Fazio v Naso [No 2] - [2017] WASC 221

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: FAZIO -v- NASO [No 2] [2017] WASC 221

CORAM: MARTINO J

HEARD: 31 JULY 2017

DELIVERED : 31 JULY 2017

FILE NO/S: CIV 1206 of 2016

MATTER :The Estate of MARIA ANTONINA FAZIO late of 40 Skeahan Street, Spearwood, Western Australia, Retired, deceased.

BETWEEN: SEBASTIANO GIUSEPPE FAZIO as Executor of the Will of MARIA ANTONINA FAZIO
Plaintiff
AND
BIANCA NASO as Executor of the Will of MARIA ANTONINA FAZIO
First Defendant
NUNZIATA MONASTRA as Beneficiary under the Will of MARIA ANTONINA FAZIO
Second Defendant
ERIGO FAZIO as Beneficiary under the Will of MARIA ANTONINA FAZIO
Third Defendant
SEBASTIANO GIUSEPPE FAZIO as Beneficiary under the Will of MARIA ANTONINA FAZIO
Fourth Defendant
FRANCESCO FAZIO as Beneficiary under the Will of MARIA ANTONINA FAZIO
Fifth Defendant

Catchwords:

Costs - Probate action - Exercise of discretion

Legislation:

Nil

Result:

Plaintiff's costs to be paid out of estate on an indemnity basis

Category: B

Representation:

Counsel:

Plaintiff:     Dr J J Hockley
First Defendant              :     Mr J G M Fiocco
Second Defendant         :     Mr J G M Fiocco
Third Defendant            :     Mr R A S Rowick
Fourth Defendant           :     In person
Fifth Defendant              :     No appearance

Solicitors:

Plaintiff:     Success Legal
First Defendant              :     Slater & Gordon Lawyers
Second Defendant         :     Slater & Gordon Lawyers
Third Defendant            :     Richard Rowick Lawyers
Fourth Defendant           :     In person
Fifth Defendant              :     No appearance

Case(s) referred to in judgment(s):

Blenkinsop v Herbert [2017] WASCA 87 (S)
Oreski v Ikac [2008] WASCA 220

MARTINO J: The late Mrs Maria Antonina Fazio, who passed away on 25 May 2014, executed two wills, one on 22 August 1998 and the other 9 June 2005. The parties were in dispute as to the validity of those wills.
The plaintiff, who is plaintiff in his capacity as a nominated executor of the 1998 will and fourth defendant in his personal capacity, the first defendant, the second defendant and the third defendant are children of Mrs Fazio. The fifth defendant is the son of the fourth defendant.
A statement of assets and liabilities filed by the plaintiff on 15 September 2015 showed that the estate had a net value of approximately $6,600,000.
The parties have resolved their disputes, save as to costs. On 1 March 2017 I ordered that the first and second defendants have leave, pursuant to O 23 r 2(4), of the Rules of the Supreme Court 1971 (WA), to withdraw their defence filed on 11 May 2016, that the court pronounce as to the force and validity of the will of Mrs Fazio made 22 August 1998 and that, subject to any requirements of the Probate Registrar, the Probate Registrar do issue a Grant of Probate in solemn form in favour of the plaintiff and the first defendant as proving executors.
I reserved the costs of the action and made directions for the filing of outlines of submissions and affidavits as to costs and for the parties to confer as to what cost orders should be made. Outlines of submissions have been filed by the plaintiff, the first and second defendants and the third defendant. Affidavits have been filed by the plaintiff, the second defendant and the third defendant. The parties have not agreed the question of costs and so the action is before me to make costs orders.
During her lifetime Mrs Fazio saw Dr Mark Wilson, Geriatrician, who wrote reports dated 10 March 2005 and 9 June 2005, both addressed to Mrs Fazio's general medical practitioner. In his report dated 10 March 2005 Dr Wilson said that the family had always dealt with finances due to Mrs Fazio's poor English, 'but at this stage no‑one has an Enduring Power of Attorney'. He expressed the opinion that the history and examination findings were consistent with a moderate severity dementia but that he considered it important to exclude other causes of cognitive impairment, such as hypothyroidism, and he had arranged a blood screen and a cranial CT scan. Dr Wilson said that, unless there was a significant finding on those investigations, it was likely that Mrs Fazio had an Alzheimer's type dementia. He also said that at that stage it did not sound like Mrs Fazio required formal community support.
In the report of 9 June 2005 Dr Wilson said that the cranial CT scan did not show a significant structural cause for Mrs Fazio's cognitive impairment. In that second report Dr Wilson said that he had spoken on the telephone to the second defendant about the possible trial of medication, which Mrs Fazio was not in favour of, and Dr Wilson decided against.
The second defendant has deposed that in 2005 she took her mother to see Dr Wilson who advised the second defendant that Mrs Fazio likely had the onset of dementia, that he suggested that the second defendant obtain an enduring power of attorney so that her affairs could be properly managed, and that the second defendant understood from this advice that Mrs Fazio was capable of granting an enduring power of attorney at that time. The second defendant discussed this advice with the fourth defendant who told the second defendant that the third defendant and the fourth defendant had taken Mrs Fazio to see the firm of Frichot & Frichot and that Mrs Fazio had executed a new will and an enduring power of attorney. The fourth defendant provided copies of the second will and an enduring power of attorney nominating the third and the fourth defendant as her attorneys.
On Mrs Fazio's death certificate severe dementia from 2005 to 2014 is shown as a contributory cause of her death.
In the years following the 2005 enduring power of attorney and the second will there were disputes between the members of the family, including between the third and fourth defendant, about matters associated with Mrs Fazio's assets, including loans made pursuant to the enduring power of attorney.
The major assets in Mrs Fazio's estate were her home in Spearwood, the Myaree shopping centre and a property in Munster.
The first defendant and the fourth defendant were nominated as executors of the first will. Under the first will the Spearwood property and its contents were to be divided equally between the third defendant and the fifth defendant, and the balance of Mrs Fazio's estate was to be divided in equal shares between Mrs Fazio's children.
The third defendant and the fourth defendant were nominated as executors of the second will. Under the second will one half of the Spearwood property and its contents were left to the fifth defendant. The balance of the estate was to be divided equally into four testamentary trusts, one trust for the benefit of each of the first, second, third and fourth defendants and their families.
On 21 July 2014 the fourth defendant sent an email to the first, second and third defendants attaching a copy of the second will and saying that he intended to apply for probate.
On 6 March 2015 the solicitor for the third defendant wrote open letters in substantially the same terms to the first defendant, the solicitor for the second defendant, the fourth defendant and the fifth defendant. The letter contained a detailed analysis of matters of family history and Mrs Fazio's testamentary capacity. It effectively proposed that the parties agree to the distribution of the estate of Mrs Fazio in accordance with the first will.
The second defendant has deposed that she was suspicious and concerned with the suggestion of not proving the second will for reasons which included that the third and the fourth defendant had not previously suggested the second will was not valid, the second will had been prepared by a lawyer and she regarded Dr Wilson's reports as not being conclusive.
On 17 March 2015 the solicitor for the second defendant wrote to the solicitor for the third defendant. The second defendant rejected the third defendant's proposal. Her position was that Mrs Fazio did not have testamentary capacity at the time of the second will but that the first will was also invalid by reason of undue influence. The second defendant proposed that she receive one quarter of Mrs Fazio's estate.
The solicitor for the third defendant proposed that mediation occur, but that did not take place because all parties did not agree to it.
On 12 June 2015 the solicitor for the third defendant wrote to the solicitors for the second defendant informing them that the third defendant would commence proceedings to prove the 1998 will and file an application for a grant of administration to preserve the assets of the estate. The solicitor for the third defendant sent a copy of that letter to the fourth defendant.
On 14 June 2015 the fourth defendant sent an email to the second defendant's lawyer concerning Mrs Fazio's estate in which he said, amongst other things, that a barrister had advised that both wills should be put before the court.
On 18 June 2015 the fourth defendant contacted the solicitor for the third defendant and informed him that he supported the third defendant's position and that if the first will was proved he would seek to be appointed a joint administrator of the estate. On the same day the solicitor for the third defendant wrote to the solicitors for the second defendant informing them of the fourth defendant's position and that it was the solicitors for the third defendant's view that opposing the first will was futile and would waste costs.
On 26 June 2015 the solicitors for the second defendant wrote to the solicitor for the third defendant informing them that the second defendant agreed that the probate application should proceed and that there was no need for the third defendant to apply for a grant of administration, that the first defendant had poor mental health and that it was unlikely that she would be able to perform the duties of executor, that the fourth defendant should be the sole executor and that, before there was any application for a grant of probate, a mediation should take place.
On 31 July 2015 the solicitor for the third defendant wrote to the solicitors for the second defendant informing them that he had been told by the fourth defendant that the first and fourth defendants would be applying for probate of the 1998 will and so the third defendant did not propose to take any further action in respect of that will.
On 17 September 2015 the plaintiff's solicitor filed a motion for a grant of probate to the plaintiff. In his affidavit in support of the application, made on 15 September 2015, the plaintiff produced the 1988 will and annexed the 2005 will.
Also annexed to the affidavit were copies of Dr Wilson's medical reports of 10 March 2005 and 9 June 2005. On 23 September 2015 the second defendant lodged a caveat based on the claims that Mrs Fazio lacked testamentary capacity when she made her last will and that the last will was an informal document which did not embody Mrs Fazio's testamentary intentions.
On 6 October 2015 the first defendant wrote to the plaintiff's solicitors contending that both wills were invalid.
On 16 October 2015 the solicitors for the second defendant wrote an email which was copied to the plaintiff's solicitors in which they said that the second defendant did not agree to the obtaining of probate of the first will. On 20 October 2015 the third defendant's solicitors wrote to the plaintiff's solicitors informing them that the third defendant supported the application for probate of the first will.
On 28 October 2015 a Probate Registrar of the court wrote to the plaintiff's solicitors referring to issues raised. The Probate Registrar suggested that the plaintiff may wish to consider bringing an action in the contentious jurisdiction of the court.
On 11 February 2016 the plaintiff, as a person named as executor of the 1998 will, commenced this action by a writ of summons endorsed with a statement of claim in which he sought an order that the court pronounce the force and validity of the 1998 will.
On 11 May 2016 the fourth defendant, in his personal capacity and acting in person, filed a defence which was in substance a letter to me in which he said that he supported probate being granted of the 1998 will as he applied for in his capacity as a person named as executor of the 1998 will.
On 11 May 2016 the fifth defendant, acting in person, filed a defence which was in substance a letter to me in which he said that he supported probate being granted in respect of either of the wills.
On 11 May 2016 the first defendant and the second defendant filed a joint defence in which they opposed the court pronouncing the force and validity of the 1988 will and sought an order that the court pronounce for the force and validity of the 2005 will. In this defence and subsequent correspondence and court attendances the first defendant and the second defendant have used the same solicitors who are not the solicitors who had previously acted for the second defendant.
On 12 May 2016 the third defendant filed a defence in which he pleaded that at the time of the 2005 will Mrs Fazio lacked testamentary capacity.
On 25 July 2016 the first defendant filed a notice that she would abide by the decision of the court. On 16 January 2017 the first defendant withdrew her notice of 25 July 2016.
Mediation before a Registrar took place in this action on 27 July 2016, 30 August 2016 and 11 November 2016. The dispute remained unresolved.
On 3 November 2016 the third defendant's solicitors wrote a letter to the parties stating that it was their position that the onus of proof lay on the first and second defendants and that the third defendant wished the action to proceed on an expedited basis.
On 18 November 2016 the solicitors for the first and second defendants wrote to the solicitor for the third defendant proposing, in substance, that the first will be proved but that the parties agree to the estate being distributed so that the children of Mrs Fazio share equally in the balance of the estate after one half of the disputed property and its contents were distributed to the fifth defendant. On 5 December 2016 the solicitors for the third defendant wrote to the solicitors for the first and second defendant rejecting that offer and making a counter-offer that the first will be proved and that the parties agree to the estate being distributed so that $10,000 of the third defendant's entitlement be paid to each of the first and second defendants. That offer was not accepted.
On 14 December 2016 I made directions for the exchange of expert evidence. On 1 March 2017 I made the orders to which I have already referred.
Today, at the hearing of the argument as to costs, I pointed out that the first order I made on 1 March 2017, that the first and second defendants have leave pursuant to O 23 r 2(4), of the Rules to withdraw their defence should not have been made under O 23 because O 23 does not apply to a probate action: O 73 r 18(1).
I had overlooked O 73 r 18(1), when I made the orders on 1 March 2017. No party submits to me that the remaining orders I made on 1 March 2017 should not have been made. In my view, having regard to the reports of Dr Wilson and the position taken by all parties, those orders remain appropriate.
The plaintiff submits that the position of the first and second defendant was unreasonable and seeks an order that the first and second defendants pay the costs of the action. Alternatively, he seeks an order that they bear their own costs and an order that the plaintiff's costs be paid out of the estate on an indemnity basis.
The first and second defendants submit they should not be ordered to pay any costs and that their costs should be paid out of the estate.
The third defendant submits that the second defendant, or both the first and second defendant, should pay the third defendant's costs on an indemnity basis; alternatively, that the second defendant, or both the first defendant and the second defendant pay the third defendant's costs on a party/party basis without regard to the limits in the scale and that the estate indemnify the third defendant for any shortfall in the third defendant's costs; alternatively, that the third defendant's costs should be paid from the estate on an indemnity basis.
As to that second alternative, the third defendant has referred to the decision in Blenkinsop v Herbert [2017] WASCA 87 (S).
The fourth defendant submits that the second defendant should pay all parties' costs.
The principles upon which costs orders should be made in probate actions were explained by Newnes AJA (Martin CJ & McLure JA agreeing) in Oreski v Ikac [2008] WASCA 220 as follows:
68.It is trite law that the court has a wide discretion in determining by whom the costs of an action should be borne. The general rule is that costs follow the event. In probate actions, however, two exceptions to the general rule have been recognised:
1.where the testator has, or those interested in the 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 concerning the document propounded, the costs may be left to be borne by those who incurred them.
69.See, for example, Mitchell v Gard (1863) 164 ER 1280, 1281; Middlebrook v Middlebrook (1962) 36 ALJR 216, 217; Re Estate of Hodges (Dec); Shorter v Hodges (1988) 14 NSWLR 698, 709; Shorten v Shorten (No 2) [2003] NSWCA 60. As was pointed out in Shorten v Shorten [20], the two categories of exception tend to overlap, but they are not coterminous. See also in that respect the discussion in Perpetual Trustee Co Ltd v Baker [1999] NSWCA 244 [13] - [15].
In my view there are some unusual aspects to this case. The third and fourth defendants, who have maintained in this action that the second will was invalid, went with Mrs Fazio to the solicitors Frichot & Frichot when the second will and an enduring power of attorney were prepared and acted under that enduring power of attorney prepared at the same time. Further, for some time prior to the action being commenced it had been the position of the fourth defendant that the second will was valid.
Further, there was considerable acrimony between the members of the family, including between the third defendant and the fourth defendant, about moneys that had been lent from the estate of Mrs Fazio.
However, it now appears that at the time the second will was prepared Mrs Fazio did not have testamentary capacity. That is the conclusion that I reached on 1 March 2017 as I have already said. In assessing how I should exercise my discretion as to costs, it is necessary to bear in mind that what was said in Oreski v Ikac as to the two exceptions to the general rule was said in the context that the court has a wide discretion in determining by whom costs of an action should be borne. The Court of Appeal was not saying that that wide discretion did not exist, but it was saying that there are two well‑recognised exceptions to the general rule that costs follow the event.
It is also necessary to bear in mind that it cannot be said, in my view, that the conduct of the first and second defendants was the cause of this action being commenced. To the contrary, the position of counsel retained by the plaintiff was, in my view, quite properly that both wills had to be presented to the court.
That had to happen, in my view, because the second will was on its face a validly executed will prepared by lawyers. The issues raised in this action had to be addressed and they have now been addressed. In all the circumstances it is my view, bearing in mind some of the unusual aspects of this case to which I have referred, that it was not unreasonable for the first and second defendants to consider the issues of validity of the wills and undue influence warranted consideration and investigation.

I take the view that they should not be ordered to pay any party's costs of this action. I take the view that they should not receive their costs out of the estate but that, in the exercise of my discretion, they should be left to bear their own costs.
I have given consideration to the position of the third defendant. I have considered whether the third defendant's position is different because the third defendant has taken steps to resolve the issues, but I have nevertheless decided in the exercise of my discretion that the third defendant has decided to incur his own legal costs.
I am not there referring to the costs incurred by the plaintiff, which as I have already said, were necessarily incurred, but the third defendant has decided to incur his own legal costs and I take the view that the appropriate exercise of my discretion is that the costs incurred by him be borne by him.
I therefore order that the plaintiff's costs be paid out of the estate on an indemnity basis. I make no other order as to costs so that the costs borne by the defendants are borne by those who incurred them.