Chronis v Karan (No 2)

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Judicial Review)
CHRONIS v KARAN & ORS (No 2)
[2021] SASC 101
Judgment of the Honourable Justice Parker
SUCCESSION - MAKING OF A WILL - TESTAMENTARY CAPACITY
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - COSTS
This is an application for costs. The applicant succeeded in his application which sought orders from the Court pronouncing the force and validity of the will made by the deceased, Efstathia Birbas (known as Stathoula), and that the will be admitted to probate in solemn form.
The applicant submits that the respondents should pay his costs up to 30 April 2020 on a standard costs basis and thereafter on a solicitor/client basis because of the respondents unreasonably failed to accept an offer to settle the matter in April 2020. The respondents submit that the parties’ costs should be paid out of the estate on a standard costs basis as the circumstances of the case were such that the Court’s supervisory jurisdiction over the administration of deceased estates was properly exercised.
Held, per Parker J:
1.The circumstances of suspicion that arose justified the respondents requiring the applicant to discharge at trial the burden of persuading the Court that it was affirmatively satisfied as to the force and validity of the will.
2.Given the state of the evidence at the time, the respondents did not act unreasonably in refusing the settlement offer in March 2020.

3. The parties’ costs are to be paid out of the deceased’s estate on a standard costs basis.
Mitchell & Anor v Gard & Anor (1863) 3 Sw & Tr 275, applied.
Fielder v Burgess [2014] SASC 98; Hall v Carney & Ors (No 2) [2012] SASCFC 105; Middlebrook v Middlebrook (1962) 36 ALJR 216; Ponder v Burmeister [1909] SALR 62; Roche v Roche & Anor (No 2) [2017] SASC 75; Spiers v English [1907] P 122, discussed.
Hall v Carney & Ors [2012] SASCFC 76, considered.

CHRONIS v KARAN & ORS (No 2)
[2021] SASC 101
Civil

PARKER J: This is an application for costs following an order of the Court pronouncing the force and validity of the will made by Efstathia (known as Stathoula) Birbas and the making of an order that her will be admitted to probate in solemn form.
The applicant contends that the respondents should pay his costs up to 30 April 2020 on a standard costs basis and thereafter on a solicitor/client basis. The basis for that contention is that the applicant submits that the respondents unreasonably failed to accept an offer to settle the matter in April 2020.
The respondents seek an order that the parties’ costs be paid out of the estate on a standard costs basis. Alternatively, the respondents submit that if that submission is rejected, no order for costs should be made or an order made that the parties bear their own costs.
The Court ultimately rejected the contentions by the respondent that Mrs Birbas lacked testamentary capacity at the time she made her will and that she did not have the requisite knowledge of, or did not approve of, the contents of her will. While I ultimately found for the validity of the will, I did find that the circumstances were such as to rebut the presumption of due execution.
I came to that conclusion in light of the agreement between the two expert witnesses, Dr Jane Hecker and Dr Sara Lucas, that Mrs Birbas had some cerebrovascular disease in December 2007. The two experts also agreed that there was a dearth of documentary medical evidence from 2007 to assist in the assessment of the testator’s testamentary capacity. Several other matters also contributed to my finding that the presumption was rebutted. These included the fact that Mrs Birbas had gifted the entirety of her estate to the applicant, her nephew, although there were other nieces and nephews who might have expected to have benefitted under her will. Other matters that collectively contributed to the existence of a doubt were the recent death of Mrs Birbas’ husband, her age, lack of education and inability to communicate in English together with the fact that the applicant had made the arrangements for the attendance of the solicitor, Mr William Niarchos, to take instructions for the will and his attendance during the early part of the interview with Mr Niarchos.
After considering those various matters, the competing expert opinions of Dr Hecker and Dr Lucas, the evidence of the lay witnesses, the medical records and the evidence of Mr Niarchos, I was ultimately affirmatively satisfied as to Mrs Birbas’ testamentary capacity and that she knew and approved of the contents of her will.
The informal offer to settle
On 2 April 2020, the solicitors acting for the applicant made an offer to settle the proceedings on the basis that within three months of the grant of probate he would pay all respondents collectively the sum of $150,000 inclusive of costs. The offer was to remain open for 28 days. The letter justified the offer on the basis that the applicant considered that he had a strong case and expected to succeed with his application for probate. However, he was prepared to compromise because of his concern at the prospect of an unpleasant trial where the credit of family members would be tested and the expected long delay due to the COVID shutdown.
By letter dated 3 April 2020 (i.e. the next day) the solicitors then acting for the respondents rejected the settlement offer. They disagreed with the suggestion that the applicant had a strong case. At that time, his only evidence was affidavits that were largely self-serving. The applicant had not obtained any expert evidence. The only expert report then available favoured the position of the respondents. They were collectively aggrieved by what they perceived “to be a high level of pressure, involvement and undue influence” on Mrs Birbas.
The applicant’s submissions
The applicant submits that the starting point for the exercise of the Court’s discretion is that costs should follow the event. However, in some circumstances one or the other of the two exceptions identified in Mitchell v Gard may potentially apply.[1] However, in recent years those exceptions are applied with increasing rarity.
[1] Mitchell & Anor v Gard & Anor (1863) 3 Sw & Tr 275.
The applicant submits that this is not a case where the first of the Mitchell v Gard exceptions has any relevance. The litigation did not arise from any “fault” of Mrs Birbas in the sense that there were multiple wills or mental incapacity. Thus, the issue is whether the second exception should apply. In other words, were there sufficient and reasonable grounds for the respondents to question the capacity of Mrs Birbas. The applicant submits that the effect of the judgment is that the grounds upon which the validity of the will was challenged were very weak.
In that light, when combined with the offer to settle, the applicant submits that there is no reason why the ordinary costs principle should not be applied. Costs should be ordered on the standard or party/party basis until 30 April 2020 and thereafter on a solicitor/client basis.
The respondents’ submissions
While acknowledging that, as a general principle, costs follow the event, the respondents submit that in the probate jurisdiction other considerations are also relevant to the exercise of the Court’s overriding discretion as to the award of costs. Sir JP Wilde observed in Mitchell v Gard the probate jurisdiction is fundamentally not a forum for the resolution of competing legal entitlements but involves the exercise of the Court’s supervisory jurisdiction over the administration of deceased estates. While in recent times this Court has moved to align liability for costs in probate matters more closely to general inter parte litigation, there still remains a distinction.
The respondents submit that the circumstances of this case were such that the Court’s supervisory jurisdiction was properly exercised as there were real and substantial issues about the testamentary capacity of Mrs Birbas which could only be determined by the Court.
The respondents also submit at the time the settlement offer was rejected in 2020 the only expert medical evidence that then existed was the report of Dr Hecker prepared in July 2019 where she had expressed the opinion that Mrs Birbas had lacked testamentary capacity at the time she made her will. The first report of Dr Lucas was not obtained by the applicant until 21 October 2020, some three months before the trial, and the medical records of the Royal Adelaide Hospital did not become available until they were produced to the Court on 22 December 2020 in response to a subpoena issued by the respondents. Those records were important and led to the preparation of further expert reports.
The respondent also points to the fact that the notes prepared by Mr Niarchos at the time he took instructions for the will were very brief and his affidavit provided little additional information concerning the testamentary capacity of Mrs Birbas. The telephone conference between the experts also did not occur until shortly before trial on 29 January 2021. In these circumstances, the respondents submit that it was appropriate that they continue to act as contradictor to the application for probate and that the matter be resolved in the Court’s supervisory jurisdiction.
Consideration
Relevant principles
The principles to be applied when determining an application for costs in probate proceedings were helpfully analysed by Kourakis CJ in Roche v Roche & Anor (No 2).[2]
[2] [2017] SASC 75 at [5]-[18].
Kourakis CJ observed in Roche that the overarching principle is that costs are in the discretion of the Court. That discretion is unfettered but must be exercised judicially. The ordinary rule is that a successful litigant will be entitled to an order for costs. However, there are exceptions to the general rule in probate matters. Those exceptions were identified in Mitchell v Gard where Sir JP Wilde observed:[3]
It is the function of this Court to investigate the execution of a will and the capacity of the maker, and having done so, to ascertain and declare what is the will of the testator. If fair circumstances of doubt or suspicion arise to obscure this question, a judicial inquiry is in a manner forced upon it. Those who are instrumental in bringing it about and subserving this inquiry are not wholly in the wrong, even if they do not succeed.
… [T]he Court deduces the two following rules for its future guidance: first, if the cause of litigation takes its origin in the fault of the testator or those interested in the residue, the costs may properly be paid out of the estate; secondly 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.
[3] Ibid at 277-278.
It is unnecessary to consider the precise effect of the reference by Sir JP Wilde to the fault of the testator. In this case the respondents rely on the second exception identified in Mitchell i.e. having regard to their knowledge and the means of knowledge available to them, they had sufficient and reasonable grounds to question the capacity of the testator.
The decision of the High Court in Middlebrook v Middlebrook provides a clear example of the application of the second exception identified in Mitchell.[4] In that case the son of the testator contended that he lacked testamentary capacity. The evidence of an experienced solicitor, whose integrity was accepted, was that he had received clear instructions from the testator two days before his death while he was in hospital. He had no reason to believe that the testator lacked capacity. However, the medical evidence was that on the day prior to the making of the will the health of the testator had deteriorated markedly. He was sedated and semi‑comatose. Despite this evidence, the trial judge ordered that the son, who had challenged the will, should pay the costs of the executor. The High Court dismissed the appeal except in relation to the question of costs. The High Court ordered that there be no order as to costs. Dixon CJ explained that decision as follows:[5]
There are in the present case circumstances which would naturally lead the caveator to think that an investigation of the validity of his father’s last will was justified. If this case were judged on its general circumstances only, I think that adequate reasons would be seen for entertaining some doubt as to the validity of the will. It is only as a result of investigations that the reasons for finding affirmatively in favour of the testator’s testamentary capacity distinctly appear. In these circumstances the proper course is to apply the principle enunciated by Sir Gorrell Barnes P that “if the circumstances lead reasonably to an investigation of the matter then the costs may be left to be borne by those who have incurred them”. Spiers v English [1907] P 122 at 123.
[4] (1962) 36 ALJR 216.
[5] Ibid at 217.
Kourakis CJ concluded his discussion of the relevant principles in Roche with the following observations:[6]
A person will not be penalised from invoking this Court’s supervisory jurisdiction in probate when the circumstances call for an investigation into the validity of a testamentary document. However, a person who challenges a testamentary disposition will risk an adverse costs order for persisting in an unmeritorious action after the discovery of evidential material which largely dispels any reasonable concerns. If a party ignores the weight of the evidential material and prosecutes an ultimately unmeritorious case to trial, the usual order that costs follow the event will be made. Exceptions from the ordinary order will not be made to allow beneficiaries a forum in which to air family disputes with impunity.
[6] [2017] SASC 75 at [18].
The preceding observations made by Kourakis CJ in Roche reflected his Honour’s earlier remarks in Fielder v Burgess concerning the anachronistic nature of some aspects of the traditional approach to costs in probate cases and the need for that to be better aligned with the general approach to costs in civil litigation.[7]
[7] [2014] SASC 98 at [58]-[63].
Analysis
I do not consider that the respondents acted imprudently in refusing the settlement offer in March 2020. At that time, the only available expert evidence, being the report of Dr Hecker prepared in July 2019, expressed a firm conclusion that Mrs Birbas had lacked testamentary capacity in December 2007. There was no contrary expert evidence disclosed by the applicant until well after the offer expired. While I ultimately placed substantial reliance upon the oral evidence of Mr Niarchos, at the time of the settlement offer the only evidence available from him was his quite brief file notes and a relatively inconclusive affidavit. In these circumstances, I consider that the respondents were entitled to maintain their insistence that the Court exercise its supervisory jurisdiction.
Due to my finding that there was a serious question as to whether Mrs Birbas lacked testamentary capacity and knew and understood the contents of her will, I accept that the second exception in Mitchell v Gard is applicable. I consider that the circumstances call for the application of the observation by Kourakis CJ in Roache that “a person will not be penalised for invoking this Court’s supervisory jurisdiction in probate when the circumstances call for investigation into the validity of a testamentary document.”
This is not a case where the respondents persisted in an unmeritorious action after the discovery of evidentiary material which largely dispelled any reasonable concerns. It was only after the Court had heard and carefully weighed substantial evidence from Dr Hecker, Dr Lucas and Mr Niarchos, (the lay evidence being inconclusive) that it was satisfied that the will should be admitted to probate.
The further question is whether the Court should order that costs be paid from the estate or, alternatively, make no order for costs consistently with the approach taken by the High Court in Middlebrook and also by Sir Gorrell Barnes P in Spiers v English.[8]
[8] [1907] P 122.
In Ponder v Burmeister Way CJ stated that when determining costs in probate matters, the Court must view the facts from the position in which they presented to the parties who failed in the litigation.[9] His Honour also stated that there should be no order as to costs where the parties who failed in the litigation were reasonably led into it by a bona fide belief in their case.[10]
[9] [1909] SALR 62.
[10] Ibid at 101.
The principles stated by Way CJ in Ponder v Burmeister were referred to with approval by Gray J (with Vanstone and Stanley JJ agreeing on this point) in Hall v Carney& Ors (No 2).[11] In that case the Full Court ordered that costs be paid from the estate on an indemnity basis. The basis for that decision was that the circumstances gave rise to suspicion so that the presumption of knowledge and approval of the contents of the will did not operate. The circumstances justified the defendant in requiring the plaintiffs to discharge the burden of proving knowledge and approval and it was necessary to conduct a trial so that the Court could assess the evidence and reach a conclusion.[12] The suspicious circumstances were that the last will of the testator involved a radical change from earlier testamentary dispositions in circumstances where the trial judge found that there had been pressure and persuasion exerted by family members.[13]
[11] [2012] SASCFC 105 at [10].
[12] Ibid at [21]-[22].
[13] Hall v Carney & Ors [2012] SASCFC 76 at [33]-[34] (Gray J with Vanstone and Stanley JJ agreeing).
In the present case, the circumstances that led me to find that the applicant could not rely on the presumption but needed to persuade the Court that it was affirmatively satisfied as to the force and validity of the will were less compelling than those referred to by the Full Court in Hall v Carney. Nevertheless, while the Court was ultimately satisfied that the will should be admitted to probate, the matters to which I have referred at [5] were far from clear cut and were only resolved by the Court after hearing a substantial body of evidence.
In these circumstances, and having regard to the authorities to which I have referred, on balance, I consider that it is appropriate to order the payment of the parties’ costs from the estate on a standard costs basis.

[2021] SASC 101

20 August 2021