Mekhail v Hana; Mekail v Hana; In the Estate of Nadia Mekhail (No 4)

[2018] NSWSC 1788

Supreme Court

New South Wales

Medium Neutral Citation:

Mekhail v Hana; Mekail v Hana; In the Estate of Nadia Mekhail (No 4) [2018] NSWSC 1788

Hearing dates:

16 November 2018

Date of orders:

27 November 2018

Decision date:

27 November 2018

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Order that the legal costs of the plaintiff Magdy Mekhail be paid out of the estate of the late Nadia Mekhail on the ordinary basis. Order that 85% of the legal costs of the plaintiff Youssef Mekail be paid out of the estate of the late Nadia Mekhail on the ordinary basis. Order that the defendant’s costs of these proceedings be paid out of the estate on the indemnity basis. The defendant’s Calderbank letters of May and November 2016 do not alter the incidence of costs in the proceedings. Existing injunctions over the South Strathfield property maintained pending appeal.

Catchwords:

COSTS – litigation concerning the testamentary capacity of the testator and whether at the time she made her will she was suffering from delusions or was being coerced – defendant successfully resists the plaintiffs’ challenges to the will on the above grounds – probate of the will granted to the defendant – the plaintiffs, nephews of the testator, also brought proceedings for family provision out of the estate – plaintiffs’ proceedings for family provision fail – findings in principal judgment provide a basis to argue that certain conduct of the deceased, and of the defendant, contributed to the present litigation – whether costs should follow the event – whether the unsuccessful plaintiffs’ costs should be paid out of the estate or whether they should bear their own costs – the defendant served two Calderbank letters on the plaintiffs before the trial of the principal proceedings – whether or not it was unreasonable of the plaintiffs not to have accepted the Calderbank letters – whether existing injunctions over the South Strathfield property should continue pending the hearing of a foreshadowed appeal.

Legislation Cited:

Uniform Civil Procedure Rules 2005, rr 42.20, 42.21

Cases Cited:

Becker v Public Trustee [2006] NSWSC 1164
Bagshaw v Pimm [1900] P. 148; [1900] 3 WLUK 45
Estate Paul Hodges (Deceased); Shorter v Hodges (1998) 14 NSWLR 698
Mekhail v Hana; Mekail v Hana; In the Estate of Nadia Mekhail [2017] NSWSC 575
Mekhail v Hana; Mekail v Hana; In the Estate of Nadia Mekhail (No 2) [2017] NSWSC 1175
Mekhail v Hana; Mekail v Hana; In the Estate of Nadia Mekhail (No 3) [2018] NSWSC 1452
Milillo v Konnecke [2009] NSWCA 109
Mitchell v Guard (1863) 3 Sw & Tr 275
Petrovski v Nasev (No. 2) [2011] NSWSC 1474
Re Estate Late Ruby Grounds: Page v Sedawie [2005] NSWSC 1311
Statham v Shephard (No. 2) (1974) 23 FLR 244
Van Eeden v Henry; Henry v Van Eeden (2005) 62 NSWLR 301

Category:

Costs

Parties:

In 2015/186751
Plaintiff: Magdy Mekhail
Defendant: Georgette Hana

In 2015/310332
Plaintiff: Youssef Shoukry Wardakhan Mekail
Defendant: Georgette Hana

Representation:

Counsel:

 

In 2015/186751
Plaintiff: J. Thomson
Defendant: D. Allen

 

In 2015/310332
Plaintiff: P.R. Glissan
Defendant: D. Allen

 

Solicitors:

 

In 2015/186751
Plaintiff: Australy Milo, P.K. Simpson & Co
Defendant: Richard Mitry, Mitry Lawyers (ceased to act on 8 August 2017)
Dante Aspite, Anderson Lawyers (notice of appearance filed 2 October 2018)

  In 2015/310332
Plaintiff: P.R. Glissan
Defendant: Richard Mitry, Mitry Lawyers (ceased to act on 8 August 2017)
Dante Aspite, Anderson Lawye rs (notice of appearance filed 2 October 2018)

File Number(s):

2015/186751; 2015/310332

Publication restriction:

No

Judgment

1. This is the Court’s fourth judgment in these proceedings. After two judgments concerning procedural matters, the Court’s third judgment, following a final hearing, found that the December 2014 will of the testator, the late Nadia Mekhail, was made whilst the testator had testamentary capacity and that, at that time, she neither suffered from delusions nor was coerced into making the will: Mekhail v Hana; Mekail v Hana; In the Estate of Nadia Mekhail (No 3) [2018] NSWSC 1452 (“the principal judgment”). In orders made after the principal judgment, the Court granted probate of the testator’s will to the defendant, Georgette Hana, and dismissed the plaintiffs’ family provision claims.

2. In the principal judgment the Court reserved all questions of costs. The present judgment deals with those outstanding questions of costs.

3. This judgment should be read with the Court’s previous judgments. Events, matters and persons are referred to in all judgments in the same way. For further background the reader is referred to the Court’s previous judgments, in particular the principal judgment.

4. The issues to be decided in this judgment are: whether the costs of both the unsuccessful plaintiffs, Magdy Mekhail and Youssef Mekail, should be paid out of the testator’s estate. Magdy and Youssef argue that all their legal costs should be paid out of Nadia’s estate. But the defendant, Georgette Hana, argues: that each of Magdy and Youssef should bear their own costs; that their costs should not be paid out of the estate; and that in any event, the estate should not have to bear the burden of two sets of costs. Georgette has made two Calderbank offers, which she says should have been accepted. But both plaintiffs contend it was not unreasonable for them not to have accepted these offers.

5. The appearances on behalf of the parties on the costs argument were the same as in the principal proceedings, except in one respect: Youssef was represented by Mr P. Glissan of counsel. During the main hearing, leading to the principal judgment, Youssef was unrepresented.

6. The plaintiffs have filed a Notice of Appeal against the principal judgment. Questions were also argued as to the appropriate relief to be continued pending the hearing of any such appeal.

Plaintiffs’ Costs Out of the Estate Or Not?

7. Each of Magdy and Youssef contend that they should have their costs paid out of the estate, notwithstanding the fact that they were unsuccessful in the probate suit. The defendant contests this claim and submits that the Court would be justified in making no order for costs with the intent that each of the parties bear their own costs of the proceedings.

8. The relevant principles may be shortly stated. Costs follow the event unless it appears to the Court that some other order should be made: Uniform Civil Procedure Rules 2005 (“UCPR”), r 42.1. This rule applies to dismissal of a claim: UCPR, r 42.20. These general rules apply to probate suits: Petrovski v Nasev (No. 2) [2011] NSWSC 1474.

9. But the Court has discretion in probate suits to depart from the usual rule in contested litigation that costs should follow the event. That departure may be justified where: (1) either the testator has, or those interested in the residue have, been the cause of the litigation, or (2) if circumstances warranted an investigation of the document propounded as the will, such that costs may be ordered to be paid out of the estate: Estate Paul Hodges (Deceased); Shorter v Hodges (1998) 14 NSWLR 698 at 709. But the rules are not inflexible and the touchstone is “what costs order best achieves justice between the parties”: Re Estate Late Ruby Grounds: Page v Sedawie [2005] NSWSC 1311 at [32]. The competing considerations that face the Court in these circumstances are no better described than in Mitchell v Guard (1863) 3 Sw & Tr 275 (“Mitchell v Guard”) at 277; 164 ER 1280 at 1281, one of the earliest cases in which this costs discretion in probate cases is identified:

“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.”

10. The plaintiffs’ contend that both the testator and Georgette were the cause of this litigation and that the instrument propounded as the December 2014 will was inherently suspicious and warranted further investigation.

11. Georgette answers these contentions indirectly. She says that the proceedings contested four main issues: about testamentary capacity, about undue influence, about family provision and about the vitiation of the March 2015 transfer. Georgette submits it is only the testamentary capacity issues which would give any occasion for the Court to depart from the usual order and that the appropriate order in the circumstances is that there be no order as to costs.

12. In my view, the probate contest in this case comes well within the principles which would justify the payment of the plaintiffs’ costs out of the estate. That contest took up most of the parties’ hearing time. There was ample basis to suspect that the deceased, Nadia, may have lacked testamentary capacity from the way the December 2014 will was written, incorrectly referring to Georgette as her daughter. Nadia, Georgette and Bishoy all contributed by their conduct to that incorrect description in the will. There was evidence of Georgette exerting strong (although, as the Court has found, not “undue” in the required sense) influence over Nadia in many matters at about the time that the December 2014 will was made. And there was available evidence, as the Court found in the principal judgment, of Georgette playing on Nadia’s superstitious side in different ways, although the ultimate finding was that Nadia was not suffering delusions such as might impair her testamentary capacity. The circumstances amply warranted an investigation of the document being propounded as the December 2014 will.

13. These suspicions were gravely compounded by Georgette’s and Bishoy’s conduct, contrary to Nadia’s best interests, in sequestering Nadia from friends and family after the December 2014 will was made. This deepened reasonable suspicions about the making of the December 2014 will on the part of those such as Magdy and Youssef who were unfamiliar with what had actually happened.

14. Here, both the testator and those interested in the residue under the December 2014 will can justly be said to be the cause of the litigation. This is a strong case for the payment of the plaintiffs’ costs out of the estate and the Court will so order.

15. The other contests in the proceedings do not affect this result. The plaintiffs were unsuccessful on their family provision claims but were wholly successful on their more time-intensive and still useful claim to set aside the March 2015 transfer.

16. One footnote is necessary. It was put on behalf of Georgette that Becker v Public Trustee [2006] NSWSC 1164 (“Becker”) supports the contention that there is an onus upon the person who ultimately turns out to have made an incorrect allegation for example, of fraud, in a probate suit, to demonstrate that it was sufficiently reasonable for it to have made the incorrect allegation in the first place. But I accept Mr Thompson’s submissions on this point. In my view Becker does not stand for that proposition and the broad discretion identified by Mitchell v Guard is the one applicable, for public interest reasons that Mitchell v Guard identifies.

Double Representation

17. Georgette argues that if the Court were to order that the plaintiffs’ costs be paid out of the estate, that two sets of plaintiffs’ costs should not be permitted. In reply, Magdy and Youssef say that should each have their costs paid out of the estate.

18. The relevant principle may be shortly stated. The Court can refuse to make an order for costs in favour of a party whose separate representation is “unnecessary or inappropriate”: Van Eeden v Henry; Henry v Van Eeden (2005) 62 NSWLR 301; [2005] NSWCA 14 at [40]. The Court will not normally allow two sets of costs to defendants where there is no possible conflict of interest between them in the presentation of their cases: Statham v Shephard (No. 2) (1974) 23 FLR 244 at [6] and Milillo v Konnecke [2009] NSWCA 109 at [109].

19. But the rule that two sets of costs will not normally be allowed where there is no possible conflict of interest between co-parties in the presentation of their cases is subject to at least three provisos: (a) enquiries should be made of other parties to see whether the conflict can be resolved; (b) even though the parties in conflict were united in their opposition to the other side of the litigation, their relationship with each other might be such that they would be acting reasonably in remaining at arm’s length during the general course of the litigation; and (c) if they are acting reasonably in maintaining separate representation for some time or for some purpose, they may still be deprived of part of their costs if they act unreasonably by duplicating costs on any particular matter or at any particular time: Milillo v Konnecke [2009] NSWCA 109 at [109].

20. Here, the separate representation of the two plaintiffs, Magdy and Youssef, was justified. They had each commenced Succession Act family provision proceedings against the estate and in those proceedings they were each competing for provision out of the same fund. Succession Act claimants for family provision out of an estate not uncommonly commence their own separate proceedings against the estate and with each, if successful, being allowed a separate set of costs against the estate. This can usually be justified on the basis that the personal circumstances of each plaintiff and the relationship of each plaintiff to the deceased need to be addressed separately from the perspective of each plaintiff.

21. Separate representation of each plaintiff in separate family provision proceedings was justified in this case on those conventional grounds. The part of the proceedings to set aside the March 2015 transfer may not only be seen as an adjunct to restoring the assets of the estate in the event that the 2001 will was upheld but can also be seen as an adjunct to the two family provision claims, to ensure that there would sufficient assets in the estate were a family provision claim against the estate to be successful.

22. But once each of Magdy and Youssef was appearing separately to bring family provision proceedings against the estate, and notwithstanding that the family provision aspect of the proceedings were a relatively minor component of the overall contest, they would still, in my view, be acting reasonably in remaining at arm’s length during the general course of the litigation.

23. And even in the probate litigation, each of Magdy and Youssef was propounding the 2001 will from a different perspective. Each was saying that by reason of Nadia asking them individually to come to Australia and offering to accommodate them (until those arrangements were interfered with by Georgette or Bishoy in each case), they each remained a proper independent object of Nadia’s testamentary bounty that should have been considered at the time that she made her December 2014 will. In this respect, and in their precise allegations made of testamentary incapacity, they each had a slightly different case to propound, with different emphasis. Their separate representation in my view was well justified and two sets of costs should be allowed, a course not unknown in probate proceedings. Two sets of costs may be allowed out of an estate provided, as here, that result is not oppressive or embarrassing: Bagshaw v Pimm [1900] P. 148; [1900] 3 WLUK 45.

24. But there was a slight degree of duplication in the way that Youssef conducted his case. For example he cross-examined after Mr Thompson cross-examined the plaintiff’s witnesses on behalf of Magdy. This degree of duplication was at a time after Youssef had ceased to retain legal representation and so was to a degree understandable. But some discount in Youssef’s costs is appropriate in all the circumstances. In my view, Youssef should be deprived of 15% of his costs because it should have been obvious to him after Magdy’s case was presented that effort should not been duplicated and some of Youssef’s case tended to waste the Court’s time, because it was not well focused upon the real issues in dispute. I see no reason to deprived Magdy of any of his legal costs on that account. Youssef and Magdy’s costs will each be assessed on the ordinary basis

The Calderbank Letters

25. Georgette served Calderbank letters in the proceedings through her solicitors, Mitry Lawyers. The first pair of letters was sent in identical terms (one to each plaintiff) on 5 May 2016. On 28 November 2016 a single letter containing a Calderbank offer to each plaintiff was sent. Neither letter needs to be set out in full.

26. The letters of 5 May 2016 offered to each of Magdy and Youssef to resolve the proceedings on the following basis: a payment of $100,000 to each of them; entry into a Deed of Settlement and Release on terms to be agreed; and otherwise each party would pay his and her own legal costs. The letters declared that they were without prejudice except as to costs and were being served in accordance with Calderbank principles. The 5 May 2016 letters also outlined the evidence proposed to be led on behalf Georgette. At the time of sending these letters, Georgette’s evidence was not as yet filed or served.

27. In the 28 November 2016 letter, Georgette made parallel offers to each of Magdy and Youssef. The offers indicated a preparedness to settle each of the proceedings on the following basis: each of Magdy and Youssef would receive $200,000 in “full and final settlement of their claim (inclusive of costs)”. The offers were open for 21 days but were conditional “on both plaintiffs accepting the offer”. Each offer also declared it was made on the basis that it was without prejudice save as to costs and in accordance with Calderbank principles.

28. Among other submissions, the plaintiffs say that it was not unreasonable of them not to accept all of these offers. Those submissions are persuasive for the following reasons.

29. As to the letters of 5 May 2016, the plaintiffs had by then put on affidavits from all their proposed witnesses. Georgette had not put on any evidence. With that imbalance of available evidence, it was not unreasonable for the plaintiffs to wait to consider whether the defendant’s filed affidavit evidence indeed matched the content of the evidence being foreshadowed in the 5 May letter and to consider whether or not that evidence had any weaknesses.

30. But it was also not unreasonable of the plaintiffs to reject the 5 May 2016 offer on other grounds. There is a Mitchell v Guard public interest in the investigation of the making of a will that is executed in inherently suspicious circumstances, as this one was. And one of the arguments Georgette Hana advanced for the plaintiffs accepting the 5 May 2016 offer was that there was nothing left in the estate, because the South Strathfield property had already been transferred out of the estate before the deceased’s death, in what has come to be known in the proceedings as “the March 2015 transfer”. Minimal information was given in the letter as to the circumstances of that transfer. As it has turned out, the principal judgment shows that the plaintiffs’ suspicions about and challenge to the March 2015 transfer were justified. At the time the Calderbank offer was made, the plaintiffs were quite entitled to test the validity of that transfer, about which they then knew very little and which also looked inherently suspicious. Information given in the Calderbank letter was not such as reasonably to alleviate the plaintiffs’ concerns about this transaction. It was not unreasonable for the plaintiffs therefore to wait longer before accepting the offer: they were at that time in no position to judge whether the South Strathfield property should be treated as still being in the estate.

31. As to the letter to both plaintiffs on 28 November 2016, it was not unreasonable for each plaintiff not to accept these offers, simply on the grounds that each offer was conditional upon acceptance of the offer by the other plaintiff. Each offer was therefore never made on an unconditional basis. The imposition of that condition on the offer meant that it was unclear, even if one or other plaintiff accepted the offer, that a binding agreement would result. So it could never clearly be said that the plaintiffs would be better off for having accepted the offer.

25. Neither Calderbank letter is effective to deprive the plaintiffs of any part of their costs, or to found an order that the plaintiffs pay the defendant’s costs of the proceedings after the date of the Calderbank letter.

Orders Pending Appeal

33. The principal judgment founds relief which would justify the setting aside of the March 2015 transfer. Were the March 2015 transfer to be set aside by the Court and the South Strathfield property restored to the estate, the funds in the estate would be sufficient to pay the costs orders that these reasons have found must be paid out of the estate in the plaintiffs’ favour. Although the March 2015 transfer does not need to be set aside to satisfy family provision orders, there is a practical reason to set it aside, because the estate now has outstanding liabilities in costs to the plaintiffs.

34. At one stage it was suggested on behalf the plaintiffs that it may be possible not to set aside the March 2015 transfer but to make a charging order in favour of the plaintiffs over the South Strathfield property. But that idea was effectively abandoned in the course of argument.

35. The Court will make a declaration that Georgette holds the South Strathfield property on constructive trust for the estate of the late Nadia Mekhail and that the estate is entitled to the reversal of the March 2015 transfer. But no orders will be made at this stage to reconvey the property. Instead, the Court will maintain the existing injunctions restraining Georgette from dealing with the property, until further order.

36. When the matter first comes before the Court of Appeal for management of the appeal, the parties may need to address the question of whether this injunction regime will continue until the hearing of the appeal or whether some other order should be made in place of it. But these orders will preserve the position for the present time and through the imminent Court vacation period.

Conclusions and Orders

37. For the reasons given, the Court makes the following declarations, orders and directions:

1. Declare that the defendant, Georgette Hana holds the South Strathfield property on constructive trust for the estate of the late Nadia Mekhail.

2. Declare that the estate of the late Nadia Mekhail is entitled to the reconveyance from the defendant of the South Strathfield property.

3. Order that the costs of Magdy Mekhail in Magdy’s proceedings be paid in full out of the estate of the late Nadia Mekhail on the ordinary basis.

4. Order that 85% of the costs of Youssef Mekail in Youssef’s proceedings be paid out of the estate of the late Nadia Mekhail on the ordinary basis.

5. Order that the costs of Georgette Hana in both sets of proceedings be paid out of the estate of the late Nadia Mekhail on the indemnity basis.

6. Continue until further order the orders the Court made on 26 July 2017 restraining the defendant Georgette Hana from dealing with the South Strathfield property.

7. Grant liberty to apply.

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Decision last updated: 27 November 2018