What Is a Costs Order in NSW Estate Proceedings and How Does It Work?

The Legal Framework: Three Key Sources

Costs in NSW estate proceedings are governed by three overlapping sources. Understanding how they interact is essential before taking any legal action.

Section 98 of the Civil Procedure Act 2005 (NSW) is the primary source of the Court’s costs power. It gives the Court full discretion to determine who pays costs, to whom, and to what extent. Costs can be awarded on an ordinary basis or an indemnity basis, and orders can be made at any stage of proceedings.

Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) establishes the general rule: if the Court makes a costs order, costs should follow the event. This means the unsuccessful party ordinarily pays the successful party’s costs. In general civil litigation, this rule applies as a strong default.

Section 99 of the Succession Act 2006 (NSW) creates a specific regime for family provision proceedings. It empowers the Court to order that costs be paid out of the estate or notional estate, or both, in whatever manner the Court thinks fit.

Costs incurred in mediation are also covered. This provision gives the Court considerable flexibility to depart from the costs-follow-the-event rule.

How Family Provision Costs Differ From General Civil Litigation

In most civil proceedings, the loser pays the winner’s costs. Family provision claims in the Supreme Court of NSW work differently.

The Court does not simply ask who won. It asks what costs outcome reflects the overall justice of the case. This principle was recognised in Singer v Berghouse (1993) and has been applied consistently in NSW courts since.

Several outcomes are possible in family provision proceedings:

• Both parties’ costs paid from the estate. Common where the claim was reasonably brought, and the estate can absorb the expense.
• Applicant’s costs from estate; executor’s costs on an indemnity basis from estate. The standard outcome where an applicant succeeds.
• Each party pays their own costs. Where a claim was not unreasonable but ultimately failed, or where proportionality concerns apply.
• Unsuccessful applicant ordered to pay the estate’s costs. Applied where the claim was weak, reasonable offers were rejected, or the applicant was not eligible.

The Court’s decision on costs is made separately from the substantive outcome. Winning the claim does not guarantee a favourable costs order, and losing does not always mean paying the other side’s costs.

More: What Is a Family Provision Claim in NSW?

The Two Bases for Costs Awards

When the Court does make a costs order, it specifies the basis on which costs are assessed. There are two options, and the basis determines how much the paying party must cover.

Ordinary Basis (Party/Party Costs)

This is the default. Costs on the ordinary basis recover a proportion of the receiving party’s actual legal costs, typically around 60 to 70 percent. The costs must be fair and reasonable for the work done and proportionate to the proceedings.

Executors acting honestly and with propriety are generally entitled to their costs from the estate on an indemnity basis, not the ordinary basis.

Indemnity Basis

Indemnity costs require the paying party to cover nearly all of the other side’s legal costs. They are awarded where one party has engaged in unreasonable or improper conduct during the proceedings, or where a settlement offer was made and not accepted and the final outcome was no better than the offer.

The two main triggers for indemnity costs are Calderbank offers and formal offers of compromise under the UCPR.

Settlement Offers and Costs Consequences

Settlement offers are among the most powerful tools for managing cost risk in estate proceedings. Two types of offer can carry significant costs consequences.

Calderbank Offers

A Calderbank offer is an informal written offer to settle, expressed to be “without prejudice save as to costs.” If a party rejects a Calderbank offer and the final outcome is no better than the offer, the Court may order that the rejecting party pay the offeror’s costs on an indemnity basis from the date the offer was made. The Court considers whether the rejection was unreasonable in all the circumstances.

Formal Offers of Compromise

Formal offers of compromise under UCPR Part 42 create automatic costs consequences. If a plaintiff’s offer is not accepted and the judgment is no less favourable than the offer, the plaintiff is entitled to indemnity costs from the date of the offer. 

If a defendant’s offer is not accepted and the judgment is no more favourable, the plaintiff must pay the defendant’s indemnity costs from that date.

Making and responding to offers requires careful advice. A poorly timed offer can work against the party who makes it.

More: Cost of Contesting a Will in NSW

Costs Capping in NSW Estate Proceedings

An increasing feature of NSW estate litigation is the Court’s willingness to cap costs, particularly in smaller estates.

Practice Note SC Eq 7 has long provided that the Court may cap costs where the net distributable estate value is less than $500,000. The Supreme Court’s Protocol Relating to Costs and Costs Capping in Probate Proceedings, effective 21 July 2025, goes further. No party has an unqualified right to cost recovery, and for estates with a net value below $1.5 million, the Court may make a maximum costs order under UCPR rule 42.4.

Courts can impose caps at any stage of proceedings, not only at final hearing. In Lord v Craig [2026] NSWSC 17, the Court imposed a prospective cap at an interlocutory stage before the matter was listed for hearing.

The purpose is proportionality. Where legal costs would otherwise consume a disproportionate share of a modest estate, the Court will intervene.

How Costs Are Assessed and Enforced

A costs order sets out who must pay, but not how much. The amount is determined separately.

The parties can agree on a figure. If they cannot, either party may apply to the NSW Costs Assessment Scheme, administered by the Supreme Court.

An independent assessor reviews the bill and determines what is fair and reasonable. Applications must be made within 12 months of the order.

Once determined, if payment is not made, the certificate can be registered as a Supreme Court judgment and enforced through garnishee orders or writs.

The Supreme Court’s costs information page provides further detail on the assessment process.

What This Means for Claimants and Executors

For anyone involved in estate proceedings in NSW, costs are not an afterthought. They should be part of the initial assessment of whether to proceed and how to conduct the matter.

Key points to understand:

• There is no automatic guarantee the estate will pay your costs, even if you succeed.
• An unsuccessful claim can result in a personal costs order against the applicant.
• Rejecting a reasonable settlement offer can trigger indemnity costs from the date of that offer.
• In smaller estates, costs caps may limit what any party can recover.
• Executors acting honestly and properly generally receive indemnity costs from the estate.

Getting early advice on costs exposure is as important as understanding the merits of the claim. To discuss the costs implications of a particular matter, call our team before committing to any course of action.

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Our head office is in Edgecliff in Sydney’s Eastern Suburbs, and we assist clients across the Inner West, North Shore, Western Sydney, and Greater Sydney. We act for clients in all Australian states and territories.

Speak With a Wills and Estate Lawyer

Costs orders can significantly affect the value of any outcome in estate proceedings. Call 1300 414 844 to speak with an experienced wills and estate lawyer before making any decisions.

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