Kincaid v Lumsden
[2021] SASC 117
•13 October 2021
SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
KINCAID v LUMSDEN & ORS
[2021] SASC 117
Decision of Judge Dart a Master of the Supreme Court
SUCCESSION - FAMILY PROVISION
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS
Applicant seeks provision out of estate - claims to be the domestic partner of the deceased - respondents dispute that the applicant was the domestic partner - applicant has other proceedings against the deceased estate - application by respondents seeking security for costs - interests of justice requires that an order for security be made.
Held:
1. Applicant to pay security for costs in the amount of $40,000.
2. The action is stayed until the security is provided.
Inheritance (Family Provision) Act 1972 (SA); Family Relationships Act 1975 (SA), referred to.
Oshlack v Richmond River Council (1998) 193 CLR 72; Reschke v Trevor Reschke Nominees Pty Ltd [2020] SASC 60, considered.
KINCAID v LUMSDEN & ORS
[2021] SASC 117
This is an application seeking security for costs. These proceedings are brought pursuant to the Inheritance (Family Provision) Act 1972. In the particular circumstances of this matter, the interests of justice requires the making of an order for security for costs.
Background
This matter has a complex background. The applicant asserts that she was in a close personal relationship with Mr Glenn Todman, who died in 2016. Over the last few years of his life Mr Todman changed his will several times. At one time the applicant received a significant bequest in his will. In the final will she only received a small conditional bequest.
The applicant opposed the final will of Mr Todman being admitted to probate. That led to the commencement of contested proceedings in this Court in 2017 seeking to have the final will admitted to probate.[1] The applicant was the respondent in those proceedings. She alleged that Mr Todman lacked capacity to make a will at the time the final will was made.
[1] SCCIV-17-723 Lumsden & Ors v Kincaid.
The opposition continued for three years. The matter was listed for a trial before Stanley J in 2020. About two months before the date fixed for trial the applicant withdrew her opposition to the final will being admitted to probate. She suffered costs orders in favour of the executors and also in favour of the third and fourth respondents in those proceedings. The costs orders have not yet been taxed. It is clear, however, that the costs once taxed will be for a significant amount, probably well over $100,000 and perhaps over $200,000.
That earlier action now continues in respect of a counterclaim. In that claim the applicant says that she is entitled to a constructive trust over the house property at Henley Beach in which she resided. Mr Todman was the registered proprietor. The property is an asset of the estate and the claim for a constructive trust is opposed by the executors and beneficiaries. That claim must be dealt with before this matter can proceed as it will determine whether or not the house property is an asset of the deceased estate.
The applicant continues to reside in the Henley Beach property. The executors sought to have the applicant vacate the property so that it could be leased on a commercial basis. The applicant opposed that. The commercial rent for the property is about $900 per week. I made an order on 19 December 2019 that the applicant pay the sum of $600 per week by way of rent to the administrator pendente lite. The money was to be held in a separate bank account. The reason for holding the money in a separate bank account is that, if the applicant succeeds on the counterclaim, she will be the owner of the property and would have not had an obligation to pay rent. However, if she is unsuccessful, then she has been occupying the property of the deceased estate and should pay rent for that. The applicant paid the rent for a short period, but has not paid the rent for about 18 months.
Whatever the relationship was between the applicant and Mr Todman, it had concluded prior to his death. It is clear that, before he died, Mr Todman was seeking to have the applicant leave the Henley Beach property. To facilitate that, he assisted the applicant to purchase her own property at Semaphore. He lent her $20,000 to assist with the deposit. The loan was recorded in a written agreement, the terms of which required the money to be repaid by 30 November 2020. That money has not been repaid by the applicant and is now a debt due to the estate and is accruing interest.
Security for costs
This proceeding was commenced after the applicant conceded that the final will could be admitted to probate. It seeks further provision on the basis that the applicant was the domestic partner of Mr Todman.
An application for security for costs is made either pursuant to statute or pursuant to the rules. This particular application is made by the third and fourth respondents. It is contained in paragraph 18 of a wide-ranging interlocutory application.[2] In family provision proceedings it is the beneficiaries under the will that take the role of contradictor. Executors adopt a neutral approach. They abide the event. The third and fourth respondents are substantial beneficiaries under the will and will be the most affected by a successful claim by the applicant.
[2] FDN6, filed 10 December 2020.
The relevant rule is as follows:
115.1—Security for costs
(1) The Court may order that an applicant in an action provide security for costs if—
(a) the applicant is bringing the claim or application for someone else’s benefit;
(b) the applicant is ordinarily resident outside Australia;
(c) there are reasonable grounds to suspect that the action has been brought for an ulterior purpose;
(d) the order is authorised by statute; or
(e) the order is necessary in the interests of justice.
The third and fourth respondents assert that an order for security for costs is necessary in the interests of justice. An order for security for costs is made where it is necessary to protect the Court’s processes in that, if the Court makes an order for costs, the party with the benefit of that order ought be able to recover the costs.
The starting point is to recognise the reason that courts make costs orders. In Oshlack v Richmond River Council McHugh J said: [3]
The expression the “usual order as to costs” embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party (104). If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
[3] (1998) 193 CLR 72 at [67].
Clearly enough, the benefit provided to a successful party in litigation by way of a costs order is of no value at all if, the party ordered to pay the costs, is unable to do so.
Making an order in the interests of justice is slightly different to the other categories referred to in the rules. In Reschke v Trevor Reschke Nominees Pty Ltd[4] Blue J considered the nature of an order made in the interests of justice. His Honour was dealing with the previous rule, but it was identical for present purposes, and said:[5]
Paragraph (e) of subrule 194(1) is expressed in different terms to the specific paragraphs (a) to (d). Paragraphs (a) to (d) clearly import a two-stage test: first, has the defendant established the prerequisite contained in the relevant paragraph (for example that the plaintiff is ordinarily resident outside Australia in the case of paragraph (a)); secondly, should the Court exercise a discretion to make a security order in all of the relevant circumstances. By contrast, paragraph (e) only applies when the Court is satisfied that a security order is necessary in the interests of justice. Before the Court can so conclude, it must take into account all relevant circumstances. If the Court concludes that a security order is necessary in the interests of justice, there is no room for the exercise of a residual discretion. Accordingly, in the case of paragraph (e), the test involves only a single stage. In this respect, I agree with the following observations by Hinton J in Strazdins v ANZ Banking Group Ltd:[6]
If the Court arrives at the conclusion that an order is necessary in the interests of justice, what discretion is there then to be exercised? All factors relevant to the question of the order being necessary in the interests of justice will have been considered. If the order is necessary, it is necessary. I cannot think of a circumstance where a court, having arrived at a conclusion that an order for security for costs is necessary in the interests of justice, would then decline to make the order. What additional factor not considered as part of determining whether the jurisdictional fact is established would subsequently be considered and, potentially, justify a conclusion that no order be made? Absent any additional factor, the answer arrived at in determining whether the jurisdictional fact was satisfied must be decisive of the exercise of the discretion.
[4] [2020] SASC 60.
[5] Reschke v Trevor Reschke Nominees Pty Ltd [2020] SASC 60 at [43].
[6] Strazdins v ANZ Banking Group Ltd [2017] SASC 3 at [40].
The question that arises in this matter is whether the particular, and relatively unusual, circumstances, mean that it is in the interests of justice to make an order.
Consideration
The starting point is to acknowledge that the applicant would not be able to meet a costs order made in this action. She is not able to pay the weekly rent due to the deceased estate, has not repaid the loan to the estate, and has a substantial costs order against her already. The evidence discloses that she is living on social security benefits and that her house at Semaphore is mortgaged.
This action was commenced by the applicant simply as a backup action. Her primary claim is pursued in the counterclaim in the earlier action. If the applicant succeeds on the counterclaim, this action will not proceed. The house at Henley Beach is valued at more than $1 million. If the counterclaim is successful, it is unlikely that the applicant would be able to establish that she has been left without adequate provision.[7]
[7] Inheritance (Family Provision) Act 1972 s 7.
I expect that these proceedings are unlikely to proceed to trial in any event. If the applicant is unsuccessful on the counterclaim, she will suffer another significant costs order against her. The cumulative value of the existing costs orders in the 2017 proceedings and subsequent costs order in respect of the counterclaim may be as high as $500,000. She would also owe rent at market value for the period in which she has occupied the Henley Beach property. There is also the loan to be repaid. This proceeding would serve no utility other than to reduce the amount that she would otherwise owe to the deceased estate. At best the relationship between the applicant and the deceased continued for barely three years and ended before he died. The shortness of the relationship may have an affect on the amount of provision awarded to the applicant if her claim is successful.
This proceeding has its own difficulty, in any event. The applicant needs to establish that she was the domestic partner of Mr Todman. The respondents, who are the family of Mr Todman, dispute that fact. The applicant will need to obtain a declaration under the Family Relationships Act 1975 to the effect that she was the domestic partner of the deceased. Unless she does so, she has no standing to bring this proceeding.
There are two matters which stand against the making of an order for security for costs. The first is that the applicant is a natural person and the second is that this claim is a family provision claim.
It is well-accepted that the courts are reluctant to order security for costs against a natural person. The policy reason behind that is that the mere fact that a person is of poor means should not be used to shut them out of pursuing a valid claim. I accept that is the starting point. It is not necessarily the end point, however. The interests of justice are capable of overriding that consideration.
The other issue is that it is unusual, in a family provision claim, for a party to seek security for costs. It is not particularly desirable, in family provision claims, to encourage parties to make such applications. Often the claimants are of extremely modest means and the value of estates are not always significant.
Of the matters that come before the Masters, family provision claims are amongst the most well-run and managed. The cohort of practitioners who practice in probate matters are well-versed in family provision claims and are cost‑sensitive. They understand that the size of the estate is fixed and, the greater the amount of legal costs incurred, the less that is available for family members to share from the estate. Interlocutory applications simply add to the cost of proceedings and delay resolution. They should not be encouraged in the usual matter.
I admit to changing my mind a number of times about the correct outcome in this matter. In the end, however, I have decided that the interests of justice do require the making of an order for security for costs. The applicant already owes significant amounts to the deceased estate and to the third and fourth respondents. She is continuing to disregard a Court order to pay an amount on account of rent. It is also relevant that this proceeding is relatively unlikely to proceed to trial. Despite that, costs must be incurred by the respondents in getting ready to defend it.
The amount of security to be awarded is at the discretion of the Court. It is normal practice to only award security for the costs to be incurred up to the first day of trial. It is for the trial Judge to consider the matter further. A solicitor’s affidavit has been filed setting out the claim for costs. It seeks the sum of $280,000. It includes the costs of the trial calculated at 20 days.
I accept that this proceeding has two aspects; first the Family Relationships Act to establish standing and only then the family provision claim. Nonetheless, this is not going to require a lengthy trial. Nor is it particularly complex. The counterclaim in the earlier action will, by way of contrast, be long and complex. It may well take a few weeks at trial. This is not an application for security for the costs of that matter.
If an order for security for costs is justified by the interests of justice, the Court should only award an amount that satisfies that interest. It needs to be more than a token amount, but it need not be the full commercial amount of the costs.
In the circumstances of this matter, I order security for costs in the amount of $40,000. This action is stayed until the security is provided.
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