Petrovski v Nasev; The Estate of Janakievska (No 2)

[2011] NSWSC 1474

Supreme Court

New South Wales

Medium Neutral Citation:

Petrovski v Nasev; The Estate of Janakievska (No 2) [2011] NSWSC 1474

Hearing dates:

28 November 2011

Decision date:

28 November 2011

Jurisdiction:

Equity Division - Probate List

Before:

Hallen AsJ

Decision:

(a) The Defendant should pay the Plaintiffs' costs of the proceedings, such costs to be calculated on the ordinary basis.

(b) Order that any difference between ordinary costs and indemnity costs of the Plaintiffs be paid out of the estate of the deceased.

Catchwords:

Reasons for judgment in the substantive case - Concluded in those reasons that the Plaintiffs were entitled to Probate in solemn form of the Will of the deceased that they propounded - Dismissed the Cross-Claim in which the Defendant had propounded a later Will - Plaintiffs seek the costs of the proceedings calculated on the ordinary basis - Defendant seeks an order that there be no order as to costs

Legislation Cited:

Civil Procedure Act 2005
Uniform Civil Procedure Rules 2005

Cases Cited:

Australiawide Airlines Limited t/as Regional Express v Aspirion Pty Limited [2006] NSWCA 365
Clay v Karlson [2001] WASC 141
Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52
Green, Re [1969] WAR 67
Grounds, Re Estate of; Page v Sedawie [2005] NSWSC 1311
Hacke, In the Estate of, Public Trustee v Wilson, (NSWSC; 13 November 1985, unreported)
Hodges, Re; Shorter v Hodges (1988) 14 NSWLR 698
Kostic v Chaplin [2007] EWHC 2909; [2007] All ER (D) 119
Middlebrook v Middlebrook (1962) 36 ALJR 216
Mitchell v Gard (1863) 3 Sw & Tr 275 at 279; 164 ER 1280
Nicholson V Knaggs & [No 3 - Severance And Costs] [2009] VSC 328
Nowell v Palmer (1993) 32 NSWLR 574
Plant, Re [1926] P 139
Shorten v Shorten (No 2) [2003] NSWCA 60
Twist v Tye (1902) P 92; Spiers v English (1907) P 122

Category:

Costs

Parties:

Pavle Petrovski
(first Plaintiff/first Cross-Defendant)
Elli Stojanoska
(second Plaintiff/second Cross-Defendant)
Gordana Becvarov
(third Plaintiff/third Cross-Defendant)
Alek Nasev
(Defendant/Cross-Claimant)

Representation:

Counsel:
Mr L Ellison SC
(Plaintiffs/Cross-Defendants)
Mr M Meek SC
(Defendant/Cross-Claimant)
Solicitors:
McGrath Dicembre & Co
(Plaintiffs/Cross-Defendants)
D Stanefska & Associates
(Defendant/Cross-Claimant)

File Number(s):

2009/310754

EX TEMPORE Judgment

The Application

1. HIS HONOUR: In this matter, I delivered reasons for judgment in the substantive case on 17 November 2011, the medium neutral citation of which is [2011] NSWSC 1275. I concluded in those reasons that the Plaintiffs were entitled to a grant of Probate of the Will of the deceased that they propounded. I granted Probate in solemn form of that Will and I dismissed the Cross-Claim in which the Defendant had propounded a later Will.

1. In broad terms, I found that the Defendant had not satisfied me that the deceased had testamentary capacity, and/or that she had known and approved of the terms of the later Will. I concluded, also, that the Defendant had exercised undue influence in having the deceased make the later Will.

1. The issue that is presently before me relates to the costs of the proceedings. The Plaintiffs seek the costs of the proceedings calculated on the ordinary basis. The Defendant seeks an order that there be no order as to costs.

The Principles

1. The Civil Procedure Act 2005, s 98(1), provides that subject to the rules of Court, and that, or any other, Act, costs are in the discretion of the Court. The discretion is broad but not unconfined. It is a judicial discretion to be exercised on a principled basis.

1. The Uniform Civil Procedure Rules 2005 ("UCPR"), r 42.1, provides that costs should follow the event, unless it appears to the Court that some other order should be made as to the whole, or any part, of the costs. UCPR r 42.20(1) provides that if the court makes an order for the dismissal of proceedings, then, unless the court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed.

1. In Re Green [1969] WAR 67, Wolff CJ pointed out (at 83) that the general rule prescribed by the Rules, also applies in probate suits: Twist v Tye (1902) P 92; Spiers v English (1907) P 122; Middlebrook v Middlebrook (1962) 36 ALJR 216 at 217; Nicholson V Knaggs [No 3 - Severance And Costs] [2009] VSC 328 at [38].

1. The effect of these two rules, in this case, is that the Defendant must pay the Plaintiffs' costs unless the court otherwise orders, and the court can only order otherwise if there is a discretionary decision to depart from what the rules provide: Australiawide Airlines Limited t/as Regional Express v Aspirion Pty Limited [2006] NSWCA 365 at [10]. In other words, the rules reflect the general proposition that an award of costs is discretionary, but, generally, the discretion is exercised in favour of the successful party: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 at [25].

1. In probate suits there are considerations that more readily affect the application of the Civil Procedure Act and the UCPR than in most other forms of litigation. These considerations act as guides to the exercise of discretion, but they are not inflexible.

1. Before turning to the considerations, two principles that are of importance in litigation of this type should also be referred to. The first is that "parties should not be tempted into a fruitless litigation by the knowledge that their costs will be defrayed by others", and the other is that "doubtful wills should not pass easily into proof by reason of the cost of opposing them": Mitchell v Gard (1863) 3 Sw & Tr 275 at 279; 164 ER 1280 at 1281-1282.

1. Any suggestion that there is a general rule that costs in Probate proceedings are borne out of the estate should be immediately 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."

1. In relation to the question of costs, Powell J (as his Honour then was), in Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698, recorded the principles generally to be applied when determining how, in Probate proceedings, the Court's discretion as to costs may be exercised.

1. At pp 709-710, he said:

"... over the years, a number of exceptions to this general rule have come to be recognised. In the field of probate litigation, two such exceptions have come to be recognised, they being:

1. Where the testator has, or those interested in residue have, been the cause of the litigation, the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate;

2. If the circumstances led reasonably to an investigation in regard to the document propounded, the costs may be left to be borne by those who respectively incurred them...

To these exceptions to the general principle should, perhaps, be added the principle that, although a legal personal representative may be entitled to recover from a party to litigation costs only on a party/party basis, he, as a fiduciary, retains the right to an indemnity from the estate, and, thus, may have recourse to the estate for any difference between his costs on a trustee basis and the costs recovered from a party."

1. This passage was approved by the Court of Appeal in Shorten v Shorten (No 2) [2003] NSWCA 60 at [15]. However, it is clear that neither of the guidelines set out in the passage is exhaustive or prescriptive.

1. In the first of the guidelines referred to, although the word "fault" is sometimes used, it does not necessarily mean moral fault or culpability. Rather, the touchstone is whether it was the deceased's conduct which had led to his, or her, will "being surrounded with confusion or uncertainty in law or fact": Kostic v Chaplin [2007] EWHC 2909; [2007] All ER (D) 119.

1. In respect of the second exception, Dixon J, in Middlebrook v Middlebrook , in the course of determining a challenge to a will founded upon lack of testamentary capacity, observed:

"It is only as a result of investigation that the reasons for finding affirmatively in favour of the testator's testamentary capacity distinctly appear. In these circumstances the proper course is to apply the principle enunciated by Sir Gorrell Barnes P that 'if the circumstances lead reasonably to an investigation of the matter then the costs may be left to be borne by those who have incurred them.' Spiers v English [1907] P 122 at p 123."

1. Whether this case falls within one, or both, of the two exceptions to the normal rule, the relevant time to consider the Defendant's position is the date of institution of the proceedings, although it must also be relevant to have regard to any knowledge or reasonable belief gained subsequently: Clay v Karlson [2001] WASC 141 at [160].

1. It is also useful to take account of what Powell J had said, in In the Estate of Gertrude Martha Elizabeth Hacke, Public Trustee v Wilson , (NSWSC, 13 November 1985, unreported):

"Although the authorities in which an unsuccessful defendant has been allowed his costs out of the estate have involved a variety of factual situations, they appear to embrace such situations as the following: -

1. The state of the testamentary papers has been such as to leave it doubtful whether an earlier will was revoked by a later ( Limas v Goodban (1865) LR 1 P & D 57; Jenner v Ffinch (1879) LR 5 PD 106) or whether an apparently executed will was intended to be testamentary ( Thorncroft v Clarke (1862) 2 Sw & Tr 479);

2. The conduct, habits and mode of life of the testator have given the defendant reasonable grounds for questioning the testator's capacity ( Davies v Gregory (1873) LR 3 P & D 28; Roe v Nix (1893) P 55,

3. The actions of the testator have given the defendant reasonable grounds for believing that the will was a forgery ( Orton v Smith (1873) LR 3 P & D 23);

4. The actions and statements of the testator immediately before, and subsequent to, the making of the will have given the defendant reasonable grounds for believing that the execution of the will had been induced by undue influence ( Cousins v Tubb (1891) 65 LT (NS) 716; Shortman v Shortman (1892) LT (NSW) 717)."

1. Finally, Campbell J (as his Honour then was) in Re Estate of the late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311 said:

"32 ... in the caselaw concerning probate litigation, it can safely be said that a consistent theme in the cases is that the principles concerning costs which are applied to a person who seeks probate (whether successfully or not) are not the same as the principles which apply to the costs of a person who opposes probate (whether successfully or not). In probate litigation, it is not only who succeeds in the litigation which matters - which is the only factor operating in the "costs follow the event" rule. As well, the role which a particular party has played in litigation, whether as plaintiff or defendant, is relevant. Further, facts about the knowledge available to parties, and the reasonableness of their conduct in conducting the litigation, can be taken into account."

1. Ultimately, in the light of all of the circumstances of the particular case, I must decide which costs order better achieves justice between the parties.

1. The following factors, it is submitted, demonstrate that the litigation had been brought about by the conduct of the deceased (or by the solicitor who prepared the 2004 Will and before whom that Will was executed):

(a) The deceased signed the 2004 Will in the presence of a solicitor and another witness;

(b) Two weeks before, she had been to see other solicitors who did not form the view that the deceased then lacked capacity;

(c) In her evidence, the solicitor maintained her belief in the deceased's testamentary capacity and knowledge and approval of the 2004 Will;

(d) Between 17 December 2004 and the date she suffered her stroke in January 2005, the deceased did not take any steps to revoke the December 2004 Will;

(e) There was some objective evidence that the deceased had expressed the view, as recently as 2002, that she wished to make provision for the Defendant;

(f) The Defendant had been correct in not accepting the transcript of the medical records, which, relevantly, had been inaccurately transcribed and, in any event did not reveal very much information about the deceased's capacity;

(g) The reports of the Plaintiffs' experts were annexed to affidavits sworn 24 September 2011, which was about one month before the hearing. This may have been relevant upon his obligation to continue to evaluate his prospects of success or failure in continuing the litigation.

1. An additional factor that is also relevant is the late amendment of the pleadings, by the Plaintiffs, to allege a lack of knowledge and approval.

1. The final factor relied upon is that the Defendant was the proper contradictor since there was a later Will which had been duly executed by the deceased and he was the only executor named in it who sought to propound it. Even then, he acted reasonably in conducting the proceedings, with the result that the case was concluded within half the estimated time allocated for the hearing.

1. For the Plaintiffs it is submitted that:

(a) it was the Defendant who gave instructions to the solicitor who drafted the 2004 Will based, in part, on those instructions;

(b) the Defendant gave initial instructions without the deceased having requested him to do so;

(c) the 2004 Will was executed without the involvement of independent legal practitioners, the solicitor who drafted the 2004 Will and who spoke with the deceased, being the solicitor for the Defendant and his wife;

(d) it was the Defendant who took the deceased to the office of the solicitors to have the 2004 Will executed on 17 December 2004;

(e) the conclusions reached regarding the conduct of the Defendant lead inevitably to the conclusion that the Defendant should pay the Plaintiffs' costs of the proceedings;

(f) a medico-legal report about capacity was obtained by the Defendant but not served, or relied upon, in the proceedings.

1. I have also considered whether the proceedings were, in fact, adversary proceedings, in which the Defendant was propounding his own interests only. In this case, the 2004 Will divided the estate between the first Plaintiff and the Defendant equally. Whilst it is true that the first Plaintiff did not wish to receive his entitlement, being satisfied that it was two of his daughters who received the bulk of the deceased's estate under the earlier Will, he was still a beneficiary entitled to a substantial share of the deceased's estate in the event that the 2004 Will was found to be the last valid Will of the deceased.

1. In this regard, reference should be made to Nowell v Palmer (1993) 32 NSWLR 574, in which Mahoney JA said, at 581:

"Mr Anderson, in his submission, had in mind, I think, the attitude which the courts have traditionally taken to the costs of legal personal representatives in defending proceedings brought against an estate. If the legal personal representative acts in accordance with proper principles, she will be safeguarded as to costs; in an appropriate case, her costs and/or the costs which she is ordered to pay in an unsuccessful defence of the estate may be ordered to be paid out of the estate: see Re Estate of Paul Francis Hodges Deceased; Shorter v Hodges (1988) 14 NSWLR 698 at 709-710; see generally Halsbury's Laws of England, 4th ed, vol 17, para 917-para 919, vol 37, para 721."

Determination

1. Looking at 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, the case appears to me to be one that was conducted by the Defendant to receive a significant share of the deceased's estate and that to which he believed he was entitled. All of his actions, in the last few months of 2004, were taken for that purpose. Accordingly, although he was not the sole beneficiary named in the 2004 Will, as a matter of reality and substance, he was seeking to establish himself as a beneficiary.

1. The Plaintiffs successfully defended all aspects of the Defendant's Cross Claim. I must also remember my conclusions about the conduct of the Defendant, particularly the findings which were the result of the evidence of the Plaintiffs or their witnesses. I must also remember the conclusion regarding undue influence.

1. In those circumstances, I have come to the view that the Defendant should pay the Plaintiffs' costs of the proceedings, such costs to be calculated on the ordinary basis.

1. I order that any difference between ordinary costs and indemnity costs of the Plaintiffs be paid out of the estate of the deceased.

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Decision last updated: 02 December 2011