Public Trustee for the State of South Australia v Carolyn Faith Burke
[2021] SASCA 92
•2 September 2021
SUPREME COURT OF SOUTH AUSTRALIA
(Court of Appeal: Civil)
IN THE ESTATE OF BADGER (DECEASED); PUBLIC TRUSTEE FOR THE STATE OF SOUTH AUSTRALIA v CAROLYN FAITH BURKE
[2021] SASCA 92
Reasons of the Honourable Justice Livesey
2 September 2021
APPEAL AND NEW TRIAL - PROCEDURE - SOUTH AUSTRALIA - SECURITY FOR COSTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS - FACTORS RELEVANT TO EXERCISE OF DISCRETION
The appellant appeals against the dismissal of her application to be joined and heard on the question whether the appellant or her deceased husband were an object of a “half-secret trust”.
The respondent applied for security for costs of the appeal on the basis that the appellant is impecunious and the prospects of the appeal succeeding are weak.
Held (per Livesey JA), dismissing the application:
1.Although there may be a greater willingness to order security for costs in the case of appeals, the appeal in this case is reasonably arguable and the appellant is impecunious. If an order for security were made, it would stultify an arguable appeal.
2.The primary purpose for an order for security in a case such as this is to provide protection for the estate, rather than the protection of the respondent personally. As the appellant’s costs will likely be paid out of the estate, it is not an appropriate case to consider the applicability of the “probate costs rule”.
Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd [2016] SASC 60; Battenberg v Phillips [2017] NSWSC 1813; Botsman v Bolitho [2018] VSCA 111; Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246; Draoui v Le [2020] SASC 155; Eustice v Channel Seven Adelaide Pty Ltd [2020] SASC 94; Food and Beverage Australia Ltd v PJ Nash Pty Ltd (No 2) [2020] SASC 82; In Re Application by the Chief Commissioner of Police (Vic) (2005) 79 ALJR 881; In The Estate Of Badger (Deceased) [2021] SASC 25; Ledgerwood v Perpetual Trustee Co (1997) 41 NSWLR 532; Matusevich v Nipperess [2008] QSC 275; Narain v Euroasia (Pacific) Pty Ltd [2008] VSCA 195; Pioneer Park Pty Ltd (in liq) v Australia and New Zealand Banking Group Ltd (2007) 65 ACSR 383; Public Trustee v Taylor (No 2) [2020] SASC 213; Re McIntyre [1993] 2 Qd R 383; Sands v State of South Australia [2013] SASC 105; Schuller v SJ Webb Nominees Pty Ltd [2015] SASC 8; Singer v Berghouse (1993) 114 ALR 521, considered.
IN THE ESTATE OF BADGER (DECEASED); PUBLIC TRUSTEE FOR THE STATE OF SOUTH AUSTRALIA v CAROLYN FAITH BURKE
[2021] SASCA 92
Court of Appeal – Civil: Livesey JA
Introduction
The Public Trustee has applied for security for costs of the appeal on the grounds that the appellant is impecunious and the prospects of the appeal succeeding are weak.
The appeal concerns the dismissal of the appellant’s application to be joined and heard on the question whether the appellant or her deceased husband, Mr Richard Burke, were an object of what is described as a “half-secret trust”.[1] One way of putting the question arising on appeal is whether it is tenable that the appellant, whether in her own right or as the sole beneficiary of her husband’s estate, has an interest in the fund comprising the deceased’s estate.
[1] Ledgerwood v Perpetual Trustee Co (1997) 41 NSWLR 532 (Young J).
Because the primary Judge found that it was not tenable that the appellant has an interest in the deceased’s estate, she refused joinder and, in the absence of the appellant, proceeded to give advice or direction about the meaning of the deceased’s will and the distribution of the estate.
After hearing argument on 17 June, on 23 June 2021, I dismissed the application for security. These are my reasons.
The application for security for the costs of the appeal
The application was made pursuant to r 115.1 of the Uniform Civil Rules 2020 (SA) which applies, with necessary changes, to an appeal by reason of r 215.3.
The principles concerning an application for the security for costs of an appeal are well known. There is an unfettered discretion which must be exercised judicially, in accordance with well-established principles. It is not necessary to find special or exceptional circumstances. Where the appellant is impecunious, this usually weighs in favour of ordering security for the costs of an appeal.[2]
[2] Draoui v Le [2020] SASC 155, [49]-[50] (Bleby J).
The prospects of success of the appeal are regarded as being of particular importance in connection with the exercise of the discretion to order security for the costs of an appeal:[3]
The prospects of success on appeal are usually of particular importance, as they speak directly to the probability of the respondent being deprived unjustly of their costs should the appeal fail. It is not appropriate to engage in a detailed review of the grounds of appeal and their merits, but obvious strength either way will carry weight.
[3] Draoui v Le [2020] SASC 155, [51] (Bleby J).
Nevertheless, it is not ordinarily appropriate to give detailed consideration to the merits:[4]
… it is not ordinarily appropriate to embark upon any detailed consideration of the merits of the appeal for the purposes of determining an application for security for costs. In a case where the appeal is particularly weak, this may weigh in favour of an order for security. Conversely, where the merits are obviously strong, this may weigh against an order. However, in circumstances such as the present, where I have concluded that the appeal raises serious issues for determination, but am not in a position to say anything more definitive without inappropriately delving into a detailed consideration of the merits, I consider the merits of the appeal to be a neutral consideration.
[4] Food and Beverage Australia Ltd v PJ Nash Pty Ltd (No 2) [2020] SASC 82, [43] (Doyle J).
Because the Court has the benefit of the primary judgment, and because the appellant has had the benefit of a judicial determination, there is often a greater preparedness to order security for the costs of an appeal compared with the approach taken before the trial of an action:[5]
It is established that the Court will order security for the costs of an appeal more readily than it will for a trial. Where the appellant, especially in the capacity of plaintiff, has had the opportunity to have the matter litigated at trial, the controversy has been determined.[6] As Kourakis J (as he then was) explained in Diakos v Mason:[7]
The statutory right of a further review by way of appeal is a safeguard against error, but the fact remains that the plaintiff has had his side of the controversy judicially determined and in fact determined adversely to him. Moreover, the risk of injustice to an appellant if an order for security is prohibitive can be assessed with greater certainty on an appeal than at first instance.
This greater ‘readiness’ to order security amounts to a conclusion. As a matter of principle, this conclusion rests on recognition of the appropriateness of giving greater weight to the impecuniosity of a plaintiff/appellant, once they have had the benefit of their claim being determined judicially.[8]
[5] Draoui v Le [2020] SASC 155, [49]-[50] (Bleby J); Schuller v SJ Webb Nominees Pty Ltd [2015] SASC 8 (Nicholson J); Food and Beverage Australia Ltd v PJ Nash Pty Ltd (No 2) [2020] SASC 82, [40]-[48] (Doyle J); Eustice v Channel Seven Adelaide Pty Ltd [2020] SASC 94, [26] (Kelly J).
[6] Food and Beverage Australia Limited v PJ Nash Pty Ltd [2020] SASC 82, [42] (Doyle J); Sands v State of South Australia [2013] SASC 105, [32] (White J).
[7] Diakos v Mason [2010] SASC 108 at [10] (Kourakis J).
[8] Diakos v Mason [2010] SASC 108 at [10] (Kourakis J).
Whilst I accept that there is a greater preparedness to order security for the costs of an appeal compared with a trial, there are two further features of importance in this case. The first concerns the so-called “probate costs rule”,[9] and the second concerns the nature of the decision which was made in this case.
[9] Public Trustee v Taylor (No 2) [2020] SASC 213, [11]-[17] (Stanley J) regarding the “probate costs rule”.
The “probate costs rule”
There was some debate during the argument about whether any “probate costs rule” governs or affects the principles to be applied. Whilst the respondent contended that the submissions supplied by the appellant went well beyond the scope of the leave granted by this Court, and consequently should be ignored,[10] further written submissions were made by both parties on this point.
[10] Carr v Finance Corporation of Australia Ltd (No 1) (1981) 147 CLR 246, 257-258 (Mason J); In Re Application by the Chief Commissioner of Police (Vic) (2005) 79 ALJR 881, [19]-[23] (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ); [53]-[54] (Kirby J).
In brief, the respondent relied upon the observations of Thomas J in Re McIntyre:[11]
It is … essential that a distinction should be maintained in the approach to costs at first instance and on appeal. Applicants and their advisers should not think that they can being appeals confident in the knowledge that the estate will in all probability be obliged to pay for the exercise. What I have called the indulgent attitude of judges at first instance to unsuccessful applicants has no place in the appeal process. A litigant has a right under the Rules of Court to test a judgment by bringing an appeal, but he has no similar right to do so at the expense of the other party or the estate.
[11] Re McIntyre [1993] 2 Qd R 383, 388 (Thomas J, with whom McPherson ACJ and Byrne J agreed).
The respondent draws a distinction between the principles applicable at first instance when determining costs in an application for family provision,[12] as well as in disputes over the validity of a will.[13] Similarly, in an application for advice or direction, the usual orders include that the costs of parties be met out of the estate because they are “usually … treated as necessarily incurred for the benefit of the estate”.[14]
[12] Including on appeal, see Singer v Berghouse (1993) 114 ALR 521 (Gaudron J). Pizimolas v Pizimolas (No 2) [2010] SASC 209, [17] (Kourakis J); Forsyth v Sinclair (No 2) (2010) 28 VR 635, [27]; Milillo v Konnecke [2009] NSWCA 109, [127] (Ipp JA, with whom Macfarlan JA and Sackville AJA agreed). See also Dal Pont, Law of Succession, 2nd edition, 2017, [23.22]-[23.38] and [25.40].
[13] See Matusevich v Nipperess [2008] QSC 275 and Battenberg v Phillips [2017] NSWSC 1813.
[14] Public Trustee v Taylor (No 2) [2020] SASC 213, [11] (Stanley J), applying Re Buckton [1907] 2 Ch 406, 414-415. See also, Ponder v Burmeister [1909] SALR 62 (Way CJ); Public Trustee v Hall [1937] SASR 252, 253 (Angas Parsons J); Fielder v Burgess [2014] SASC 98, [58]-[65] (Kourakis CJ); Elton v Public Trustee [2014] SASC 169 (Stanley J). As to the continuing application of that principle in South Australia, see Public Trustee v Taylor (No 2) [2020] SASC 213, [12]-[17].
The respondent emphasised that the principles that apply in these types of litigation do not apply to an appeal, including by way of analogy.
It is unnecessary to resolve the debate in this case. It is sufficient, I think, to observe that there was really no question but that the respondent would, in all probability, be entitled to be paid her costs of the appeal out of the estate.
The background circumstances – the decision made
The deceased in this case is Lady Edith Maud Badger, who died on 24 November 2016. By the terms of her last will dated 16 July 2012, the appellant’s husband Mr Burke was appointed executor and trustee. Relevantly, the will stated:
I GIVE the whole of my estate to [Mr Burke] so that [he] shall distribute the same as [he] shall know to be in accordance with my wishes.
Mr Burke died on 29 December 2016.
On 7 June 2018, the respondent was granted letters of administration with the will annexed of Mr Burke’s estate at the appellant’s request.
On 9 August 2018, the respondent was granted letters of administration with the 2012 will annexed to the deceased’s estate. This too was at the request of the appellant.
The deceased’s estate now comprises around $580,000.
Pursuant to s 69 of the Administration and Probate Act 1919 (SA), the respondent sought advice or direction concerning the proper construction of the 2012 will and the disposition of the deceased’s estate.
The primary Judge found that there was no doubt that the 2012 will created a “half-secret trust” of which Mr Burke was trustee.[15] The real question for the Public Trustee, and about which she was in doubt, is the question of the distribution of the estate in accordance with the half-secret trust created by the 2012 will. The respondent served the application on the appellant who attended the hearing and gave evidence.
[15] In The Estate Of Badger (Deceased) [2021] SASC 25, [97]-[107] (Bampton J).
After judgment was reserved on 12 November 2020, the appellant applied to be joined as a respondent. A written application was made on 22 February 2021.
The primary Judge held that the appellant’s complaints about the conduct of the respondent could not affect her office as the lawfully appointed administrator of the deceased’s estates and had no bearing on the construction of the 2012 will.[16] The primary Judge also held that it was untenable and not reasonably arguable that the deceased had given her estate beneficially to Mr Burke.[17]
[16] In The Estate Of Badger (Deceased) [2021] SASC 25, [69]-[70].
[17] In The Estate Of Badger (Deceased) [2021] SASC 25, [89], [107].
Importantly, the appellant did not allege that she or Mr Burke were arguably an object of the half-secret trust until only three days before the hearing on 22 February 2021. Counsel for the appellant declined the opportunity to file further evidence with the benefit of an adjournment in February 2021.
Ultimately, the primary Judge found that the contention pressed by the appellant was “unlikely”.[18] The primary Judge used other descriptions to describe the prospect that the appellant was an object of the estate, such as “against the weight of the evidence”, “very unlikely”, “most unlikely” and “untenable”.[19]
[18] In The Estate Of Badger (Deceased) [2021] SASC 25, [120].
[19] In The Estate Of Badger (Deceased) [2021] SASC 25, [120], [122], [126] and [127].
The primary Judge therefore concluded that it was not reasonably arguable that an order for joinder was justified.[20] In the result, the underlying merits of the appellant’s claim have not been tested and were not made the subject of a judicial determination.
[20] In The Estate Of Badger (Deceased) [2021] SASC 25, [127].
The prospects of success on appeal
The respondent maintains that the appeal has only limited prospects of success. This is so regardless whether one accepts that a half-secret trust was created or whether it is a “hybrid form of trust”, as was suggested by the appellant.[21]
[21] Ledgerwood v Perpetual Trustee Co (1997) 41 NSWLR 532 (Young J).
Though I accept that there may be a greater willingness to order security in the case of appeals, it is neither necessary nor appropriate to make any finding about the merits of the various appeal grounds: it is sufficient to determine whether the appeal against joinder is arguable.
Whilst the appellant subjected the grounds of appeal to close scrutiny, contending that a number were without merit, she did not seriously contest the proposition that Lady Badger had the right and power to change her mind regarding the objects of the half-secret trust. That is, even if it was unlikely that Mr Burke was an object of the will at the time it was made, on learning that Mr Burke was battling a life-threatening illness, it was open to Lady Badger to include him.
Significantly, the evidence before the Court includes a file note made by an officer in the respondent’s office which suggests that, during 2017, the appellant told that officer that the appellant had been told by her husband that the entire estate was to pass to him.
It may readily be accepted that this statement does not sit easily with the appellant’s conduct and the rather desultory way in which the issue was raised before the primary Judge. However, at bottom, the case for the appellant rests on a question of fact and that question has not been determined in a hearing. It may be that the appellant is ultimately to be disbelieved. However, it is at least arguable that what she asserts cannot be determined on the papers in the exercise of a discretion to permit or refuse joinder. In that context, the issue is whether the appellant’s case is tenable. Self-evidently, when deciding whether the appellant’s case is tenable it is not necessary to determine whether she is in fact an object of the estate, still less whether the case to be made by her is likely to succeed.
In the circumstances, I am prepared to go no further than find that the appellant genuinely wishes to press an arguable appeal against an order refusing joinder.
Stultification
Whilst the respondent maintains that the appellant’s impecuniosity weighs in favour of security, she also argues that there is an insufficient basis to find that the appeal will be stultified by the making of an order for security.[22]
[22] Adelaide (SA Pools & Spa) Manufacturing and Installation Pty Ltd v Westcourt General Insurance Brokers Pty Ltd [2016] SASC 60, [17] (Doyle J), as for appeals, see Pioneer Park Pty Ltd (in liq) v Australia and New Zealand Banking Group Ltd (2007) 65 ACSR 383, [51]; Narain v Euroasia (Pacific) Pty Ltd [2008] VSCA 195; Schuller v SJ Webb Nominees Pty Ltd [2015] SASC 8, [15] (Nicholson J); Botsman v Bolitho [2018] VSCA 111, [39].
In the course of oral submissions, counsel for the appellant conceded that the appellant is impecunious, explaining that she is currently residing in a hostel in Queensland as she could no longer afford the rent on her North Adelaide property. Counsel also advised that the appellant’s only source of income is an aged pension.
The evidence presented on behalf of the appellant, in my view, demonstrates both that the appellant is impecunious and that the appeal will likely be stultified in the event that an order for security was made.
It would appear to be the case that the appellant’s legal representatives are not being paid by the appellant, or anyone else, and I was told that there is nothing in the nature of a contingency agreement in place. It was not seriously suggested that the appellant’s legal representatives would be prepared to meet an order for security.
The exercise of discretion
This is not a case where the underlying merits of the appellant’s claim have been tested and made the subject of a judicial determination. The appeal is concerned with the threshold question of joinder, concerning the appellant’s opportunity to have her claim considered. While that application has been determined, I have found that an aspect of the appeal is arguable.
I do not overlook that the estate is relatively modest and that the respondent has, to date, incurred around $23,000.
It seems to me that the primary purpose of an order for security will be to provide protection for the estate rather, than protection for the respondent, personally. On any view, the respondent will likely recoup her appeal costs from the estate.
In the exercise of my discretion, I decline to order security for the costs of the appeal.
The question of the costs of this application has been reserved to the Court of Appeal.
0
23
0