Jageurs v Downing (No 2)
[2015] VSC 509
•25 September 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROBATE LIST
S PRB 2014 17341
IN THE MATTER of the will and informal codicil of DANIEL JOSEPH JAGEURS
| MICHAEL DAVID JAGEURS (who is sued as executor and trustee of the estate of DANIEL JOSEPH JAGEURS) | Plaintiff |
| v | |
| PATRICIA MARGARET DOWNING | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 11 September 2015 |
DATE OF RULING: | 25 September 2015 |
CASE MAY BE CITED AS: | Jageurs v Downing (No 2) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 509 |
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WILLS & ESTATES — Where substantial delay in applying for grant of probate of will and informal document as a codicil — Application to propound informal document refused — Where lack of communication with other sibling beneficiaries — Whether executor should be passed over as the executor of the estate.
COSTS — Whether usual rules as to probate litigation apply — Whether costs of unsuccessful party should be assessed on an indemnity basis — Hall v Carney (No 2) [2012] SASCFC 105 — Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M McKenzie | A. B. Natoli Pty Ltd |
| For the Defendant | Mr S Newton | Suzanne Jones Lawyers |
| For the non-party, Annette Hope | Ms U Stanisich | David Gibbs & Associates |
| For the non-party, John Jageurs | Mr G Baker | Wisewould Mahony |
HER HONOUR:
Introduction
The plaintiff (‘Michael’) is the executor of the estate of his late father, Joseph Jageurs (‘the deceased’). By application filed 13 November 2014, the plaintiff sought a grant of probate of his father’s will dated 5 April 2007 and an informal document dated 20 May 2010, pursuant to s 9 of the Wills Act 1997 (‘the Act’).
The defendant (‘Patricia’) successfully opposed the application for the informal document to be admitted as a codicil to the 2007 will.[1]
[1]Jageurs v Downing [2015] VSC 432 (21 August 2015) [135].
In the reasons for judgment, I indicated that I would hear the parties as to the costs of the proceeding and, subject to further submissions, my preliminary view was that the entitlements of Patricia and Annette under the 2007 will should not be affected in any way.[2]
[2]Ibid [137].
I also referred Michael’s failure to administer the estate of the deceased in a timely manner and to communicate effectively with Patricia, which raised the question of whether Michael was the appropriate person to be propounding the 2007 will, notwithstanding he is named as the executor in it.[3]
[3]Ibid [136].
On 11 September 2015, the parties to the proceeding and their two siblings, John Jageurs (‘John’) and Annette Hope (‘Annette’), appeared and made submissions as to whether Michael should remain as the executor of the estate the costs of this proceeding.
Should Michael remain as the executor of the estate of the deceased?
Of the four siblings, only Patricia sought that Michael to be passed over as the executor of the estate. The remaining siblings pointed out the estate was relatively straight forward to administer in that it was necessary for Michael to transfer the properties to the respective beneficiaries who take them under the deceased’s will. They considered that to appoint an independent administrator to undertake the administration would incur unnecessary expense. Michael’s counsel informed the Court that Michael would make an application for a grant of probate of the 2007 will within two weeks and transfer the 33 Kireep Road property to Patricia within six weeks of the grant being made.
Whilst I consider that these submissions fail to take account of the reasons for the doubts expressed in the judgment as to Michael’s ability to administer the estate, I will proceed with Michael remaining as the executor of the estate on the terms as were indicated by his counsel but subject to the Court being informed as to the progress of the administration of the estate, including the transfer of the 33 Kireep Road property to Patricia.
Costs of the application to admit the informal document as a codicil to the 2007 will
Michael and John
In respect of the application to admit the informal document as a codicil to the 2007 will, Michael submits the following orders should be made:
(a) the executor’s costs be paid out of the estate of the deceased on the usual indemnity basis;
(b) Patricia’s costs in respect of the informal codicil application be paid out of the estate on the standard basis; and
(c) the costs of both parties be borne by the four siblings pro rata in the proportions as the value of their entitlements under the will at the date of distribution.
John supports Michael’s submissions on the costs.
Patricia and Annette
Patricia submits the costs should be paid out of the assets left to Michael and John under the 2007 will and those costs should be paid on an indemnity basis.
Patricia’s estimated costs on an indemnity basis, until the end of trial, are $57,354.48 (including GST), with this amount not including any costs since the trial.
Annette supports Patricia’s submissions and also seeks her costs of and incidental to appearing at the hearing on 11 September 2015.
Applicable principles
Section 24(1) of the Supreme Court Act 1986 provides that costs are in the discretion of the court. This discretion must be exercised in accordance with established principle. The ‘usual order as to costs’ is that a successful party in litigation is entitled to an award of costs in its favour. The unsuccessful party bears the liability for the costs of the unsuccessful litigation.[4]
[4]Oshlack v Richmond River Council [1993] HCA 11; (1998) 193 CLR 72, 97.
Where the litigation concerns probate, such as whether a grant should be made of an informal will, the Court generally applies the usual rules as to costs in probate proceedings, that is, where the litigation has been caused, or contributed to, by the way in which a testator made his or her testamentary intentions known, costs would usually be ordered to be paid out of the estate. The authorities concerning the costs in probate proceedings and the administration of an estate are conveniently and clearly set out in Hall v Carney (No 2).[5]
[5][2012] SASCFC 105 (17 September 2012) [8]-[12] (Gray J). See also Fielder v Burgess [2014] SASC 98 (7 August 2014); Murdocca v Murdocca (No 2) [2002] NSWSC 505 (25 June 2002).
The reason for the usual rules relating to probate litigation was explained by Sir J P Wilde in Mitchell v Gard as follows:
It is of high public importance that doubtful wills should not pass easily into proof by reason of the cost of opposing them. It is of equal importance that parties should not be tempted into a fruitless litigation by the knowledge that their costs will be defrayed by others.[6]
[6] (1863) 3 Sw & Tr 275, 279.
These general rules were repeated in modified form by Powell J in Re Hodges some 125 years later, and remain the key principles for assessing whether, in exercising its discretion, the Court should decline to apply the ‘usual order’ in probate litigation.[7]
[7](1988) 14 NSWLR 698, 709; Shorten v Shorten[No 2] [2003] NSWCA 60 (9 April 2003) [15].
Confusion as to costs in probate litigation can occur where there is a significant degree of overlap between circumstances in which the testator is properly seen as the cause of the litigation, and circumstances that reasonably call for an investigation. This was referred to by White J in Gray v Hart [No 2], where his Honour said:
Where the categories do overlap, if the testator is properly seen as the cause of the litigation, the usual order is that costs be paid out of the estate. It is where the testator is not the cause of the litigation, but an investigation is reasonably called for, that there is usually no order as to the unsuccessful party’s costs. Of course if there is no reasonable cause for investigation, that is, if the unsuccessful party has not acted reasonably, then he or she will pay the costs.[8]
Trustee’s entitlement to indemnity from trust funds
[8][2012] NSWSC 1562 (11 December 2012) [19].
Section 36(2) of the Trustee Act 1958 provides that:
A trustee may reimburse himself or pay or discharge out of the trust premises all expenses incurred in or about the execution of the trusts or powers.
As well, r 63.26 of the Rules provides as follows:
Unless the Court otherwise orders, a party who sues or is sued as trustee or mortgagee shall be entitled to the costs of the proceeding out of the fund held by the trustee or out of the mortgaged property in so far as the costs are not paid by any other person.
Trustees are ordinarily entitled to costs out of the estate in litigation relating to the administration of the trust estate, unless they have been guilty of misconduct.[9] Indemnity is confined to expenses that are properly incurred.[10] Expenses and liabilities that are improperly incurred, such as acting beyond power, in bad faith or exercised power ‘with an absence of care and diligence that a person or ordinary prudence should exercise’ are not caught by the right of indemnity and shall be borne by the trustee personally.[11] Both English[12] and Australian[13] authorities have affirmed that, in cases of doubt, the trust estate should bear the trustee’s costs. Ormiston JA approved the approach of Bowen LJ in Re Beddoe to a limited extent, where his Honour expanded upon the meaning of ‘properly’. Bowen LJ stated that the term ‘properly’ means that trustees should not be personally liable for ‘mere errors in judgment’ and that ‘mere bona fides is not the test’.[14] Ormiston JA added that ‘what is “proper” and “improper” must be answered by reference to the circumstances and in particular by reference to the duty with which a trustee was obliged to comply or the power which a trustee is intending to exercise’.[15]
[9]Turner v Hancock (1882) 20 Ch D 303; J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 7th ed, 2006) 591 [2136].
[10]Dal Pont, Equity and Trusts in Australia (Lawbook Co, 5th ed, 2011) 689, 679 citing Turner v Hancock (1882) 20 Ch D 303, 305; Re Beddoe [1893] 1 Ch 547, 558; Nolan v Collie (2003) 7 VR 287, 303–10 (Ormiston JA).
[11]Dal Pont, above n 13, 679–80 citing Re O’Donogue [1998] 1 NZLR 116, 121; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566, 606; Nolan v Collie (2003) 7 VR 287.
[12]Re Beddoe [1893] 1 Ch 547, 558.
[13]Nolan v Collie (2003) 7 VR 287, 304.
[14]Re Beddoe [1893] 1 Ch 547, 562.
[15]Nolan v Collie (2003) 7 VR 287, 306–7.
The onus to prove that the trustees should not be indemnified rests with the party seeking to deny the right of indemnity to demonstrate that costs have been improperly incurred.[16]
[16]Ibid 306.
Was the deceased the cause of the application under s 9 of the Wills Act 1997?
Michael submits that it was proper and appropriate that he apply to have the informal document admitted to probate. It was a document expressing testamentary intentions of the deceased, signed by the deceased and witnessed by Mr Beninga. As well, the deceased said words to the effect of his intentions to Michael, John, Mr Beninga and his solicitor, Mr Paul Watkins.
In making this submission, Michael is submitting that the usual orders for costs in probate matter should be applied because the litigation was caused by the deceased. In effect, he submits this was a case in which there was no fault in bringing the application because Michael had a duty to propound the informal document and required the Court to investigate the matter.
There is no doubt that it would be reasonable for an executor at least to make some inquiries into the nature of an informal document such as in the present case, but there is no duty to bring an application that the document should be admitted as an informal will.[17]
[17]Rowe v Storer (No 2) [2013] VSC 635 (21 November 2013) [24]; Re Leonard Michial Quinlivabn; Ex Parte Quinlivan [2013] WASC 286 (2 August 2013) [33]–[34].
In my view, the application to propound the informal document was not the fault of the deceased nor was it proper or appropriate in the circumstances. Michael made the decision to propound a document in full knowledge of the many grounds that were ultimately the reasons for the failure of the application. Michael’s submissions ignore a number of important and critical reasons for the decision to refuse the application:
(a) there was no evidence to support the contention that the deceased intended the informal document to be a codicil to his 2007 will;
(b) the informal document purported to devise property that the deceased was unable to devise;
(c) the application was not brought by Michael as an impartial executor seeking guidance from the court in the administration of the estate;
(d) Michael, with the support of John, brought the application for his own and John’s significant benefit and to the significant detriment of Patricia;
(e) Michael failed to make proper discovery of Mr Watkins’ file and failed to obtain an accurate affidavit from Mr Watkins; and
(f) both Michael and John were found not to be credible witnesses and there was an inference of influence by them over the deceased.
My view as to the costs of this proceeding remain unchanged, that is, the entitlements of Patricia and Annette under the 2007 will should not be affected in any way.
Patricia’s costs in her related proceeding
In proceeding number S CI 2014 05424, Patricia has sought orders that Michael make an application for a grant in the estate or renounce probate. That proceeding is no longer necessary in view of the findings in this proceeding and Patricia also seeks her costs of proceeding number S CI 2014 05424.
In my view, Patricia acted reasonably in bringing her related proceeding. Michael had little or no communication with her concerning his administration of the estate and what information she did receive was incorrect and misleading. She needed finality for herself in respect of the ownership of the 33 Kireep Road property, something she did not have for three and a half years before she issued the proceeding. Had Michael made a timely application for a grant of probate of the deceased’s will, the costs of this proceeding would not have been incurred by Patricia.
Michael’s conduct in relation to the administration of the estate of the deceased is such that it falls within the category of bad faith or has been undertaken with an absence of care and diligence that a person of ordinary prudence should exercise. Accordingly, Michael should pay Patricia’s costs of this proceeding and these costs should be paid by him personally.
Should the costs be assessed on an indemnity basis?
Patricia seeks that her costs of this proceeding and proceeding number S CI 2014 05424 be paid on an indemnity basis.
Although the usual order is to award costs to the successful party on a standard basis, the Court has a discretion to make a special costs order in special circumstances.[18]
[18]Australian Electoral Commission v Towney [No 2] (1994) 54 FCR 383.
In Ugly Tribe Co Pty Ltd v Sikola,[19] Harper J identified the following circumstances as warranting a special costs order, noting also that the categories of circumstances are not closed:
[19][2001] VSC 189 (14 June 2001).
(a) the making of an allegation, known to be false, that the opposite party is guilty of fraud;
(b) the making of an irrelevant allegation of fraud;
(c) conduct which causes loss of time to the Court and to other parties;
(d) the commencement or continuation of proceedings for an ulterior motive;
(e) conduct which amounts to a contempt of court;
(f) the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law; and
(g) the failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial.[20]
[20]Ibid [7]-[8], full citations omitted.
In my view, there is a proper basis for the court to exercise its discretion to award indemnity costs to Patricia. Michael’s delay in administering the estate and his application to propound the informal document as a codicil to the 2007 will was an attempt by him to persuade Patricia to sign over part of the 33 Kireep Road property to John. The reasons for the failure of the application to propound the informal document should have been apparent to Michael, and to John, who supported him. Their evidence was not credible. After the application was issued, Michael failed to make discovery of the solicitor’s file until a court order was obtained compelling him to do so. He also placed considerable pressure on Patricia to agree to transfer part of the 33 Kireep Road property to John by his letter dated 14 February 2014 to her. Not only was it three and a half years after the deceased’s death but it contained inaccurate statements and then invited her to engage in ‘round table discussions’, making any discussion on the basis alleged in the letter completely unfair and misleading to her.
Orders
Accordingly, I will order as follows:
(a) The costs of Patricia be taxed or agreed on an indemnity basis and paid so that her entitlements under the 2007 will are not affected in any way.
(b) The costs of Annette of an incidental to her appearance on 11 September 2015 be taxed or agreed on a standard basis and paid so that her entitlements under the 2007 will are not affected in any way.
(c) Michael’s costs of the application to propound the informal document as a codicil to the 2007 will be taxed or agreed and paid so that the entitlements of Patricia and Annette under the 2007 will are not affected in any way.
I will also make an order in proceeding number S CI 2014 05424 that Patricia’s costs be taxed or agreed on an indemnity basis and paid by Michael personally. A copy of these reasons and the orders will be retained on the file for proceeding number S CI 2014 05424.
I will adjourn this proceeding and proceeding number S CI 2014 05424 to 11 December 2015 by which time Michael is to inform the Court of the finalisation of the administration of the estate.
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