Alexakis v Masters (No 3)

[2023] NSWSC 694

Supreme Court

New South Wales

Medium Neutral Citation:

Alexakis v Masters (No 3) [2023] NSWSC 694

Hearing dates:

On the papers

Date of orders:

23 June 2023

Decision date:

23 June 2023

Jurisdiction:

Equity

Before:

Henry J

Decision:

(1) Order that the plaintiff’s costs of the proceedings, calculated on the indemnity basis, be paid out of the estate of the late Raymond John McClure (deceased) from the gift of the residue and remainder made to the plaintiff under clause 2(D)(i) of the deceased’s will dated 10 July 2017.

(2) Make no order as to the costs of the first, second, third and fourth defendants/cross-claimants with the intention that they bear their own costs of the proceedings.

Catchwords:

SUCCESSION — contested probate — costs — whether costs incurred by unsuccessful defendants/cross-claimants should be borne by estate — whether defendants/cross-claimants should bear their own costs — whether defendants/cross-claimants should pay any costs of plaintiff — where undue influence raised — where finding that it was reasonable to investigate that and other matters — where finding that deceased and plaintiff did not cause litigation

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Succession Act 2006 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Ballam v Ferro (No 2) [2022] NSWSC 1358

Becker v Public Trustee of New South Wales [2006] NSWSC 1146

Blendell v Byrne; Estate of Blendell (No 2) [2019] NSWSC 798

Brown v Guss (No 2) [2015] VSC 57

Chant v Curcuruto [2021] NSWSC 882

Estate of Gertrude Martha Elisabeth Hacke, The Public Trustee v Wilson (Unreported, Supreme Court of NSW, Powell J, 13 November 1985)

Estate of Guamani; Guamani v De Cruzado [2023] NSWSC 502

Gray v Hart; Estate of Harris (No 2) [2012] NSWSC 1562

Middlebrook v Middlebrook (1962) 36 ALJR 216

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Perpetual Trustee Co Ltd v Baker [1999] NSWCA 244

Re Cutcliffe’s Estate [1959] P 6

ReEstate Rofe [2021] NSWSC 257

Re the Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698

Shorten v Shorten (No 2) [2003] NSWCA 60

Starr v Miller; Starr v Miller (No 2) [2021] NSWSC 685

Trustee for the Salvation Army (NSW) Property Trust t/as Salvation Army v Becker (No 2) [2007] NSWCA 194

Texts Cited:

Gino Dal Pont, Law of Succession (3rd ed, 2020, LexisNexis Butterworths)

Roland Hastings and George Weir, Probate Law and Practice (2nd ed, 1948, The Law Book Co of Australasia Pty Ltd)

Category:

Costs

Parties:

Peter Alexakis (Plaintiff/First Cross-Defendant on the First, Second and Third Cross-Claims)

Gary Masters (First Defendant/Cross-Claimant on the First Cross-Claim/Second Cross-Defendant on the Second and Third Cross-Claims)

Frank Camilleri (Second Defendant/Fourth Cross-Defendant on the First Cross-Claim/Second Cross-Claimant/Third Cross-Defendant on the Third Cross-Claim)

Hildegard Schwanke (Third Defendant/Second Cross-Defendant on the First Cross-Claim/Third Cross-Defendant on the Second Cross-Claim/First Cross-Claimant on the Third Cross-Claim)

Irmgard (Marianne) Schwanke (Fourth Defendant/Third Cross-Defendant on the First Cross-Claim/Fourth Cross-Defendant on the Second Cross-Claim/Second Cross-Claimant on the Third Cross-Claim)

Representation:

Counsel:
L Ellison SC with L Fernandez (Plaintiff)
R Wilson SC with C Birtles (First Defendant)
V Bedrossian SC with L Reeves (Second Defendant)
J Brown with P Wiggins (Third and Fourth Defendants)

Solicitors:
Teece Hodgson & Ward (Plaintiff)
Makinson d’Apice Lawyers (First Defendant)
Crumpton Lawyers (Second Defendant)
Turner Freeman (Third and Fourth Defendants)

File Number(s):

2019/201496

Publication restriction:

Nil

JUDGMENT

1. On 16 May 2023, I published my reasons for making orders that the plaintiff, Dr Peter Alexakis, be granted letters of administration in relation to the will of the late Raymond McClure dated 10 July 2017 and the cross-claims filed by the first, second and third and fourth defendants (the Salvation Army, Mr Camilleri and the Schwankes respectively) be dismissed: Alexakis v Masters (No 2) [2023] NSWSC 509 (Judgment).

2. These reasons deal with the costs of the proceedings. They assume familiarity with and use the same terms as those used in the Judgment.

3. The Court directed the parties to file and serve written submissions together with any affidavit evidence on which they relied and indicated that the issue of costs would be dealt with on the papers. Written submissions have been received from each of the parties. No further evidence has been filed.

4. The main dispute between the parties concerns the costs incurred by the defendants/cross-claimants in relation to their unsuccessful challenges to the validity of the July Will, the June Will and the gifts made to Dr Alexakis under those wills, and their alternative challenges to the retention of the gifts by Dr Alexakis (assuming that one of the wills was a valid testamentary instrument).

5. The Salvation Army and the Schwankes submit that their costs, calculated on the ordinary basis, ought to be borne by Mr McClure’s estate whereas Dr Alexakis submits that the unsuccessful defendants/cross-claimants should bear their own costs subject to payment of what he refers to as a “nominal amount” towards his costs. Mr Camilleri’s primary position is that the unsuccessful defendants/cross-claimants ought to bear their own costs of the proceedings although he says that he should be treated in a manner consistent with the Salvation Army and the Schwankes in the event that the Court makes the costs orders those parties seek.

6. There is no dispute that Dr Alexakis is entitled to an indemnity for his costs out of the estate. The issue is whether some other order should be made having regard to the position of Mr Camilleri and the Schwankes as residuary beneficiaries under the July Will and any consequential costs burden imposed on them.

Legal principles

7. The parties’ written submissions set out the applicable legal principles relating to costs in probate proceedings (which are not in dispute) by reference to the summaries provided by: Hallen J in Blendell v Byrne; Estate of Blendell (No 2) [2019] NSWSC 798 (Blendell v Byrne) at [50]–[54] and in Ballam v Ferro (No 2) [2022] NSWSC 1358 at [77]–[80]; Meek J in Estate of Guamani; Guamani v De Cruzado [2023] NSWSC 502 (Estate of Guamani) at [185]–[190]; and Lindsay J in ReEstate Rofe [2021] NSWSC 257 (Estate Rofe) at [652]–[658].

8. These cases confirm that the general rules applicable to the award of costs also apply in probate litigation. The Court therefore has a broad discretion to award costs under s 98 of the Civil Procedure Act 2005 (NSW) (CP Act) and the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) apply, which provide that costs follow the event and are calculated on the ordinary basis unless the Court considers that some other costs order should apply: UCPR, rr 42.1, 42.2 and 42.20.

9. The Court’s discretion is unfettered but must be exercised judicially and with regard to the principle that the award of costs is compensatory in nature, not punitive: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [44].

10. In probate litigation, there are two well-recognised exceptions to the general rule that costs follow the event, namely:

1. where the testator has, or those interested in the residue have, been the cause of litigation, the costs of the party who unsuccessfully challenged the will may be paid out of the estate; and

2. where the circumstances reasonably called for an investigation of the will, the costs may be left to be borne by those who incurred them,

see: Re the Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709; Perpetual Trustee Co Ltd v Baker [1999] NSWCA 244 (Perpetual v Baker) at [13]–[14]; Shorten v Shorten (No 2) [2003] NSWCA 60 at [14]–[15]; Estate Rofe at [654]; Estate of Guamani at [185]; and Blendell v Byrne at [50].

11. The exceptions in probate litigation reflect the Court’s concern to give effect to the last will of a free and capable testator and the public policy considerations that a doubtful will should not pass easily into proof by reason of the costs of opposing them and that parties should not avoid bringing fruitless litigation by knowledge that their costs will be defrayed by others: Estate Rofe at [655]–[656], citing Gray v Hart; Estate of Harris (No 2) [2012] NSWSC 1562 at [4]–[5].

12. The two probate exceptions tend to overlap although they remain conceptually distinct: Perpetual v Baker at [13]–[14]. Like the general rule on costs, the exceptions provide a starting point; they are not exhaustive nor prescriptive, they may not operate fairly in a particular case and the Court retains flexibility when awarding costs in probate actions. The exceptions provide guidance to the Court in the exercise of its discretion having regard to the overall circumstances, the justice between the parties and the “reality of the contest”, which also takes account of the facts connected with the litigation, such as the role which a party has played in the proceedings, the facts about the knowledge available to parties and the reasonableness of their conduct in the litigation: Chant v Curcuruto [2021] NSWSC 882 at [32], citing Starr v Miller; Starr v Miller (No 2) [2021] NSWSC 685 (Starr v Miller) and Brown v Guss (No 2) [2015] VSC 57 at [36] and Perpetual v Baker at [14].

13. It has been said that the failure to establish an allegation of undue influence or fraud will ordinarily be borne by the party who raised it and they may be required to pay the costs, not only of the charge, but of the whole action: Re Cutcliffe’s Estate [1959] P 6, Hodson LJ at 21; and Gino Dal Pont, Law of Succession (3rd ed, 2020, LexisNexis Butterworths) (Dal Pont) at [23.13] and the cases cited at footnote 64.

14. However, where the evidence would have led a reasonable person to enquire whether the testamentary disposition represented a free and independent exercise of the testator’s will, the costs of an unsuccessful undue influence claim may be met out of the estate or the party may be relieved from the costs of the successful opponent: Middlebrook v Middlebrook (1962) 36 ALJR 216 at 223; Becker v Public Trustee of New South Wales [2006] NSWSC 1146 at [15]; Estate of Gertrude Martha Elisabeth Hacke, The Public Trustee v Wilson (Unreported, Supreme Court of NSW, Powell J, 13 November 1985) at 4; Estate of Guamani at [190] referring to Roland Hastings and George Weir, Probate Law and Practice (2nd ed, 1948, The Law Book Co of Australasia Pty Ltd) at 336–8; and see also Dal Pont at [23.13] and the cases cited at footnote 65.

The parties’ submissions

Dr Alexakis

15. Dr Alexakis submits that his costs should be indemnified out of the estate as he was successful in all respects.

16. As to the orders that should be made in relation to the various unsuccessful defendants/cross-claimants, Dr Alexakis submits that they should pay their own costs and a modest contribution towards his costs, being $250,000 from the Salvation Army and $125,000 from Mr Camilleri and the Schwankes jointly.

17. Dr Alexakis submits that this is an appropriate outcome as it reflects the history of the case, the various defences, the result, the failure of the Salvation Army to accept an offer of compromise that was made by Dr Alexakis during the course of the proceedings and it would avoid any further delay in assessment, noting that lump sum orders are contemplated by s 98(4)(c) of the CP Act.

18. Dr Alexakis emphasises the comments of Hallen J in Starr v Miller at [67], where his Honour stated:

“In order to come within the first exception, and receive the benefit of a costs order, the unsuccessful party needs to show, relevantly, that the deceased was the ‘cause’ of the litigation.”

19. Dr Alexakis submits that Mr McClure, by his conduct, did not cause the litigation, stating the following: Mr McClure executed a series of valid wills that complied with the formalities required by s 6 of the Succession Act 2006 (NSW) (Succession Act); there was no challenge to testamentary capacity; perhaps only some challenges to Mr McClure’s knowledge and approval could be directed to the conduct of Mr McClure; and the various challenges under the heads of undue influence (in equity and probate) and unconscionable conduct were directed at Dr Alexakis personally and were unsuccessful.

20. Dr Alexakis submits that he should not be burdened by the costs incurred by three sets of defendants/cross-claimants, particularly as they mounted attacks from different directions and as the claim by the Salvation Army was motivated by self-interest. The latter contention is made in the context where, Dr Alexakis says, the Salvation Army sought probate of the 2016 Will notwithstanding that the evidence disclosed that Mr McClure had made it clear that he intended to make a new will with no benefit passing to the Salvation Army.

21. Dr Alexakis submits that the defendants/cross-claimants’ challenges based on knowledge and approval and undue influence relied on an attack of the credit of Dr Alexakis and Mr Andresakis in cross-examination, which he says did not eventuate, and while the defendants/cross-claimants were entitled to adopt the approach of seeking for those persons to be “broken down” in cross-examination, they failed and they did so at their risk of costs. He contends that, as the defences and cross-claims were wholly unsuccessful, the defendants/cross-claimants should not receive an order for their costs and, while the Schwankes may not have pleaded new issues and Mr Camilleri’s challenge was in respect of a narrow ground, their involvement necessarily led to increased costs and, in the case of Mr Camilleri, proceeded on novel grounds.

22. Dr Alexakis’ submissions refer to an offer of compromise served on the Salvation Army on 24 September 2020, which Dr Alexakis says sought agreement that the July Will be admitted to probate and, if either of the 2017 Wills were admitted to probate, offered to pay the indemnity costs of the Salvation Army out of the estate and make a payment of $150,000. He submits that the rejection of the offer of compromise, which he characterises as a generous offer that provided for a more favourable result than that which the Salvation Army obtained, is a further reason why the Salvation Army should pay its own costs.

23. Dr Alexakis submits that there are a number of reasons why the defendants/cross-claimants should be ordered to pay some or all of his costs, referring to, amongst other matters: his total success; the defences that relied on equating probate undue influence with equitable undue influence had no legal basis and were contrary to recent authorities; and if the defendants/cross-claimants were ordered to pay his costs, the costs burden would be spread between the three of them, each in their own interest, such that they would only pay approximately one-third each. However, as noted above, he does not seek such an order, contending that in all the circumstances, and if only to avoid a prolonged period of assessment, an appropriate order is, subject to his submissions made about the payment of the amounts referred to at [16] above, that the defendants/cross-claimants be responsible for their own costs and no other.

24. Dr Alexakis submits that he has incurred considerable costs over the long history of the litigation, the burden of which was added to by dealing with three sets of cross-claimants. He says that it is appropriate in the circumstances of this case that he be awarded some costs to ameliorate and compensate him for the costs incurred for successfully establishing the validity of the July Will, noting that even if he received an indemnity order out of the estate in respect of his costs, he would have to pay approximately 90% of the costs himself because of his entitlement to that share of the residue.

Salvation Army

25. The Salvation Army seeks an order that its costs, on the ordinary basis, be paid from the estate because the controversy in the proceedings was caused by Mr McClure and Dr Alexakis, being the substantive residuary beneficiary, and the circumstances of the case led reasonably to an investigation of the 2017 Wills.

26. The Salvation Army submits that there was a reasonable basis for investigation of the circumstances of the making of the 2017 Wills having regard to the affidavit evidence and the contemporaneous records of the independent medical witnesses. It also submits that the reasonableness of the investigation continued to the time of the hearing as aspects of the evidence of Dr Alexakis and Mr Andresakis were incomplete and inaccurate which meant that additional facts, which were necessary to obtain a more complete understanding of the circumstances leading to the making of the 2017 Wills, were only discovered during cross-examination.

27. The Salvation Army submits that Mr McClure was partially the cause of the litigation, referring to his statements to Dr Wroth and Mr Myhill and the findings regarding his personal characteristics, in particular, the findings that Mr McClure had a suspicious nature and a tendency to mistrust (Judgment at [439]), he seemed to be driven by emotion, did not always reflect the reality of the situation and expressed such views at different times to different people (Judgment at [446]), and that his immense desire to get out of hospital spoke of a somewhat desperate and vulnerable man (Judgment at [447]).

28. The Salvation Army also submits that Dr Alexakis was partially the cause of the litigation because his affidavit evidence did not disclose the extent of his involvement in coordinating arrangements between Mr Andresakis and Mr McClure and because the frequency of his visits to Mr McClure at the RPAH prior to and after making the 2017 Wills was suspicious and not inconsistent with the alleged arrangement.

29. The Salvation Army submits that, given this context and in circumstances where there is a genuine doubt about the validity of the 2017 Wills, this is a case where there is a public interest in a close examination of the facts and the overall justice of the case warrants an order that the Salvation Army’s costs be paid out of the estate on the ordinary basis.

30. The Salvation Army submits that the unsuccessful claims of undue influence should not prevent the Court from awarding its costs, on the ordinary basis, from the estate as there were reasonable grounds for raising that defence and the overall justice of the case may require such an order to be made.

31. As to the fraud allegation, the Salvation Army submits that it was a minor aspect of its case, occupying less than 2% of the hearing time, such that the Salvation Army’s lack of success in respect of that allegation should not be the subject of a separate costs order.

32. The Salvation Army’s submissions also refer to various findings in the Judgment which it says are relevant to the exercise of the Court’s discretion as to costs, which are set out at [5(a)–(r)] of its written submissions, and to which I have had regard.

Schwankes

33. The Schwankes also contend that their costs, on the ordinary basis, should be borne by the estate and accept that Dr Alexakis should have his indemnity costs out of the estate.

34. The Schwankes submit that the circumstances of the making of the 2017 Wills required investigation and there was a reasonable doubt as to whether Mr McClure was unduly influenced by Dr Alexakis, the principal beneficiary. They submit that they were clearly justified in pleading undue influence, pointing to the statements made by Mr McClure to Mr Myhill about the alleged arrangement, the Court’s ultimate conclusion against a finding of undue influence being, in part, dependent on the findings that Mr McClure had been unreliable in his statements to those around him (Judgment at [635] and [642]) and other findings of the Court that were conducive to undue influence (Judgment at [447], [452], [453] and [657]).

35. In support of an order of costs in their favour, the Schwankes also submit that: they had a proper interest in the proceedings, having been in every will Mr McClure made; they were joined to the proceedings late and did not raise any new issues or seek any relief that had not already been pleaded or sought by the Salvation Army or Mr Camilleri; they were not aware of the circumstances of the creation of the 2017 Wills and their enquiries were therefore legitimate; they did not allege fraud or engage in any other conduct that would put them at risk as to costs; and the estate is large such that their costs would not be an undue burden.

33. If the Court is against their principal submission, the Schwankes submit that it would be appropriate for no order to be made as to their costs.

Mr Camilleri

37. Mr Camilleri submits that he should be treated in the same manner as the Salvation Army and the Schwankes, such that if the Court is minded to order that their costs, on the ordinary basis, be paid out of the estate, then his costs should also be paid on that basis.

38. Nevertheless, Mr Camilleri submits that, as a matter of principle and upon the proper exercise of the Court’s discretion, it would not be correct to permit the Salvation Army, the Schwankes or himself to recoup their costs from the estate, accepting that they were conducted in pursuit of private financial interests. Mr Camilleri’s primary position is that the unsuccessful defendants/cross-claimants ought to bear their own costs of the proceedings.

39. Mr Camilleri’s submissions focus on Dr Alexakis’ costs and assume that no order as to costs is made in relation to the defendants/cross-claimants’ costs. While acknowledging that Dr Alexakis was successful in the proceedings and that his costs, on the indemnity basis, would ordinarily be payable out of the estate, Mr Camilleri states his concern that such an order would result in he and the Schwankes bearing part of the costs burden as residuary beneficiaries, while the primary opposing party, the Salvation Army, would avoid any such burden. For that reason, he contends that the Court should depart from the usual position and proposes two alternative costs orders which he says would better reflect a fair and equitable allocation of the burden of costs, being:

1. the Court make no order as to the parties’ costs of the proceedings, in which case Mr Camilleri would not contribute to Dr Alexakis’ costs through the estate; or

2. the Court allow Dr Alexakis to recoup his costs, on the indemnity basis, from the estate but make an order that the Salvation Army pay to Mr Camilleri costs (or provide something akin to an indemnity) equivalent in quantum to 9% of the indemnity costs amount claimed by Dr Alexakis. It is recognised that this is a more complicated approach than the one identified at [39(a)] above.

40. Mr Camilleri submits that such orders would be appropriate as he played a very limited role in the proceedings. He did not involve himself in any challenge to the validity of the 2017 Wills and says that, to the extent that he pursued the equitable undue influence case, he relied on the matters advanced by the Salvation Army and/or the Schwankes. He submits that his positive involvement was limited to the discrete issue of unconscionable conduct, which contributed very marginally to the hearing time and involved only limited cross-examination of witnesses and short oral closing submissions.

41. Mr Camilleri also says that if the Court makes an order for the payment of costs by any of the defendants/cross-claimants, such an order should be directed primarily against the Salvation Army, with any order against Mr Camilleri amounting to a small fraction of Dr Alexakis’ costs and not exceeding 5–10% of the proportion for which an order is made against the Salvation Army.

Consideration and determination

42. As the Salvation Army, Mr Camilleri and the Schwankes unsuccessfully opposed Dr Alexakis’ claims for letters of administration on all grounds and failed on each of their cross-claims, the prima facie position is that they should be ordered to pay Dr Alexakis’ costs on the ordinary basis.

43. The question is whether the Court is satisfied, in the circumstances of this case, that some other costs order is warranted. In particular, whether the defendants/cross-claimant’s costs, on the ordinary basis, ought to be borne by the estate as contended for by the Salvation Army and the Schwankes, or whether they should bear their own costs and pay any of Dr Alexakis’ costs.

44. In the Judgment, I accepted that there were suspicious circumstances in relation to knowledge and approval that reasonably required the Court to carefully scrutinise the evidence as to whether Mr McClure appreciated and approved the contents and effect of the 2017 Wills. While I did not assess the suspicious circumstances relating to knowledge and approval to fall within the most extreme category, the finding of suspicious circumstances in any event satisfies me that this was a case that warranted investigation of those matters. The Salvation Army and the Schwankes were proper parties to bring a claim of this nature and the addition of the Schwankes’ claim challenging knowledge and approval did not significantly add to the time and costs of dealing with that issue.

45. The suspicious circumstances raised in relation to knowledge and approval, which included that the 2017 Wills resulted from the alleged arrangements, were relied on by the Salvation Army and the Schwankes in their undue influence claims as circumstances vitiating the 2017 Wills and, in the case of the Schwankes (and Mr Camilleri), the gifts to Dr Alexakis under those wills. In addition, they asserted that Dr Alexakis, being Mr McClure’s long-standing GP who visited him at home, held a position of trust, confidence, loyalty and ascendancy over Mr McClure which gave rise to a relationship of undue influence as a matter of fact and presumption.

46. In my view, the circumstances in which the 2017 Wills were created were such as to reasonably raise a doubt as to whether Mr McClure was unduly influenced when he made the 2017 Wills. The following matters in particular satisfy me that it was reasonable for the defendants/cross-claimants to enquire whether the 2017 Wills were the result of Mr McClure’s free and independent acts: the doctor and patient relationship between Dr Alexakis and Mr McClure; the size of the bequests made to Dr Alexakis; the contact between Dr Alexakis and Mr McClure in the lead up to the making of the 2017 Wills; Mr McClure’s offer of $10,000 to Dr Alexakis to assist him in absconding from the RPAH; the absence of any clear reason for the change in Mr McClure’s testamentary wishes between the making of the June Will and the July Will regarding the size of the bequest made to Dr Alexakis; Mr McClure’s personal circumstances, namely, his terminal illness, social isolation, strong desire to be out of hospital and be cared for at home, and his trust and reliance on Dr Alexakis; and the evidence from the doctors at the RPAH, Dr Wroth and Mr Myhill concerning Mr McClure’s statements to them about his wills and his discussions with Dr Alexakis.

47. Thus, I accept the Salvation Army and the Schwankes’ submission that the affidavit evidence and contemporaneous records provided a proper and reasonable basis to investigate the circumstances of the making of the 2017 Wills, that there was a justification for pleading undue influence in this case and that the undue influence claim was reasonably pursued to the hearing.

48. I do not consider that Mr McClure and Dr Alexakis should be characterised as being the causes of the litigation. In some sense, Mr McClure’s conduct could be said to have been a cause. This is because, when making the 2017 Wills, he used a lawyer recommended by Dr Alexakis, chose to leave the bulk of his estate to his GP and made statements to different people at different times that created incorrect impressions.

49. As to Dr Alexakis, there were aspects of his evidence that were not adequately explained nor discovered until cross-examination, including his evidence as to the extent of his discussions with Mr Andresakis around the time of the making of the June Will and as to when he commenced his daily visits to Mr McClure following his discharge from the RPAH. However, in my view, the conduct of Mr McClure and Dr Alexakis does not make them responsible for, or the cause of, the litigation. Rather, their conduct raised suspicious circumstances that made it reasonable to require Dr Alexakis to establish that the July Will was valid (and the June Will) and for the defendants/cross-claimants to raise and pursue the undue influence claim through to the hearing.

50. The undue influence case occupied the bulk of the hearing time in proceedings that lasted nine days. It was a circumstantial case that required the evaluation of extensive lay and documentary evidence as there was no direct evidence that Mr McClure was subjected to some form of pressure, coercion, manipulation or influence by Dr Alexakis that caused him to make wills that he did not wish or desire to make. There was also evidence available to the defendants/cross-claimants that might have alerted them to the challenges associated with an undue influence claim, particularly if the Court were to accept Dr Alexakis’ evidence that, at the relevant times, he did not know about the contents of the 2017 Wills or that he was to be a beneficiary under them, which it did (Judgment at [601], [623] and [712]). That evidence included that Mr McClure had made it known for some time that he wanted to get his affairs in order and change his will to remove the Salvation Army as a beneficiary due to his concerns about the organisation following the Royal Commission (Judgment at [498]), and Mr McClure did not give any indication to the doctors at their meeting on 13 June 2017 or raise any suggestion with Dr Spalding, the police or Mr Myhill that he had been pressured or coerced by Dr Alexakis into making the 2017 Wills (Judgment at [614] and [615]). Considered in that context, and while accepting that there was a basis on which to plead and pursue the undue influence claim and there were suspicious circumstances that required justified investigation and grounds for opposing the 2017 Wills and the gifts to Dr Alexakis under them, I am not persuaded that the costs of the Salvation Army and the Schwankes (and Mr Camilleri) should be paid out of the estate, as they submit. In my view, an order of that nature would not achieve a just outcome in the circumstances of this case. There are other factors that, in my view, also tend against awarding the defendants/cross-claimants’ costs from the estate.

51. First, such an order would fall on the residue of the estate with the effect that Dr Alexakis, who has been wholly successful, would be liable for payment of 90% of the defendants/cross-claimant’s costs, in addition to his own costs (subject to any other order of the Court), and Mr Camilleri and the Schwankes would also share in the burden of the Salvation Army’s costs (in addition to their own costs).

52. Second, although these proceedings concerned a probate suit, there is force to the submissions made by Dr Alexakis and Mr Camilleri that, in reality, the defences and cross-claims of the Salvation Army, Mr Camilleri and the Schwankes were advanced, in large part, in pursuit of their own private financial interests. In my view, this is apparent from the different positions adopted by the Salvation Army on the one hand, and Mr Camilleri and the Schwankes on the other.

53. The Salvation Army sought to uphold the 2016 Will, under which it was the main beneficiary, by challenging the validity of the 2017 Wills on the grounds of lack of knowledge and approval, undue influence and fraud. In the alternative, it relied on equitable principles of undue influence to challenge the gifts to Dr Alexakis under the 2017 Wills and to claim that they should be held on trust for the Salvation Army as the disappointed beneficiary of a previous will.

54. In contrast, the challenges made by Mr Camilleri and the Schwankes were limited to the gifts to Dr Alexakis under the 2017 Wills, with the Schwankes contending that they were invalid on the same grounds as the Salvation Army save they did not advance a claim of fraud. Mr Camilleri and the Schwankes also invoked equitable principles of undue influence, with Mr Camilleri also advancing an argument of unconscionable conduct, to claim that the gifts should be held on trust for their benefit, relying on, amongst other matters, s 42(2) of the Succession Act.

55. Third, the Salvation Army, Mr Camilleri and the Schwankes may have relied on essentially the same factual matters and there was a significant overlap in their claims. However, the differences in their positions and the presence of three sets of defendants and cross-claims inevitability increased the costs to all parties including Dr Alexakis.

56. Fourth, this was not a case in which issues were ever raised about the testamentary capacity of Mr McClure.

57. Fifth, the claims pursued by each of the defendants/cross-claimants extended beyond issues in probate and relied, in part, on the application of equitable undue influence principles in relation to which there were doubts as to whether the Court could rely on that concept.

58. Sixth, the Salvation Army pursued the fraud claim which, in my view, was not justified on the evidence. A reasonable evaluation of the strengths and weaknesses of the case should have led to a recognition that the fraud claim was unlikely to succeed. That said, I accept the Salvation Army’s submission that it was a minor aspect of the case and occupied a very small percentage of the evidence and the time of the hearing, of less than 5%.

59. Seventh, as to the unconscionable conduct claim advanced by Mr Camilleri, which was also pleaded by the Salvation Army and the Schwankes but was not pursued at the hearing, it was a minor aspect of the case overall. It relied on the same factual matrix as the undue influence claim and occupied a very small percentage of the time of the hearing, of less than 2%.

60. Having considered all the matters in the Judgment and the parties’ submissions, I have concluded that the appropriate order is that the defendants/cross-claimants bear their own costs of the proceedings and are also relieved of the burden of Dr Alexakis’ costs.

61. I have carefully considered whether the defendants/cross-claimants should be ordered to pay some amount towards Dr Alexakis’ costs, either by way of a dollar figure or a percentage, in relation to the fraud and equitable claims raised by the Salvation Army’s defence and the cross-claims. The factors outlined at [23], [52]–[59] provide some support for such an order. However, weighing all of the factors in this case, and given that most of the time and costs in these proceedings were directed to the probate issues of knowledge and approval and undue influence, which I consider were reasonably pursued, I have concluded that it would not be unfair to deal with costs on a global basis in the manner proposed.

62. As to Dr Alexakis’ reference to the offer of compromise and his proposal for a payment of a “nominal amount” of $375,000 towards his costs, I should record that I accept that offers of compromise made under the UCPR are relevant to an assessment of costs in probate matters (Trustee for the Salvation Army (NSW) Property Trust t/as Salvation Army v Becker (No 2) [2007] NSWCA 194 at [14]–[21]) and that the Court has the power to make a lump sum costs order under s 98(4)(c) of the CP Act. However, in the absence of evidence from Dr Alexakis relating to the offer of compromise or evidence that would otherwise enable me to determine on a logical, fair and reasonable basis whether the sums proposed by Dr Alexakis were proper, such as evidence of what costs have been incurred by Dr Alexakis, I do not consider that it is appropriate to have regard to what was referred to in Dr Alexakis’ submissions as the offer of compromise or to order that the defendants/cross-claimants pay Dr Alexakis the amount of $375,000.

63. In relation to Dr Alexakis’ costs, he should receive an indemnity for his costs from the estate. I am persuaded by Mr Camilleri’s submission that the making of such an order would cast an indirect costs burden on him and the Schwankes given their position as residuary beneficiaries, which would not reflect a fair and equitable allocation of the burden of costs in circumstances where the Salvation Army, the party with carriage of the main issues in dispute, would not be burdened by Dr Alexakis’ costs at all.

64. I have considered the two alternative costs orders proposed by Mr Camilleri, outlined at [39] above, but I am not persuaded that they are the appropriate orders to make in this case. To my mind, the better approach, and the one that I propose to adopt, is to provide for Dr Alexakis’ costs to be indemnified out of that part of the estate that is referrable to his gift of residue under cl 2(D)(i) of the July Will. Given the value of the estate and Dr Alexakis’ 90% share of the residue, that will be more than sufficient to cover his costs, with the final position being that each party will, in effect, bear the burden of the costs they incurred in this case.

65. For these reasons, I make the following orders:

1. Order that the plaintiff’s costs of the proceedings, calculated on the indemnity basis, be paid out of the estate of the late Raymond John McClure (deceased) from the gift of the residue and remainder made to the plaintiff under clause 2(D)(i) of the deceased’s will dated 10 July 2017.

2. Make no order as to the costs of the first, second, third and fourth defendants/cross-claimants with the intention that they bear their own costs of the proceedings.

**********

Decision last updated: 23 June 2023