NSW Trustee and Guardian v Budniak No 2

[2015] NSWSC 1317

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

The Estate of Stanislaw Budniak; NSW Trustee & Guardian v Budniak No 2 [2015] NSWSC 1317

Hearing dates:

13 August 2015

Decision date:

10 September 2015

Jurisdiction:

Equity

Before:

Hallen J

Decision:

See Paragraphs 85 and 86

Catchwords:

COSTS – Two proceedings heard together – Probate and family provision proceedings – The Plaintiff, the executor named in the duly executed Will of the deceased in the Probate proceedings was unsuccessful in propounding that Will – Agreement at hearing that if duly executed Will not the subject of a grant, Probate in solemn form of an informal Will be granted to the Defendant/Cross-Claimant – Issue whether costs of the Plaintiff, calculated on the indemnity basis, rather than on the ordinary basis of the Probate proceedings, be paid out of the estate of the deceased – No dispute that Defendant/Cross-Claimant should receive his costs, calculated on the indemnity basis, out of the estate of the deceased

 

In the family provision proceedings, the Plaintiff in the Probate proceedings named as the Defendant in order to defend the proceedings – Proceedings dismissed as a result of decision in Probate proceedings – Whether Defendant should receive any costs of the family provision proceedings – No dispute that the Plaintiffs in the family provision proceedings should receive their costs as part of the costs of the Defendant/Cross-Claimant in the Probate proceedings – Affidavits read in Probate proceedings

  ASSESSMENT OF COSTS – Because Plaintiff unsuccessful in Probate proceedings it no longer relevantly interested in quantum of Defendant/Cross-Claimant’s costs – One of the beneficiaries in informal Will seeks order that costs of the Defendant/Cross-Claimant in both the Probate proceedings and the costs of the Plaintiffs in the family provision proceedings be assessed

Legislation Cited:

Civil Procedure Act 2005 (NSW)
Legal Profession Uniform Law Application Act 2014 (NSW)
NSW Trustee & Guardian Act 2009 (NSW)
Succession Act 2006 (NSW)
Supreme Court Rules 1970 (NSW)
Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Bool v Bool [1941] St R Qd 26
Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343
Di Carlo v Dubois [2002] QCA 225
Estate of Allwood v Benjafield [2009] NSWSC 1383
Gonzales v Claridades [2003] NSWSC 508; (2003) 58 NSWLR 188
Gray v Richards [No 2] [2014] HCA 47
Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84
Mitchell v Gard (1863) 164 ER 1280
Oasis Hotel Ltd v Zurich Insurance Company (1981) 28 BCLR 230
O’Brien v McCormick [2005] NSWSC 619
Public Trustee v Hammerman; Estate of Ida Hammerman (Supreme Court (NSW), Hodgson J, 23 February 1996, unrep)
Kallinicos v Hunt (2005) 64 NSWLR 561
Luxmore Pty Ltd v Hydedale Pty Ltd [2008] VSCA 212; (2008) 20 VR 481
Ponder v Burmeister [1910] SA Law Rp 4; [1909] SALR 62
QBE Insurance (Australia) Limited v Hotchin [2013] NSWSC 315
Re Estate Late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311
Re Plant [1926] P 139
Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151
Rennie v Massie (1866) LR 1 P & D 118
Sydney Markets Credit Services Co-operative Ltd v Taylor (No. 3) [2015] NSWSC 1236
The Estate of Stanislaw Budniak; NSW Trustee & Guardian v Budniak [2015] NSWSC 934

Category:

Costs

Parties:

NSW Trustee & Guardian (Plaintiff in 2011/228232 and Defendant in 2012/159538)

 

Robert Zbigniew Budniak (Defendant/Cross-Claimant in 2011/228232 and Plaintiff in 2012/159538)
Lech Jerzy Budniak (Defendant in 2011/228232 and Plaintiff in 2012/159538)
Eliza Krystyna Budniak (Defendant in 2011/228232 and Plaintiff in 2012/159538)
Joanna Maria Borysewicz (Defendant in 2011/228232 and Plaintiff in 2012/159538)

  Tomasz Jan Budniak and Benjamin Budniak (Interested parties)

Representation:

Counsel:
Mr A Hill; Ms M Pringle (Plaintiff in 2011/228232 and Defendant in 2012/159538)
Mr L Ellison SC; Mr M Newton (Defendants in 2011/228232 and Plaintiffs in 2012/159538)

  Solicitors:
Gordon A Salier (Plaintiff in 2011/228232 and Defendant in 2012/159583)
Gokani and Associates Legal (Defendants in 2011/228232 and Plaintiffs in 2012/159538)
Mitchell Lawyers (Tomasz Jan Budniak and Benjamin Budniak as interested parties)

File Number(s):

2011/228232; 2012/1595382011/228232; 2012/159538

Judgment

The Background

1. HIS HONOUR: In this matter, I delivered reasons for judgment on 30 July 2015, the medium neutral citation of which is The Estate of Stanislaw Budniak; NSW Trustee & Guardian v Budniak [2015] NSWSC 934 (“the principal judgment”).

2. In the principal judgment, I concluded, in summary, that the NSW Trustee & Guardian had not satisfied the court, on the totality of the evidence, of the testamentary capacity of the deceased at the time he made, or that he had known and approved of the contents of, the 2007 Will. It followed, because of concessions made during the hearing, that a grant of Probate, in solemn form, of the 1994 document should be granted to Robert Budniak, the Defendant/Cross-Claimant in the Probate proceedings. (To all intents and purposes, the other siblings of Robert, who were also named as Defendants but who were not Cross-Claimants in the Probate proceedings, supported Robert’s position and filed evidence in support thereof. Their costs in the Probate proceedings should be treated as part of Robert’s costs and disbursements in defending the claim by the NSW Trustee & Guardian and in succeeding on the Cross-Claim. In this way, it is only necessary to refer to Robert’s costs and disbursements in the Probate proceedings.) In relation to the associated family provision proceedings, with the consent of the parties, I shall dismiss the proceedings.

3. I directed the parties to deliver Short Minutes of Order in respect of each of the proceedings and this was done. At the conclusion of these reasons, I shall make the declaration and the orders, subject to some minor amendments, upon which the parties agreed, and the costs orders that reflect these reasons upon which agreement was not able to be reached.

4. The parties had been unable to reach agreement on the issue of costs prior to the conclusion of the hearing. For their benefit, and in the hope that it might have assisted them to reach agreement after the reasons for judgment were delivered, I wrote, at [470]-[473] of the reasons:

“For the assistance of the parties, on the issue of the burden of costs, I mention that this case is one in which there appears to have been a real, and legitimate, question whether the 2007 Will was the last valid Will of the deceased, in which the facts did not all point in the same direction.

It must be remembered, also, that probate litigation is not entirely between parties, because they did not make the Will and the Court is required to determine whether a document of somebody who is dead is a valid testamentary instrument. There is a public interest in ensuring that the matter is properly proved: Tu v Tu; Estate of Tu.

In relation to the family provision case, the evidence read on that case has been read in the probate proceedings also. I mention, again, the failure to disclose fully and accurately the financial circumstances of each of the Plaintiffs in the proceedings which was only remedied during the course of the hearing.

I shall give the parties the opportunity to consider the form of the orders that should be made, and also to consider the question of costs. I shall stand the matter over to a date convenient to the parties and to the court. In the event that agreed Short Minutes of Order reflecting these reasons, and the question of costs, is resolved between the parties, I shall make orders in Chambers.”

5. Clearly, what I had written did not immediately achieve its intended consequence on the costs question, because, subsequently, each of the parties provided me with detailed, and lengthy, submissions. The submissions from Robert, with documents upon which he wished to rely, comprised 47 pages, whilst the submissions of the NSW Trustee & Guardian comprised 11 pages.

6. At the hearing of the costs argument, submissions were sought to be made on behalf of Tomasz and Benjamin, as beneficiaries named in the 2007 Will, and on behalf of Tomasz, one of the five beneficiaries in the 1994 Will, who had filed an Appearance in the Probate proceedings, but who had not formally appeared at the hearing. That the beneficiaries, in circumstances where the NSW Trustee & Guardian will play no further part in the administration of the deceased’s estate, including in relation to the payment of debts, funeral and testamentary expenses, should be entitled to make the submissions was not the subject of dispute on the costs application.

7. Subsequently, their solicitor delivered written submissions which, taken with documents upon which he sought to rely, comprised 14 pages.

8. The hearing of the costs argument was listed for 1 hour but it took longer. At that hearing, following some discussion between Bench and bar, the parties were able to agree that the following issues would need to be determined by the court:

(a)   Whether the NSW Trustee & Guardian should receive the costs of the Probate proceedings, calculated on the indemnity basis, there being no issue that it is entitled to those costs calculated on the ordinary basis, to be paid out of the estate of the deceased;

(b)   Whether the NSW Trustee & Guardian should receive any costs of the family provision proceedings and, if so, on what basis should those costs be calculated;

(c)   Whether the costs of Robert of both proceedings, albeit to be paid on the indemnity basis, should be assessed.

9. These issues reveal that the parties were able to agree, despite the nature of submissions filed, that the costs of the NSW Trustee & Guardian, calculated on the ordinary basis, in respect of the Probate proceedings, should be paid out of the estate. This meant that most of the written submissions became irrelevant.

10. It is regrettable that this agreement was not able to be reached earlier despite what I had written because it resulted in more time than was necessary being devoted to whether the NSW Trustee & Guardian should be entitled to any costs of the Probate proceedings at all.

11. Before turning to the determination of the agreed issues, it is necessary to refer to some of the documents upon which one side, or the other, relied.

12. The first document relied upon by Robert was a letter dated 5 August 2013, sent by his solicitors to the solicitor for the NSW Trustee & Guardian. I shall not rehearse its contents, which spanned 21 pages, but it is fair to say that the letter provided a detailed basis of Robert’s opposition to the grant of Probate of the 2007 Will.

13. There was an Offer of Compromise served by Robert, and dated 5 August 2013, in which he offered to settle the proceedings upon the basis that there should be a declaration that the 1994 Will was an informal testamentary document within the meaning of s 8 of the Act; a grant of Probate to Robert of that document; and consequential orders. Importantly, this Offer of Compromise included terms that the costs of all parties, calculated on the indemnity basis, should be paid out of the estate of the deceased.

14. The next letter is also dated 5 August 2013, in which Robert’s solicitors suggested that, perhaps, Tomasz should be joined as a Defendant and that he could conduct the proceedings. The letter went on to threaten that “in the event that the 2007 Will is not admitted and the 1994 Will is propounded, the Defendants/Cross-Claimant will make an application for their costs to be paid by the NSW Trustee & Guardian on the indemnity basis and without recourse to the estate and that there be no order as to the costs of the NSW Trustee & Guardian to the intent that it bears its own costs of the proceedings”.

15. The letter also included the statement that a copy of the letter and the Offer of Compromise (to which reference has been made) would be sent to the solicitors acting for Tomasz.

16. The next document is an Offer of Compromise, dated 24 September 2013, served by Robert, in which he, again, offered to settle the proceedings upon the basis that there should be a declaration that the 1994 Will was an informal testamentary document within the meaning of s 8 of the Act; a grant of Probate to Robert of that document; and consequential orders. This Offer of Compromise also included terms that the costs of all parties, calculated on the indemnity basis, should be paid out of the estate of the deceased.

17. The next correspondence is a copy email, dated 18 August 2015, from the solicitor for Tomasz and Benjamin, to Robert’s solicitors, requesting a copy of the costs of Robert in the Probate proceedings, and of the other Plaintiffs (in the family provision proceedings). The response, by email also dated 18 August 2015, stated that the solicitor did not have instructions to release the bill of costs “and do not anticipate receiving any instructions to do so unless it is formally required”. (It also refers to an earlier letter of 14 August 2015, in which “the process by which agreement may be reached with your client in relation to the issue of costs” was articulated.)

18. (This is an unfortunate approach since one-fifth of Robert’s costs and disbursements will be borne, effectively, by Tomasz from his share of the estate. One might think that Tomasz would be entitled, at least, to consider the basis of the calculation of the quantum of those costs and disbursements.)

19. As earlier stated, the NSW Trustee & Guardian did not rely upon any correspondence in support of its application for indemnity costs.

20. I should note, as I noted in the principal judgment, that the NSW Trustee & Guardian (or as it was in 2007, the Public Trustee), in the course of its business, drafted wills. It provided that service, through Mr Kennedy, to the deceased. It became involved with the deceased, principally as a result of Nurse McDonnell, who had arranged for, and attended with, Mr Kennedy, at the deceased’s home, when Mr Kennedy took instructions from the deceased to prepare a Will in May 2007.

21. In the submissions of Tomasz and Benjamin, there is no suggestion that the NSW Trustee & Guardian should not receive its costs calculated on the indemnity basis from the estate of the deceased. This is hardly surprising since four-fifths of those costs would be borne by Tomasz’s siblings out of their share of the deceased’s estate.

22. I should reiterate my view that the NSW Trustee & Guardian was the appropriate and natural Defendant, in the family provision proceedings, even though there was no grant of administration made to it. To all intents and purposes, in those proceedings, it was the party which acted as the legal representative of the deceased.

The Legal Principles

23. In this case, it is not necessary to set out the principles as to costs that apply in respect of Probate proceedings, since the parties now agree that Robert, as the successful party, and as the executor named in the 1994 document of which Probate will be granted, should receive his costs, calculated on the indemnity basis out of the estate of the deceased. They also, now, agree that the costs of the NSW Trustee & Guardian, in the Probate proceedings, calculated on the ordinary basis, should be paid out of the estate.

24. Now, the only difference in the positions of the parties, at least in relation to the Probate proceedings, is whether the costs, calculated on the indemnity basis, of the NSW Trustee & Guardian, should be paid out of the estate of the deceased.

25. The agreement reached as to the costs of the Probate proceedings, it seems to me, involves the application of the settled principle that “[i]t 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”: Mitchell v Gard (1863) 164 ER 1280, at 1281-1282. Also see, Re Estate Late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311, per Campbell J, at [30]-[32].

26. There was no suggestion made during the Probate proceedings, that the NSW Trustee & Guardian must have known that it was attempting to obtain the court’s sanction to a document that could not be supported, and for that reason, would be liable for costs of the proceedings: Boughton v Knight (1873) LR 3 P & D 64, per Sir James Hannen, at 77.

27. It is not necessary, also, to refer to the principles of law relating to the service of an Offer of Compromise because of the agreement as to issues. However, the fact that two Offers of Compromise were made by Robert, may be relevant on the question of whether the NSW Trustee & Guardian should receive its costs calculated on the indemnity basis. I have borne these Offers of Compromise in mind in reaching my decision.

28. I should mention, in any event, that there were sound reasons for the NSW Trustee & Guardian not to accept any of the offers made. The case being propounded by it, in regard to the 2007 Will, was clearly a tenable one and for the reasons already dealt with, it was reasonably entitled to propound that Will on behalf of the beneficiaries named therein, one of whom was a minor. I would not find that Robert is entitled to indemnity costs based upon the service of any of the Offers of Compromise. In this regard, I am satisfied that the NSW Trustee & Guardian rebutted the presumptive rule that would otherwise apply.

29. There remains a dispute about the NSW Trustee & Guardian’s costs of the family provision proceedings, the issue remaining whether it should obtain any of its costs out of the deceased’s estate, and, if so, on what basis those costs should be calculated.

30. On behalf of Tomasz and Benjamin, Mr Mitchell submitted that, in the event the Court did not order the Plaintiffs in the family provision proceedings to pay the NSW Trustee & Guardian’s costs, each party should bear his or her own costs, respectively, of the family provision proceedings, and that 80 per cent of the Defendants’ costs in the Probate proceedings, calculated on the indemnity basis, should be borne by the estate. He submitted that, in any event, there should be no costs order on the indemnity basis in favour of the Defendants prior to their Offer of Compromise dated 5 August 2013.

31. Section 98 of the Civil Procedure Act 2005 (NSW) provides:

“(1) Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court...”

32. The use of this expression “full power to determine by whom, to whom and to what extent costs are to be paid” in the context of s 98(1)(b) “is to be understood as providing the Court with power (unconstrained except to the extent that it must be exercised judicially and in accordance with the relevant legal principles: Oasis Hotel Ltd v Zurich Insurance Company (1981) 28 BCLR 230, per Lambert JA, at 237) to make a costs order that it regards as just in all the circumstances of the case”: QBE Insurance (Australia) Limited v Hotchin [2013] NSWSC 315, per Bergin CJ in Eq, at [54]. As was recently written, “[t]he disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires”: Gray v Richards [No 2] [2014] HCA 47, at [2].

33. Section 98(4) refers to the Court’s power to fix a specified gross sum instead of assessed costs at any time before costs are referred for assessment.

32. Section 33 of the NSW Trustee & Guardian Act 2009 (NSW) provides:

“(1) The NSW Trustee is entitled to the NSW Trustee’s costs out of an estate for any application by the NSW Trustee for probate of any will or for administration with a will annexed.

(2) The NSW Trustee is entitled to the NSW Trustee’s costs out of an estate if the NSW Trustee applies for administration at the request of one or more beneficiaries of a deceased estate who cannot agree as to the person to be appointed administrator, whether or not the NSW Trustee is appointed administrator.

(3) The NSW Trustee is not liable for the costs of any other person in respect of an application or estate referred to in subsection (1) or (2).”

35. In s 3 of the NSW Trustee & Guardian Act, “costs” are defined as including “fees, charges, commission, disbursements, expenses and remuneration”.

36. The basis upon which those costs are calculated is not identified in the Act. Indeed, the section itself does not suggest that the costs are to be calculated on the indemnity basis: Public Trustee v Hammerman; Estate of Ida Hammerman (Supreme Court (NSW), Hodgson J, 23 February 1996, unrep). The section does suggest, however, that it relates to “any application by the NSW Trustee for probate of any will”, which, of course, includes a contested application.

37. Section 11(1) of the NSW Trustee & Guardian Act provides that the NSW Trustee may be appointed to, and may, act in a number of capacities, including as executor or administrator. Subsection (3) provides that it may prepare wills and carry out professional services in connection with wills, probate and administration. When it acts in any of those capacities, it is deemed to be acting in a “trust capacity” for the purposes of the NSW Trustee & Guardian Act. (“Trust capacity” is defined in s 3(1) to mean any of the capacities specified in s 11(1).)

38. Section 11(4) provides:

“The NSW Trustee, if appointed to act in a trust… capacity:

(a) has the same liabilities, and

(b) is entitled to the same rights and immunities, and

(c) is subject to the same control and orders of any court,

as a private person acting in the same capacity.”

39. The NSW Trustee & Guardian has the function of administering the estate of a deceased person in accordance with the grant of probate to it by the Supreme Court of New South Wales: see ss 10, 11 and 22 of the NSW Trustee & Guardian Act. In this case, since it will not obtain Probate of the 2007 Will, it has no further functions of administration in relation to the estate of the deceased.

40. Next, reference should be made to Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”), rule 42.25 which provides:

“(1) Subject to subrule (2), a person who is, or has been, a party to any proceedings in the capacity of trustee… is entitled to be paid his or her costs in the proceedings, in so far as they are not paid by any other person, out of the fund held by the trustee…

(2) The court may order that the person’s costs not be so paid if:

(a) the trustee… has acted unreasonably, or

(b) in the case of a trustee, the trustee has in substance acted for his or her own benefit rather than for the benefit of the fund.”

41. There is nothing in this rule that indicates the basis upon which the costs of the person who has been a party to any proceedings in the capacity of trustee are to be calculated. (It is to be noted that the rule speaks in terms of “in the capacity of” rather than a person who is admitted, or found to be, a trustee.)

42. However, some guidance may be provided by UCPR rule 42.2, which is in the following terms:

“Unless the court orders otherwise, or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis.”

43. UCPR rule 42.5 then provides:

“If the court determines that costs are to be paid on an indemnity basis:

(a) in the case of costs payable out of property held or controlled by a person who is a party to the proceedings:

(i) in the capacity of trustee, executor, administrator or legal representative of a deceased estate, or

(ii) in any other fiduciary capacity,

all costs (other than those that have been incurred in breach of the person’s duty in that capacity) are to be allowed, and

(b) in any other case, all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed.”

44. The mere existence of facts and circumstances capable of warranting an order for costs calculated on the indemnity basis does not mean that the Court is obliged to make such an order, as costs, ultimately, remain in the discretion of the Court: Bolger v McDermott (No 2) [2013] NSWSC 1330 at [45].

45. There is no suggestion that the Civil Procedure Act, and the UCPR, do not apply to probate or family provision proceedings. However, because of the wording of s 98(1) of the Civil Procedure Act, it is necessary to consider the provisions of the Act, which are in Chapter 3, and which, therefore, relate to the family provision proceedings. Relevantly, s 99 of the Act provides:

“(1) The Court may order that the costs of proceedings under this Chapter in relation to the estate or notional estate of a deceased person (including costs in connection with mediation) be paid out of the estate or notional estate, or both, in such manner as the Court thinks fit.”

46. It is clear that s 99 of the Act, also gives the court an unfettered discretion as to how the costs of the proceedings for a family provision order may be borne. It also provides an unfettered discretion as to the part, or parts, of the estate, or notional estate, that is, or are, to bear the burden of costs. Importantly, the section relates to the payment of costs out of the estate or notional estate or both. It does not appear to relate to how costs may be borne otherwise.

47. Because of s 98(1)(c) of the Civil Procedure Act, and UCPR rule 42.2, the court does have the power to make an order that the costs of the NSW Trustee & Guardian be calculated on the indemnity basis. The decision to award such costs will depend on the exercise of the Court’s discretion in light of the particular circumstances of the case. Ultimately, the question is whether the justice of the case requires the costs to be calculated on that basis: Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343, at [10].

48. In Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84, Gray J, in the Full Court, wrote, at [17]:

“The overriding principle that costs are in the discretion of the court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case. Attention must always be paid to the particular circumstances of the individual case. The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding.”

49. Black CJ, in Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, at 152 and 153, wrote:

“... indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the Court exercising its discretion in that way. See John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 at 203 per Hill J, referring to the judgment of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. But as Hill J pointed out in John S Hayes (at 203):

‘... care must be taken not to circumscribe the discretion by reference to closed categories. It is not a necessary condition of the power to award costs that a collateral purpose be shown. The categories warranting the exercise of the discretion are not closed: Colgate-Palmolive at 233; Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, 3 May 1991) per French J at p 8; Regata Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993) per Davies J at p 6. In each case it will be necessary to look at the particular facts and circumstances to see whether an exercise of discretion to order costs on an indemnity basis is warranted.’”

50. In Di Carlo v Dubois [2002] QCA 225, the Court of Appeal also referred to a reason to justify departure from the usual rule of costs being calculated on the ordinary basis, as and when the justice of the case might so require, also noting, at [37], that the categories in which the discretion may be exercised are not closed.

51. A perusal of cases where costs orders have been made in favour of the unsuccessful propounder of a will reveals that there is no invariable practice that costs calculated on the indemnity basis, rather than on the ordinary basis, have been ordered. For example, in Bool v Bool [1941] St R Qd 26, there was division between the members of the Full Court as to the basis on which the plaintiff executor who had unsuccessfully propounded a will was entitled to his costs out of the estate. Webb CJ concluded, at 38, that the costs of both parties of the trial and of the appeal should be “as between solicitor and client”. He did not state any reasons for that view. EA Douglas J, at 47, agreed with the order as to costs proposed by the Chief Justice.

52. Macrossan SPJ concluded that it was not unreasonable to allow the plaintiff executor his costs of the action out of the estate, but on a party and party basis. His Honour noted, at 41, that the plaintiff was not entitled to the benefit of a costs rule dealing with the right of executors, administrators, trustees and mortgagees to costs out of a particular estate or fund, because as the will he propounded was found against, he was not an executor. He went on to say, at 42, that “I have come to the conclusion that it would not be unreasonable to allow the plaintiff his costs of the action out of the estate, but I think they should be taxed as between party and party, and not as between solicitor and client”.

53. Finally, on the first issue to be decided, I should refer to Rennie v Massie (1866) LR 1 P & D 118. In that case, the Plaintiff propounded the will and one codicil of the deceased. The Defendants, who were legatees under the will, pleaded several defences in opposition to the validity of the codicil. The jury found that the deceased was not of sound mind at the time when he executed the codicil and that he did not know and approve of its contents. The Court thereupon pronounced for the will and against the codicil. (It should be noted that the Plaintiff was appointed executor both in the will and in the codicil. He took no interest under either of them.)

54. Sir J.P. Wilde wrote at 119:

“I thought there was no reasonable ground for the litigation in this case, but it was suggested that the Plaintiff ought not to be condemned in costs because he was a nude executor. I think that is no ground for relieving him from his liability as to costs. An executor is not bound to propound a testamentary paper if he does not like to do so, and in a case of doubt it would not be unreasonable that he should take the precaution of obtaining security for costs from the persons interested in upholding it. If the Plaintiff has not taken that precaution, it is his own fault. If the Court were to refuse to condemn a person in costs on the ground that he is an executor, great injustice would follow, for anyone who wished improperly to set up a testamentary paper would be able to do it under the shield of an executor without the risk of costs.” [My emphasis]

55. The passage was quoted, with approval, by Way CJ, in Ponder v Burmeister [1910] SA Law Rp 4; [1909] SALR 62, at 105.

56. On the second issue to be decided, in relation to the costs of the NSW Trustee & Guardian of the family provision proceedings, as was pointed out in the principal judgment, the proceedings were heard together with the evidence in one being the evidence in the other. It was appropriate, and necessary, for the NSW Trustee & Guardian to be the proper contradictor. It is clear that one of the duties of administration is to deal with any claim made for a family provision order - dealing with such claims is one example of the task of administration of ascertaining the identity of the persons to whom the legal personal representative must transfer the net estate assets: Gonzales v Claridades [2003] NSWSC 508; (2003) 58 NSWLR 188, at [48].

57. In O’Brien v McCormick [2005] NSWSC 619, Campbell J noted:

“[28] The defence of Family Provision Act 1982 proceedings is one of the tasks an executor performs in administering the estate: Re Woodman, deceased; ex parte The Trustee (1940) 11 ABC 159 at 175; Re Linning [1995] 1 QdR 274 at 276; Re Lowe [2000] NSWSC 1180 at [5].

...

[56] It has been the law for a very long time that a trustee is entitled to be reimbursed out of the trust property in respect of all the charges and expenses properly incurred in the execution of the trust: Worrall v Harford [1802] EngR 342; (1802) 8 Ves Jun 4 at 8; [1802] EngR 342; 32 ER 250 at 252; In re Grimthorpe, deceased [1958] 1 WLR 381; Carver v Duncan (Inspector of Taxes);Bosanquet v Allen (Inspector of Taxes) [1983] 1 WLR 494 at 502. That principle also applies to executors... Whether conduct of an executor in defending Family Provision Act 1982 proceedings is reasonable is influenced by the executor’s duty to place before the court all material which a beneficiary wishes to have placed before the Court, except to the extent that the executor knows that that material is false: Vasiljev v Public Trustee [1974] 2 NSWLR 497 at 503-4; Dijkhuijs (formerly Coney) v Barclay (1988) 13 NSWLR 639 at 654 per Kirby P, 655 per Hope JA.”

58. Any costs order should reflect the way in which the proceedings were conducted and dealt with, or as was recently noted by Slattery J in Sydney Markets Credit Services Co-operative Ltd v Taylor (No. 3) [2015] NSWSC 1236, at [32] “[t]he costs order should reflect the reality of the contest”.

59. I then turn to the third issue to be decided. In doing so, I should refer, first, to s 60 of the Civil Procedure Act, which provides that “[i]n any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute”.

60. Robert did not make any application, pursuant to s 98(4) to fix a specified gross sum instead of assessed costs payable out of the deceased’s estate. Even if such an application had been made, I would have been unlikely to do so. In the principal judgment, I expressed some concern about Robert’s and his other siblings’ estimated costs of both proceedings.

61. Neither party submitted that the court did not have power to refer Robert’s costs and disbursements for assessment.

62. I am satisfied, in any event, that the court, in circumstances such as this, where the NSW Trustee & Guardian no longer has any interest in the estate of the deceased, and bearing in mind what I have said about the quantum of Robert’s and his siblings costs in the principal judgment (at [108]-[114]), the court has such power to require Robert to have his costs of the Probate proceedings assessed.

63. Section 74(2) of the Legal Profession Uniform Law Application Act 2014 (NSW) provides that a court or tribunal may refer for assessment, costs payable under an order made by the court or tribunal. Such a reference is taken to be an application duly made for assessment of the costs. That Act received assent, in NSW, on 20 May 2014 and came into effect on 1 July 2015.

64. Even if that section were not to apply, the Court has the inherent power to control the assessment process as an aspect of its jurisdiction to control the affairs of solicitors, being officers of the Court: Kallinicos v Hunt (2005) 64 NSWLR 561, at [76]; Estate of Allwood v Benjafield [2009] NSWSC 1383.

65. It may be that Tomasz, by his legal representatives, will make objections in the assessment of Robert’s costs, since his siblings will be bearing four-fifths of those costs. If Tomasz chooses to make objections, no contention could be advanced on behalf of Robert that Tomasz’s participation, as a beneficiary entitled to a one-fifth share of the estate, in the costs assessment process, would result in any unfairness or denial of procedural fairness to Robert.

Determination

66. In Luxmore Pty Ltd v Hydedale Pty Ltd [2008] VSCA 212; (2008) 20 VR 481, Maxwell P and Kellam JA said, at [12]:

“In the ordinary case, it is both appropriate and desirable that a costs question be decided at the conclusion of argument. Rarely will it be necessary for a judge to give detailed reasons for decision adverting to every matter debated in argument. This court will assume, as should the parties, that every matter addressed in argument on costs has been considered. This court will set its face against any proposition which would require judges disposing of questions of costs to give elaborate reasons.”

67. In relation to the first issue for determination, namely, whether the NSW Trustee & Guardian should receive the costs of the Probate proceedings calculated on the indemnity basis, there being no issue that it is entitled to those costs calculated on the ordinary basis, I am not satisfied that such an order should be made. Taking into account the whole of the evidence in the case and all its circumstances, some of which I have mentioned above, but remembering also my findings of fact in the substantive proceedings, and also the submissions (including the service of the Offer of Compromise), the justice of the case does not warrant such an order. In my view, there is nothing in the particular facts and circumstances of the case that warrant the making of an order for costs other than on the ordinary basis.

68. In this regard, it cannot be suggested that Robert’s conduct of the Probate proceedings justifies such an order. His solicitor’s letter to the NSW Trustee & Guardian set out, in some detail, the reasons why he was opposing a grant. Although that letter was sent at a time when investigations were incomplete, the broad thrust of the defence, and the reasons therefor, were identified.

69. Also, the NSW Trustee & Guardian should have been aware that in the event it was unsuccessful, costs out of the estate were not guaranteed. There can be no doubt it was given fair warning that in the event probate in solemn form of the 2007 Will was not granted, Robert would not only be opposing obtaining an order for costs, but he would also seek an order that it should pay his costs of the proceedings calculated on the indemnity basis.

70. Any suggestion that there is a general rule that costs in Probate proceedings are borne out of the estate should be rejected. As long ago as 1926, it was said, in Re Plant [1926] P 139, at 152:

“I should be reluctant to do anything to create the idea that unsuccessful litigants might get their costs out of the estate, without making a very strong case on facts. The lure of ‘costs out of the estate’ is responsible for much unnecessary litigation.”

71. Whilst the NSW Trustee & Guardian may have considered that s 33 of the NSW Trustee & Guardian Act would protect it from an adverse order for costs and would entitle it to obtain costs, and assuming that view was justified, there was no certainty that an order for indemnity costs in its favour would be made.

72. To the extent that there is a difference between the costs calculated on the indemnity basis and those costs calculated on the ordinary basis, in accordance with the principle identified in Rennie v Massie, referred to above, the NSW Trustee & Guardian should have sought an indemnity from Tomasz and Benjamin, as the persons whose interests it was seeking to protect by propounding the 2007 Will.

73. The NSW Trustee & Guardian did not make any submission to the effect that in the event that it did not obtain its costs calculated on the indemnity basis out of the estate, that the difference between those costs and the costs that it did recover out of the estate, should be borne out of the share of the estate passing to Tomasz under the 1994 document.

71. I shall leave it to the solicitor for the NSW Trustee & Guardian and Tomasz’s solicitors to determine whether any difference in the costs of the NSW Trustee & Guardian of the Probate proceedings should be borne out of the share of the deceased’s estate passing to Tomasz. I do not propose to make such an order since there was no application to do so.

72. In my view, there is no special or unusual feature in the case justifying the Court exercising its discretion to order the costs of the NSW Trustee & Guardian of the Probate proceedings to be calculated on the indemnity basis. Nor does the justice of the case warrant the court exercising its discretion in that way.

73. In relation to the costs of the family provision proceedings, and in dealing with the second issue, namely, whether the NSW Trustee & Guardian should receive any costs of the family provision proceedings and, if so, on what basis should those costs be calculated, I am of the view that the NSW Trustee & Guardian should receive those costs, such costs to be calculated on the indemnity basis. After all, the NSW Trustee & Guardian was representing the deceased’s estate in the family provision proceedings. It was the proper contradictor, in all the circumstances, with knowledge of the facts and circumstances relating to the defence of those proceedings. In addition, it took all of the steps usually taken by the administrator in such proceedings.

74. By way of example, it filed and served evidence by Tomasz, and by Nathalie, in opposition to the claim for a family provision order by each of the other children of the deceased, including Robert. It read each of his, and her affidavits, as part of the proceedings, and required each to be present for cross-examination. Furthermore, it was able to demonstrate, by relevant cross-examination, that there had been a failure to disclose, fully and accurately, the financial circumstances of each of the Plaintiffs in the family provision proceedings, which failure was only remedied during the course of the hearing. It did so, having investigated the circumstances of each of the Plaintiffs.

75. There is no suggestion that the NSW Trustee & Guardian acted unreasonably, or that it acted for its own benefit, rather than for the benefit of the beneficiaries named in the 2007 Will, in its defence of the proceedings commenced by the Plaintiffs.

76. Ultimately, I do not know whether the two different orders will result in any difference in the quantum of the costs of the NSW Trustee & Guardian. No doubt, if agreement is unable to be reached, it will be necessary to incur further costs and expense in having its costs, in respect of each matter, assessed.

77. In relation to the costs of the family provision proceedings of each of the other Plaintiffs, even though those proceedings are to be dismissed, in my view, most of the affidavit evidence filed by each Plaintiff was read in the Probate proceedings. Whilst some time was taken during the hearing cross-examining each of the Plaintiffs and his or her spouse or partner, I am satisfied that the justice of the case requires that the affidavits read in the family provision proceedings should be regarded as part of Robert’s costs of the Probate proceedings.

78. One would think that it would be difficult, if not impossible, to have an assessment carried out upon the basis that parts of the affidavits that bear upon the financial and material circumstances of each should be excluded from the costs in the Probate proceedings.

79. In any event, it is to be remembered that the children of the deceased, other than Tomasz, are entitled to four-fifths of the deceased’s residuary estate. Thus, indirectly, they will be bearing four-fifths of all of the costs of the proceedings.

80. In relation to Robert’s costs of the Probate proceedings, I note that the parties have agreed that those costs, calculated on the indemnity basis, should be paid out of the deceased’s estate. The only issue is whether those costs should be assessed.

81. Bearing in mind that the Defendant’s/Cross-Claimant’s estimated costs and disbursements of the proceedings (which included the costs of the Plaintiffs in the family provision proceedings), including senior and junior counsel’s fees, calculated on the indemnity basis, calculated until the completion of the hearing, was about $650,000 (inclusive of GST and upon the basis of a seven day hearing of both matters), I am of the view that those costs are so high as to warrant them being assessed, unless all of the beneficiaries agree, in writing, that the costs and disbursements need not be assessed, or unless some other agreement as to the quantum of those costs is reached.

82. In the Probate proceedings, the Court:

(a) Declares that the document dated 25 June 1994 (“the 1994 Will”) in the English language (Exhibit 1) is an informal testamentary document of the late Stanislaw Budniak (“the deceased”) within the meaning of section 8 of the Succession Act2006 (NSW).

(b)   Orders that Probate of the 1994 Will in solemn form be granted to Robert Budniak, the executor named therein.

(c) Orders that further compliance with Part 78, rule 2 of the Supreme Court Rules 1970 (NSW) as to service of notices on affected persons be dispensed with.

(d)   Orders that the proceedings be referred to the senior deputy Registrar in Probate to complete the grant.

(e)   Orders that within 21 days of the grant of Probate, that the Plaintiff deliver to the executor, Robert Budniak, such estate assets and documents referable thereto as may be held by the Plaintiff.

(f)   Orders that the Amended Statement of Claim and the Further Amended Cross-Claim are otherwise dismissed.

(g)   Orders that the costs of the Plaintiff/Cross-Defendant, calculated on the ordinary basis, of the Probate proceedings, be paid out of the estate of the deceased.

(h)   Orders that the Defendant’s/Cross-Claimant’s costs, calculated on the indemnity basis, of the Probate proceedings, be paid out of the estate of the deceased.

(i)   Orders that the Defendant’s/Cross-Claimant’s costs of the Probate proceedings, and of the family provision proceedings, be assessed, unless all of the beneficiaries named in the 1994 Will agree, in writing, that those costs and disbursements need not be formally assessed.

(j)   Notes the undertaking to the Court given by the Defendant/Cross-Claimant not to reduce the assets of the deceased’s estate to less than $300,000 pending payment of any costs of the Probate proceedings and the family provision proceedings, ordered to be paid to the NSW Trustee & Guardian.

86. In the family provision proceedings, the Court:

(a)   Orders that the Summons be dismissed.

(b)   Orders, subject to the order for assessment referred to in the Probate proceedings, that the costs of the Plaintiffs, calculated on the indemnity basis, are to form part of the costs and disbursements of the Defendant/Cross-Claimant in the Probate proceedings and that they are to be paid out of the estate of the deceased.

(d)   Orders that the costs of the Defendant, the NSW Trustee & Guardian, calculated on the indemnity basis, of the family provision proceedings, be paid out of the estate of the deceased.

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Amendments

11 September 2015 - Paragraph numbers for decision amended on Coverpage from 78 and 79 to 85 and 86

Decision last updated: 11 September 2015