Re Molnar (No. 2) - [2016] SASC 159

SUPREME COURT OF SOUTH AUSTRALIA
(Testamentary Causes Jurisdiction)
In the Estate of ISTVAN MOLNAR (NO. 2)
[2016] SASC 159
Judgment of The Honourable Justice Stanley
30 September 2016
SUCCESSION - MAKING OF A WILL - STATUTORY POWER OF RECTIFICATION
LIMITATION OF ACTIONS - EXTENSION OR POSTPONEMENT OF LIMITATION PERIODS - TRUSTS AND DECEASED ESTATES
SUCCESSION - PROBATE AND LETTERS OF ADMINISTRATION - COSTS - WHERE LITIGATION CAUSED BY TESTATOR, EXECUTOR OR INTERESTED PERSONS - GENERALLY
In this matter the court granted an application for rectification of the will of Istvan Molnar (the deceased) dated 22 September 2010 and granted an extension of time within which to make the application for rectification pursuant to s 25AA of the Wills Act 1936 (SA). The application was brought by Mr Baker who sought orders rectifying the will in relation to provision for a binding option to purchase an asset of the estate, being property he leased on King William Street. The applications were granted in the face of opposition from the Michelons, parties with an interest in part of the testator’s estate, namely, the King William Street property.
The court has received submissions as to the costs of the matter from the parties who appeared on the application as well as the residuary beneficiaries of the estate.
Each of the parties have sought an order for the payment of his or their costs. At issue is whether orders should be made for payment of their costs and who should pay those costs.
The court has also received submissions from one of the executors, Mr Lempens, the solicitor who drafted the deceased’s will, in his personal capacity, as to his liability for payment of the costs of Mr Baker, and the other parties.
The residuary beneficiaries, who were not parties to the action, have made submissions that the estate should not be ordered to pay costs.
The court has also separately received submissions on behalf of the estate.
Held, per Stanley J:
1. Mr Lempens pay Mr Baker 50 per cent of his costs of the action and pay the costs of the residuary beneficiaries. Mr Baker’s costs should be taxed as between party and party. The costs of the residuary beneficiaries are to be paid on an indemnity basis (at [56]).
2. The executors are to repay any costs charged to the estate save and except for the costs of the preparation and filing of the affidavit of the circumstances of the administration of the estate; the affidavit of Mr Lempens concerning the circumstances in which the will was drafted and executed; and the costs that would have been incurred by counsel appearing at the commencement of the trial to announce that the executors would submit to the court’s decision. Those specific costs should be repaid to the estate by Mr Lempens. Mr Lempens should indemnify the other executors, Mr Robinson and Mr Botten, in relation to the balance of the costs to be repaid to the estate (at [57).
Wills Act 1936 (SA) s 25AA; Supreme Court Act 1935 (SA) s 40(1); Supreme Court Civil Rules 2006 (SA) r 263; Supreme Court Civil Supplementary Rules 2014 (SA) r 195, referred to.
Hind v Collins [2006] 1 Qd R 514, discussed.
Kerr v Kerr (No. 2) [2016] SASC 24; Hall v Carney & Ors (No. 2) [2012] SASCFC 105; Fielder v Burgess [2014] SASC 98; In the Estate of Rea Costello (Deceased) [2014] SASC 134; Re Schoenmakers (No. 2) [2013] VSC 658; Taylor v Haygarth; Estate of Haygarth Unreported, Hodgson J, Supreme Court of New South Wales, 7 October 1994; Long v Long; Estate of Long (No. 2) [2004] NSWSC 1114; ANZ Trustees Ltd v Hamlet [2010] VSC 207; Magarry v Kiely Unreported, Thomas J, Supreme Court of Queensland, 13 July 1990; Marley v Rawlings (No. 2) [2014] UKSC 51; Macedonian Orthodox Community Church of Saint Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Dioceses of Australia and New Zealand (2008) 237 CLR 66, considered.

In the Estate of ISTVAN MOLNAR (NO. 2)
[2016] SASC 159
Testamentary causes jurisdiction
STANLEY J:
Introduction

In this matter the court granted an application for rectification of the will of Istvan Molnar (the deceased) dated 22 September 2010 and granted an extension of time within which to make the application for rectification pursuant to s 25AA of the Wills Act 1936 (SA). The application was brought by Mr Baker who sought orders rectifying the will in relation to provision for a binding option to purchase an asset of the estate, being property he leased on King William Street. The applications were granted in the face of opposition from the Michelons, parties with an interest in part of the testator’s estate, namely, the King William Street property.
The court has received submissions as to the costs of the matter from the parties who appeared on the application as well as the residuary beneficiaries of the estate.
Each of the parties have sought an order for the payment of his or their costs. At issue is whether orders should be made for payment of their costs and who should pay those costs.
The court has also received submissions from one of the executors, Mr Lempens, the solicitor who drafted the deceased’s will, in his personal capacity, as to his liability for payment of the costs of Mr Baker, and the other parties.
The residuary beneficiaries, who were not parties to the action, have made submissions that the estate should not be ordered to pay costs.
The court has also separately received submissions on behalf of the estate.
In order to resolve the question of the appropriate costs orders, it is necessary to commence with a consideration of the principles applicable to an award of costs in relation to probate matters.
Relevant principles
Section 40(1) of the Supreme Court Act 1935 (SA) provides:
Subject to the express provisions of this Act, and to the rules of court, and to the express provisions of any other Act whenever passed, the costs of and incidental to all proceedings in the court, including the administration of estates and trusts, shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent such costs are to be paid.
6SCR 263 provides:
(1)     As a general rule, costs follow the event.
(2)The general rule is, however, subject to specific rules to the contrary1 and also to the following exceptions (which apply subject to the Court's order to the contrary)—
(a)     the costs of an amendment are to be awarded against the party making the amendment;
(b)     the costs of an application to extend time fixed by or under these Rules are to be awarded against the applicant;
(c)     the costs of an application that should have been (but was not) made at an earlier stage of the proceedings are to be awarded against the applicant;
(d)     the costs of an adjournment arising from a party's default are to be awarded against the party in default;
(e)     the costs of proving a fact or document that a party has unreasonably failed to admit are to be awarded against that party;
(f)    in an action founded on a claim for defamation, general costs of action are not to be awarded in favour of the successful plaintiff unless the damages exceed $50,000;
(g)     in an action founded on a claim for damages or any other monetary sum (other than a claim for defamation), general costs of action are not to be awarded in favour of the successful plaintiff unless the amount awarded exceeds $120,000.
…
6SCR 264 provides:
264—Basis for awarding costs
(1)The Court may, in the exercise of its discretion as to costs, award costs on any basis the Court considers appropriate.
(2)As a general rule, however, costs are awarded as between party and party (that is, on the basis that the party entitled to the costs will be reimbursed for costs reasonably incurred by the party in the conduct of the litigation to an extent determined by reference to the scale of costs in force, under these Rules or the old rules, when the costs were incurred).
(3)The scale of costs for work done in the period commencing on 4 September is fixed by schedules to the Supplementary Rules.
(4)The Court may depart from the scale if there is good reason to do so.
Example—
The Court might allow a fee greater than allowed by either scale for a pleading if satisfied that the fee is justified by the difficulty of the case.
(5)In exercising its general discretion as to costs, the Court may—
(a) award costs as between solicitor and client (that is, on the basis that the party will be fully reimbursed for costs incurred by the party in the conduct of the litigation to the extent that the party entitled to the costs shows them to have been reasonably incurred); or
(b) award costs on the basis of an indemnity (that is, on the basis that the party will be fully reimbursed for costs incurred by the party in the conduct of the litigation except to the extent that the party liable for the costs shows them to have been unreasonably incurred); or
Note—
The difference between solicitor and client costs and indemnity costs is as to the onus of proof and persuasion: that onus lies on the party entitled to costs when solicitor and client costs are ordered and lies on the party liable for costs when indemnity costs are ordered.
(c)award costs by way of lump sum; or
(d)award costs on any other basis the Court considers appropriate.
(6)The Court may award different components of costs on different bases.
(7)The Court may include in an award of costs an amount representing interest.
(8)A party who is entitled to costs, or against whom costs have been awarded, may apply to the Court to have costs, or a particular component of costs, awarded on a particular basis.
Supplementary r 195 provides:
Costs in probate matters
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.
In Kerr v Kerr (No. 2)[1] Gray J addressed the practice in relation to the costs of an application for rectification. He said:[2]
The usual practice in this State in a case involving rectification of a will, is that the costs of the parties are paid out of the estate unless the solicitor is at fault, in which case the costs are paid by the solicitor. This practice follows the long established practice of courts of probate that where the litigation has been brought about through the conduct of the testator or testatrix costs should be paid out of the estate.
Likewise, and by analogy, where it is necessary in the interests of justice that the issue of testamentary capacity and, therefore, the validity of testamentary documents, be the subject of judicial determination, it is the long established practice to order no costs against the unsuccessful executor or legatee and to allow them their costs out of the estate.
[Citations omitted].
[1] [2016] SASC 24.
[2] [2016] SASC 24 at [3] - [4].
In Hall v Carney & Ors (No. 2)[3] Gray J, with whom Vanstone J and I agreed on this topic, considered a submission that the general rule that costs follow the event, subject to some exceptions, is applicable in probate actions. He said:[4]
[3] [2012] SASCFC 105.
[4] [2012] SASCFC 105 at [8] – [12].
The Court’s attention was drawn to the following observations of Sir James Wilde in Mitchell v Gard:
… It is the function of this Court to investigate the execution of a will and the capacity of the maker, and having done so, to ascertain and declare what is the will of the testator. If fair circumstances of doubt or suspicion arise to obscure this question, a judicial inquiry is in a manner forced upon it. Those who are instrumental in bringing about and subserving this inquiry are not wholly in the wrong, even if they do not succeed. …
…
… the Court deduces the two following rules for its future guidance: first, if the cause of litigation takes its origin in the fault of the testator or those interested in the residue, the costs may properly be paid out of the estate; secondly, if there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator, or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent.
The observations of Sir James Wilde were addressed by Henderson J in Kostic v Chaplin:
Although Sir James Wilde framed his first rule in terms of blame and fault, it is in my view reasonably clear that he did not necessarily mean moral fault or culpability, but rather that the touchstone should be whether it was the testator's own conduct which had led to his will "being surrounded with confusion or uncertainty in law or fact". If that causal test is satisfied, it should not in my judgment matter for the purposes of the first rule whether the problem is one relating to the state in which the deceased has left his testamentary papers (for example where a will cannot be found, or where there is a question whether a will has been revoked), or whether the problem relates to the capacity of the deceased to make a will. I do not, therefore, read Sir James Wilde's formulation of the second rule as implying that an unsuccessful challenge to (or defence of) a will on grounds of want of knowledge and approval, lack of due execution or mental incapacity can never come within the scope of the first rule, but rather as being intended to provide guidance in cases where, on the facts, the first rule is not engaged.
In Ponder v Burmeister, Way CJ discussed the principles applicable to determining the appropriate costs order in a probate matter. The following principles have been extracted from the reasons of Way CJ:
¾The general rule is that costs follow the event.
¾Departure from the general rule is to be the exception, occurring only when there is adequate reason for such an order.
¾Costs should be awarded from the estate where the testator’s conduct has been the cause of the litigation.
¾There should be no order as to costs where the parties who failed in the litigation were reasonably led into the litigation by a bona fide belief in their case. They must have acted in good faith and must have had reasonable ground for disputing or upholding the will. This award should be made even though the testator and the beneficiaries under the will were not to blame for the litigation.
¾In determining the question of costs, the court must view the facts from the position in which they were presented to the parties who failed in the litigation.
Way CJ relied on a passage in the judgment of Sir James Hannen in Davies v Gregory. There, his Honour posed the following question to determine whether costs should be paid from the testator’s estate: “Is the testator, by reason of his conduct, to be considered the cause of the reasonable litigation which has occurred after his death as to the validity of his will?”. Sir James Hannen then considered the circumstances in which there is to be no order for costs. His Honour expanded on the above observations:
… Where the facts shew that neither the testator nor the persons interested in the residue have been to blame, but where the opponents of the will have been led reasonably to the bona fide belief that there was good ground for impeaching the will, there will be no order as to costs. Of course the opponents must have taken all proper steps to inform themselves as to the facts of the case, but if, having done so, they bona fide believe in the existence of a state of things which, if it did exist, would justify litigation, then, although no blame should attach to the testator or to the executors and persons interested in the residue, each party must bear his own costs
In Public Trustee v Hall, Angas Parsons J identified the principles discussed in Mitchell v Gard as those applicable to the determination of an award of costs in a probate matter. In doing so, his Honour also referred, inter alia, to the decision of Way CJ in Ponder v Burmeister and observed:
The rules relating to costs have been classified as follow:— 1. If the litigation results through the fault of the testator or those interested in the residue the costs may properly be paid out of the estate. 2. If there be sufficient and reasonable ground looking to the knowledge and means of knowledge of the opposing party to question either the execution of the will or the capacity of the testator, or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent. 3. Unless the circumstances of the case bring it within one of the foregoing exceptions, the general rule that costs follow the event ought to prevail. …
[Citations omitted].
In Fielder v Burgess[5] Kourakis CJ made the following observations in relation to the award of costs in probate litigation:[6]
[5] [2014] SASC 98.
[6] [2014] SASC 98 at [57] - [65].
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 19^th 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.
In support of the probate costs rule, it is also sometimes contended that s 12 of the Wills Act requires a contested hearing before the Court can be satisfied of the circumstances prescribed by that section. It is not obvious to me why the Court might not be so satisfied by reason of the consent of all interested parties supported, if necessary, by jointly submitted documentary evidence.
The probate costs rule is arguably anachronistic in modern times in which there is a greater concern with the need for proportionality in litigation. It may soon be necessary to reconsider it.
[Citations omitted].

The observations of Kourakis CJ in Fielder v Burgess were made before the court made supplementary r 195. In my view, supplementary r 195 is informed by those observations, if it does not enshrine in the rules the principles to which the Chief Justice referred in Fielder v Burgess, reflecting the modern approach to the award of costs in probate litigation. Its purpose is to alter the approach previously taken to the award of costs in probate actions.
Liability of a defaulting solicitor for costs
Mr Lempens submits that no order for costs should be made against him. He submits that the reasons of Gray J in Kerr (No. 2) cited above relating to the liability for costs of a defaulting solicitor in an application for rectification is obiter and unsupported by the authorities cited. I accept that the authorities cited do not stand squarely for the proposition adopted by Gray J. The case of In the Estate of Rea Costello (Deceased)[7] however is a case where the defaulting solicitor paid the costs of the application. In any event, there is authority in Australia and the UK supporting the principle enunciated by Gray J in Kerr (No. 2).
[7] [2014] SASC 134.
In Re Schoenmakers (No. 2)[8] a beneficiary applied for rectification of a will in respect of a property that had been sold by a trustee company after the will was made but before the death of the testator. The trustee company was the holder of a power of attorney. By its legal arm it was also the drafter of the will and the executor of the deceased’s estate. The trustee company opposed the application. McMillan J held that the trustee company’s failure to draft a will that gave effect to the testamentary wishes of the testator was the substantial cause of the litigation. Rectification was granted. The trustee company sought an order that the costs of all parties be paid out of the estate. McMillan J held that such an application was neither understandable nor proper.[9] Her Honour ordered that the trustee company pay the costs of the beneficiary and not otherwise be indemnified from the estate.
[8] [2013] VSC 658.
[9] [2013] VSC 658 at [24].
In Taylor v Haygarth; Estate of Haygarth[10] an executor who was the solicitor who drew the will, which through faulty drafting failed to reflect the testator’s intentions, applied for rectification. The defendants were persons potentially entitled on intestacy. They opposed the order for rectification. Hodgson J ordered that the solicitor pay the defendants’ costs on an indemnity basis and that he not be indemnified out of the estate either for those costs or his own costs.
[10] Unreported, Hodgson J, Supreme Court of New South Wales, 7 October 1994.
Long v Long; Estate of Long (No. 2)[11] was a rectification case in the New South Wales Supreme Court. Barrett J applied Taylor v Haygarth. However, in that case the solicitor was not a party to the proceedings and the court ordered that the solicitor be given an opportunity to be heard on the question of costs before it considered whether to order the solicitor to pay the costs personally.
[11] [2004] NSWSC 1114.
In ANZ Trustees Ltd v Hamlet[12] Pagone J in the Victorian Supreme Court dismissed an application for rectification brought by a trustee company who had been responsible for drafting the will. In obiter remarks, Pagone J stated[13] that had the application for rectification succeeded he would still have ordered the trustee company to pay the costs of the defendant beneficiaries on the basis that it was the drafting for which it was responsible that made the proceedings necessary.
[12] [2010] VSC 207.
[13] [2010] VSC 207 at [19].
In Magarry v Kiely[14] Thomas J of the Queensland Supreme Court thought that defaulting solicitors should pay the costs of a rectification application.
[14] Unreported, Thomas J, Supreme Court of Queensland, 13 July 1990.
In Marley v Rawlings (No. 2)[15] the UK Supreme Court had to consider costs of a successful application for rectification. A solicitor was responsible for a drafting error in the will. Lord Neuberger, delivering the leading judgment of the court, said that it was the error of the solicitor that was primarily responsible for the problem that gave rise to the proceedings but the solicitor’s insurers required Mr Marley to bring the proceedings by way of mitigation. In circumstances where the solicitor had no defence whatsoever to a damages claim from Mr Marley, his Lordship held that it was a particularly strong case for holding the solicitor liable for costs. The court ordered the insurers of the solicitor to pay the costs of the proceedings.[16]
[15] [2014] UKSC 51, [2015] AC 157.
[16] The insurer for the solicitor conducted the appeal, presumably on the basis of subrogation.
On the other hand, in Hind v Collins[17] McMurdo J declined to make an order for costs against a solicitor in circumstances where the solicitor was both the drafter of the will the subject of an application for rectification and the instructing solicitor for the executor. In those circumstances the court ordered that the costs of the respondent should be met by the estate and whether the estate recoups them from the solicitor was not a matter that could be fairly considered within the application.
[17] [2006] 1 Qd R 514.
While in Kerr (No. 2) Gray J did not make an order against the solicitor who was at fault, that was because the submission that the solicitor should pay the costs of the action ultimately was not pressed and the solicitor did not attend before the court and was not heard on the issue.
The weight of authority supports the principle enunciated in Kerr (No. 2) that on an application for rectification the costs of the parties are paid out of the estate unless the solicitor is at fault.
Consideration
In the present proceedings the application for rectification arose from the error of the testator’s solicitor, Mr Lempens, in drafting the will. As I have observed, Mr Lempens is one of the executors of the deceased testator’s estate. The executors appeared by counsel throughout the conduct of the trial. They adopted the formal position of neither supporting nor opposing the applications for rectification and an extension of time, but despite assuming that position formally, they submitted that rectification would be futile as it would not resolve the claim by the Michelons to a prior equity in the King William Street property. I did not accept that submission. Later in these reasons I will say something further about the conduct of the executors in the proceedings.
There was no finding that the need for rectification arose from any error or misconduct on the part of the testator. In those circumstances there is no reason why the residuary beneficiaries should have their interest adversely affected by any costs orders. There should be no order that costs be paid out of the estate.
The Michelons opposed the applications for an extension of time and for rectification. The Michelons acted as the contradictors to both applications. They were unsuccessful on both issues. They had a commercial interest in the outcome of the proceedings because they claimed a prior equity in the King William Street property. If an order for rectification was not made Mr Baker could not have asserted an entitlement to an option to purchase the King William Street property. If the estate was not bound to grant an option to Mr Baker then the dispute as to the prior equity would not arise. But the Michelons’ interest was not a direct legal interest in the rectification of the will. They had no immediate legal interest in the outcome of the action albeit they had a commercial interest. Their role as contradictors must be understood against that background.
They submit that neither the question of whether to extend time or whether to order rectification were capable of being resolved on the papers. They submit the court was assisted by having the benefit of a controverter. Accordingly, the role they played was desirable and appropriate. Nonetheless, they failed in their opposition to both applications. Yet they seek an order for payment of their costs by the estate.
Mr Baker seeks an order for the payment of his costs. He makes a number of submissions as to who should be liable to pay them.
It is convenient to address discretely the costs of the application for an extension of time and the costs of the application for rectification.
Consideration of the application for an extension of time occupied a not inconsiderable part of the trial. The terms of 6SCR 263(2)(b) provide that Mr Baker, as the applicant, should be liable for the costs of the application to extend time. But the time occupied on this issue would not have been as great but for the Michelons’ opposition to the court extending time within which to bring the application for rectification. The Michelons submit that their opposition was reasonable. They submit that there was no proper explanation for the delay. It was not an application capable of being resolved on the papers.
While the court was assisted by the Michelons’ role as a controverter, the fact remains that the Michelons undertook that role in the pursuit of their own commercial interests. Having failed, I see no justification for awarding them the costs of their failure on the application for an extension of time.
There is no justification for any other party to recover their costs in relation to the application for an extension of time. Quite apart from other considerations to which I will come shortly, the executors took no position in relation to the grant of an extension of time. There is no basis upon which they should be entitled to any order for payment of costs in relation to the application for an extension of time in any event.
There is no basis for ordering Mr Lempens to pay the costs of the application for an extension of time. He was not responsible for the failure to bring the application for rectification within time.
The failure to bring the application for rectification within time was the fault of Mr Baker’s solicitor. Unlike Mr Lempens, he is not a party to the proceedings. No application has been made for him to pay costs personally. He has not been heard on the application. While I consider Mr Baker should not be liable for the Michelons’ costs on the application for an extension of time, he cannot recover his costs from any party to the proceedings. It will be a matter for him whether he pursues his solicitor for his costs of the application for an extension of time.
In the circumstances I consider the appropriate order is that there be no order as to payment of costs on the application for an extension of time. I will address later in these reasons how that conclusion might be effected in a pragmatic disposition of the matter.
It is necessary to consider the conduct of the executors in relation to the proceedings. It is evident that the executors, Mr Robinson and Mr Botten, acted on the advice of Mr Lempens. The executors played an active role in the action without seeking advice and directions from the court prior to the trial concerning what role, if any, they should play in the proceedings.
In my view, subject to three minor matters the executors should not recover their costs of the trial. The executors have represented themselves, at the expense of the estate, in these proceedings unnecessarily. They should not have done so without first obtaining directions from the court as to whether their active participation in the action at the expense of the estate was justified. They did so notwithstanding the objection of the residuary beneficiaries and the warning that they would seek to recover any monies the executors had paid to their solicitors in relation to the matter.[18]
[18] Affidavit of Mark Jappe affirmed on 17 May 2016.
In Macedonian Orthodox Community Church of Saint Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Dioceses of Australia and New Zealand[19] the High Court endorsed the views expressed by the English Court of Appeal In Re Beddoe[20] that a trustee who, without the sanction of the court, commences an action or defends an action unsuccessfully, does so at his own risk as regards to costs and should not be allowed to charge those costs out of the trust estate except in very exceptional circumstances. One of those exceptional circumstances is where a court subsequently comes to the conclusion that it would have authorised the action or defence had application been made.[21]
[19] [2008] HCA 42, (2008) 237 CLR 66.
[20] [1893] 1 CH 547 at 557.
[21] [2008] HCA 42 at [47], (2008) 237 CLR 66 at 86 - 87.
In this case the only justifiable legal costs incurred by the executors related to the costs of providing an affidavit deposing to the present circumstances of the administration of the estate and appearing at the commencement of the trial to announce they would submit to the court’s decision and withdraw. In addition, I accept that it is not unreasonable for the estate to incur the expense of Mr Lempens preparing, filing and serving an affidavit deposing to the circumstances in which the will was drafted and executed, given the terms of the orders made by Gray J on 18 September 2015 notwithstanding that his evidence in relation to the circumstances in which the will was made did not relate to his conduct as an executor but rather to his conduct as the solicitor retained to prepare the testator’s will. However, given that this was the subject of a court order, I accept that the executors are entitled to recover their costs from the estate in relation to these matters. With respect to the remainder of the legal costs incurred by the executors, I consider that these costs should not be visited upon the estate. The representation of the executors at the trial was not for any reasons connected with their status and functions as executors of the estate of the deceased. This is not a case that falls into the exception identified in In Re Beddoe approved by the High Court in Macedonian Orthodox Church.
As I consider the actions of the executors were dictated by Mr Lempens, as the solicitor acting for the executors, he should personally bear any liability for costs that may be visited upon the executors.
Mr Baker is entitled to recover his costs of the application for rectification. He succeeded on this application. I think it appropriate he recover 50 per cent of his costs of the proceedings. I apportion costs between the application for rectification and the application for an extension of time. For the reasons explained, I do not consider the applicant is entitled to recover the costs of the application for an extension of time. Adopting a broad axe approach I consider that 50 per cent fairly represents the respective costs of each application. In accordance with the general rule in 6SCR 264(2) those costs should be taxed as between party and party. I will turn to the question of who should pay his costs shortly.
For the reasons I have already explained, the executors are not entitled to an indemnity from the estate in respect of their costs. Given the basis upon which the executors conducted the proceedings, namely, in the interests of Mr Lempens, they should repay to the estate any costs charged save and except for those costs I have identified earlier in these reasons which were properly incurred. Those costs are to be met by Mr Lempens personally. He should indemnify the other executors, Mr Robinson and Mr Botten, in respect of the costs to be repaid to the estate.
The Michelons were unsuccessful in resisting the application for rectification. Notwithstanding the utility of the role performed by the Michelons as a controverter, ultimately, they were the unsuccessful party. Just as with the application for an extension of time, I can see no justification for awarding them the costs of their failure on the application for rectification. I will address their liability for the costs of the other parties shortly.
The residuary beneficiaries have incurred legal costs in defending their interests in the estate from the costs claim by other parties. If those costs are not met by another party they will bear those costs personally. The residuary beneficiaries did not seek to be heard on the trial because their interests related only to the question of the costs of the application and not to the substantive application for rectification. Accordingly, the costs they seek are in relation only to the argument as to costs. For reasons I have explained earlier, there is no reason why their interests should be adversely affected. They are entitled to an order for payment of their costs.
I turn to the question of who should pay the costs of Mr Baker and the residuary beneficiaries.
Mr Baker’s costs should be paid by Mr Lempens personally. The need for rectification was a direct result of his errors in drafting the will. While Mr Lempens did not require Mr Baker to bring the proceedings, unlike the position in Marley v Rawlings (No. 2), the application for rectification was the only way the problem caused by Mr Lempens’ error could be corrected. Mr Baker had to apply to the court pursuant to s 25AA of the Wills Act to rectify the will. The proceedings were unavoidable and resulted directly from Mr Lempens’ error.
I reject the submission that any decision in relation to Mr Lempens’ liability to pay the costs of the proceedings should await the outcome of any issue between Mr Baker and the Michelons in relation to the exercise of his entitlement under the will to exercise the binding option to purchase the King William Street property. This is merely a variation on the submission put by the executors that an order for rectification would be futile given the existence of the Michelons’ prior equity in the property. For the reasons I have given in the primary action, there is utility in granting the application for rectification. The costs of those proceedings should be determined in this action and on the basis of the outcome of this action. There is no sound reason in principle or practice why any orders as to costs should be contingent upon the outcome of a dispute extrinsic to these proceedings, which in any event, may never arise.
I also reject the submission that costs should not be ordered against Mr Lempens on the basis that it would be unfair to do so given the basis of his involvement in the trial of the action. That submission is contrary to the principle in Kerr (No. 2) and the authorities I have referred to which support that principle.
I also reject the submission that Mr Baker and the residual beneficiaries should bring separate proceedings to claim their costs as damages. That would be contrary to the approach in Marley v Rawlings (No. 2) and the principle in Kerr (No. 2).
I also reject the submission that the court should have regard to any question of the nature and extent of any indemnity Mr Lempens might have from his insurer in determining his liability for costs. That is not a proper matter to be considered in deciding the liability for costs.
That leaves the issue of whether the Michelons should be liable to the applicant for his costs or whether the Michelons should pay to Mr Lempens any portion of his liability for the applicant’s costs.
Although I have wavered on this question, ultimately I have come to the conclusion that while the Michelons were unsuccessful in defending the application for rectification, the need for the application was solely the result of the errors of Mr Lempens. In those circumstances I do not consider it fair or reasonable to visit liability for the applicant’s costs, even in part, on the Michelons.
Mr Lempens should also pay the costs of the residuary beneficiaries. The need for them to make submissions and to incur legal costs arose by reason of the errors made by Mr Lempens in his failure to accept liability for any costs orders that may be made. Those costs should be paid on an indemnity basis otherwise the residuary beneficiaries will be unfairly prejudiced in circumstances where they were not at fault.
Conclusion

I would order that Mr Lempens pay Mr Baker 50 per cent of his costs of the action and pay the costs of the residuary beneficiaries. Mr Baker’s costs should be taxed as between party and party. The costs of the residuary beneficiaries are to be paid on an indemnity basis.
The executors are to repay any costs charged to the estate save and except for the costs of the preparation and filing of the affidavit of the circumstances of the administration of the estate; the affidavit of Mr Lempens concerning the circumstances in which the will was drafted and executed; and the costs that would have been incurred by counsel appearing at the commencement of the trial to announce that the executors would submit to the court’s decision. Those specific costs should be repaid to the estate by Mr Lempens. Mr Lempens should indemnify the other executors, Mr Robinson and Mr Botten, in relation to the balance of the costs to be repaid to the estate.