Noyce v Jeromel (No 2) - [2021] SASCA 111

SUPREME COURT OF SOUTH AUSTRALIA
(Court of Appeal: Civil)
NOYCE v JEROMEL (No 2)
[2021] SASCA 111
Judgment of the Court of Appeal
(The Honourable President Kelly, the Honourable Justice Livesey and the Honourable Justice Blue)
14 October 2021
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT
The Court determined a separate issue in this action, namely that the first respondent did not, by reason of the lodgement at the Lands Titles Office of specified dealings on 19 May 2020, distribute a property at Royal Terrace Royal Park or a property at Arnold Street Royal Park within the meaning of subsection 8(5) of the Inheritance (Family Provision) Act 1972: Noyce v Jeromel [2021] SASCA 87.
The applicant seeks an order that her costs of the hearing and determination of the separate issue be paid by the second respondent. The second respondent contends that the costs should be reserved to the trial Judge or alternatively be the applicant’s costs in the cause or alternatively be paid out of the estate.
The applicant also seeks an order that her costs of the respondents’ appeal against an order by a Master granting an extension of time within which to commence the action be paid by the second respondent and an order that her costs of her application for an extension of time be paid as to 75 per cent by the second respondent.
Held by the Court:
1There is no reason why the costs of the separate issue should not follow the event (at [13]-[14]).
2The costs of the separate issue should be paid by the second respondent personally and not out of the estate (at [18]).
3The applicant’s costs of the appeal should be paid by the second respondent personally and not out of the estate (at [23]).
4The Master’s order reserving the costs of the application to extend time should not be disturbed (at [26]).

Inheritance (Family Provision) Act 1972 (SA) ss 8, 9; Supreme Court Act 1935 (SA) s 40(1), referred to.
Craker v Craker (No 3) [2019] SASC 13; Green v Ellul (No 2) [2018] SASCFC 105; Hall v Carney (No 2) [2012] SASCFC 105; In the Estate of Amuso (No 2) [2021] SASC 61; Pizimolas v Pizimolas (No 2) [2010] SASC 209; Public Trustee v Hall [1937] SASR 252; Public Trustee v Taylor (No 2) [2020] SASC 213; Roche v Roche (No 2) [2017] SASC 75, considered.

NOYCE v JEROMEL (No 2)
[2021] SASCA 111

THE COURT: On 2 September 2021, on referral by a single Judge, this Court determined a separate issue in this action, namely that the first respondent Paul Jeromel (as executor of the estate of Irene Johanne Jeromel) (the Executor) did not, by reason of the lodgement at the Lands Titles Office of specified dealings on 19 May 2020, distribute a property at Royal Terrace Royal Park or a property at Arnold Street Royal Park (collectively the Royal Park properties) within the meaning of subsection 8(5) of the Inheritance (Family Provision) Act 1972 (SA) (the Act).[1]
[1] Noyce v Jeromel [2021] SASCA 87.
Leaving aside small monetary bequests to the applicant Danuta Noyce (Danuta) and her children totalling $6,000, Irene by her will left her estate to Paul Jeromel. Mr Jeromel as the Executor (the first respondent) and in his personal capacity as the residuary beneficiary (the second respondent) contended at the hearing of the separate issue that the Royal Park properties had been distributed by reason of the lodgement of the specified dealings.
Danuta seeks an order that her costs of the hearing and determination of the separate issue be paid by the second respondent Paul Jeromel in his personal capacity. Mr Jeromel contends that the costs should be reserved to the trial Judge or alternatively that they should be Danuta’s costs in the cause or alternatively that they should be paid out of the estate.
Danuta seeks an order that her costs of Mr Jeromel’s appeal against an order by a Master granting an extension of time within which to commence the action[2] be paid by the second respondent. Mr Jeromel contends that there should be no order as to the costs of the appeal.
[2] Described in our previous reasons for judgment in Noyce v Jeromel [2021] SASCA 87 at [28]-[29].
Danuta seeks an order that her costs of her application for an extension of time (on which she was successful and which costs were reserved by the Master) be paid as to 75 per cent[3] by the second respondent. Mr Jeromel contends that the Master’s order reserving the costs (effectively to the trial Judge) should not be disturbed.
[3] Danuta accepts that some costs were necessarily incurred because she required an extension of time and submits that this apportionment reflects the proportion of costs incurred other than by reason of her application for an extension.
Costs of separate issue
Danuta was successful on the separate issue. The starting point is that costs ordinarily follow the event. Although in some cases it is appropriate to order that the costs of an interlocutory issue be reserved to the trial judge,[4] as a matter of principle and authority, costs of a separate issue should ordinarily not be reserved but determined at the time of determination of the preliminary issue.[5]
[4] See the discussion in Mayfield Family Wines Pty Ltd v Growers Wine Group Pty Ltd (No 2) [2021] SASC 75 at [8]-[14] per Blue J.
[5] See for example Floruit Holdings Pty Ltd v Sebastian – Builders and Developers PtyLtd [2009] NSWCA 411 at [7] per Bergin CJ in Eq (with whom Allsop P and Young JA agreed).
Reservation of costs to trial Judge?
Mr Jeromel accepts that ordinarily the costs of a separate issue should follow the event and not be reserved. However, he contends[6] that the position is different in the case of proceedings under the Act because in such proceedings there is a broader discretion under subsection 9(8) of the Act and considerations of costs rely upon an assessment of the merits of the underlying claim for provision.
[6] Relying on Pizimolas v Pizimolas (No 2) [2010] SASC 209 at [6]-[7] per Kourakis J and Green v Ellul (No 2) [2018] SASCFC 105 at [10]-[19] per Kourakis CJ, Stanley and Lovell JJ.
Subsection 9(8) of the Act provides:
The Court may make such order as to the costs of any proceeding under this Act as it considers just.
This provision confers a power as to costs similar to that conferred by subsection 40(1) of the Supreme Court Act 1935 (SA), which 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.
In Pizimolas v Pizimolas (No 2)[7] the plaintiff failed on the merits in his claim for greater provision under the Act. Kourakis J ordered that the defendants recover their costs of defending that claim out of the estate rather than from the plaintiff. No separate issue was determined and this decision therefore does not support a reservation of costs of a separate issue. Kourakis J said amongst other things:
The ordinary rule as to costs is more easily displaced in family provision claims. In my view that approach reflects conflicting public interest considerations. On the one hand unmeritorious litigation which dissipates the estate should not be encouraged. On the other hand the purpose of family provision legislation is to charge the estates of testators who have made inadequate provision with such an amount as is necessary for the support of their dependents; that public policy objectives may not be achieved in practice if meritorious claimants are discouraged from making a claim by the ordinary rule as to costs…
In my view, the principles which govern the award of costs where the validity of a will is contested have some application to family provision claims by way of analogy. Those principles were summarised by Angas Parsons J in Public Trustee v Hall:
The rules relating to costs have been classified as follows: - 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.[8]
[7] [2010] SASC 209.
[8] At [6]-[7]. (Footnotes omitted).
In Hall v Carney (No 2)[9] Gray J (with whom Stanley J relevantly agreed) had earlier adopted a statement of principles that culminated in citing the passage from Public Trustee v Hall[10] extracted in the last paragraph of [10] above.
[9] [2012] SASCFC 105.
[10] [1937] SASR 252.
In Green v Ellul (No 2)[11] the defendants were successful on an appeal against a decision by a Master determining a preliminary issue. The Full Court held that the plaintiff was unsuccessful on the preliminary issue in that the plaintiff’s summons had not sought an extension of time within the meaning of subsection 8(5) of the Act. The result was that almost all of the estate had been distributed before the application. The Full Court ordered that the successful defendants’ costs of the appeal and of the preliminary issue be paid out of the estate rather than by the unsuccessful plaintiff. The Full Court did not reserve the costs of the appeal or the determination of the separate issue to a trial judge but made orders in respect of those costs. This decision therefore does not support a reservation of costs of a separate issue. Kourakis CJ, Stanley and Lovell JJ cited the passage from Pizimolas v Pizimolas (No 2)[12] extracted at [10] above and said:
In this case, the Court has not considered, and it appears is unlikely to consider, the merits of the respondents’ claim to the benefit of the Act. Their claims founder in limine because of the failure of their solicitor to serve the summons within the limitation period or seek an extension of time in that summons. Accordingly, it cannot be determined whether their claims were meritorious. Nonetheless, the mere possibility that their claims were meritorious invokes the public policy objective identified in Pizimolas that the costs discretion should not be exercised so as to discourage the bringing of meritorious claims. In the absence of a determination that the respondents’ claims are unmeritorious, we consider that the principled exercise of the Court’s unfettered discretion as to costs should be exercised against making an award that the respondents pay the appellants’ costs of the appeal and the hearing before the master.
We are reinforced in this view by two considerations. First, that the course adopted of having the issue of the extension of time dealt with on a preliminary basis was agreed by the parties. Almost certainly the adoption of this course has eliminated the need for a trial. This results in a substantial saving to the estate and its beneficiaries. Second, because there has been no determination of the application on its merits, it may be that the respondents have been left without adequate provision. It scarcely would seem fair to burden them with an award of costs in those circumstances.[13]
[11] [2018] SASCFC 105.
[12] [2010] SASC 209.
[13] At [16]-[17].
In the present case, there is no good reason to defer the making of a costs order to await the result of the trial of the action on the merits nor to order that Danuta’s costs be costs in the cause. The result of the trial will not affect the question whether Danuta should recover her costs of the hearing and determination of the separate issue. Danuta was successful on that separate issue and the respondents were unsuccessful. Costs should follow the event in accordance with the ordinary position referred to at [6] above.
Neither of the considerations identified in the last paragraph extracted at [12] above applies in respect of the costs of the separate issue. The dispute whether the Royal Park properties had been distributed before 2 June 2020 and its subject matter did not result through the fault of the testator or anyone other than Paul Jeromel contending in his own interest that there had been such a distribution to him in his personal capacity. Nor did the separate issue involve the execution of the will or the capacity of the testator, or a charge of undue influence or fraud, or any similar issue.
Costs against first or second respondent?
Mr Jeromel contends that there is a general principle that the costs of the parties to an action under the Act will be paid out of the estate and that the possibility that such an order may be made at the end of the action is a reason to order that the costs of the separate issue be reserved to the trial Judge. For the reasons given above, we reject Mr Jeromel’s second proposition: the costs of the separate issue should be determined now and Danuta as the successful party on that issue should recover her costs.
This leaves the question whether Danuta’s costs should be paid by the Executor and thereby borne by the estate or whether they should be paid personally by Paul Jeromel. Danuta seeks an order that her costs be paid personally by Paul Jeromel and he opposes that order.
Since the decision of the Full Court in Green v Ellul (No 2),[14] there have been several decisions of single Judges of this Court which have thrown doubt on the question whether the principles identified by Angas Parsons J in Public Trustee v Hall[15] continue to be applicable to probate litigation. Those decisions include Roche v Roche (No 2),[16] Craker v Craker (No 3),[17] Public Trustee v Taylor (No 2)[18] and In the Estate of Amuso (No 2).[19] We agree that the principles applicable to costs in probate actions should be reconsidered in light of developments since they were formulated. However, we will assume, for the purposes of determining who should pay Danuta’s costs of the separate issue, that, if Danuta is ultimately successful on the merits in her claim under the Act, it may be that it will be ordered that those costs be paid out of the estate rather than by Paul Jeromel personally.
[14] [2018] SASCFC 105.
[15] [1937] SASR 252.
[16] [2017] SASC 75.
[17] [2019] SASC 13.
[18] [2020] SASC 213.
[19] [2021] SASC 61.
Whatever may be the position in respect of the costs of the claim under the Act, the award of costs on the separate issue involves different considerations. Paul Jeromel in his personal capacity, as the sole residual beneficiary of the estate, was the respondent who had a self-interest in contending that the Royal Park properties had been distributed to him as at the relevant date. Mr Jeromel in his capacity as executor had no specific interest in the outcome of that issue and, if he had been an independent executor, may be expected to have simply abided the event. The determination of the separate issue involved a contest between private interests: it being in the interest of Danuta that it be determined that there was no distribution and it being in the interest of Paul Jeromel as residual beneficiary that it be determined that there was a distribution. The consideration identified by the Full Court in Green v Ellul (No 2)[20] in the first paragraph extracted at [12] above has no application to the present case. For reasons similar to those given above for concluding that she is entitled to payment of her costs of the separate issue, Danuta’s costs of the separate issue should be paid by Paul Jeromel in his personal capacity and not out of the estate.
[20] [2018] SASCFC 105.
Costs of appeal
Danuta applied for an extension of time under subsection 8(2) of the Act in which to make an application for further provision out of the estate. Mr Jeromel opposed the application, essentially on the ground that there was no utility in granting it because the Royal Park properties had already been distributed and the remaining assets of the estate were insufficient to justify the grant of an extension of time. The Master rejected Mr Jeromel’s argument and granted the extension.
Mr Jeromel filed a notice of appeal to a single Judge against the Master’s order on the sole ground that the Master erred in holding that the Royal Park properties had not been distributed. On the hearing of the appeal, the parties agreed that it was desirable that the issue whether the properties had been distributed be decided directly by the Court of Appeal. Concern was expressed that a decision on appeal would not give rise to issue estoppel because the question whether the properties had been distributed was merely a factor in the exercise of the discretion to grant an extension. It was agreed that that question should be determined instead by the Court of Appeal as a separate issue.
Danuta seeks an order that her costs of Mr Jeromel’s appeal against the Master’s order be paid by the second respondent Paul Jeromel. Paul Jeromel contends that there should be no order as to the costs of the appeal. He does not oppose the Court of Appeal (rather than the single Judge) determining these costs for practical reasons.
Given our determination of the separate issue, it is inevitable that the appeal must be dismissed. The starting position is that ordinarily the costs of an appeal should follow the event. There is no reason why costs should not follow the event in the present case. The mere fact that the parties agreed to the mechanism of determination of a separate issue to ensure finality does not entail that there should be no order as to costs.
Danuta’s costs of the appeal should be paid by Paul Jeromel personally and not out of the estate.
Costs of application for extension of time
The Master ordered that the costs of the application for an extension of time be reserved (effectively to the trial Judge).
Danuta seeks an order that her costs of that application be paid as to 75 per cent by the second respondent Paul Jeromel. Mr Jeromel contends that the Master’s order should not be disturbed.
There is no appeal against the Master’s costs order. The result of the determination of the separate issue in favour of Danuta affords no reason to reconsider or alter that costs order.
Conclusion
In case number 318 of 2020, we order that the second respondent pay the applicant’s costs of the hearing and determination of the separate issue.
In case number 882 of 2021, we order that the second appellant pay the respondent’s costs of the appeal.