Craker v Craker (No 3) - [2019] SASC 13

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
CRAKER v CRAKER & ORS (No 3)
[2019] SASC 13
Judgment of The Honourable Justice Stanley
15 February 2019
SUCCESSION - MAKING OF A WILL - TESTAMENTARY INSTRUMENTS - MISTAKES AND OMISSIONS
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES - FAILURE IN PORTION OF A CASE
This is an application for the costs of an action for rectification of a will pursuant to s 25AA of the Wills Act 1936 (SA) (the Act).
The plaintiff is the widow of the deceased and the mother of the fourth defendant. The first, second and third defendants are the children of the deceased by a previous marriage. The plaintiff made an application for rectification. The solicitors who drafted the will were joined to the proceedings as an interested party. They were the sole contradictors in the trial of the rectification proceedings. Ultimately, the plaintiff succeeded in her application for rectification of clauses 10 and 11 of the will but failed in relation to application for rectification of clause 12.
The plaintiff now seeks orders that the interested party pay the costs of the first to third defendants on a party/party basis, the costs of the fourth defendant on an indemnity basis, and 75 per cent of the plaintiff’s costs on a solicitor/client basis.
Held:
1. The need for rectification in respect of clauses 10 and 11 of the will arose from the fault of the solicitor who drafted the will. In those circumstances it is appropriate that the interested party should pay the costs of the parties to the action.
2. It would be unfair to visit the costs of the whole action upon the interested party as the plaintiff failed in relation to her application for rectification of clause 12. That can most appropriately be addressed by wielding a broad axe in relation to the interested party’s liability for the costs of the action.
3. The interested party is to pay 50 per cent of the plaintiff’s costs of the action on a party/party basis.
4. The interested party is to pay the first, second and third defendants’ costs of the action on a party/party basis.
5. The interested party is to pay the fourth defendant’s costs of the action on an indemnity basis.
Wills Act 1936 (SA) s 25AA, referred to.
Craker v Craker & Ors (No. 1) [2018] SASC 10; Re Molnar (No. 2) [2016] SASC 159; Morley v Rawlings [2015] 1 AC 129; City of Burnside v Attorney-General of South Australia (1994) 63 SASR 65; Coates v Wattson Estate of Sullivan [2013] NSWSC 604; Public Trustee v Permanent Trustee Company Ltd [2003] NSWSC 556; Wesley v Wesley [1998] SASC 6560, discussed.
Kerr v Kerr (No. 2) [2016] SASC 24; Badenach v Calvert (2016) 257 CLR 440, considered.

CRAKER v CRAKER & ORS (No 3)
[2019] SASC 13
STANLEY J:
Introduction

This is an application for the costs of an action for rectification of a will pursuant to s 25AA of the Wills Act 1936 (SA) (the Act).
The trial of the rectification action occurred in unusual circumstances.
The plaintiff is the widow of the deceased and the mother of the fourth defendant. The first, second and third defendants are the children of the deceased by a previous marriage.
After the commencement of the rectification proceedings the parties reached a settlement. A term of the settlement permitted the plaintiff to continue with the rectification proceedings on the condition that the outcome of such proceedings would not interfere with the settlement they had agreed in relation to the deceased’s estate.
Shortly after the settlement, the solicitors who had drafted the will the subject of the application for rectification were joined to the proceedings as an interested party.
The solicitors subsequently sought a stay of the rectification proceedings on the basis that the proceedings were an abuse of process. I dismissed that application for the reasons published in Craker v Craker & Ors (No. 1).[1]
[1] [2018] SASC 10.
As a result of the settlement the defendants took no part in the trial of the rectification proceedings. The solicitors, as an interested party, were the sole contradictors.
Upon the hearing of the application for rectification there were two discrete issues. First, whether clause 12 concerning the life insurance and superannuation policies which were left to the children of the deceased should be rectified to provide that that bequest was conditional on the plaintiff not surviving the deceased with the consequence that if she survived the deceased the policies would fall into the residue of the estate of which she is the sole beneficiary. Second, the plaintiff sought rectification of clauses 10 and 11 of the will concerning two properties at Wombat’s Rest near Morgan on the River Murray. The deceased was the sole registered lessee of Lot 79 while he had a one-quarter interest in Lot 80. The will left Lot 79 to the fourth defendant, the only child of the plaintiff and deceased’s marriage, and the quarter interest in Lot 80 to the plaintiff. The plaintiff sought to rectify those provisions of the will to achieve the opposite result.
Ultimately the plaintiff succeeded in her application for rectification of clauses 10 and 11 but failed in relation to application for rectification of clause 12.
In granting rectification of clauses 10 and 11 I found that the solicitor who drafted the will either misunderstood the instructions she was given by the deceased or in drafting the will erred in respect of the specific allocation of the lease numbers for each property.
In these circumstances, the plaintiff seeks the following orders in relation to costs:
1.The costs of and incidental to the action of the first to third defendants be paid by Heuzenroeders Lawyers, such costs to be adjudicated or agreed on a party/party basis.
2.The costs of and incidental to the action of the fourth defendant be paid by Heuzenroeders Lawyers, such costs to be adjudicated or agreed on the footing of an indemnity.
3.Subject to the costs order made on 9 February 2018, 75 per cent of the remaining costs of and incidental to the action of the plaintiff be paid by Heuzenroeders Lawyers, such costs to be adjudicated or agreed on a solicitor/client basis.
4.Certified fit for senior counsel.
The plaintiff submits the Court should make these orders in accordance with any of three approaches: first, in accordance with the principles based on the fault of the solicitors necessitating the action for rectification as analysed in Molnar No. 2;[2] second, in accordance with the approach taken by the United Kingdom Supreme Court in Marley v Rawlings;[3] third, in accordance with the principle that costs should follow the event.
[2] [2016] SASC 159.
[3] [2015] 1 AC 129.
On the other hand, the interested party seeks an order that its costs and the plaintiff’s costs be paid by the estate. If any other order is made as to costs, particularly against the interested party, it submits it should be confined to the costs of the action.
Relevant principles
In Re Molnar (No. 2)[4] I stated the principles in respect of costs in a statutory action for rectification in the following terms:[5]
[4] [2016] SASC 159.
[5] [2016] SASC 159 at [12]-[14].
In Kerr v Kerr (No. 2) Gray J addressed the practice in relation to the costs of an application for rectification. He said:
The usual practice in this State in a case involving rectification of a will, is that the costs of the parties are paid out of the estate unless the solicitor is at fault, in which case the costs are paid by the solicitor. This practice follows the long established practice of courts of probate that where the litigation has been brought about through the conduct of the testator or testatrix costs should be paid out of the estate.
Likewise, and by analogy, where it is necessary in the interests of justice that the issue of testamentary capacity and, therefore, the validity of testamentary documents, be the subject of judicial determination, it is the long established practice to order no costs against the unsuccessful executor or legatee and to allow them their costs out of the estate.
[Citations omitted].
In Hall v Carney & Ors (No. 2)[6] Gray J, with whom Vanstone J and I agreed on this topic, considered a submission that the general rule that costs follow the event, subject to some exceptions, is applicable in probate actions. He said:
[6] [2012] SASCFC 105.
The Court’s attention was drawn to the following observations of Sir James Wilde in Mitchell v Gard:
… 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 about and subserving this inquiry are not wholly in the wrong, even if they do not succeed. …
…
… the 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.
The observations of Sir James Wilde were addressed by Henderson J in Kostic v Chaplin:
Although Sir James Wilde framed his first rule in terms of blame and fault, it is in my view reasonably clear that he did not necessarily mean moral fault or culpability, but rather that the touchstone should be whether it was the testator's own conduct which had led to his will "being surrounded with confusion or uncertainty in law or fact". If that causal test is satisfied, it should not in my judgment matter for the purposes of the first rule whether the problem is one relating to the state in which the deceased has left his testamentary papers (for example where a will cannot be found, or where there is a question whether a will has been revoked), or whether the problem relates to the capacity of the deceased to make a will. I do not, therefore, read Sir James Wilde's formulation of the second rule as implying that an unsuccessful challenge to (or defence of) a will on grounds of want of knowledge and approval, lack of due execution or mental incapacity can never come within the scope of the first rule, but rather as being intended to provide guidance in cases where, on the facts, the first rule is not engaged.
In Ponder v Burmeister, Way CJ discussed the principles applicable to determining the appropriate costs order in a probate matter. The following principles have been extracted from the reasons of Way CJ:
¾The general rule is that costs follow the event.
¾Departure from the general rule is to be the exception, occurring only when there is adequate reason for such an order.
¾Costs should be awarded from the estate where the testator’s conduct has been the cause of the litigation.
¾There should be no order as to costs where the parties who failed in the litigation were reasonably led into the litigation by a bona fide belief in their case. They must have acted in good faith and must have had reasonable ground for disputing or upholding the will. This award should be made even though the testator and the beneficiaries under the will were not to blame for the litigation.
¾In determining the question of costs, the court must view the facts from the position in which they were presented to the parties who failed in the litigation.
Way CJ relied on a passage in the judgment of Sir James Hannen in Davies v Gregory. There, his Honour posed the following question to determine whether costs should be paid from the testator’s estate: “Is the testator, by reason of his conduct, to be considered the cause of the reasonable litigation which has occurred after his death as to the validity of his will?”. Sir James Hannen then considered the circumstances in which there is to be no order for costs. His Honour expanded on the above observations:
… Where the facts shew that neither the testator nor the persons interested in the residue have been to blame, but where the opponents of the will have been led reasonably to the bona fide belief that there was good ground for impeaching the will, there will be no order as to costs. Of course the opponents must have taken all proper steps to inform themselves as to the facts of the case, but if, having done so, they bona fide believe in the existence of a state of things which, if it did exist, would justify litigation, then, although no blame should attach to the testator or to the executors and persons interested in the residue, each party must bear his own costs
In Public Trustee v Hall, Angas Parsons J identified the principles discussed in Mitchell v Gard as those applicable to the determination of an award of costs in a probate matter. In doing so, his Honour also referred, inter alia, to the decision of Way CJ in Ponder v Burmeister and observed:
The rules relating to costs have been classified as follow:— 1. If the litigation results through the fault of the testator or those interested in the residue the costs may properly be paid out of the estate. 2. 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. Unless the circumstances of the case bring it within one of the foregoing exceptions, the general rule that costs follow the event ought to prevail. …
[Citations omitted].
In Fielder v Burgess[7] Kourakis CJ made the following observations in relation to the award of costs in probate litigation:[8]
[7] [2014] SASC 98.
[8] [2014] SASC 98 at [57] - [65].
There is a long line of authority to the effect that where probate litigation has been caused, or contributed to, by the way in which the testator made his testamentary intentions known it is appropriate that costs be ordered to be paid out of the estate (the probate costs rule). The authorities are conveniently collected in the judgment of Gray J in Hall v Carney (No 2).
The principle has a long lineage, but it is perhaps so long that it has become something of an anachronism. For centuries before the judicature reforms of the 19^th century, grants of probate were the concern of the Ecclesiastical Court. Ecclesiastical courts operated according to forms of Roman law with an inquisitorial judge rather than common law style juries. These courts claimed jurisdiction over substantive matters that concerned salvation and church order including sexual misconduct, determinations and annulment of marriage, defamation and the personal estates of deceased persons. It is perhaps not surprising that an inquisitorial jurisdiction which was concerned with public rectitude adopted such a costs principle.
The application of the costs rule in probate cases was recently considered in the English case of Shovelar v Lane. In that case a husband and wife, who each had children from previous marriages, made mutual wills leaving their residuary estate to the other if he or she survived 30 days, failing which it fell to their children, grandchildren and other relatives. The husband survived the wife and later made a new will that made no provision for his wife's descendants. Following the husband’s death, the wife’s descendants brought a claim against both the executors of the husband’s estate and descendants. The claimants successfully relied on the doctrine of mutual wills, claiming that the executors held the husband’s estate on constructive trust for those entitled under his earlier will. On the question of costs, the defendants submitted that the Judge should apply the rule in probate actions being that if a testator were the cause of litigation then the costs ought to come out of the estate. The Judge rejected this submission and held that the claimants were entitled to have their costs paid by the defendants. The claimants appealed against certain terms of the costs order and the defendants cross-appealed against the Judge’s conclusion that the costs should not be paid out of the estate.
The Court of Appeal, dismissing the cross-appeal, held:
The probate rule is rooted in the inquisitorial exercise that was conducted by the ecclesiastical courts and the Probate Division where the court had to be satisfied of the validity of the will before it could pronounce for the will and admit it to probate. The effect of mutual wills upon the distribution of the estate under a later will which is admitted to probate is a matter for the Chancery Division applying the law of trusts; it is not a matter of probate law and practice. The nature of that litigation is not inquisitorial: it is adversarial and, not infrequently, very adversarial as the two families disunited by death battle for their perceived true inheritance...
The judge was entitled to find, indeed right to find, that “the contention between the parties was not unlike any other hostile litigation and not such that would enable the court to move away from the general rule”... The reasons she gave in para 39 of her judgment which I have also cited at para 28 above is beyond challenge: there would be a plain injustice if the claimants were deprived of any benefit of their success (compare In re Evans, decd [1986] 1 WLR 101). The challenge by the defendants as to what had been said and done and the legal consequences of that behaviour do not provide a reason for departing from the general rule that costs follow the event.
It follows that in my judgment [the judge] was fully entitled to order the defendants to pay the claimants’ costs.
In my view, the legal policy underlying the decision of the Court of Appeal is applicable to probate cases beyond mutual wills claims of the kind considered in Shovelar v Lane. It is not obvious to me why a testator’s fault in the making of a will should result in a loss to the successful beneficiary in litigation over the estate. True it is there is a public element to the resolution of disputes over estates. It is for that reason that the probate costs rule is generally framed in terms of applying when there are reasonable grounds to require the person propounding a doubtful will or contending for a particular construction of an ambiguous provision to make out their case before a judge in a contested hearing.
However, the bottom line is that the disputes are between private parties advancing competing claims to the testator’s bounty for their private financial benefit. Of even greater contemporary significance is the effect of the old probate costs rule on parties to litigation of this kind. The probability of the payment of the costs of all parties out of the estate irrespective of the result gives the parties little incentive to make appropriate decisions as reasonable self-funded litigants about their prospects of success, and the proportionality of the expense incurred in bringing or defending proceedings.
I cannot see any utility in putting the beneficiaries to the expense of a contested hearing and depleting the estate in cases in which the ultimate result of litigation is clear notwithstanding the suspicion or ambiguity clouding the will.
In support of the probate costs rule, it is also sometimes contended that s 12 of the Wills Act requires a contested hearing before the Court can be satisfied of the circumstances prescribed by that section. It is not obvious to me why the Court might not be so satisfied by reason of the consent of all interested parties supported, if necessary, by jointly submitted documentary evidence.
The probate costs rule is arguably anachronistic in modern times in which there is a greater concern with the need for proportionality in litigation. It may soon be necessary to reconsider it.
[Citations omitted].

The awarding of costs against a solicitor at “fault” is an application of the power of the Court to award costs against non-parties. In determining a claim or cause of action, the Court has power to determine by whom and to what extent the costs of proceedings are to be paid. This power may be exercised against non-parties. The power to award costs against non-parties is subject to the ordinary principles of natural justice.[9]
[9] Craker v Craker & Ors (No. 1) [2018] SASC 10 at [41].
The solicitors were at fault
In this matter I found that the solicitors were at fault within the meaning of Kerr v Kerr (No. 2)[10] and Molnar. The order for rectification was the result of the solicitor who drafted the deceased’s will misunderstanding her instructions or making a transposition error in drafting the will. Necessarily, the will required rectification because of the solicitor’s error. On the other hand, the plaintiff sought a wider rectification than the Court granted. The proceedings for rectification were more prolonged and extensive than was justified given the unsuccessful application for rectification of clause 12 of the will.
[10] [2016] SASC 24.
The solicitors were interveners in the rectification proceedings.
In City of Burnside v Attorney-General of South Australia[11] Debelle J stated the relevant principles for costs of an intervener as follows:[12]
… generally speaking, a successful intervener will recover costs only if the intervention was necessary to protect his interest. A successful intervener is unlikely to recover his costs even if the intervention was well intentioned and proved to be of assistance to the Court.
There appears to be no reason why as a matter of general principle an unsuccessful intervener should not be subject to the general rule that costs follow the event. However, it is not appropriate to apply that general rule without qualification. If a successful intervener is not entitled to his costs where his interests are adequately protected by an existing party to the action, it would be inequitable for an unsuccessful intervener to be liable to costs in like circumstances. However, an unsuccessful intervener might be liable for costs if his intervention has substantially extended the hearing or put the successful party to unnecessary cost. In such circumstances, the intervener might be liable to pay a portion of the successful party's costs, that portion being determined by the extent to which the hearing has been lengthened by the intervention. Such a rule is consistent with the principle that, generally speaking, an intervener must take the action as he finds it.
In determining whether the intervener should be liable for costs, the court should adopt a broad axe approach. If the hearing was slightly longer than it would have been but for the intervention, it might not be appropriate to order the intervener to pay costs. It will be a question of fact and degree in every case whether the intervener's participation has resulted in the trial being substantially longer than it would have been but for the intervention. In determining whether the intervener should be liable, it would be appropriate to have regard also to such factors as whether the interest which the intervener sought to protect was adequately protected by an existing party. Depending on the nature of the issues in the action, it might be a relevant factor that the intervener has assisted the parties and the court in identifying or elucidating the issues. It is not unrealistic to suppose that, although the intervention has prolonged the trial, the intervener's participation has been of substantial assistance. In such a case, it might be inequitable to order the intervener to contribute to the costs of the successful party.
[Citations omitted].
[11] [1994] SASC 5136, (1994) 63 SASR 65.
[12] [1994] SASC 5136 at [10]-[12], (1994) 63 SASR 65 at 67-68.
I am satisfied that the interest of the solicitors in this matter was directed to minimising the risk that they would be exposed to costs orders on the basis of a finding that rectification of the will was required because the solicitor who drafted the will erred. To that extent, the interested party has been partially successful. Further, the Court has been assisted by the intervention of the interested party as without them there would have been no contradictor.
The interested party submit there are five reasons the estate should pay its costs and the plaintiff’s costs. First, the interested party had to intervene in relation to the life insurance and superannuation issue. Accordingly, the rectification proceedings should be regarded as an expense in the administration of the estate. Second, the plaintiff could have resolved the issue of rectification of clauses 10 and 11 without the need to proceed to trial. Accordingly, there was little justification in the plaintiff incurring significant additional costs in pressing for rectification. Where the interested party was required to participate in the rectification proceedings on a matter upon which the plaintiff failed, it is both reasonable and fair that the interested party’s costs be met by the estate. Third, authorities such as Coates v Wattson; Estate of Sullivan,[13] Public Trustee v Permanent Trustee Company Ltd[14] and Wesley v Wesley[15] support the proposition that the costs of rectification of an administrative or transposition error of the kind that occurred in this case are a matter for the estate. Fourth, given the Court’s finding in relation to the application for rectification of clause 12, the original claim for rectification against the defendants was bound to fail in that respect. Accordingly, no consequential costs orders would have been visited upon the interested party. The settlement militated against the need for a trial on rectification but the plaintiff insisted upon pursuing the application, inter alia, in relation to the life insurance and superannuation policies upon which she ultimately failed. This failure justifies the course adopted by the interested party in incurring costs in opposing the application for rectification. On that issue the interested party submits that it is entitled to its costs from either the plaintiff or the estate. Fifth, even if the Court were to conclude that the plaintiff is entitled to some of her costs payable by the interested party, as opposed to the estate, in relation to rectification of clauses 10 and 11, the identification of what part of her costs she should be entitled to recover is so difficult as to dissuade the Court from exercising its costs discretion to permit that course. That would require the Court to offset the costs to which the interested party is entitled in relation to the rectification application in respect of clause 12. The interested party contends that this underlines why the fairest and most just course is to order the estate to pay the costs of the interested party and the plaintiff.
[13] [2013] NSWSC 604.
[14] [2003] NSWSC 556.
[15] [1998] SASC 6560.
Consideration
I reject the submissions of the interested party.
In this matter, the solicitor was under a duty to act on the testator’s instructions and to apply the requisite level of care and skill in doing so.[16] It was the duty of the solicitor drafting the will to identify the relevant Certificate of Title references and in light of those references to ensure that the terms of the will reflected those instructions. I accept that the testator relied upon the solicitor to ensure that his instructions were accurately reflected in the terms of the will she drafted. While the testator was confused by the terms by which the Wombat’s Rest properties were referred to in the drafts of his will, responsibility for ascertaining precisely the terms of his instructions in relation to those properties rested with the solicitor who drafted the will. The only confusion in this matter was on the part of the solicitor. While I accept that the testator failed to identify the mistake that had been made, I do not consider that there is any attribution of “fault” on his part. The fault lay with the solicitor.
[16] Badenach v Calvert [2016] HCA 18, (2016) 257 CLR 440 at [18].
On the other hand, in considering the position in relation to the plaintiff’s claim for rectification of clause 12, the plaintiff must or should have understood that her claim had no reasonable prospect of success. The plaintiff was present at a conference between the testator and his solicitor on 8 December 2011 when the testator gave instructions to the solicitor in relation to what became clause 12. Further, I found that the plaintiff attended with the testator at a further conference with the solicitor on 22 December 2011 when the wills were executed after being read to them.
None of the submissions put by the solicitors justify an order that its costs and the plaintiff’s costs be paid by the estate. The action was necessitated by the fault of the solicitors. For reasons I have given in Craker v Craker & Ors (No. 1)[17] the plaintiff was entitled to pursue the action notwithstanding the settlement. The solicitors failed to resolve the matter in relation to the application for rectification in respect of clauses 10 and 11 upon which the plaintiff succeeded. I see no basis to criticise the conduct of the plaintiff in respect of that part of the action. On the other hand, it would be unfair to visit the costs of the whole action upon the solicitors as the plaintiff has failed in relation to her application for rectification of clause 12. That can most appropriately be addressed by wielding a broad axe in relation to the solicitors’ liability for the costs of the action.
[17] [2018] SASC 10.
In my view the principle identified in Molnar (No. 2)[18] applies to this case. The need for rectification in respect of clauses 10 and 11 of the will arose from the fault of the solicitor who drafted the will. In those circumstances I consider it appropriate that the interested party should pay the costs of the parties to the action. That includes the costs of the defendants incurred in the action. None of those costs would have been incurred but for the fault of the solicitor. I do not consider it fair or just that costs should be paid by the estate in these circumstances. While I accept that there are cases which can be found where the Court in similar circumstances has ordered the costs paid out of the estate, it appears that in the three authorities cited, no consideration was given to an order that the solicitors should pay costs. However, an adjustment must be made for the plaintiff’s failure to succeed on the application for rectification of clause 12. The adjustment must necessarily be a broad axe. Doing the best I can, I would order that the interested party pay 50 per cent of the plaintiff’s costs of the action. It is appropriate the interested party pay the defendants’ costs of the action. Again, but for the solicitor’s fault, the defendants would not have incurred the costs of defending the action for rectification. Given the fourth defendant was a child in respect of whom a litigation guardian had been appointed, I consider it appropriate that her costs should be paid on an indemnity basis.
[18] [2016] SASC 159.
Except for the fourth defendant’s costs, costs of the other parties, namely, the plaintiff and the first, second and third defendants, are to be assessed on a party/party basis. I would certify costs fit for senior counsel.
Conclusion
I would order the interested party to pay 50 per cent of the plaintiff’s costs of the action on a party/party basis. I would order the interested party to pay the first, second and third defendants’ costs of the action on a party/party basis. I would order the interested party to pay the fourth defendant’s costs of the action on an indemnity basis. I would certify costs fit for senior counsel.