Drummond v Drummond

[2017] NSWSC 856

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:	The Estate of Drummond; Drummond v Drummond [2017] NSWSC 856
Hearing dates:	26 June 2017
Date of orders:	26 June 2017
Decision date:	26 June 2017
Jurisdiction:	Equity - Probate List
Before:	Kunc J
Decision:	Probate granted; Cross-claim dismissed; No order as to cross-claimants’ costs
Catchwords:	SUCCESSION — Probate — Documents amending will — Testamentary intention COSTS — Offer of compromise — Applicability to probate suits ― Reasonable investigations
Legislation Cited:	Succession Act 2006 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Wills, Probate and Administration Act 1898 (NSW)
Cases Cited:	Estate of Laura Angius; Angius v Angius [2013] NSWSC 1895 Hatsatouris v Hatsatouris [2001] NSWCA 408 Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698
Category:	Principal judgment
Parties:	Alexander John Drummond (First Plaintiff) Raymond George Drummond (Second Plaintiff0   Michelle Margaret Ghalayini (First Defendant) Michael Dimitrios Drummond (Second Defendant)
Representation:	Counsel: N. Kirby (First and Second Plaintiff) C. Wilson (First and Second Defendant)   Solicitors: McIntyre Legal (First and Second Plaintiffs) Kydon Segal Lawyers (First and Second Defendants)
File Number(s):	2016/205068
Publication restriction:	No

EX TEMPORE Judgment

Summary

1. Margaret Kinloch Drummond died on 12 April 2016 at the age of 90. She made a will dated 26 April 2012 (the "2012 Will"). Without any disrespect, I shall refer to her and other family members by their given names.

2. The plaintiffs, Alexander and Raymond, are Margaret's two sons. They are her sole and equal beneficiaries under the 2012 Will. At the date of Margaret's death, her estate had an estimated gross value of approximately $7,500,000.

3. By statement of claim filed on 13 February 2017, Alexander and Raymond seek a grant of probate in common form of the 2012 Will. They were represented by Mr N Kirby of Counsel.

4. The defendant/cross-claimants, Michelle and Michael, are Raymond's children. They were represented by Mr C Wilson of Counsel. By cross-claim filed on 8 March 2017 they seek this declaration:

“1. A declaration pursuant to section 8(2)(b) of the Succession Act 2006 that the document dated 22 March 2016, a copy of which is annexed hereto, constitutes an amendment to the last will of Margaret Kinloch Drummond, deceased."

5. In these reasons, I shall refer to the document dated 22 March 2016 as the "2016 Document."

6. On 22 March 2016 (three weeks before her death) Margaret had a conversation with her friend and former accountant, Mr Barry Ahern. As a result of that conversation Mr Ahern wrote the 2016 Document, which was signed by him and Margaret.

7. The only question for determination is whether "the Court is satisfied that [Margaret] intended [the 2016 Document] to form an alteration to...her will" within the meaning of section 8(2)(b) of the Succession Act 2006 (NSW) ("the Act"). The Court answers that question "no". Probate of the 2012 Will will be granted to Alexander and Raymond and the cross-claim will be dismissed.

The Facts

8. The facts may be shortly stated.

9. Both the 2012 Will and an earlier will were prepared for Margaret by her longstanding solicitor, Mr Richard Yeo. The 2012 Will divided Margaret's estate equally between Alexander and Raymond.

10. There was no dispute between the parties that Margaret was an intelligent woman who was meticulous about her legal affairs. Although in March 2016 she was ill and weak, having been told by her doctors that she was "going backwards", there is no suggestion that her intelligence and meticulous nature had deserted her.

11. The evidence in relation to the creation of the 2016 Document was given by Mr Ahern. It was not challenged in any significant way and I accept him as a truthful and careful witness.

12. Mr Ahern had first met Margaret in about 1984 or 1985. He was then working as an accountant in an accounting firm and undertook professional work for the watchmaking business that Margaret and her husband ran from a shop in Miller Street, North Sydney.

13. Over the years, Mr Ahern became close friends with Margaret. After he retired from practice in about 2002, he continued to assist Margaret with her accounts as she had ceased to retain the firm for which Mr Ahern had worked.

14. After Margaret had retired and closed the shop, Mr Ahern regularly visited Margaret at her home. While he continued to do some work for her, generally they would just sit and chat. Mr Ahern estimated that he visited Margaret about once a month.

15. In about October 2015 Margaret was admitted to the Castlecrag Private Hospital. Mr Ahern understood that she had heart problems and had suffered a stroke. She returned home shortly before Christmas 2015.

16. Mr Ahern continued to visit Margaret. On Tuesday, 22 March 2016 he visited Margaret at her home. Margaret telephoned Raymond and, soon after, Raymond and his wife Patricia arrived. After pleasantries, Mr Ahern's evidence of what occurred is:

“20.   I recall that Mrs Drummond asked Raymond and Patricia if she and I could be left alone to discuss some things. Mrs Drummond said words to the effect: “I want to discuss some private matters with Barry. Would you please leave us alone?” I recall that Raymond and Patricia said goodbye and left the house.

21.   I recall that Mrs Drummond sat down slowly and then said to me words to the effect:

“I want to change my will” … and

“My doctor tells me I am going backwards so I am going to phone my solicitor about the changes but I want to discuss the changes with you first.”

22.   Mrs Drummond then said to me words to the effect:

“Alec and his family have been a disappointment for me. They haven’t done much for me while I’ve been sick. I have hardly seen Martin since I went into hospital [in October] although young Alexander has visited me and helped me out. I appreciate his effort.” “As for Mary, I hardly ever see her and that’s fine. The less the better I say. Raymond and Patricia have been marvellous. I’m very, very grateful for their care.”

23.   Mrs Drummond and I had a further conversation in words to the effect:

Mrs D:   “I have decided to leave Alec’s younger son Martin a cash amount”.

Me:   “How much? $50,000; $100,000; do you have any idea?”

Mrs D:      “I will think about it.”

24.   I was surprised by what Mrs Drummond said and how definite she was so asked her if I should take notes. I said to her words to the effect: “Should I take brief notes?” She replied: “yes.”

25.   Mrs Drummond referred to “property” saying that “it is important”. I understood that she was referring to the shop in Miller Street. We then said words to the effect

Mrs D:    “The value of the shop is in the vicinity of $4,400,000.”

“Out of the proceeds [of the Miller Street property] I want Raymond to receive one million dollars with the residual funds to be shared equally between Alec and Raymond.”

Me:   “Can you confirm that?”

Mrs D:   “Yes I want Raymond to receive one million dollars from the property and the rest to be shared equally between Alec and Raymond.”

…

Mrs D:   “I want my home to be transferred in the following way – 30% each to Raymond, his daughter, Michelle and son, Michael, with the remaining 10% to go to Alexander Junior.”

…

“The three properties including Raymond’s take up the whole block in Jenkins Street and could be sold as one development in future years.”

Me:      “That will cause a few ripples.”

Mrs D:   “I think the IBD [interest bearing deposit] is worth about $1.7mill. I will check on the maturity date. I want to help Michelle and Ziad with their mortgage and help Michael to be able to afford a home of his own in Zurich. Michael tells me it is very expensive and difficult to find something ‘over here Gran’. I will leave whatever is reinvested to Raymond and Alexander equally.”

26.   I then discussed my upcoming trip to New Zealand with Mrs Drummond. Our conversation was in words to the effect:

Me:   I’m going to New Zealand soon but I will be back on Thursday 7th April.”

Mrs D;   “When you get back, I will call Richard [Yeo] to come over and arrange the changes. I would like you to be here as well.”

Me:   “I will phone you when I return late on Thursday 7 April.”

27.   I wrote down what Mrs Drummond said to me about changing her will and handed the note to her. I then said words to the following effect: “Read over what I have written and check the details.” Mrs Drummond took the note and appeared to read it.

28.   We then spoke words to the following effect:

Mrs D:   “Yes, that will see us over till we can both see Richard Yeo.”

Me:   “If that is what you want then it should be signed by you and I will witness it.”

17. The 2016 Document (entirely handwritten) states:

“      DISCUSSION WITH RITA

DRUMMOND 22.3.2016

WILL – Mrs Drummond has decided to leave

Martin       -    a cash amount

Miller Street    -   $4,400,000

Raymond    $1 mil +50% residue

Alex   -   balance

Home    -

Michelle   30%

Michael   30%

Raymond    30%

Alec      10%

Bank Account

IBD      -   $1.7

Money to Alex and Raymond

[Mrs Drummond’s signature]

MARGARET DRUMMOND

22/3/16

[Mr Ahern’s signature] 22.3.16”

The Law

18. Section 8 of the Act provides:

“8 When may the Court dispense with the requirements for execution, alteration or revocation of wills?

(1) This section applies to a document, or part of a document, that:

(a) purports to state the testamentary intentions of a deceased person, and

(b) has not been executed in accordance with this Part.

(2) The document, or part of the document, forms:

(a) the deceased person’s will-if the Court is satisfied that the person intended it to form his or her will, or

(b) an alteration to the deceased person’s will-if the Court is satisfied that the person intended it to form an alteration to his or her will, or

(c) a full or partial revocation of the deceased person’s will-if the Court is satisfied that the person intended it to be a full or partial revocation of his or her will.

(3) In making a decision under subsection (2), the Court may, in addition to the document or part, have regard to:

(a) any evidence relating to the manner in which the document or part was executed, and

(b) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person.

(4) Subsection (3) does not limit the matters that the Court may have regard to in making a decision under subsection (2).

(5) This section applies to a document whether it came into existence within or outside the State.”

19. These proceedings are governed by s 8 of the Act, rather than by its predecessor, s 18A of the Wills, Probate and Administration Act1898 (NSW). Because there is no material difference between s 8 and its predecessor, the Court has continued to apply those cases which considered s 18A.

20. In Hatsatouris v Hatsatouris [2001] NSWCA 408, Powell JA (with whom Priestley and Stein JJA agreed) (emphasis in original) said:

“[55] It is convenient first, to set out the relevant portions of ss. 17, 18A of the Act, which are as follows:

“17 …

(2) A will may be revoked by another will.

(3) A will may be revoked

(a) by some writing declaring an intention to revoke the will and executed in the manner in which a will is required to be executed by s.7;

(b) if the will is in writing, by burning, tearing or destruction otherwise of the will by the testator or by some person in the testator’s presence and by the testator’s direction, with the intention of revoking the will; or

(c) by some writing on the will, or by any dealing with the will, by the testator or by some person in the presence of the testator and by the testator’s direction, if the Court is satisfied from the state of the will that the writing was made or the dealing was done with the intention of revoking the will.

…

18A(1) A document purporting to embody the testamentary intentions a Deceased person, even though it has not been executed in accordance with the formal requirements of this Act, constitutes a will of the Deceased person, an amendment of such a will or the revocation of such a will if the Court is satisfied that the Deceased person intended the document to constitute the person’s will, an amendment of the person’s will or the revocation of the person’s will.

(2) In forming its view, the Court may have regard (in addition to the document) to any other evidence relating to the manner of execution or testamentary intentions of the Deceased person, including evidence (whether admissible before the commencement of this section or otherwise) of statements made by the Deceased’s person.”

[56]   It is, and has long been, my view that the questions arising on applications raising a question as to the applicability of s.18A are essentially questions of fact, the particular questions of fact to be answered being:

(a) was there a document,

(b) did that document purport to embody the testamentary intentions of the relevant Deceased?

(c) did the evidence satisfy the Court that, either, at the time of the subject document being brought into being, or, at some later time, the relevant Deceased, by some act or words, demonstrated that it was her, or his, then intention that the subject document should, without more on her, or his, part operate as her, or his, Will?

(see, for example, The Public Trustee v. Commins; The Estate of Gwendolyn Myrtle Wray Powell J, 19 June 1992 (unreported) ).”

21. I also respectfully adopt and apply the summary of the law in relation to s 8 which appears in the judgment of Hallen J in Estate of Laura Angius; Angius v Angius [2013] NSWSC 1895 (“Angius”):

“250. The burden of proof of all issues relating to s 8 is on the Plaintiff and is to be satisfied on the balance of probabilities. In deciding whether it is so satisfied, without limiting the matters that may be taken into account, the Court is required to take into account that these are Probate proceedings (the nature of the cause of action); that the size of the estate is substantial (the nature of the subject matter of the proceeding); and the significant difference between the two documents (the gravity of the matters alleged): s 140 Evidence Act 1995.

…

259.   As was recently pointed out by White J in Re Estate of Puruto [2012] NSWSC 827, at [28], "... it is sometimes put, the deceased must have intended that without more, the document should have effect as her Will" (my emphasis). (The genesis of the highlighted phrase is taken from a number of judgments of Powell J, including The Application of Kencalo; In the Estate of Buharoff (NSWSC, 23 October 1991, unreported) and The Public Trustee v Commins; The Estate of Gwendolyn Myrtle Wray (NSWSC, 19 June 1992, unreported). However, in Hatsatouris v Hatsatouris [2001] NSWCA 408, at [56], Powell JA, as a member of the Court of Appeal, with whom Priestley and Stein JJA agreed, noted that one of the questions posed in other cases was "did the evidence satisfy the Court that, either, at the time of the subject document being brought into being, or, at some later time, the relevant deceased, by some act or words, demonstrated that it was her, or his, then intention that the subject document should, without more on her, or his, part operate as her, or his, Will".)

…

260.   In my view, the use of the words "without more on her, or his, part", does not really add anything. What the words do is direct attention to a consideration of the particular document itself, which must purport to "state the testamentary intentions of the deceased person", and then determine whether the Court is satisfied that the deceased person intended that particular document to form his, or her, Will, or to form an alteration to his, or her, Will. Thus, the focus of the section is on the actual testamentary intention of the deceased so far as it relates to the particular document in question. Both elements need to be satisfied.

261.   I also respectfully agree with what White J said in NSW Trustee and Guardian v Halsey; Estate of Von Skala [2012] NSWSC 872, at [15]:

"To restate the last requirement, the question is whether the deceased intended the document to be his or her testamentary act, that is, to have present operation as a will (Re Estate of Masters (decd); Hill v Plummer (1994) 33 NSWLR 446 at 455; Oreski v Ikac [2008] WASCA 220 at [52]–[55])."

262.   Also, I accept, as Windeyer AJ pointed out in National Australia Trustees Ltd v Fazey [2011] NSWSC 559, at [18], that:

"Great care must be taken in determining this question. Many people write out proposals for their wills on pieces of paper headed 'will' but often these are no more than present thoughts not testamentary intentions and certainly not intended to be wills."

263.   In Fry v Lukas; Brown v Fry; Estate of Honey; Application of Fry [2011] NSWSC 1329, White J, at [17], noted, also:

"Section 8 permits part of a document to form a deceased person's will if it states his or her testamentary intentions and the person intended that part of the document to operate as his will. The intention that the document, or part, form the person's will may, and usually will, exist at the time the document is brought into existence. But the section may also be satisfied if the deceased subsequently forms the intention that the document, or part, have a present operation as the deceased's will. (See Bell v Crewes [2011] NSWSC 1159 at [25] citing Application of Kencalo; In the Estate of Buharoff; and Mr Justice Powell, "Recent Developments in New South Wales in the law relating to wills" (1993) 67 ALJ 25 at [38])."

264.   In Dolan v Dolan [2007] WASC 249, at [22], I note that Murray J put the matter this way:

"... the document will be held to constitute the will of the deceased if the court is satisfied that the deceased intended its terms without more - without any alteration or reservation - to be the manner in which the property of the deceased dealt with in the document was to be disposed of upon his or her death."

265.   In Deeks v Greenwood [2011] WASC 359, E M Heenan J, referred to the use, in some of the cases, of the phrase "without more". He wrote, at [71]–[73]:

"The question of whether or not the document was intended to take effect as the testator's will without more plainly emphasises that it needs to be established that it embodies the final expression of testamentary intentions upon which the testator was at the time resolved, and that it should not be tentative, advisory or prepared in the anticipation that it may need revision, further thought or final confirmation. That is consistent with principle and with the statute but the phrase, not found in the legislation itself, is capable of suggesting that if anything more is required for the paper to take effect as a will it could not be valid even as an informal will . With respect, I am satisfied that this is not what was intended by his Honour's observations in Oreski v Ikac. ...

...

Clearly enough, a will prepared by a solicitor, or any will in conventional form contemplating execution with the formalities and requirements provided for by s 8 of the Wills Act, suggests that formal execution will follow and that the testament will thereupon be the will of the testator unless revoked or amended by a subsequent will or codicil or otherwise. However, this does not necessarily mean that such a document prepared for execution and submitted to the testator is incapable of being accepted as an informal will if it nevertheless embodies the testator's settled testamentary intentions. There are obviously cases, such as Mitchell v Mitchell, where the evidence establishes that the deceased had formed settled testamentary intentions to be expressed in his will and had adopted a particular document as embodying them notwithstanding that, for some sudden and unexpected reason, the document was not executed or properly executed.

Nevertheless, such cases can present difficulties because if, as is often the case, a proposed will is prepared on instructions given by a testator and then sent by the solicitors to the testator for consideration or, as here, marked plainly with the word 'Draft', that implies that the document may be for consideration, further thought or revision and is still awaiting the expression of the final settled intention of the intended testator. Those are instances in which the document clearly is only a preliminary, tentative or provisional expression of testamentary intention and where it is clearly contemplated that the final decision by the testator whether to adopt its terms or to vary them needs to be made. Those are the features which led to the rejection of the attempt to prove as informal wills the documents being propounded in The Estate of Perriman (dec) and in Oreski v Ikac."

266.   Recently, Habersberger J considered the authorities on this topic in Fast v Rockman [2013] VSC 18. His Honour concluded, at [113]–[116]:

"In many cases where wills that do not comply with statutory formalities are sought to be admitted to probate, the would be testator, especially where a solicitor had been engaged to prepare one, is likely to have been aware that the document in question had to be executed in accordance with those formalities to have legal effect. But this, in my opinion, is only one of the factual circumstance which a court will take into account in assessing what ultimately is a question of fact as to whether the requisite intention existed.

Like Murray J in Dolan v Dolan, I consider that the words "without more" have been mentioned by way of emphasising that the court must be satisfied that the deceased really did intend the terms of the document - "without any alteration or reservation" - to be the manner in which his or her property was to be disposed of upon his or her death. Or as EM Heenan J put it in Mitchell v Mitchell, the words "without more" were used in Oreski v Ikac:

... to emphasise the need for the document being propounded for proof as an informal will to express the concluded testamentary intentions and decision of the deceased rather than being some provisional, preliminary or tentative proposal which had not by then received the deceased's full assent.

In my opinion, the insistence by counsel for Mrs Rockman that an unsigned will could never be held to be an informal will under s 9 if a deceased intended to sign a document and thereby to make it his or her will but died before signing it, has rather surprising consequences. Probably the best illustration of this is the following situation. The deceased had read the will prepared by his solicitors on his prior instructions, announced to those present that it was what he wanted in his will and that he was going to sign it, picked up a pen and as he was about to sign collapsed and died from a massive heart attack. The argument by Mrs Rockman's counsel would result in the document about to be signed by the deceased in the above hypothetical situation not being admitted to probate because he still had more to do before it could be recognised as his will. That cannot be correct, in my opinion.

As pointed out by Kirby P in Re Masters, Hill v Plummer a too rigid insistence on the formalities or other characteristics necessary to constitute a document the deceased's will defeats the purpose of a provision such as s 9 to allow a document to be admitted to probate as an informal will where the court is satisfied that the deceased intended that document to be his or her will."

267.   Finally, it is important, in this regard, to remember what Wrangham J said in In theEstate of Knibbs, deceased;Flay v Trueman [1962] 1 WLR 852, at 855–856:

"As Salter J said in Beech's case (In the Estate of Beech, deceased [1923] P 46 at 57):

'I think that, in order to constitute a will, the words used by the testator must be intended by him, at or after the time when he uses them, to be preserved or remembered so as to form the guide to those who survive in carrying out his wishes.'

In other words, in order to be a testamentary act there must be a statement of the deceased's wishes for the disposition of his property after his death which is not merely imparted to his audience as a matter of information or interest, but is intended by him to convey to that audience a request, explicit or implicit, to see that his wishes are acted on."

Consideration

22. Without suggesting that it was the sole foundation of his clients’ case, Mr Wilson accepted that their case substantially depended upon the words spoken by Margaret to Mr Ahern in relation to the 2016 Document, "Yes, that will see us over until we can both see Richard Yeo" (emphasis added). Mr Wilson called in aid the fact that Margaret was, at the time, intelligent and meticulous but knew that she was "going backwards". He submitted that it was clear that Margaret wanted Mr Ahern to be with her when she went to see Mr Yeo and that she understood that Mr Ahern was going away for a fortnight or so.

23. Mr Wilson submitted that, in those circumstances, the Court should be satisfied that what Margaret meant by the expression "that will see us over" was that the 2016 Document was intended to take immediate effect as an alteration to the 2012 Will. While she may have wanted to have matters formalised by Mr Yeo when Mr Ahern came back, the gravamen of Mr Wilson's submission was that it was the very fact that Mr Ahern was going away that motivated Margaret to intend the 2016 Document to have immediate testamentary effect. In other words, it was to have effect until replaced by a more formal document prepared by Mr Yeo once Mr Ahern had returned.

24. For the following seven reasons, the Court is unable to accept Mr Wilson's submission and, accordingly, is unable to be satisfied to the requisite standard (see paragraph [250] of Angius set out in paragraph [21] above) that Margaret intended the 2016 Document to be immediately effective as an alteration to the 2012 Will. Those reasons are:

1. In its own terms the 2012 Document is incomplete. She indicated to Mr Ahern that she would think about how much money she intended to leave Martin.

2. Three times during her conversation with Mr Ahern, Margaret — who, the Court readily infers from Mr Yeo’s evidence of drawing her two previous wills, was familiar with the formalities of will-making — expressly said that she would be approaching Mr Yeo:

1. "So I am going to phone my solicitor about the changes" (paragraph 21 of Mr Ahern's affidavit);

2. "When you get back I will call Richard [Yeo] to come over and arrange the changes" (paragraph 26 of Mr Ahern's affidavit);

3. "Yes, that will see us over and then until we can both see Richard Yeo" (paragraph 28 of Mr Ahern's affidavit – emphasis added).

3. It was Mr Ahern, rather than Margaret, who suggested the creation of the 2016 Document.

4. It was Mr Ahern, rather than Margaret, who suggested that the 2016 Document be signed by her and that he “witness” her signature. There was some criticism of Mr Ahern by Mr Kirby that while Mr Ahern said in his affidavit that he would "witness" her signature on the 2016 Document, there was no reference to that in an earlier statement he had prepared. Nothing turns on that difference.

5. Margaret did not ask Mr Ahern to keep the 2016 Document or to make any special arrangements concerning it, for example that it be kept safe or be provided to Mr Yeo in the event of her death. I infer from Mr Ahern's evidence of how he took the 2016 Document to Mr Yeo that Mr Ahern had in fact taken the 2016 Document with him after it had been created. The point, however, of this and the preceding two reasons, is that nothing in Mr Ahern's evidence (other than that, at his suggestion, Margaret signed it) bespeaks that she placed any particular significance on the 2016 Document that would justify the Court in inferring that she intended it to have immediate testamentary effect.

6. There is no suggestion that Margaret thought her death was imminent. She was obviously content to wait until Mr Ahern had returned from New Zealand so that Mr Yeo could come to her home and make the changes to the 2012 Will with Mr Ahern present.

7. The terms of the 2016 Document are not consistent with Margaret's meticulous nature. It is important to note that the 2016 Document is advanced as an alteration to her 2012 Will, but it is not entirely clear how the alterations would operate on the 2012 Will. Mr Kirby, in my view correctly, submitted that if the 2016 Document were to be admitted as an alteration to the 2012 Will, then a construction suit would be required to determine how the two documents sat together. That would be inconsistent with the picture which the Court has gleaned of Margaret, who even three weeks before her death appeared to be, as Mr Yeo’s evidence noted, as "sharp as a needle".

Conclusion

25. Probate of the 2012 Will will be granted to Alexander and Raymond. The cross-claim will be dismissed.

Costs

26. I have now heard the parties as to costs.

27. There was no dispute between the parties that, in the result, Alexander and Raymond are entitled to an order for their costs of the entirety of the proceedings on the indemnity basis from Margaret’s estate. There was, however, debate about the appropriate costs order to be made in relation to Michelle and Michael’s costs of the proceedings, in particular the cross-claim.

28. The debate centred around the effect of an offer of compromise under the Rules which was served on or about 10 March 2017 (the “Offer”) whereby Alexander and Raymond offered to settle the cross-claim “on the following basis: a. The Cross-Claim be dismissed; b. No order as to costs”.

29. There is no doubt that the Offer was an offer of compromise under the Rules (see Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) Part 20 r 20.26(3)(a)).

30. The issue was that if effect was given to the Offer, then it had the potential to work a result that would be significantly different to that which might usually apply in a probate suit of this kind. The result as to costs in a probate suit is often determined by the application of the judgment of Powell J (as his Honour then was) in Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698 (“Re Hodges”) at 709:

“I turn to deal albeit but briefly with the question of costs.

Costs are, of course, in the discretion of the court, but that discretion, being a judicial, and not an unfettered, one must be exercised in accordance with established principle.

The general principle to be applied in adversary litigation is that costs follow the event, those costs being taxed on a party and party basis.

However, over the years, a number of exceptions to this general rule have come to be recognised. In the field of probate litigation, two such exceptions have come to be recognised, they being:

1.   where the testator has, or those interested in residue have, been the cause of the litigation, the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate;

2.   if the circumstances led reasonably to an investigation in regard to the document propounded, the costs may be left to be borne by those who respectively incurred them: see, eg, Mitchell and Mitchell v Gard and Kingwell (1863) 3 Sw & Tr 278; 164 ER 1280; Orton v Smith (1873) LR 3 P & D 23; Wilson v Bassil [1903] P 239; Spiers v English [1907] P 122; Kenny v Wilson; In the Estate of Holtam; Gillett v Rogers (1913) 108 LT 732.

To these exceptions to the general principle should, perhaps, be added the principle that, although a legal personal representative may be entitled to recover from a party to litigation costs only on a party and party basis, he, as a fiduciary, retains the right to an indemnity from the estate, and, thus, may have recourse to the estate for any difference between his costs on a trustee basis and the costs recovered from a party.”

31. As it had to be in a case of this kind, the Offer was an offer of compromise as to costs. Mr Wilson submitted that if the Court were to give effect to the statutory offer of compromise regime in a case of this kind, then it would run a serious risk of discouraging investigations in the context of probate suits which courts have accepted were reasonable to be made. In those cases courts have generally, but not always, applied the approach set out in the judgment in Re Hodges in what might be termed “reasonable investigation” cases.

32. In my view, there is much force in Mr Wilson's submission, force that was accepted (properly) by Mr Kirby. If the Court accepted that Michelle and Michael had acted reasonably in raising the 2016 Document for investigation, then there should no order as to costs so that they paid their own costs. If they had acted unreasonably, then the Offer should operate so that, in accordance with UCPR Part 42 r 42.15, they will be required to pay Alexander and Raymond’s costs of the proceedings on the ordinary basis up to the date of the Offer and thereafter on the indemnity basis.

33. In those circumstances, the parties accepted that the costs of the cross-claim would be determined by whether or not the Court came to the view that the present case was one that fell within the "reasonable investigation" category. In referring to it as a category, I am not to be taken as suggesting that the approach in Re Hodges has statutory force. Fundamentally, costs remain in the discretion of the Court to be exercised in a principled way, starting with the proposition that costs follow the event. The approach taken in Re Hodges has simply come to be accepted as a guide to the appropriate and principled exercise of that discretion in certain types of cases.

34. Mr Wilson submitted that this was a "reasonable investigation" case. He submitted that his clients had acted correctly and reasonably to have raised for the Court's consideration the status of the 2016 Document. Although they had failed, the basis on which they had put forward their case was reasonable. In particular, the significance for which they had contended of Margaret's words, "Yes, that will see us over till we can both see Richard Yeo", was reasonably open in their context.

35. Mr Kirby submitted to the contrary. He said that when the context was properly understood, including the various other statements made by Margaret in the course of her discussion with Mr Ahern (and on which the Court has relied in forming its ultimate conclusion), this was not a case where it was reasonable to have suggested that Margaret intended the 2016 Document, there and then and without more, to have testamentary effect so as to alter the 2012 Will.

36. On balance, it seems to me that this is a case which falls within the "reasonable investigation" category. There is a danger in undertaking the present exercise of placing too much emphasis on the fact that Michelle and Michael have lost so as to lead automatically to the conclusion that their case was unreasonable. The question of reasonableness must be viewed on the basis of the totality of the evidence and, in my opinion, the totality of the evidence in this case means that it falls on the side of a case where it was reasonable for Michelle and Michael to have required the status or the significance of the 2016 Document to be investigated by the Court.

37. For these reasons, accepting that the Offer is a valid offer of compromise under the Rules, the Court will "order otherwise" for the purposes of r 42.15(2) to effect the result that no order as to costs will be made in respect of Michelle and Michael’s costs of the proceedings.

38. The orders of the Court will be as follows:

1. The cross-claim is dismissed.

2. Grant leave to the plaintiffs to amend paragraph 8 of the statement of claim by deleting the word “common” and inserting the word “solemn”.

3. Order that there be a grant of probate of the will of the late Margaret Kinloch Drummond made on 26 April 2012 in solemn form to the plaintiffs.

4. Dispense with any other requirements of the Rules in relation to the grant.

5. Refer the proceedings to the Registrar in Probate for the making of the grant.

6. Order that the plaintiffs be indemnified out of the estate for their costs of the proceedings on the indemnity basis.

7. Order that UCPR Part 42 r 42.15 not apply to the defendant/cross-claimants.

8. Direct that the exhibits be returned.

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Amendments

27 June 2017 - Minor amendment to cover sheet - date of orders

Decision last updated: 27 June 2017