Magiera v Igor Cekan (No 2)

[2023] SASC 47

SUPREME COURT OF SOUTH AUSTRALIA

(Testamentary Causes Jurisdiction)

MAGIERA & ANOR v IGOR CEKAN & ANOR (No 2)

[2023] SASC 47

Judgment of the Honourable Justice Stanley  

31 March 2023

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT - PARTIAL SUCCESS

SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - COSTS

The respondent in this matter brought an application for the revocation of a grant of probate in solemn form of a will of the deceased made in 2016, on the ground that the deceased made a subsequent valid will in 2018.

The applicants are the executors of the 2016 will. The respondent is the residual beneficiary of the 2018 will.

The Court dismissed the application for revocation. The parties now seek orders for costs.

The applicants seek orders that their costs of and incidental to the probate revocation application be paid by the respondent on an indemnity basis and that the applicants are entitled to receive any shortfall from the deceased’s estate.

The respondent seeks an order that the applicants have their costs on a standard basis reduced by 50 percent having regard to their failure to succeed on the awareness issue.

Held:

1.      The respondent is to pay the applicants’ costs of and incidental to the revocation application on an indemnity basis.

A, DC v Prince Alfred College Inc (No. 2) [2016] SASCFC 27; Dodds Family Investments Pty Ltd v Lane Industries Ltd (1993) 26 IPR 261; Fielder v Burgess [2014] SASC 98; Jams & Ors v Surf Road Nominees Pty Ltd & Ors (No. 2) [2005] NSWCA 296; Miller v Miller (No. 2) [2017] SASC 53; Mitchell v Gard (1863) 3 Sw & Tr 275; Rawley Pty Ltd ACN 009 027 454 v Bell (No. 3) [2007] FCA 1429; Roche v Roche & Anor (No. 2) ; Roche v Roche & Anor (No. 2) [2017] SASC 75, considered.

MAGIERA & ANOR v IGOR CEKAN & ANOR (No 2)
[2023] SASC 47

Civil

STANLEY J:      

1. The respondent in this matter brought an application for the revocation of a grant of probate in solemn form of the testator’s 2016 will.  He did so in order to propound a 2018 will.  The applicants are the executors appointed under the 2016 will.  The respondent is the residual beneficiary under the 2018 will. 

2. The principal asset of the deceased’s estate is a residential property at Trimmer Parade, Woodville West.

3. The Court dismissed the application for revocation. The parties now seek orders for costs.

4. The applicants also sought an order for possession of the Trimmer Parade property which was occupied by the respondent.  The applicants were the registered proprietors of the property and were entitled to possession.  Judge Dart granted a possession order but its execution was stayed pending the outcome of the application for revocation. In the circumstances I consider the issue of the costs of the possession proceedings should be heard and determined by Judge Dart.

5. The basis of the application for revocation was that the respondent was unaware of the application for a grant of probate in solemn form notwithstanding attempts made to serve him with the application.  Those attempts were unsuccessful and culminated in the applicants obtaining an order for substituted service.  Substituted service was effected in accordance with the terms of the Court’s order. 

6. At the hearing of the revocation application, considerable time was occupied in an attempt by the applicants to prove that, contrary to the respondent’s evidence, he was aware of the probate application.  On that issue the applicants were unsuccessful.  I found that while the respondent was unaware of the application at the time the application was heard and when the Court made a grant in solemn form in favour of the applicants as executors of the 2016 will, nonetheless his solicitors had been served. 

7. The applicants seek orders that their costs of and incidental to the probate revocation application be paid by the respondent on an indemnity basis and that the applicants are entitled to receive any shortfall from the deceased’s estate.

8. The respondent seeks an order that the applicants have their costs on a standard basis reduced by 50 percent having regard to their failure to succeed on the awareness issue. 

9. The respondent submits that throughout the course of the proceedings the applicants expended significant effort attempting to prove that the respondent was aware of the proceedings notwithstanding his clear evidence to the contrary and that he was not in Australia at the relevant time.  To this end the applicants filed a total of nine affidavits, seven of which were directly related to the issue of the respondent’s awareness.  The agitation of this issue necessitated the respondent filing a further affidavit and chronology, as well as submissions in respect of the awareness issue.  He was cross-examined on his affidavit and a significant amount of the allocated time for the hearing was spent challenging his evidence of his lack of actual knowledge of the application for a grant of probate in solemn form.  The respondent submits these costs were incurred unnecessarily, particularly in circumstances where he did not challenge the validity of the order for substituted service and the fact that substituted service had occurred in compliance with the Court’s order. 

10. In Roche v Roche & Anor (No. 2)[1] Kourakis CJ observed that the overarching legal principle in relation to costs is that they are in the discretion of the Court.  That discretion is unfettered but must be exercised judicially.  As a general rule, a successful litigant is entitled to an order that costs follow the event.  However, in probate litigation the Chief Justice identified two well-recognised exceptions to the general rule:  first, if the cause of litigation has its origin in the fault of the testator or those interested in the residue, the costs may properly be paid out of the estate; second, 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 the successful opponent.[2] 

    [1] [2017] SASC 75.

    [2]    Mitchell v Gard (1863) 3 Sw & Tr 275, 277-278.

11. However, in 2014 in Fielder v Burgess[3] the Chief Justice observed that the probate costs rule is arguably anachronistic in modern times in which there is a greater concern with the need for proportionality in litigation.  He considered that it might soon be necessary to reconsider it.  In fact, as was noted in Roche, that has subsequently occurred.  In Roche the Chief Justice went on to observe:[4]

    The underlying rationale for departing from the ordinary rule in some testamentary capacity cases remains. The risk that an aged, infirm or vulnerable testator will be manipulated in private, and away from independent scrutiny, to execute a testamentary document has subsisted through the ages. However, its relative importance as a costs consideration has been diminished by contemporary social conditions and professional practices. The expansion of public aged residential care has reduced the physical isolation of the aged. Medical care by general practitioners is readily available and the degree of specialist intervention and referrals for pathological testing is more extensive. Aged persons are not as confined and are more socially active than they once were. Record keeping by professionals is more detailed and their notes more readily accessible. Audio-visual records are more common. Nonetheless, invoking this Court’s testamentary jurisdiction may sometimes be sufficiently warranted to depart from the ordinary rule even if the challenge to testamentary competence ultimately fails. Cases in which a testator, suffering a material cognitive impairment has made a Will, particularly one which departs from previous testamentary dispositions, whilst under the close care of a potential beneficiary or beneficiaries, with no or very little independent evidence of capacity, are examples.

    A person will not be penalised for invoking this Court’s supervisory jurisdiction in probate when the circumstances call for an investigation into the validity of a testamentary document. However, a person who challenges a testamentary disposition will risk an adverse costs order for persisting in an unmeritorious action after the discovery of evidential material which largely dispels any reasonable concerns. If a party ignores the weight of that evidential material and prosecutes an ultimately unmeritorious case to trial, the usual order that costs follow the event will be made. Exceptions from the ordinary order will not be made to allow beneficiaries a forum in which to air family disputes with impunity.

    [3] [2014] SASC 98 at [65].

    [4] [2017] SASC 75 at [17]-[18].

12. In the ordinary course of litigation courts now more readily modify the general rule that costs ordinarily follow the event, recognising that the interests of justice sometimes require a reduction in the costs that would otherwise have been awarded to a successful party when that party has failed on particular disputed questions of fact or law.  Parties should not be encouraged to add to a claim which has sufficient prospects, in itself, to justify the bringing of an action, other claims of doubtful merit, on the assumption that the costs of pursuing the latter claims will be recovered because of success on the good claim.  A party’s legal advisors have a responsibility to actively consider the effect of adding doubtful claims or mounting defences to good claims without any foundation for doing so, on the efficient resolution of the proceedings, and give advice on the costs implications of doing so accordingly.[5]  On the other hand, the Court should not be overly parsimonious in the award of costs to a party who has won a judgment.  There can be no precision in the balancing of the tension between the ordinary rule and its qualification.  Much will depend on the extent to which the costs of the litigation of the separate issues can be easily segregated and on the reasonableness of the forensic decision of the successful party to pursue, not only the claims on which he or she succeeded, but also those claims on which he or she failed.[6]

    [5]     A, DC v Prince Alfred College Inc (No. 2) [2016] SASCFC 27 at [5], [8] and [10].

    [6] Ibid [12]-[13].

13. Costs orders can be made either on an issue by issue basis or by a percentage depending upon the severability of the issues.[7]

    [7]     Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No. 2) [2008] FCAFC 107 at [3]-[5].

14. In James & Ors v Surf Road Nominees Pty Ltd & Ors (No. 2)[8] Beazley, Tobias and McColl JJA stated that the assessment of such a costs order is not a matter of mathematical precision.  The exercise of the judicial discretion will often depend upon matters of impression and evaluation.[9]  The question of “impression” must be assessed with regard to how the litigation itself unfolded and the conduct of the parties in it.[10]

    [8] [2005] NSWCA 296 at [40].

    [9]     Dodds Family Investments Pty Ltd v Lane Industries Ltd (1993) 26 IPR 261.

    [10]   Rawley Pty Ltd ACN 009 027 454 v Bell (No. 3) [2007] FCA 1429 at [17].

15. In my view those discretionary factors apply generally to the exercise of the costs discretion, including probate litigation.

16. At issue is whether, in the exercise of the Court’s discretion in relation to costs, the Court should adopt the approach of determining costs on a fragmented basis by making an award by reference to success or failure on discrete issues in the litigation rather than making an award on the basis that costs follow the event.  Either approach may be legitimate depending on the circumstances of the case. 

17. In the circumstances of this case, however, I consider that it is appropriate that costs should follow the event and that the respondent should pay the applicant’s costs on an indemnity basis.  There are three reasons for adopting this approach.  First, at issue was whether the respondent was aware of the application for a grant of probate in solemn form and, if not, whether in circumstances where the application was the subject of an order for substituted service, the Court should revoke the grant of probate.  If the applicants succeeded on either issue an order for revocation would not have been made.  In those circumstances, I do not consider it was unreasonable of the applicants to have ventilated the factual issue of the respondent’s actual knowledge.  Second, in my view it is important to recognise the basis upon which the applicants acted in this matter, which was to protect the estate.  Their conduct was not self-interested.  They did not stand to benefit except to the extent that they are members of the Polish Christian Church which is the principal beneficiary under the 2016 will.  They were merely fulfilling their duties as executors of the 2016 will.  Third, the estate should not be depleted as a result of the revocation application except to the extent that the indemnity costs of the applicants cannot be recovered from the respondent. 

18. On the other hand, the respondent is a private party who sought to advance his claim to the testator’s bounty for his private financial benefit as the residual beneficiary under the purported 2018 will.[11] 

    [11]   Fielder v Burgess [2014] SASC 98 at [62].

19. In these circumstances the position of the applicants as executors should be protected by an order that costs follow the event on an indemnity basis rather than descending into a fragmentation of costs on an issue-by-issue basis that can only have the effect of depleting the deceased’s estate at the expense of the intended beneficiaries. 

20. I would order that the respondent pay the applicants’ costs of and incidental to the revocation application on an indemnity basis.