Public Trustee v Taylor (No 2)
[2020] SASC 213
•3 November 2020
SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction: Application)
PUBLIC TRUSTEE v TAYLOR & ORS (No 2)
[2020] SASC 213
Judgment of The Honourable Justice Stanley
3 November 2020
SUCCESSION - ADMINISTRATION OF ESTATE - DISTRIBUTION - MATTERS RELATING TO BENEFICIARIES - PRESUMPTION OF DEATH AND SURVIVORSHIP
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - COSTS - GENERAL PRINCIPLES
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - COSTS - WHERE LITIGATION CAUSED BY TESTATOR, EXECUTOR OR INTERESTED PERSONS - GENERALLY
The Public Trustee brought an application pursuant to s 69 of the Administration and Probate Act 1919 (SA) (the Act) seeking advice and direction regarding the disposition of jointly owned assets of Sigrid Karla Todt and Karl Heinz Todt following their deaths on 20 September 2015. Mr and Mrs Todt died commorientes.
The advice and direction sought had the effect of distributing the joint assets of the estates on an intestacy. The first respondent (the executor and sole beneficiary under Mr Todt’s wills) and the second respondent (the sole beneficiary under Mrs Todt’s will and her next-of-kin) opposed these orders, while the third and fourth respondents (Mr Todt’s next-of-kin) supported the advice and direction. The Court gave the advice and direction as sought.
The third and fourth respondents now seek orders that the first and second respondents pay their costs on an indemnity basis. The first respondent opposes this order, and seeks its costs to be paid out of the share of the joint assets attributable to Mr Todt. The second respondent concedes he is liable but on a party/party basis. Further guidance is sought with respect to an earlier costs order made in favour of the first respondent.
Held:
1. The first respondent was acting in respect of this application in an adversarial manner. He is not entitled to have his costs met from the joint assets and he is jointly liable with the second respondent for the costs of the third and fourth respondents.
2. The first and second respondents are to pay the third and fourth respondents’ costs of the application for advice and direction, to be agreed or taxed on a party/party basis.
3. The first respondent is entitled to his costs in respect of the administration of the estate of Mr Todt up to and including 5 March 2019 in the sum of $20,000, including counsel fees.
Administration and Probate Act 1919 (SA) s 69, referred to.
Fielder v Burgess [2014] SASC 98; In the Estate of Istvan Molnar (No. 2) [2016] SASC 159; Roche v Roche & Anor (No 2) [2017] SASC 75; Craker v Craker & Ors (No 3) [2019] SASC 13; Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, discussed.
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 ; J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No. 2) (1993) 46 IR 301, considered.
PUBLIC TRUSTEE v TAYLOR & ORS (No 2)
[2020] SASC 213Testamentary Causes Jurisdiction: Application
STANLEY J:
Introduction
This is an application for costs arising from the hearing of an application by the Public Trustee for advice and direction pursuant to s 69 of the Administration and Probate Act 1919 (SA) (APA). The Public Trustee is the executor of the estate of Sigrid Karla Todt (Mrs Todt) and the administrator of the estate of her late husband Karl Heinz Todt (Mr Todt). They died on 20 September 2015. The application concerned the disposition of jointly owned assets of Mr and Mrs Todt.
The joint estate is relatively modest. It is about $660,000. The evidence is that Mr Todt had no estate apart from the joint assets.
The application concerned commorientes. The evidence could not establish whether either of Mr or Mrs Todt had pre-deceased the other. As a result, there was no proof of survivorship.
The first respondent is the executor appointed under Mr Todt’s last will. The first and second respondents are beneficiaries under the respective last wills made by each of Mr and Mrs Todt. The first respondent is the sole beneficiary under Mr Todt’s last will. The second respondent is the sole beneficiary under Mrs Todt’s last will. The second respondent was also the next of kin of Mrs Todt. The third and fourth respondents were the next of kin of Mr Todt. They took a 50 per cent share of the joint estate of Mr and Mrs Todt on the intestacy resulting from commorientes. The second respondent took the other 50 per cent share of the joint estate on intestacy as the next of kin of Mrs Todt.
The first and second respondents sought to establish an entitlement to the joint assets under the wills. I rejected their submissions.
The first respondent contended that 50 per cent of the joint assets passed to him under Mr Todt’s will and not to the third and fourth respondents who took on intestacy. The second respondent also contended that the third and fourth respondents had no entitlement to the joint assets. The second respondent takes the position he is entitled to all of the joint assets on the basis that each of the deceased had a 50 per cent interest in the joint assets that passed under their wills, and that in the case of Mr Todt, the relevant will was not the last one he made on 24 February 2015, which was invalid on the basis of a lack of testamentary capacity, but an earlier will of 6 June 2014 under which the second respondent was the primary beneficiary.
I gave advice and direction on the basis that the joint assets should be distributed as on an intestacy.
The submissions
Against this background the third and fourth respondents seek an order that the first and second respondents pay their costs of the application for advice and direction on an indemnity basis. They submit the case put by the other respondents was hopeless and doomed to fail. The second respondent submits that he and the first respondent should pay 50 per cent of the costs of the third and fourth respondent, but on a party/party basis. He accepts that having lost the argument costs should follow the event. The first respondent submits that the third and fourth respondents’ costs should be paid out of the estates of Mr and Mrs Todt in equal shares on a solicitor/client basis and his costs should be paid out of the portion of the deceased’s estate attributable to the estate of Mr Todt on a solicitor/client basis. He puts this submission on the basis that his role in the proceedings as the executor appointed by Mr Todt’s last will was not adversarial but intended to assist the Court by putting before it facts and issues as a contradictor.
The third and fourth respondents also seek a direction in relation to an order made by the Court on 5 March 2019. That order was that the costs of the first respondent to that date be adjudicated or agreed as between solicitor and client and paid out of the portion of the deceased’s estate attributable to the estate of Mr Todt. The order of 5 March 2019 was made without the third and fourth respondents being heard. They were only joined to the proceedings by an order made on that date. They sought a direction that the costs of the first respondent to 5 March 2019 should be paid out of the first respondent’s share of Mr Todt’s estate (being the assets of the estate excluding the joint assets). As I have observed earlier, Mr Todt’s estate has no other assets. The directions sought by the third and fourth respondents would have had the result that the first respondent would bear his own costs. The third and fourth respondents shifted their position to submit that the Court should fix the costs of the first respondent to 5 March 2019 in the sum of $7,500 to be paid out of Mr Todt’s share of the joint assets.
They put the submission that the Court could fix costs in that sum, in the absence of any evidence of costs incurred, having regard to the work that was necessarily undertaken to that date, namely, straightforward and non-contentious work involving no substantive argument but merely the filing of a one and a half page affidavit, attaching a copy of Mr Todt’s will; and attending eight 10 minute chambers list hearings before a master. They further submitted that the Court should do so by taking a broad axe approach to avoid a wasteful and costly taxation in light of the principles in relation to costs in probate proceedings. However, in answer to a notice to produce the first respondent produced evidence of the costs he had incurred up to 5 March 2019. Those documents evidenced costs from the time the application was filed in January 2018 to 5 March 2019 in an approximate sum, including counsel fees, of $20,000.
Costs principles in applications for advice and direction
The authors of Williams, Mortimer and Sunnucks[1] explain the approach to costs in an action instituted for directions sought from a court for the determination of a question of law arising in the administration of an estate. Costs will be determined in accordance with the following classifications set out in Re Buckton:[2]
(1)Where the action is reasonably brought by the representative for the guidance of the court, the costs of all parties will usually be treated as necessarily incurred for the benefit of the estate and an order made for payment out of it.
(2)Where such an action is reasonably commenced by a person other than the representative, a similar costs order will usually be made.
(3)Where the action seeks similar relief but is hostile, the usual approach to costs in hostile litigation apply.
(4)Where the issue is being pursued by a beneficiary and a third party, in circumstances where, had it not been for the third party, the costs would have fallen into category (2), the costs should be shared amongst the parties. Where a beneficiary’s unreasonable conduct led to substantial costs being incurred by a personal representative in applying to the court, it is appropriate for that beneficiary to bear those costs rather than them falling on the estate and therefore the beneficiaries generally.
[1] Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 21st Edition at 63-05.
[2] [1907] 2 Ch 406 at 414-415
In 2014 in Fielder v Burgess,[3] Kourakis CJ observed that the probate costs rule is arguably anachronistic in modern times in which there is a greater concern with a need for proportionality in litigation and it may soon be necessary to reconsider it.[4]
[3] [2014] SASC 98.
[4] [2014] SASC 98 at [65].
Kourakis CJ set out his reasons for this observation in the following terms:[5]
[5] [2014] SASC 98 at [57]-[63].
There is a long line of authority to the effect that where probate litigation has been caused, or contributed to, by the way in which the testator made his testamentary intentions known it is appropriate that costs be ordered to be paid out of the estate (the probate costs rule). The authorities are conveniently collected in the judgment of Gray J in Hall v Carney (No 2).
The principle has a long lineage, but it is perhaps so long that it has become something of an anachronism. For centuries before the judicature reforms of the 19th century, grants of probate were the concern of the Ecclesiastical Court. Ecclesiastical courts operated according to forms of Roman law with an inquisitorial judge rather than common law style juries. These courts claimed jurisdiction over substantive matters that concerned salvation and church order including sexual misconduct, determinations and annulment of marriage, defamation and the personal estates of deceased persons. It is perhaps not surprising that an inquisitorial jurisdiction which was concerned with public rectitude adopted such a costs principle.
The application of the costs rule in probate cases was recently considered in the English case of Shovelar v Lane. In that case a husband and wife, who each had children from previous marriages, made mutual wills leaving their residuary estate to the other if he or she survived 30 days, failing which it fell to their children, grandchildren and other relatives. The husband survived the wife and later made a new will that made no provision for his wife's descendants. Following the husband’s death, the wife’s descendants brought a claim against both the executors of the husband’s estate and descendants. The claimants successfully relied on the doctrine of mutual wills, claiming that the executors held the husband’s estate on constructive trust for those entitled under his earlier will. On the question of costs, the defendants submitted that the Judge should apply the rule in probate actions being that if a testator were the cause of litigation then the costs ought to come out of the estate. The Judge rejected this submission and held that the claimants were entitled to have their costs paid by the defendants. The claimants appealed against certain terms of the costs order and the defendants cross-appealed against the Judge’s conclusion that the costs should not be paid out of the estate.
The Court of Appeal, dismissing the cross-appeal, held:
The probate rule is rooted in the inquisitorial exercise that was conducted by the ecclesiastical courts and the Probate Division where the court had to be satisfied of the validity of the will before it could pronounce for the will and admit it to probate. The effect of mutual wills upon the distribution of the estate under a later will which is admitted to probate is a matter for the Chancery Division applying the law of trusts; it is not a matter of probate law and practice. The nature of that litigation is not inquisitorial: it is adversarial and, not infrequently, very adversarial as the two families disunited by death battle for their perceived true inheritance...
The judge was entitled to find, indeed right to find, that “the contention between the parties was not unlike any other hostile litigation and not such that would enable the court to move away from the general rule”... The reasons she gave in para 39 of her judgment which I have also cited at para 28 above is beyond challenge: there would be a plain injustice if the claimants were deprived of any benefit of their success (compare In re Evans, decd [1986] 1 WLR 101). The challenge by the defendants as to what had been said and done and the legal consequences of that behaviour do not provide a reason for departing from the general rule that costs follow the event.
It follows that in my judgment [the judge] was fully entitled to order the defendants to pay the claimants’ costs.
In my view, the legal policy underlying the decision of the Court of Appeal is applicable to probate cases beyond mutual wills claims of the kind considered in Shovelar v Lane. It is not obvious to me why a testator’s fault in the making of a will should result in a loss to the successful beneficiary in litigation over the estate. True it is there is a public element to the resolution of disputes over estates. It is for that reason that the probate costs rule is generally framed in terms of applying when there are reasonable grounds to require the person propounding a doubtful will or contending for a particular construction of an ambiguous provision to make out their case before a judge in a contested hearing.
However, the bottom line is that the disputes are between private parties advancing competing claims to the testator’s bounty for their private financial benefit. Of even greater contemporary significance is the effect of the old probate costs rule on parties to litigation of this kind. The probability of the payment of the costs of all parties out of the estate irrespective of the result gives the parties little incentive to make appropriate decisions as reasonable self-funded litigants about their prospects of success, and the proportionality of the expense incurred in bringing or defending proceedings.
I cannot see any utility in putting the beneficiaries to the expense of a contested hearing and depleting the estate in cases in which the ultimate result of litigation is clear notwithstanding the suspicion or ambiguity clouding the will.
[citations omitted]
As I observed in In the Estate of Istvan Molnar (No. 2)[6] those considerations find expression in the terms of supplementary r 195 which provided:[7]
When there are a number of separately represented parties, the Court will exercise its general discretion as to costs under rule 263 of the Rules as appropriate in the circumstances of a particular case, but having particular regard to—
(a)ordering costs against parties who have not succeeded;
(b)ordering costs in the light of whatever offers have been made under rule 187 of the Rules;
(c)not giving full costs to separately represented parties when they could properly have been jointly represented;
(d)awarding less than full costs when the amount in issue is relatively small.
[6] [2016] SASC 159.
[7] [2016] SASC 159 at [11].
Subsequently, in Roche v Roche & Anor (No 2),[8] Kourakis CJ returned to this topic noting that since Fielder v Burgess there have been further judicial warnings that the probate exception might be invoked more sparingly. He said:[9]
[8] [2017] SASC 75.
[9] [2017] SASC 75 at [15]-[16] and [18].
In Barbon v Tessar (Barbon) McMillan J ordered that an unsuccessful defendant pay the plaintiff’s costs. McMillan J said:
Looked at objectively, I am satisfied that the defendant knew of these matters or had the means of knowing them, yet she still made the decision to initiate the proceeding. In my view, knowing of these matters or having the means of knowing them, the defendant did not have reasonable grounds for challenging the validity of the deceased’s will.
The usual exceptions in the probate rules for costs not following the event should not apply to the defendant’s costs in this proceeding. In reality, the litigation has been adversarial litigation instituted by the defendant against the plaintiff and she has been unsuccessful. The usual rules as to costs should apply, that is, the defendant should pay the plaintiff’s costs of the proceeding.
In the matter of In the Estate of Frances Ponikvar (Deceased) (No 2) a defendant opposed an application for a copy Will to be admitted to probate. The defendant proceeded on the basis that the presumption of revocation had not been rebutted. Stanley J found that ‘there was strong evidence that rebutted the presumption against revocation. Nonetheless, Ms Novak pressed ahead in opposing the application’. Stanley J ordered that Ms Novak pay 25 percent of the applicant’s cost of the trial on a party/party basis because she had pressed ahead against the weight of that evidence.
…
A person will not be penalised for invoking this Court’s supervisory jurisdiction in probate when the circumstances call for an investigation into the validity of a testamentary document. However, a person who challenges a testamentary disposition will risk an adverse costs order for persisting in an unmeritorious action after the discovery of evidential material which largely dispels any reasonable concerns. If a party ignores the weight of that evidential material and prosecutes an ultimately unmeritorious case to trial, the usual order that costs follow the event will be made. Exceptions from the ordinary order will not be made to allow beneficiaries a forum in which to air family disputes with impunity.
[citations omitted]
I returned to this matter in Craker v Craker & Ors (No 3)[10] adopting the principles considered in the above authorities and applying the approach I took in Molnar (No. 2).
[10] [2019] SASC 13.
The statements of principle found in these authorities reflect the third and fourth categories in Re Buckton.[11]
[11] [1907] 2 Ch 406 at 414-415.
Consideration
In my view, the first respondent was acting in respect of this application in an adversarial manner. He was pursuing his own interest in the disposition of the joint assets by propounding a distribution in accordance with the wills of the deceased. The first respondent sought to cloak himself in the raiment of a contradictor. That attempt cannot conceal the self-interested nature of the part he played in the proceedings. In that regard, I am satisfied he was acting in his own interests rather than to assist the Court. That is not to be critical of the first respondent but rather to recognise the true role he played in the determination of the application. It was not as executor but as a beneficiary.
The first respondent’s case on their application for advice and direction was unsuccessful. In accordance with the principles I have set out above, he is not entitled to have his costs met from the joint assets and he is jointly liable with the second respondent for the costs of the third and fourth respondents. However, while I am satisfied that the first and second respondents should pay the costs of the third and fourth respondents, I do not accept the submission of the third and fourth respondents that they should do so on an indemnity basis. Notwithstanding my conclusion rejecting the submissions put by the first and second respondents as being contrary to well-established principle, I consider that in the circumstances where the Court approaches the question of costs on the basis that they should follow the event, the appropriate basis for the award of costs is the usual order that costs should be paid on a party/party basis. To that extent, I accept the submission of the second respondent. While the Court has a discretion to depart from awarding costs on that basis, including awarding costs on an indemnity basis, the usual order is that where the Court orders the costs of one party to litigation to be paid by another party, the order is for payment of those costs on a party/party basis.
The Court should only depart from that approach where good reason exists to do so, i.e. where the justice of the case so requires. The guiding principle is whether the particular facts and circumstances of the case warrant the making of an order for payment of costs other than on a party/party basis.[12] Those circumstances include where proceedings are commenced or continued in wilful disregard of clearly established law.[13] However, as pointed out in Colgate‑Palmolive Co v Cussons Pty Ltd by Sheppard J:[14]
It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.
[12] Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536 at [24], (1993) 46 FCR 225 at 233.
[13] Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202, (1988) 81 ALR 397; J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No. 2) [1993] FCA 70, (1993) 46 IR 301; Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536 at [24], (1993) 46 FCR 225 at 233.
[14] [1993] FCA 536 at [24], (1993) 46 FCR 225 at 234.
In the particular circumstances of this case I am prepared to follow the approach for which the third and fourth respondents contend in relation to the costs order made on 5 March 2019. Having regard to the size of the joint assets and the costs which a taxation would incur and having regard to the evidence of the costs incurred, I would fix the costs of the first respondent up to and including that date. Adopting a broad axe approach I would order that the first respondent is entitled to costs of $20,000, including Mr Crocker’s counsel fees, to be paid from Mr Todt’s share of the joint assets.
Conclusion
I would order:
(1)the first and second respondents are to pay the third and fourth respondents’ costs of the application for advice and direction, to be agreed or taxed on a party/party basis; and
(2)the first respondent is entitled to his costs in respect of the administration of the estate of Mr Todt up to and including 5 March 2019 in the sum of $20,000, including counsel fees.
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