In the Estate of Frances Ponikvar (deceased) (No. 2)
[2016] SASC 166
•4 November 2016
SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction: Application)
In the Estate of FRANCES PONIKVAR (DECEASED) (NO. 2)
[2016] SASC 166
Judgment of The Honourable Justice Stanley
4 November 2016
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - GRANTS OF PROBATE AND LETTERS OF ADMINISTRATION - LIMITED, SPECIAL AND CONDITIONAL GRANTS OF PROBATE AND ADMINISTRATION - PROBATE OF LOST WILL
SUCCESSION - MAKING OF A WILL - REVOCATION - METHODS OF REVOCATION - DESTRUCTION OR MUTILATION, OR STRIKING OUT PORTIONS - PRESUMPTION OF DESTRUCTION OF LOST WILL INTENDED TO BE REVOKED - REBUTTAL OF PRESUMPTION
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - COSTS - WHERE LITIGATION CAUSED BY TESTATOR, EXECUTOR OR INTERESTED PERSONS - GENERALLY
This was an application for a grant of probate of a copy of a will. The sole issue for determination was whether the presumption of revocation had been rebutted. At trial there was evidence of the deceased having made two wills, the first in 1993 and the second in 2007. The deceased died in 2010. Subsequent searches of the deceased’s home could not discover the original of the 2007 will. The admission to probate of the copy 2007 will would have prejudiced the interests of a niece of the deceased, Sandra Novak. She appeared on the trial of the action and opposed the grant of probate that was sought in respect of the 2007 copy will. She was unsuccessful.
The application was brought by Ivan Ponikvar, who was the named executor in the 2007 will. He seeks orders that his costs be paid out of the estate on an indemnity basis. Ms Novak does not oppose that application. Mr Ponikvar also seeks orders that Ms Novak pay her own costs and any additional costs that have been incurred by him, to be taxed as between solicitor and client, as a result of her opposition to the orders he sought. Ms Novak submits that her costs should be paid out of the estate and taxed as between solicitor and client.
Held, per Stanley J:
1. Ms Novak is to bear her own costs (at [11]).
2. Ms Novak is to pay 25 per cent of Mr Ponikvar’s costs of the trial to be taxed on a party/party basis (at [17]).
3. Mr Ponikvar is entitled to have the balance of his costs of the action paid by the estate on an indemnity basis (at [17]).
Supreme Court Civil Rules 2006 (SA) r 264(2), referred to.
Estate of Plant (Deceased); Wild v Plant [1926] P 139; In the Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698; In the Estate of Molnar [2016] SASC 159, considered.
In the Estate of FRANCES PONIKVAR (DECEASED) (NO. 2)
[2016] SASC 166Testamentary Causes jurisdiction
STANLEY J:
Introduction
This was an application for a grant of probate of a copy of a will. The sole issue for determination was whether the presumption of revocation had been rebutted. At trial there was evidence of the deceased having made two wills, the first in 1993 and the second in 2007. The deceased died in 2010. Subsequent searches of the deceased’s home could not discover the original of the 2007 will. The admission to probate of the copy 2007 will would have prejudiced the interests of a niece of the deceased, Sandra Novak. She appeared on the trial of the action and opposed the grant of probate that was sought in respect of the 2007 copy will. She was unsuccessful.
An issue now arises as to the costs of the action.
The application was brought by Ivan Ponikvar, who was the named executor in the 2007 will. He seeks orders that his costs be paid out of the estate on an indemnity basis. Ms Novak does not oppose that application. Mr Ponikvar also seeks orders that Ms Novak pay her own costs and any additional costs that have been incurred by him, to be taxed as between solicitor and client, as a result of her opposition to the orders he sought. Ms Novak submits that her costs should be paid out of the estate and taxed as between solicitor and client.
The applicant’s costs
It is uncontroversial that Mr Ponikvar is entitled to his costs of the application out of the estate on an indemnity basis. The applicant, being the personal representative of the deceased, is a fiduciary, and retains the right to an indemnity from the estate. All of the expenses of and incidental to proving the deceased’s will are a charge on the deceased’s estate and the applicant has a right to take them without an order of the Court. The onus of depriving a personal representative of costs out of the estate is upon those who contest that right.[1]
[1] Estate of Plant (Deceased); Wild v Plant [1926] P 139.
In this case there is no opposition to the applicant being entitled to an order for payment of his costs out of the estate on an indemnity basis. I do so.
The real issue is Ms Novak’s costs.
Relevant principles
Mr Ponikvar submits that the relevant principles in relation to the costs of an unsuccessful party in probate litigation is stated in In the Estate of Hodges; Shorter v Hodges[2] where Powell J said:[3]
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.
[2] (1988) 14 NSWLR 698.
[3] (1988) 14 NSWLR 698 at 709.
The applicant submits that in this case there is no sufficient reason for the court to depart from the general rule, and that neither of the recognised exceptions apply. Ms Novak submits that the principles identified by Powell J in In the Estate of Hodges apply and that she should be entitled to her costs as she falls within the first exception justifying an order that she be paid her costs out of the estate.
In my view, the principles enunciated by Powell J in In the Estate of Hodges no longer apply to probate litigation in this State. The relevant principles in relation to costs are stated by me in In the Estate of Molnar (No. 2).[4]
[4] [2016] SASC 159 at [8] – [15].
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 provides:
(1) As a general rule, costs follow the event.
(2) The general rule is, however, subject to specific rules to the contrary1 and also to the following exceptions (which apply subject to the Court's order to the contrary)—
(a)the costs of an amendment are to be awarded against the party making the amendment;
(b)the costs of an application to extend time fixed by or under these Rules are to be awarded against the applicant;
(c)the costs of an application that should have been (but was not) made at an earlier stage of the proceedings are to be awarded against the applicant;
(d)the costs of an adjournment arising from a party's default are to be awarded against the party in default;
(e)the costs of proving a fact or document that a party has unreasonably failed to admit are to be awarded against that party;
(f)in an action founded on a claim for defamation, general costs of action are not to be awarded in favour of the successful plaintiff unless the damages exceed $50,000;
(g)in an action founded on a claim for damages or any other monetary sum (other than a claim for defamation), general costs of action are not to be awarded in favour of the successful plaintiff unless the amount awarded exceeds $120,000.
…
Supplementary r 195 provides:
Costs in probate matters
When there are a number of separately represented parties, the Court will exercise its general discretion as to costs under rule 263 of the Rules as appropriate in the circumstances of a particular case, but having particular regard to—
(a) ordering costs against parties who have not succeeded;
(b) ordering costs in the light of whatever offers have been made under rule 187 of the Rules;
(c) not giving full costs to separately represented parties when they could properly have been jointly represented;
(d) awarding less than full costs when the amount in issue is relatively small.
In Kerr v Kerr (No. 2)[5] Gray J addressed the practice in relation to the costs of an application for rectification. He said:[6]
[5] [2016] SASC 24.
[6] [2016] SASC 24 at [3] - [4].
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)[7] 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:[8]
[7] [2012] SASCFC 105.
[8] [2012] SASCFC 105 at [8] – [12].
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:
¾ The general rule is that costs follow the event.
¾ Departure from the general rule is to be the exception, occurring only when there is adequate reason for such an order.
¾ Costs should be awarded from the estate where the testator’s conduct has been the cause of the litigation.
¾ There 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.
¾ In 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[9] Kourakis CJ made the following observations in relation to the award of costs in probate litigation:[10]
[9] [2014] SASC 98.
[10] [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 19th 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 observations of Kourakis CJ in Fielder v Burgess were made before the court made supplementary rule 195. In my view, supplementary rule 195 is informed by those observations, if it does not enshrine in the rules the principles to which the Chief Justice referred in Fielder v Burgess, reflecting the modern approach to the award of costs in probate litigation. Its purpose is to alter the approach previously taken to the award of costs in probate actions.
Consideration
In my view the salient factor in deciding the liability for Ms Novak’s costs is that she was ultimately unsuccessful in opposing the application.
On that basis I consider that she should bear her own costs.
I am reinforced in this view by the fact that, notwithstanding her reliance upon the evidence of her conversation with the deceased shortly after she made the 2007 will when the deceased reassured Ms Novak that she was “still in it”, there was strong evidence that rebutted the presumption against revocation. Nonetheless, Ms Novak pressed ahead in opposing the application. No doubt she did so in the hope that if the court found that the presumption was not rebutted, she would be a beneficiary of the deceased’s estate. While I accept that the deceased’s conduct contributed to the stance adopted by Ms Novak, that is no longer a relevant consideration.
The second issue in relation to costs is whether Ms Novak should be liable to pay the applicant any costs.
While there is much to be said for the proposition that costs should follow the event and, accordingly, an order should be made that Ms Novak pay the applicant’s costs of the proceedings, I do not consider that is an appropriate order. If Ms Novak had not opposed the application, Mr Ponikvar would have had to rebut the presumption of revocation. The evidence still would have had to have been adduced to satisfy the court that the presumption of revocation was rebutted. Mr Ponikvar submits that the trial was needlessly prolonged by the participation of Ms Novak. Ms Novak submits that her role in the trial was to lead further evidence by way of cross-examination from the deponents to the affidavits filed and relied upon by Mr Ponikvar. She submits this evidence would not have been adduced otherwise but should have been because it was relevant to the issue of rebuttal of the presumption. She submits that the result of her participation in the trial, light was thrown onto the relevant events permitting the court to make the findings of fact it did. Accordingly, it can’t be said that her participation was unreasonable or led to unreasonable costs being incurred.
Mr Ponikvar submits that it must have been apparent to Ms Novak well before trial that the presumption had been rebutted and that her opposition to the application was needlessly obstructive and ultimately futile. I am not prepared to decide the question of costs on that basis. However, I do consider that the trial was longer than it would otherwise have been had Ms Novak not opposed the application. I consider that it would be just and reasonable that she be ordered to pay the additional costs that have been incurred by the applicant as a result of Ms Novak’s opposition to the orders sought.
It would be convenient to deal with those costs on a broad-axe pragmatic basis. Doing the best I can, I would order that Ms Novak pay 25 per cent of the applicant’s costs of the trial. Those costs are to be taxed on a party/party basis in accordance with the provisions of 6SCR 264(2).
Conclusion
Ms Novak is to pay 25 per cent of Mr Ponikvar’s costs of the trial to be taxed on a party/party basis. Mr Ponikvar is entitled to have the balance of his costs of the action paid by the estate on an indemnity basis.
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