Becker v Public Trustee of New South Wales

[2006] NSWSC 1146

CITATION:	Reginald Alfred Becker v Public Trustee of New South Wales & 2 ors [2006] NSWSC 1146
HEARING DATE(S):	18.09.06
JUDGMENT DATE :	2 November 2006
JUDGMENT OF:	Nicholas J
DECISION:	para 63
CATCHWORDS:	COSTS – Contested probate application on grounds of want of approval and undue influence – whether unsuccessful party should pay costs of the proceedings – whether exceptions to ordinary costs rule established – offer of compromise and Calderbank offers – whether costs sanctions apply in proceedings for grant of probate where offers not accepted – whether circumstances justify indemnity costs
LEGISLATION CITED:	Civil Procedure Act s 98 UCPR Pt 20 Div 4, Pt 42
CASES CITED:	Bardon, Re v Florence; Shekelton v Bardon; Estate Ruah Jeanette Bardon [Unreported, NSWSC, 15 December 1983] Boyse v Rossborough (1857) 6 HLC 1; 10 ER 1192 Briginshaw v Briginshaw (1938) 60 CLR 336 Calderbank v Calderbank [1975] 3 WLR 586 Colgate Palmolive v Cussons (1993) 118 ALR 248 Leichhardt Municipal Council v Green [2004] NSWCA 341 Miller v Jones [1999] NSWCA 467 Mitchell v Gard [1863] 3 Sw & Tr 275 Re Estate Late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311 Re Cutcliffe’s Estate [1959] P 6 Revie v Druitt [2005] NSWSC 902 Watson v Foxman (1995) 49 NSWLR 315 Wingrove v Wingrove (1885) 11 PD 81 Winter v Crichton (1991) 23 NSWLR 116
PARTIES:	Reginald Alfred Becker - plaintiff Public Trustee of New South Wales - first defendant The Royal Flying Doctor Service - second defendant The Salvation Army - third defendant
FILE NUMBER(S):	SC 3332/03
COUNSEL:	L Ellison SC - plaintiff submitting appearance - first defendant C J Bevan/E Young - second and third defendant
SOLICITORS:	Tress Cox - plaintiff submitting appearance - first defendant Mallesons Stephen Jaques - second and third defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

Nicholas J

2 November 2006

3332/03 Reginald Alfred Becker v Public Trustee of New South Wales & 2 ors

JUDGMENT

1 His Honour: In my judgment delivered 25 July 2006 I held that the plaintiff, as executor, had satisfied the court that Miss Wilson approved of the contents of the Balmoral will, and that the contention that Ms Abel coerced Miss Wilson into making it was without evidence to support it so that the claim of undue influence must be rejected. Accordingly, I held that the plaintiff was entitled to a grant of probate of the Balmoral will in solemn form, and that the cross-claim be dismissed.

2 This judgment deals with the remaining question of costs of these proceedings. The plaintiff sought orders that the second and third defendants (the charities) pay the plaintiff’s costs of the proceedings. His principal claim was for an order that the charities pay his costs of the proceedings on an indemnity basis by reason of their refusal to accept the offer of compromise made by letter made on 19 October 2005 and the Calderbank offers made by letters of 28 June and 3 July 2006. Alternatively, he sought an order that the charities pay the costs of the proceedings on the usual basis.

3 The charities opposed the orders sought by the plaintiff and proposed alternative orders. Their primary claim, relevantly, was for orders that their costs of the proceedings be paid out of the estate on the usual basis, and that the plaintiff’s costs be paid out of the estate on an indemnity basis, and that special orders be made for the costs of these costs proceedings. Alternatively, they sought orders that their costs be paid out of Ms Abel’s share of the estate, that the plaintiff’s costs be paid out of the estate on an indemnity basis, and alternative special orders for the costs of these costs proceedings. As a third alternative, the charities sought an order that there be no order as to their costs to the intent that they bear their own, and sought orders for the plaintiff’s costs, and as to these costs proceedings in terms similar to those under the second alternative.

4 By an offer made 19 October 2005 the plaintiff offered to compromise the whole of the proceedings by consenting to the following orders:

“1. Probate of the Will dated 21 February 2002 in solemn form be granted to the First cross-defendant/First plaintiff.

2. The costs of the First cross-defendant/First plaintiff on the indemnity basis be paid out of the estate of the deceased.

3. No order as to the costs of the First and second cross-claimants/Second and third defendants to the intent each bears its own costs.

4. The grant be referred to the Registrar in Probate for completion in accordance with the Rules.”

The offer was stated to have been made in accordance with Pt 20 Div 4 UCPR. It was open for acceptance until 4pm, 25 November 2005.

5 The offer was not accepted.

6 The evidence of Mrs Mawson was taken on 24 February 2006. The hearing resumed on 26 June and continued until 5 July 2006.

7 By letter dated 28 June 2006 the plaintiff’s solicitors put a settlement offer to the defendants’ solicitors. It was headed “WITHOUT PREJUDICE SAVE AS TO COSTS”. It was in the following terms:

“The Plaintiff/First Cross Defendant offers to compromise the whole of the proceedings by consenting to the making of the following Orders:

1. Probate in solemn form of the Will dated 21 February 2002 be granted to the Plaintiff/First Cross-defendant.

2. The costs of the Plaintiff/First Cross-defendant on the indemnity basis be paid out of the estate of the deceased.

3. The costs of the Second and Third Defendants/First and Second Cross-claimants agreed in the sum of $100,000 be paid out of the estate of the deceased.

4. Interest at UCPA rates to run on so much of the costs as ordered in paragraph 3 hereof, as remain unpaid more than 4 months after the making of the Orders herein.
The offer is made in accordance with the principles of Calderbank v Calderbank (1975) 3 WLR 586 . In the event the Plaintiff/First Cross-defendant obtains a grant of Probate of the 23 February 2002 Will an application will be made that the Second and Third Defendants/First and Second Cross-claimants pay the costs of the Plaintiff/First Cross-defendant of the proceedings. Further, an Order that the costs of the Plaintiff/First Cross-defendant be assessed on the indemnity basis will also be sought.
This offer is open for acceptance up until 4pm on Friday 30 June 2006 after which time it will lapse. We assume this will be a sufficient period for you to obtain instructions. If not, please advise.”

8 By letter dated 3 July 2006 to the plaintiff’s solicitors the defendants’ solicitors rejected the offer and put the following counter offer:

“Consent orders to the following effect:

1. There be a verdict given, and judgment entered, for the Second and Third Defendants against the Plaintiff.

2. There be a verdict given, and judgment entered, for the First and Second Cross-Claimants against the Cross-Defendant.

3. Probate in solemn form of the Will of the late Joyce Pippa Wilson dated 23 January 2002 be granted to the Public Trustee.

4. The costs of the Plaintiff/First Cross-Defendant and also the costs of the Second and Third Defendants/First and Second Cross-Claimants be paid out of the deceased’s estate on and indemnity basis.
5. The proceedings be referred to the Registrar to attend to all formalities regarding the making of a grant of probate of the will dated 23 January 2002.”

9 The letter also proposed that a deed of release be made between the parties and Ms Abel which provided for the sale of the property at No. 28 Wyong Road, Mosman, and for an agreement to vary the will made on 23 January 2002 (the January will) upon the terms specified in the letter. It stated that the offer would remain open until the close of business on the day on which closing addresses concluded and judgment was reserved.

10 By letter dated 3 July 2006 to the defendants’ solicitors, the plaintiff’s solicitors repeated the offer made on 28 June 2006. It contained the following:

“We refer to our letter of 28 June 2006. We note the offer contained therein was rejected after it had expired.
We are instructed to make that offer again in the same terms.
This offer is open for acceptance up until 4.30pm on Tuesday 4 July 2006 after which time it will lapse. We assume this will be a sufficient period for you to obtain instructions. If not, please advise.”

11 The offer was not accepted.

The principles

12 The basic rule in probate actions, as in other litigation, is that, ordinarily, costs follow the event. In probate litigation there are two well recognised exceptions which, in Re Estate Late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311, Campbell, J explained:

“30 ... Both parties took me to the leading cases concerning costs in probate litigation, In the Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709, Perpetual Trustee v Baker [1999] NSWCA 244 at [13]-[14] and Shorten v Shorten (No 2) [2003] NSWCA 60. The focus of the passages in those cases to which I was taken was the costs order that a court should make concerning a person who had unsuccessfully opposed the making of a grant of probate. Broadly, those cases recognised that, concerning such an unsuccessful party, there was an exception to the rule that costs follow the event in that where the testator had been the cause of the litigation the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate, and if the circumstances led reasonably to an investigation concerning the testator’s will, costs may be left to be borne by those who incurred them. The Court of Appeal has recognised that there is an overlap between those two exceptions. If a case for decision falls within that area of overlap, one of the exceptions suggests that the appropriate order concerning costs should be different to the order which is suggested by the other exception. In that area of overlap, the principles which are recognised by the two exceptions are insufficient to produce a result. It is a matter for the trial judge, in light of the circumstances of the particular case before him or her, to decide which costs order better achieves justice.

…

32 … In probate litigation, it is not only who succeeds in the litigation which matters – which is the only factor operating in the “costs follow the event” rule. As well, the role which a particular party has played in litigation, whether as plaintiff or defendant, is relevant. Further, facts about the knowledge available to parties, and the reasonableness of their conduct in conducting the litigation, can be taken into account”.

13 The exceptions are rules for the guidance of the court in the exercise of its discretion with regard to the overall requirements of justice in the particular case. Accordingly, the question whether some special costs order should be made in favour of an unsuccessful defendant so as to relieve him of the burden of costs falls for determination on the basis of whether there were circumstances which afforded reasonable grounds for a defendant’s opposition to the grant of probate. Ordinarily, failure to establish an allegation of undue influence or fraud will be followed by condemnation in costs. In Re Cutcliffe’s Estate [1959] P 6 Hodson, LJ said (p 21):

“… The discretion of the court is always there, and the rules on which that discretion is exercised are there for the assistance of those who have to advise litigants before they embark on litigation, so that they may have some idea of the risks they run as to costs. It must surely be obvious to anyone who has studied the history of litigation in the Probate Division, notwithstanding the exceptions which are to be found in the books, that where pleas of undue influence and pleas of fraud are made, the probability, at any rate, if they are unsuccessfully made, is that the people who make such charges and fail will be condemned in the costs not only of that charge but of the whole action.”

14 It follows that the unsuccessful allegation of undue influence or fraud may result in the loser being required to pay the costs of the whole of the proceedings even if it be shown that there were reasons warranting the contemporaneous investigation of due execution, knowledge and approval, and of testamentary capacity (Bardon, Re v Florence; Shekelton v Bardon; Estate Ruah Jeanette Bardon [Unreported, NSWSC, 15 December 1983] per Holland, J, p 4).

15 However, an unsuccessful defendant may be relieved of paying costs if there were reasonable grounds for contesting the case on these issues. In Mitchell v Gard [1863] 3 Sw & Tr 275 it was said:

“… if there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator, or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent.”

16 Assessment of the reasonableness of a party’s conduct in raising and maintaining a claim of undue influence involves consideration of what is needed to discharge the onus of proving the claim. I repeat the following statements to which I referred in my reasons for judgment:

“87 In Miller v Jones [1999] NSWCA 467, Beazley, JA said (para 28):
“For a finding of undue influence to be made, the Court must be satisfied that the Will was the result of the overbearing of the testator’s will. However, appeals to sentiments of affection do not, of themselves, constitute undue influence. As Sir James Wilde explained in Hall v Hall (1868) LR 1 P & D 481 at 482:
“… a testator may be led but not driven; and his will must be the offspring of his own volition, and not the record of someone else’s.””
88 In Revie v Druitt [2005] NSWSC 902 Windeyer, J explained (para 51):

“The onus is on the person alleging undue influence to prove it. It is not sufficient to establish pressure or importuning conduct bearing on the deceased. What is needed for a claim of undue influence to be successful is evidence that the conduct of the person or persons alleged to be exerting pressure was such that it amounted to coercion so that it overbore the free will of the testator: Wingrove v Wingrove (1885) LR 11 PD 81; Boyse vRossborough (1857) 6 HL Cas 1; Winter v Crichton (1991) 23 NSWLR 116.”

17 In Boyse v Rossborough (1857) 6 HLC 1; 10 ER 1192 it was said (pp 51, 52; 1212):

“But in order to set aside the will of a person of sound mind, it is not sufficient to show that the circumstances attending its execution are consistent with the hypothesis of its having been obtained by undue influence. It must be shown that they are inconsistent with a contrary hypothesis. Can it be truly said that there is any such inconsistency here?
The undue influence must be an influence exercised in relation to the will itself, not an influence in relation to other matters or transactions.”

18 In Winter v Crichton (1991) 23 NSWLR 116 (p 121) Powell, J referring to Wingrove v Wingrove (1885) 11 PD 81 held (pp 82-83) that the influence which must be shown to avoid a will must amount to force or coercion destroying free agency. Further, he said (p 122):

“3. Where what is relied upon is a purely circumstantial case, such as is illustrated by the particulars in this case, the duty of the defendant goes further than merely establishing the circumstances from which it is sought to have the inference drawn. Thus, in Wingrove v Wingrove (at 83) Sir James Hannen P concluded his charge to the jury with the following:
‘There remains another general observation that I must make, and it is this, that it is not sufficient to establish that a person has the power unduly to overbear the will of the testator. It is necessary also to prove that in the particular case that power was exercised, and that it was by means of the exercise of that power, that the will such as it is, has been produced.’”

19 Discharge of the onus of proof requires proof to the reasonable satisfaction of the court having regard to the nature and consequence of the fact or facts to be proved. In Briginshaw v Briginshaw (1938) 60 CLR 336, Dixon, J said (p 362):

“The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters “reasonable satisfaction” should not be produced by inexact proofs, indefinite testimony, or indirect references”.

Thus an issue of fraud or conduct involving grave moral delinquency must be proved clearly, or with certainty.

20 These requirements and principles are well known, and it may be expected that those advising the charities were aware of them.

Submissions

21 In these reasons I summarise only what I understood to be the principal submissions made on the question of costs. The submissions, both written and oral, were extensive. I have given them careful consideration. For the purpose of this judgment I deal with them only to the extent which I consider necessary.

22 For the plaintiff it was submitted that it was unreasonable for the charities to have pleaded undue influence in that they were doomed to fail in attempting to prove it. It was put that the bulk of the evidence went to this ground and the litigation of it unduly prolonged the trial beyond the time appropriate to deal with the issue of approval. It was submitted that the failure of the charities to accept the offer of compromise made on 19 October 2005, and the Calderbank offers of 28 June and 3 July 2006 were relevant to the exercise of discretion in favour of an order for costs for the plaintiff either on the ordinary or on an indemnity basis.

23 The principal submission for the charities was for an order that their costs be paid out of the estate on the usual basis. In support, it was put that the conduct of Miss Wilson and Ms Abel (being a person interested in the estate) caused the litigation to occur in that it founded a reasonable suspicion as to the validity of the Balmoral will and hence an exception should be made to the general rule that costs follow the event.

24 The conduct of Miss Wilson included making the Balmoral will which was inconsistent with the January will made four weeks earlier and after discussion of her testamentary wishes with the Public Trustee officers, and where the Public Trustee held her power of attorney. The conduct of Ms Abel included occupying the house rent-free for some 12 months before the Balmoral will was made whereby she put herself in a position to exercise undue influence which, in turn, gave credence to Miss Wilson’s allegations to Mrs Mawson that she had been forced to leave Ms Abel the house. Reference was made to the circumstances in which the will kit was provided and the will made; to the failure of Ms Abel to comply with Miss Wilson’s request to give the will to the executor/plaintiff thereby inexplicably keeping it secret until she died; and to the fact that both the document of 21 January 2002 and the Balmoral will were made in the presence of Ms Abel alone, whereas the January will by which she left her estate to the charities had been made in the presence of the officers of the Public Trustee.

25 Alternatively, the charities submitted that their costs should be ordered to be paid out of that part of the estate represented by the gifts to Ms Abel of the residuary estate and the house. It was put that, as the principal beneficiary, her conduct in the circumstances in which the Balmoral will was made created suspicion which she was obliged to dispel for there to be a grant of probate.

26 Reliance was placed upon Ms Abel’s conduct referred to above. In addition, it was put that it was relevant that she failed to arrange for the preparation of the Balmoral will in the presence of Public Trustee officers and/or nursing staff and/or a solicitor at a time when Miss Wilson’s state of health required careful evaluation.

27 As to the undue influence allegation, the charities submitted that Ms Abel was as much to blame for its genesis as the deceased. It was put that Ms Abel, by occupying the house, gave credence to what was said to be the allegations made about her by Miss Wilson to the various witnesses, and that the arrangement for her occupation was likely to allow Miss Wilson to misunderstand that Ms Abel was impecunious and would be homeless.

28 It was emphasised that Miss Wilson’s statement to Mrs Mawson that she had been forced to leave Ms Abel the house was reasonable justification for prosecution of the undue influence claim. For example, counsel for the charities stated (T 18.09.06, p 8, l 40): “… If it had not been for Mrs Mawson there would not have been an allegation of undue influence”.

29 As a further alternative, it was put that there should be no order as the costs of the charities to the intent that they bear their own costs of the proceedings. In support it was put that the circumstances called for the court’s investigation, and that although the charities failed they should not be required to pay costs but should bear their own. Additionally, it was put that the rejection of Miss Wilson’s statement to Mrs Mawson as probative of undue influence was not foreseeable. It was put that it was reasonable to rely upon the evidence of Sister Hargreaves that on an occasion after 21 February 2002 Miss Wilson appeared to her to be unhappy and said: “I just wanted to go to Balmoral beach. That was all I ever wanted”. It was put that this gave further support for Miss Wilson’s statement to Mrs Mawson in addition to the evidence of the various witnesses to whom Miss Wilson said that Ms Abel was impecunious and would be homeless but for her consent to occupy the house.

30 Relevantly, counsel for the charities stated (T 18.19.06, p 20, l 15):

“If we didn’t have an earlier will in substantially similar terms revoked four weeks earlier, if we didn’t have a 12 months course of conduct where similar sorts of things are said to third parties, it we didn’t have the will being kept secret and all the other things we rely on, then there wouldn’t be circumstances justifying an investigation into the Balmoral will. One further factor, of course, is that perhaps of itself the will is made without the knowledge of the manager of her affairs and her attorney, who is the author of the previous two wills”.

31 In opposition to the claim for indemnity costs by reason of the failure to accept the offer of compromise or the Calderbank offers, the charities contended that none of the offers were valid on the following grounds: Firstly, that they were merely invitations to capitulate, and lacked the requisite element of compromise. For example, the offer of 19 October 2005 was said to amount to no more than a proposal that the proceedings be determined in the plaintiff’s favour with his costs paid on an indemnity basis out of the estate, and that the charities bear their own costs. As to the Calderbank offers of 28 June and 3 July 2006 it was put that their effect was the same as the earlier offer except that they proposed the payment of the sum of $100,000.00 out of the estate to the charities for their costs.

32 Secondly, that in probate litigation of this kind in which the only outcome would be either a grant of probate of the Balmoral will or a grant of probate of the January will, the compromise procedure by way of offers of compromise or Calderbank offers has no application. As I understood it, the submission was that in this type of litigation there is no room for compromise between a party who seeks a grant of probate and a contesting party because the outcome can only be that the applicant either is wholly successful or fails altogether, whereas in other litigation the outcome may reflect the partial success or failure of the parties.

33 Further, it was put that as this compromise procedure sounds in costs, it should have no application because it would effectively operate to oust the jurisdiction of the court in probate litigation to make orders for costs within the recognised exceptions to the ordinary rule that costs follow the event. It was argued that it was not open to a successful party by resorting to offers of compromise and/or Calderbank offers to preclude the court from making an exceptional costs order favourable to an unsuccessful party.

34 Thirdly, it was put that the offer of compromise did not comply with the requirement of r 20.26(2) that it be exclusive of costs, but purported to propose compromise of both the plaintiff’s claim for a grant of probate and costs, and thus did not attract the application of r 42.14 under which a plaintiff may seek an order for indemnity costs. Further, it was submitted that the Calderbank offers were vitiated by inclusion of the term that the charities’ costs agreed in the sum of $100,000.00 be paid out of the estate because a consequence of acceptance would be that the charities not only capitulated but lost the opportunity to have their costs assessed if, although they lost, they obtained an order that their costs be paid out the estate.

Decision

35 The charities unsuccessfully opposed the grant of probate on all grounds namely want of approval, lack of testamentary capacity, and undue influence. At the conclusion of the evidence on 4 July 2006 (T p 511) counsel for the charities stated that testamentary capacity was no longer an issue. Until then it was contended that on the day Miss Wilson signed the Balmoral will she was suffering from hypoxia which rendered her so confused that she did not know what she was doing.

36 The charities’ case on the issue of approval included the allegation that at the time she made the will Miss Wilson was labouring under the misapprehension that Ms Abel would be homeless if she did not give the house to her. It was put that this misapprehension was the product of fraudulent misrepresentations made by Ms Abel to Miss Wilson on occasions during the preceding 12 months the effect of which was to constrain her to give the house to Ms Abel against her wishes to leave her estate to the charities (Judgment para 64(vi)). This allegation was also the basis of the case on undue influence. There was, necessarily, significant overlap between the grounds upon which the grant was contested.

37 The principles to which I have earlier referred provide guidance as to the proper exercise of discretion in making the appropriate costs order in these proceedings. The question whether the grounds were justifiable is to be judged upon their merits, taking into account the knowledge available to the charities, and the reasonableness of their conduct in conducting the litigation (Re Estate late Hazel Ruby Grounds para 32; Mitchell).

38 With respect to the charities’ claim that Miss Wilson and Ms Abel caused the litigation, I am not persuaded that the evidence supports such a finding. In my assessment the only evidence of conduct relevant to this issue was the statements she made to Mrs Mawson that Ms Abel forced her to sign the Balmoral will. Without more, in my opinion, these utterances did not provide the charities with cause to litigate a challenge to the will on grounds of want of approval, lack of testamentary capacity, and undue influence, and do not support the finding that she was responsible for the litigation. There was no evidence to support the allegation that Ms Abel by fraudulent misrepresentations exercised undue influence, and it was rejected. In my opinion she had done nothing to provoke the litigation.

39 My conclusion is that the conduct of Miss Wilson and Ms Abel as relied upon by the charities does not support the finding that either or both caused this litigation. However, I agree to the extent considered below, that such conduct made it reasonable to require the plaintiff to establish to the satisfaction of the court that the will was valid.

40 Had the issue been limited to one of approval absent the allegation of undue influence the circumstances in which the Balmoral will was made were, in my opinion, such as to engender suspicion and oblige the plaintiff to put the full story before the court. Relevantly, these included the events on the day the will was made, Miss Wilson’s state of health, the changes in testamentary intention recorded in the document of 21 January 2002, the January will, the Balmoral will, Miss Wilson’s statement to Mrs Mawson, and, importantly, the involvement of Ms Abel. I took the view that, although Ms Abel was not an attesting witness, there should be a vigilant examination of the whole of the evidence of the circumstances of its execution because she was the only person who was present and observed Miss Wilson complete the will prior to its execution and was the principal beneficiary (Judgment para 40).

41 Had this been the scope of the contest the charities would have had a strong case that there appeared reasonable grounds for opposing the plaintiff’s claim and for calling for an investigation into the circumstances in which the will was made, and hence should be relieved of an order for costs against them.

42 However, in my opinion the charities failed to demonstrate that there were reasonable grounds for contesting the will on the ground of undue influence, an essential component of which was Ms Abel’s fraudulent conduct.

43 The charities undertook to prove that the Balmoral will was not made freely and voluntarily. Evidence was required which proved that Ms Abel had fraudulently misrepresented to Miss Wilson that she would be homeless and impecunious unless given the house whereby Miss Wilson was coerced to make the will against her wishes to leave her estate to the charities, and that the circumstances attending its execution were inconsistent with a contrary hypothesis (Boyse pp 51, 52). The elements of the claim required clear or certain proof (Briginshaw p 362; Watson v Foxman (1995) 49 NSWLR 315 pp 318-319).

44 The case rested on Miss Wilson’s statement to Mrs Mawson contained in the latter’s affidavit of 17 January 2005, para 11. The same affidavit (para 12) contained Mrs Mawson’s account of a conversation at which the plaintiff was present in which Ms Abel denied that she made Miss Wilson change her will. (The details are in the Judgment paras 61, 62.) Ms Abel denied the conduct alleged in her affidavit of 15 February 2005 (para 11). In his affidavit of 10 February 2005 (para 12) the plaintiff replied to Mrs Mawson’s affidavit. He recalled the conversation and said that Mrs Mawson was a friend, and at no time raised with him any concerns about the will or Ms Abel. On 24 February 2006 Mrs Mawson gave oral evidence of these matters to the same effect.

45 From the outset it was apparent that Miss Wilson’s allegation was denied. I have found that the statements made by her to the various witnesses were incapable of supporting an inference that Ms Abel made the alleged representation at the relevant time, or at all (Judgment para 78). Any reasonable evaluation of this parcel of evidence prior to the hearing should have led to the same conclusion. Further, it should have been apparent that if the court accepted Ms Abel’s denials, as it did, the charities were without any evidence which provided arguable support for any component of the claim. It should also have been apparent that they were without any relevant evidence with which to contradict or challenge Ms Abel’s evidence.

46 There was no evidence on the issue of reasonableness which indicated that consideration had been given as to whether the circumstances were inconsistent with a contrary hypothesis. Had enquiries been made of obvious and available sources of information e.g. nursing staff, Public Trustee officers, it is probable that the nature and extent of the relationship between Ms Abel and Miss Wilson as I found it to have been would have been ascertained. Likewise, it is probable that enquiry of Public Trustee officers would have disclosed the basis upon which Ms Abel occupied the house, and that it was Miss Wilson’s wish that she did so. Had such information been obtained and considered the contrary hypothesis, that Miss Wilson was motivated by affection, gratitude, or a sense of moral obligation, should have been apparent. However, apart from Miss Wilson’s allegation, there was no evidence adduced to justify rejection of this hypothesis.

47 In the circumstances, and had account been taken of what was required to discharge the onus of proof (see cases at paras 13-19 above) it should have become apparent at least during the course of pre-trial preparations that the claim was unlikely to succeed. In my opinion the gravity of the charge against Ms Abel when weighed against the lack of reliable evidence to prove it justifies the conclusion that a reasonable evaluation of the strengths and weaknesses of the charities’ case would have led to the recognition that it was unlikely to succeed and should not have been maintained. I was left with the overall impression that there was an element of speculation about the charities’ case on this ground that evidence necessary for success would be obtained from Ms Abel in cross-examination. However, this did not eventuate. It follows that the charities have failed to persuade me that it was reasonable to oppose probate on the ground of undue influence.

48 Accordingly, I do not consider that in the circumstances of this case the interests of justice require departure from the ordinary rule that costs should follow the event. I propose to order that the charities pay the plaintiff’s costs of these proceedings.

49 The next question is whether costs should be on the ordinary basis or on an indemnity basis.

Basis for costs

50 The plaintiff’s claim for indemnity costs was on the ground that the charities had failed to accept the offer of compromise and the Calderbank offers.

51 The court’s powers as to costs are provided by s 98 Civil Procedure Act and Pt 42 UCPR. Relevantly, s 98(1) is in the following terms:

“98 Courts powers as to costs

(1) Subject to rules of court and to this or any other Act:


(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis”.

52 Offers of compromise and Calderbank offers attract the application of these provisions. No exception is made of offers which are made in the course of probate litigation. The public policy objective of encouraging resolution of litigation by settlement applies as much to probate litigation as to any other. Merely because in probate litigation of this kind the court, in the exercise of its discretion as to costs, has a range of options peculiar to such litigation does not support the general proposition that costs sanctions relating to unaccepted offers are inapplicable. The charities’ submissions to this effect are rejected.

53 In Leichhardt Municipal Council v Green [2004] NSWCA 341 Santow, JA (with whom Bryson, Stein JJA agreed) referred to the principles and policy underlying the costs sanctions relating to unaccepted offers of compromise. Relevantly, he said:

“18 The New South Wales Court of Appeal appears to have accepted that a Calderbank offer is a legitimate alternative to an offer of compromise under the statutory rules. That conclusion is implicit in the reasoning of the Court in Jones v Bradley (No 2) [2003] NSWCA 258 at [5]. Thus a party may elect between the two procedures in making an offer of compromise.
19 There are some distinctions between the two procedures in their attendant costs consequences. A key difference is that where an offer of compromise has been made under the Rules, a prima facie entitlement arises in the relevant party to have costs awarded in accordance with the appropriate Rule. This entitlement, though subject to the Court’s discretion to prevent substantial injustice in exceptional cases, will rarely be interfered with: District Court – Practice Note 42; Supreme Court - Hillier v Sheather (1995) 36 NSWLR 414 and Morgan v Johnson (1998) 44 NSWLR 578. By contrast, the costs consequences attendant under general law upon an offer of compromise made in a Calderbank letter lie within the discretion of the Court, to be exercised having regard to all the relevant circumstances of the case: SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] per Giles JA; affirmed in Jones v Bradley (No 2) (supra) at [9] per curiam. It is not the case that unaccepted offers of compromise by Calderbank letter should give rise to a prima facie presumption of indemnity costs if the offer is not bettered.
20 Despite such differences, the two procedures should be regarded as being directed to the same ends. It is relevant for a Court considering a Calderbank offer to consider the various Rules of Court concerning offers of compromise when exercising its discretion regarding costs, although the Court’s discretion is not constrained by those rules: Jones v Bradley (No 2) at [13] per curiam”.

54 The offer of compromise of 19 October 2005 was to settle the whole of the proceedings being the plaintiff’s claim and the defendants’ amended cross-claim. It proposed orders that probate of the Balmoral will be granted to the plaintiff, that his costs on an indemnity basis be paid out of the estate, and that there be no order as to the costs of the charities. In my opinion, at best from the plaintiff’s viewpoint, the offer should be construed as a “walk away” offer in which the charities were required to give up their opposition to the plaintiff’s claim as well as their claim for probate of the January will, on terms that they be relieved of any burden of costs. Of course, under the Balmoral will the charities were left an interest in the residue, whilst under the January will they were left the whole of the estate. The only incentive for the charities was avoidance of the risk of an order for costs if they were unsuccessful. In my opinion, given that at the time it was made the charities had, at least, an arguable case on the ground of approval even without an undue influence component, the offer did not contain a sufficient or real element of compromise requisite to constitute a genuine offer of compromise, and therefore was not an offer within the meaning of r 20.26 (Leichhardt paras 22-27).

55 It follows, in my opinion, that the failure to accept the offer of compromise in the circumstances does not establish the entitlement of the plaintiff to an order for indemnity costs under r 42.14(2). Alternatively, assuming that the offer of 19 October 2005 is an offer of compromise within the meaning of the rules, in my view there should be an order otherwise to be made in the exercise of the court’s general discretion.

56 The costs consequences of the unaccepted Calderbank offers lie entirely within the court’s general inherent jurisdiction as to costs. (Leichhardt paras 46, 47.)

57 The Calderbank offer of 28 June 2006 proposed settlement of the whole proceedings, with orders that probate of the Balmoral will be granted to the plaintiff, that his costs on an indemnity basis be paid out of the estate, and that the costs of the charities in the sum of $100,000.00 be paid out of the estate with interest on so much of the costs which were unpaid more than four months after the orders were made. The offer was made during the third day of the trial. It was open until 4pm 30 June 2006, by which time the evidence of Mrs Mawson, the plaintiff, Ms Abel, the attesting witnesses, and others including Public Trustee officers had been taken. It was rejected.

58 In my opinion, having regard to the circumstances in which it was made, the plaintiff’s offer was an offer of a real and genuine compromise. It offered a substantial sum towards the charities’ costs out of the estate which, if accepted, would have resulted in an outcome more favourable to them than they in fact obtained.

59 Upon receiving the offer the charities were obliged carefully to evaluate their prospects of success or failure if the litigation continued. At the relevant time they were well positioned to assess prospects with regard to the substantial body of tested evidence already before the court, including that of Ms Abel which, in large measure, was left unchallenged and uncontradicted. In my opinion, had a reasonable evaluation of the strengths and weaknesses of their case been made by or on behalf of the charities it would have become clear by this time that they were without any reliable evidence to prove the grounds upon which their opposition was based. I take into account and repeat my observations and conclusion on the issue of reasonableness in paras 43-47 of these reasons.

60 In all the circumstances, I am satisfied that in failing to accept the Calderbank offer of 28 June 2006, and in maintaining their opposition to the plaintiff’s claim thereafter the charities acted unreasonably in that they adhered to allegations that ought never to have been made and thereby unduly prolonged the case. Such circumstances provide ample grounds to justify departure from the usual rule and to make an order for indemnity costs (Colgate Palmolive v Cussons (1993) 118 ALR 248; Leichhardt para 48). The appropriate order is that the charities pay the plaintiff’s costs on an indemnity basis from the time the offer expired, otherwise on the ordinary basis.

61 For these reasons I propose to order the charities to pay the plaintiff’s costs of the proceedings up to 4pm 30 June 2006 on the ordinary basis, and thereafter on an indemnity basis.

62 On an overall view of the contested applications as to costs the plaintiff is the successful party. He is entitled to an order for costs in respect of these applications.

Conclusion

63 The orders of the court are that

(1) No order as to the costs of the first defendant.

(2) The second and third defendants pay the plaintiff’s costs of the proceedings up to 4pm 30 June 2006 on the ordinary basis, and thereafter on an indemnity basis.

(3) To the extent the plaintiff’s costs are not wholly reimbursed by order 2, the plaintiff’s costs on an indemnity basis be paid out of the estate of the deceased.

(4) The second and third defendants pay the plaintiff’s costs of the costs application.

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