with the defendant) and
- a superannuation death benefit worth $293,345.
The Court accepted that the deceased’s failure to sever the joint tenancy and to nominate a legal personal representative for the superannuation benefit as “relevant property transactions” under section 75 of the Succession Act 2006 (NSW). Had the deceased taken those steps, the deceased’s estate would have included a half-interest in the home (worth around $550,000) and the full superannuation benefit.
Because the defendant had made substantial contributions towards the property and the deceased’s superannuation, Breteton J adjusted the figures to reflect the deceased’s share, to an assessed $600,000. On intestacy division under ss 113 and 127 of the Act would leave the defendant the deceased’s personal belongings, a fixed statutory amount (indexed to inflation), and half of the estate’s remaining assets. The plaintiff would receive the other half of the estate.
Ultimately, Brereton J found that the plaintiff’s serious medical condition, Von Hippel-Lindau Syndrome, created heightened financial vulnerability and justified further provision. His Honour ordered an additional $120,000 (in addition to the $30,000 already received), secured as a charge over the Bateau Bay property, although with scope for the defendant to discharge the obligation by making a lump-sum payment.
His Honour acknowledged that the charge would prolong an unwelcome legal relationship between the plaintiff and the defendant. Still, the order was necessary to meet the plaintiff’s pressing needs and ensure a fair outcome.
Oates v Oates [2025] NSWSC 548 illustrates how notional estate orders can reshape the estate landscape, particularly where joint tenancy interests and superannuation are involved. This case, along with similar principles applied in McLean v Cree [2025] NSWSC 577 and McLean v Cree (No 2) [2025] NSWSC 684, provides essential insights into the application of notional estate provisions that could potentially influence future legal proceedings.
Brereton J accepted counsel’s suggestion to make the proposed orders in broad terms, leaving the parties to finalise the details—ideally by agreement. The plaintiff’s draft outline included a range of necessary machinery provisions that the defendant had not yet addressed, and was allowed to consider.
In summary, Brereton J indicated that the orders should provide for:
- A family provision order entitles the plaintiff to 10% of the net proceeds from the sale of the Bateau Bay property, with definitions of “net proceeds” and provisions for timing, interest, and sale (to be completed no later than six months after the defendant’s death).
- A form of security to protect the plaintiff’s entitlement.
- The defendant can pay $120,000 upfront (or in the near future) as an alternative to waiting until sale proceeds are available, depending on her ability to access funds such as superannuation.
- A mechanism for release, allowing the defendant to discharge the plaintiff’s 10% entitlement by paying an amount equivalent to 10% of the property’s assessed value at the time of payment.
- A notional estate order limited to the Bateau Bay property is sufficient to give effect to the family provision order.
- Subject to further submissions, a likely cost order of $120,000 in the plaintiff’s favour recognises the impact on the defendants’ limited resources but justified given he resistance to any provision.
- Ancillary provisions necessary to implement the scheme.
Brereton J directed the parties to confer and provide final agreed orders by June 11 2025, failing which the matter would return for directions on June 13 2025.
Costs in Family Provision Proceedings
The Court retains broad discretion to determine costs under sections 98 of the Civil Procedure Act 2005 (NSW) and section 99 of the Succession Act 2006 (NSW). The general rule in r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) provides that a successful party is ordinarily entitled to their costs. Since the plaintiff succeeded in obtaining a family provision order, he was prima facie entitled to his costs.
Making of offer of Compromise
Any party in proceedings can make a written offer to settle all or part of a claim on specific terms.
The offer must clearly identify:
- the claim or part of the claim it relates to, and
- The proposed orders for resolving that claim (including any monetary judgment amount).
If the offer covers only part of the claim, it must state:
- for plaintiffs—whether the remainder of the proceedings will be pursued or abandoned,
- for defendants—whether the balance will be defended or conceded.
The offer must:
- not include costs or be expressed as inclusive of costs,
- state that it is made under the rules
- disclose if it is in addition to any interim payment already made, and
- Specify the acceptance period.
Permitted Terms
Offers may propose:
- judgment for the defendant (with no order as to costs or with a specified costs payment),
- payment of agreed or assessed costs up to the time of the offer, or
- costs on an ordinary or indemnity basis from a specified estate or fund.
Supporting Information
If making the offer before providing the necessary particulars or documents, the offeree may give notice within 14 days that they cannot properly assess the offer.
Timing of Acceptance
- If made at least two months before trial, the offer must remain open for at least 28 days.
- Otherwise, the acceptance period must be reasonable in the circumstances
- Unless otherwise stated, acceptance requires payment or performance within 28 days of receipt.
Other Features
- Offers are presumed to be made “without prejudice” unless stated otherwise.
- Parties can make Multiple offers.
- Withdrawal of an offer during its acceptance period requires the Court’s permission.
- Attempts to exclude or alter the operation of rules on costs and consequences (rr 42.14–42.15) are invalid.
The plaintiffs Position
In Oates v Oates (No 2) [2025] NSWSC 929, the plaintiff sought a costs order in a fixed gross sum of $120,000, even though his legal costs were significantly higher. The plaintiff submitted that the notional estate is responsible for this amount.
The defendant’s Opposition
The defendant opposed the plaintiff’s application, contending that her settlement offers, if accepted, would have produced a better result for the plaintiff than the outcome at trial. The plaintiff should receive his costs only up to February 22, 2024. From that date, due to the unreasonable refusal of the defendants’ offers, the plaintiff should pay the defendants’ costs on an indemnity basis.
The Settlement Offers
On February 23 2024, the defendant served two offers:
- Offer of Compromise—$180,000, exclusive of costs, purportedly made under UCPR r 20.26.
- Calderbank Offer—$220,000 inclusive of costs, expressed to operate if the plaintiff found the formal offer of compromise non-compliant.
The plaintiff also made settlement offers, but they were more favourable to him than the Court’s eventual orders and thus irrelevant to the costs discretion.
Validity of the Offer of Compromise
Brereton J found the offer of Compromise defective. Proposing “judgment for the plaintiff in $180,000”, which is not an order available in family provision proceedings. Under s 65 of the Succession Act, orders must specify the person, amount, source, and manner of provision. Further, as the estate lacked sufficient assets, notional estate orders were required but not identified. The offer therefore failed to comply with UCPR r 20.26 and could not trigger the adverse cost consequences in r 42.15.
The Calderbank Offer
Unlike the offer of Compromise, the Calderbank offer was valid and clear. It proposed a settlement for $220,000, including costs, which the defendant could have easily implemented by paying that sum and dismissing the proceedings. Although it described itself as “equivalent or similar” to the formal offer, its terms were unambiguous and understandable.
Assessing Reasonableness of Rejection
The Court considered whether it was reasonable for the plaintiff to have rejected the Calderbank offer. The plaintiff submitted that:
The evidence of the deceased’s testamentary intentions was incomplete at the time.
Later evidence weakened this case; notably,
Family provision outcomes are inherently unpredictable.
Brereton J rejected these submissions. The latter evidence, in fact, strengthened the plaintiff’s case, since it suggested the deceased had some intention to provide for him. The unpredictability of outcomes in family provision proceedings was not a justification for rejection—indeed, it could increase the reasonableness of accepting a certain settlement sum, particularly in modest estates.
Policy Considerations
The Court emphasised that settlement offers should be encouraged in family provision cases, which often involve relatively small estates. Rejection of reasonable offers risks substantial erosion of the estate due to legal costs, as occurred here, where spending nearly $250,000 occured after the defendant made the offer.
Conclusion
The Court held the plaintiff’s rejection of the defendant’s Calderbank offer was unreasonable. Although obtaining a family provision order, the Court found that the plaintiff achieved a worse outcome than accepting the offer. Accordingly, while entitled to some costs, the plaintiff curtailed their entitlement in light of the settlement offers. Brereton J considered it appropriate to award indemnity costs in favour of the defendant from the offer date.
The Effect of an Adverse Costs Order on the Plaintiff
An adverse costs order requires the losing party—the plaintiff—to cover the winning party’s legal expenses, reflecting the common rule in Australia, that “costs follow the event.
In determining costs, the Court must consider whether an order would undermine the purpose of granting a family provision order. In Estate of May Berry [2016] NSWSC 130, Lindsay J held that plaintiffs should receive their costs from the estate even though they failed to better earlier settlement offers. The Court of Appeal in Berry v Nicholls [2016] NSWCA 272 confirmed that this approach involved no error of principle. The plaintiff similarly argued that the defendant’s proposed costs order would negate the benefit of the family provision order made in his favour.
The Potential Consequences
Brereton J had determined that the plaintiff should receive a provision of $120,000 from the notional estate and had initially contemplated that he might also receive a fixed costs order of $120,000.
In contrast, the defendant proposed that:
- The plaintiff recover only his ordinary costs up to February 22 2024, likely less than $30,000 (compared with his indemnity costs of around $35,000 at that point).
- The plaintiff pays the defendant’s indemnity costs from February 23 2024, onwards, amounting to $112,603.26 and continuing to accrue.
- The effect of the defendant’s proposal was that although the plaintiff nominally succeeded with a family provision order, he would end up worse off overall once the plaintiff took his own reduced costs and liability for the defendant’s indemnity costs into account. Payment of indemnity costs was inconsistent with the purpose of the grant of family provision to meet the plaintiff’s ongoing medical and financial needs.
Evaluation of the Offers
The Court reaffirmed that the defendant’s Calderbank offer of $220,000 was clear, unambiguous, and reasonable. Brereton J found that the plaintiff’s rejection of it was unreasonable. While predicting the outcome of family provision proceedings can be difficult, the uncertainty weighed in favour of accepting a certain sum, particularly given the modest size of the estate and the substantial costs of litigation. No new evidence emerged after the offer that materially weakened the plaintiff’s case.
Brereton J noted that denying any defendant’s costs advantage might lead parties to see little value in making settlement offers. Nonetheless, an indemnity costs order in the defendant’s favour would effectively deprive the plaintiff of the benefit of the family provision order, contrary to the statutory purpose.
The Orders
Balancing these competing considerations and guided by the “overall justice of the case” (Singer v Berghouse [1993] HCA 35), the Court ordered:
- The defendant is to pay the plaintiff’s costs on the ordinary basis up to and including February 23 2024 (the date of her Calderbank offer).
- No order as to costs thereafter, with each party to bear their own costs from February 24 2024, onwards.
- This outcome preserved the substance of the plaintiff’s family provision order while still recognising the defendant’s reasonable settlement attempt.
As a result of this order, the plaintiff’s financial recovery is reduced compared to what it would have been without the Calderbank offer. At the same time, the defendant benefits from the offer she made. Brereton J believes this is a fair and reasonable outcome.
Next Steps
Brereton J directed the parties to confer on the final form of orders to give effect to the Court’s reasons and notify chambers by August 22 2025.