Daniel v Van Zwol - [2015] SASCFC 93

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
DANIEL v VAN ZWOL
[2015] SASCFC 93
Judgment of The Full Court
(The Honourable Chief Justice Kourakis, The Honourable Justice Stanley and The Honourable Justice Parker)
24 July 2015
PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES - SUBSTANTIAL SUCCESS
SUCCESSION - FAMILY PROVISION - APPEALS
This is an application for costs.
In an appeal to this Court, the appellant sought orders setting aside the judgment and orders of a master on a claim pursuant to the Inheritance (Family Provision) Act 1972 (SA). On 7 April 2015, the Court allowed the appeal to the limited extent of adjusting the award that had been made in favour of the first respondent to provide that he receive a share of the residual estate equal to the other beneficiaries.
The parties are now at issue as to the appropriate order as to the costs of the appeal.
Held (the Court):
1. The principle that costs generally follow the event applies to appeals under the Inheritance (Family Provision) Act 1972 (SA) (at [11]).
2. Although allowed to a limited extent, the appeal in effect left the decision of the master undisturbed. The appellant has, in substance, failed on the appeal. The appellant should pay the costs of the first respondent on the appeal (at [14]).
3. There should be a reduction in the amount of 10 per cent of the costs of the first respondent to be paid by the appellant to account for the fact that during oral argument the first respondent put submissions against the approach adopted by the Court (at [14]).
4. The appellant is not to be indemnified for the costs of the first respondent out of the estate (at [15]).
5. The appellant’s costs are not to be met out of the estate (at [15]).
6. The appellant in her personal capacity is to pay 90 per cent of the first respondent’s costs of the appeal on a party-party basis. The appellant is to bear her own costs (at [16]).
Inheritance (Family Provision) Act 1972 (SA) s 9(8); Supreme Court Act 1935 (SA) s 40(1); Supreme Court Civil Rules 2006 (SA) s 263(1), referred to.
Bowyer v Wood (2007) 99 SASR 190; Lathwell v Lathwell [2008] WASCA 256; Re McIntyre [1993] 2 Qd R 383; Black v McIntyre [1991] ACL Rep 395 Qld 20; Freeman v Jaques [2006] 1 Qd R 318; Golosky v Golosky Unreported, New South Wales Court of Appeal, delivered 5 October 1993; Jvancich v Kennedy (No. 2) [2004] NSWCA 397; Re Duncan [1939] VLR 355; In the Estate of Pettitt [1998] SASC 6701, considered.

DANIEL v VAN ZWOL
[2015] SASCFC 93
Full Court: Kourakis CJ, Stanley and Parker JJ
THE COURT:
Introduction

In an appeal to this Court, the appellant sought orders setting aside the judgment and orders of a master on a claim pursuant to the Inheritance (Family Provision) Act 1972 (SA) (the Act). On 7 April 2015, the Court allowed the appeal to the limited extent of adjusting the award that had been made in favour of the first respondent to provide that he receive a share of the residual estate equal to the other beneficiaries. The parties are now at issue as to the appropriate order as to the costs of the appeal.
Background
At first instance, the first respondent instituted proceedings pursuant to the Act claiming that a will made by his mother failed to make adequate provision for his proper maintenance. Those proceedings were defended by two of the three beneficiaries named in the will, namely, the appellant who was also executrix of the estate and her remaining brother. A master allowed the claim and awarded the first respondent the sum of $70,000 from the estate with the three named beneficiaries being entitled to the residue of the estate in equal shares. The appellant appealed this decision in her personal capacity. The other beneficiaries took no part in the appeal. The Court rejected the grounds of appeal advanced by the appellant. However, the Court found that, to the extent that the award made by the master would result in the first respondent receiving a greater legacy than the other beneficiaries whose claim on the testatrix’s bounty was the same, because of subsequent costs orders which depleted the residue of the estate, the exercise of the master’s discretion had miscarried.
Submissions
The appellant seeks an order that the appellant’s costs, or such proportion of them as is deemed appropriate, be paid out of the estate of the deceased on a party-party basis, that any costs that may be awarded in favour of the first respondent be paid out of the estate of the deceased on a party-party basis, that the costs of the second respondent be paid out of the estate on an indemnity basis and that no order as to costs be made with respect to the third and fourth respondents. The first respondent applies for an order that the appellant in her personal capacity pay 90 per cent of the first respondent’s costs of the appeal on a party-party basis and that the appellant otherwise bear her own costs.
Relevant principles
Section 40(1) of the Supreme Court Act 1935 (SA) provides:
Subject to the express provisions of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid.
6SCR 263(1) provides that “as a general rule, costs follow the event.”
Pursuant to s 9(8) of the Act the Court is empowered to make such orders as to the costs of any proceeding under the Act as it considers just. In Bowyer v Wood[1] Debelle J considered the exercise of the discretion conferred by s 9(8). He said:[2]
The general rule is that the court will make no order as to costs where an application is unsuccessful, that is to say, the unsuccessful applicant is not liable to pay the costs of other parties. The personal representatives of the testator will usually be entitled to an order for costs out of the estate…
The principles are that, generally speaking, there will be no order as to costs of an unsuccessful application. The court may in its discretion make an order in favour of an unsuccessful applicant who makes a reasonable application founded on a moral claim or obligation. While it is unnecessary to decide the issue in this case, the cases also suggest that the court may in its discretion order an unsuccessful applicant to pay costs where the claim was frivolous or vexatious or made with no reasonable prospects of success or where the applicant has been guilty of some improper conduct in the course of the proceedings.
[1] [2007] SASC 327, (2007) 99 SASR 190.
[2] [2007] SASC 327 at [65], [68], (2007) 99 SASR 190 at 208 – 211.
Nyland and Anderson JJ agreed.
These principles apply to trials, not appeals, but can inform the exercise of the discretion by an appellate court.
In other jurisdictions a working rule has been adopted in awarding costs in unsuccessful appeals that costs will follow the event and the appellant will have to pay the costs of all parties, at least where the appellate court has characterised the appeal as unmeritorious, adventurous, brought on weak grounds or in effect seeking a second opinion.[3] For example, in Lathwell v Lathwell[4] the Western Australian Court of Appeal ordered costs against an executrix in her personal capacity where she had brought an unsuccessful appeal which lacked merit, and in which she had a significant personal interest in the subject matter of the appeal. However, in some cases, an unsuccessful appellant may be awarded costs or avoid an adverse costs order. For example, a widow who had her award of provision reduced on appeal received the costs of the appeal out of the estate in Golosky v Golosky.[5]Kirby P described this costs order as “the practice of the Court concerning the costs of spouses in such cases”. In Jvancich v Kennedy (No. 2)[6] an adult daughter awarded $250,000 by a trial judge had her provision reduced to $60,000 on appeal. Nonetheless, her costs of the appeal were paid from the estate. The court drew an analogy with contested probate matters, where, if the litigation were caused by the testator, parties may generally expect costs to be paid from the estate. In Re Duncan[7] the estate was ordered to pay the costs of an unsuccessful appeal where the appeal was found to be justified as it was decided on grounds which differed from those of the court below.
[3] Re McIntyre [1993] 2 Qd R 383; Black v McIntyre [1991] ACL Rep 395 Qld 20; Freeman v Jaques [2005] QCA 423, [2006] 1 Qd R 318.
[4] [2008] WASCA 256.
[5] Unreported, New South Wales Court of Appeal, delivered 5 October 1993.
[6] [2004] NSWCA 397.
[7] [1939] VLR 355.
These decisions must be understood in the context of the manner in which the parties litigate in family provision matters in those jurisdictions. In those jurisdictions the position of an executor or administrator differs from the position in South Australia. In other States the executor or administrator is the party that actively defends the proceedings and, accordingly, appeals against a successful applicant. By contrast, in South Australia the executor or administrator adopts a neutral role and it is the beneficiaries who actively defend the action.[8] In those jurisdictions where an executor or administrator is an active party to the proceedings and is unsuccessful on appeal, as can be seen, the court will generally, but not always, order the executor or administrator to pay the costs of the appeal.
[8] See In the Estate of Pettitt [1998] SASC 6701.
In our view the principle that costs generally follow the event applies to appeals under the Act. When considering the exercise of the discretion in relation to appeals under the South Australian legislation it is relevant that disputes under the Act are between private parties advancing competing claims on the testator’s estate for their private financial benefit. At least on appeal, the adoption of approaches taken in the probate jurisdiction to the award of costs from the estate is contraindicated. We consider the prospect of the payment of the costs of an unsuccessful appellant out of the estate gives 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 an appeal under the Act. In the circumstances we consider the usual principles applicable to the conduct of litigation should apply to appeals under the Act. In our view that supports the proposition that a beneficiary who unsuccessfully appeals an award under the Act should not only meet the respondent’s costs of the appeal but should not be entitled to any indemnity from the estate in respect of their costs of the appeal.
In relation to the award of costs in respect of the trial of proceedings brought pursuant to the Act, we consider a different approach can be taken reflecting the reasoning in Bowyer v Wood. But in relation to unsuccessful appeals, for the reasons set out above we consider the general approach should be that costs should follow the event. Of course, ultimately, the award of costs is a discretionary judgment and it is open to an appeal court to depart from that general approach where the circumstances justify doing so.
Consideration
The first respondent contends that, notwithstanding that the appeal was allowed to a limited extent, it cannot really be said that the appellant was successful on the appeal. In support of this contention it is submitted that none of the grounds of appeal advanced by the appellant nor any of the complaints raised in the written or oral submissions made on behalf of the appellant were successful. The first respondent submits that, in fact, the point upon which the appeal ultimately succeeded accorded with the submission made by the first respondent at first instance that there should be an equity of provision between the named beneficiaries and the first respondent. The first respondent concedes that while this submission may have been made at first instance it was expressly repudiated on appeal and suggests that a 10 per cent discount of the first respondent’s costs of the appeal to be paid by the appellant should be applied to account for this. The first respondent further submits that it was he who placed the Court in a position to consider this point by handing up an estimate of his costs incurred at first instance.
We accept the submissions made on behalf of the first respondent. We consider that, although allowed to a limited extent, the appeal in effect left the decision of the master undisturbed. It did little more than alter the arithmetical method by which the legacy to the first respondent was to be calculated in order to correct an anomalous result. It follows that the appellant has, in substance, failed on the appeal. Accordingly, we are persuaded that the appellant should pay the costs of the first respondent on the appeal. We consider it appropriate that, as conceded by the first respondent, there be a reduction in the amount of 10 per cent of the costs of the first respondent to be paid by the appellant to account for the fact that during oral argument the first respondent put submissions against the approach adopted by the Court.
The first respondent opposes any order either that the appellant be paid her own costs or be indemnified for any costs of the first respondent that she is to pay, out of the estate. It is submitted that by virtue of the manner in which the residue of the estate is to be distributed, any such order would effectively cause the first respondent to pay a quarter of his own costs of the appeal and a quarter of the appellant’s costs of the appeal despite essentially succeeding on the appeal. In addition the costs order sought by the appellant would have the result that the third and fourth respondents would each pay a quarter of the first respondent’s costs of the appeal and a quarter of the appellant’s costs of the appeal despite taking no part in the appeal. We accept that such an outcome would be unjust. We decline to order that the appellant be indemnified for the costs of the first respondent out of the estate. We reject the submission made on behalf of the appellant that the appellant’s costs ought to be met out of the estate on a party-party basis. The appellant brought the appeal in her personal capacity, unsupported by the other beneficiaries. In doing so, she was acting in her own personal interest and seeking to vindicate her personal position, in circumstances where her evidence had not been accepted at trial. On appeal she was unsuccessful. In these circumstances, we consider it appropriate that the appellant bear her own costs.
Conclusion
We would order that the appellant in her personal capacity pay 90 per cent of the first respondent’s costs of the appeal on a party-party basis. We would order that the appellant bear her own costs.