Saunders v Pedemont (No 2)
[2012] VSC 601
•11 DECEMBER 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
PROBATE LIST
S CI 2012 04212
| GARRY NORMAN SAUNDERS | Plaintiff |
| v | |
| NICOLE MARIE PEDEMONT | Defendant |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 4 DECEMBER 2012 | |
DATE OF JUDGMENT: | 11 DECEMBER 2012 | |
CASE MAY BE CITED AS: | SAUNDERS v PEDEMONT (NO 2) | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 601 | |
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Wills – Statutory will – Application unsuccessful – Costs – Whether costs should follow the event – On what basis costs should be ordered.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms CH Sparke SC | Professor Phillip Hamilton |
| For the Defendant | Ms U Stanisich | Moores Legal |
| For State Trustees Limited as administrator of Ronald Ernest Macquire | Mr J Smith | State Trustees Limited Legal Branch |
HIS HONOUR:
Introduction
On 28 November 2012, I published my reasons for refusing the plaintiff’s application under s 21 of the Wills Act 1997 that the Court make a “statutory will” for Ronald Ernest Macquire.
Argument on the question of the costs of the proceeding had to be adjourned in order that State Trustees Limited, the administrator of Mr Macquire, could be present to oppose a foreshadowed application by the plaintiff that the costs of the proceeding be paid by the estate of Mr Macquire. State Trustees had been served with the originating motion and supporting material and had entered an appearance prior to the directions hearing on 10 August 2012. However, it adopted a neutral position concerning the application for the making of a statutory will, presumably because Ms Pedemont, Mr Macquire’s granddaughter, who had also been served with the papers, had appeared by counsel to oppose the application. Nevertheless, State Trustees appeared by counsel at the start of the trial to reserve its right to be heard on the question of costs at the appropriate time. State Trustees’ concern that a costs order not be made against the estate of Mr Macquire was no doubt a reaction to the criticisms of “its apparent passivity” in the similar situation considered by the Court of Appeal in Boulton v Sanders.[1]
[1](2004) 9 VR 495, [156] (Dodds-Streeton AJA).
The Costs Orders Sought
The successful defendant sought the following orders:
(a) that there be no order as to the plaintiff’s costs; and
(b)that the plaintiff pay the defendant’s costs on a solicitor and client basis, alternatively that the plaintiff pay her costs on a party and party basis and that the difference between the amount of her costs on a solicitor and client basis and the amount of her costs on a party and party basis be paid from the estate of Mr Macquire.
State Trustees sought the following orders:
(a)that the plaintiff pay its costs, as the administrator of Mr Macquire, on a solicitor and client basis; and
(b)that otherwise there be no order for costs from the estate of Mr Macquire.
Counsel for State Trustees made no submission concerning costs as between the plaintiff and the defendant.
The unsuccessful plaintiff submitted that the following orders should be made:
(a) that there be no order as to the plaintiff’s costs; and
(b)that the defendant’s costs and State Trustees’ costs be paid from the estate of Mr Macquire.
Consideration of the Issues
There are, therefore, a number of issues to be considered in deciding what costs orders should be made. The first issue is whether there should be an order that the plaintiff pay the defendant’s costs, as sought by the defendant, or whether there should be an order that the defendant’s costs be paid from the estate of Mr Macquire, as sought by the plaintiff.
In Hill v Hill (No 2),[2] Byrne J made no orders for costs of any party. They were the successful plaintiff, who was the daughter of the propositus, who became the sole beneficiary; the propositus whose affairs were administered by State Trustees; and the Cat Protection Society of Victoria, which lost its half interest under the will revoked by the statutory will. His Honour commenced his analysis by commenting that:
In equity cases concerning trust estates and deceased estates, it is customary for the trustee or executor to have its costs and expenses paid or retained from the trust assets or the estate. On the other hand, the entitlement to costs of other parties, whom I refer to as the contending parties, and the measure of these costs will depend upon their success and whether it was reasonable for them to make or resist the claim to the trust or the estate.[3]
[2][2001] VSC 135.
[3][2001] VSC 135, [6].
Byrne J then considered and rejected as helpful analogies the approach taken to costs in both the testamentary capacity cases and family provision cases.[4] Instead, his Honour held that:
Another and, to my mind, more apposite approach is for the ordinary rule applicable for contentious litigation to apply: costs follow the event. In such a case as the present, the contending parties, on the one hand, are seeking a benefit, and on the other are protecting their expected benefit from the estate in due course.[5]
[4][2001] VSC 135, [7]-[8].
[5][2001] VSC 135, [9].
At first instance in Boulton v Sanders (No 2),[6] Balmford J rejected the unsuccessful plaintiff’s submission that the costs of all parties should be borne out of the estate of the intended testatrix. Instead, her Honour ordered that the plaintiff pay the costs of the defendants on a party and party basis.[7]
[6][2003] VSC 409.
[7][2003] VSC 409, [9] and [12].
The Court of Appeal dismissed an appeal against the costs orders made by her Honour. Dodds-Streeton AJA, with whom Ormiston and Charles JJA agreed, referred to what both Byrne J in Hill and Balmford J at first instance had said and concluded:
Where an application is brought by and for the benefit of persons including the applicant, rather than by a disinterested administrator, the ordinary principles governing costs in adversarial litigation properly apply. It should not be presumed that the estate, rather than an unsuccessful applicant, will be ordered to pay the costs of the proceeding merely because there is “a fair case of dispute”.[8]
[8](2004) 9 VR 495, [153].
Counsel for the plaintiff in the present case submitted that as a proper contradictor the defendant should receive her costs, but from the estate of Mr Macquire not from the plaintiff. In support of that submission, counsel referred to the observation of Byrne J in Hill that it would be a matter of regret if parties were dissuaded from participating in statutory will cases “for fear that they might be obliged to do so at their own expense”.[9] However, counsel also sought to rely on that observation as support for the submission that unsuccessful plaintiffs should not have to pay costs because there was a public interest in having a person’s testamentary intentions ventilated in court. Counsel also pointed out that the estate of Mr Macquire was sufficiently large to be able to bear the costs without that payment affecting his security and welfare. Whilst she acknowledged that the size of the estate alone did not make it automatic that costs should be paid from the estate of the propositus, the impact or lack thereof on Mr Macquire was a matter for the Court to consider. The plaintiff’s counsel submitted that all of these reasons justified the defendant receiving her costs from the estate of Mr Macquire, and not from the plaintiff.
[9][2001] VSC 135, [10].
I do not agree with this submission. First, I do not accept that this was an application which had to be brought before the Court or that there was any public interest in the litigation. Mr Macquire had a will. The plaintiff chose in his own interest and that of his wife and his brother and his wife to apply to have that will revoked by a statutory will benefiting the four of them. On the other hand, the defendant was not merely a contradictor, she was seeking to protect the benefit she would receive under her grandfather’s existing will. The application therefore falls squarely within the situations envisaged by Byrne J and Dodds-Streeton AJA in the passages from their judgments set out above.
Secondly, in the quotation from the judgment of Byrne J mentioned in paragraph 11 above, his Honour was referring to defendants being dissuaded from participating in statutory will cases to oppose the application by leading evidence and making submissions. His Honour was not referring to plaintiffs, particularly unsuccessful plaintiffs. In this case the plaintiff commenced the litigation in his own interest, forced the defendant to incur costs in opposing the application, and lost. Therefore, I see no reason why the plaintiff should not be ordered to pay the defendant’s costs.
Thirdly, I do not consider that the estate of the propositus should be the first source of payment of the costs of the proceeding. In Boulton v Sanders (No 2) it was submitted to Balmford J that costs could be borne by the estate of Miss Sanders because her “assets were such that the payment of the costs out of her estate would not adversely affect her lifestyle”.[10] Her Honour rejected that submission,[11] after quoting the following passage from the judgment of Byrne J in Hill v Hill (No 2):
[10][2003] VSC 409, [2].
[11][2003] VSC 409, [9].
… in a case such as the present, the will-maker is still alive and entitled, so long as she lives, to enjoy her assets undiminished by the burden of paying the costs of those whose claims anticipate her demise.[12]
[12][2001] VSC 135, [8].
His Honour also said in that case:
… I have regard also to the modest size of the assets of the will-maker who is, of course, in no way responsible for this claim. Such enjoyment of life which she now has by reason of these assets should not lightly be interfered with. I have regard, too, to the fact that her only substantial asset is a piece of real estate which will have to be sold if the costs of the contending parties are to be paid from the estate. In such an event the financial position of the will-maker may indeed be precarious.[13]
In dismissing the appeal from the costs order made by Balmford J, Dodds-Streeton AJA said:
In determining whether it is appropriate to exercise the discretion to order that the costs of an application under Pt 3, Div 2 of the Act be paid from the estate of a living but incapacitated person, the avoidance of any potentially adverse impact on that vulnerable person’s long-term security and welfare will always be an important consideration.[14]
In my opinion, any reduction in the assets of Mr Macquire as a result of this litigation should be kept to a minimum, even if it appears that they are now more than sufficient for his present needs. Apart from anything else, the likely result of the plaintiff’s submission would be that the defendant would effectively be paying her own costs, as such a costs order would diminish the size of the estate which ultimately she will probably inherit from her grandfather.
[13][2001] VSC 135, [12].
[14](2004) 9 VR 495, [154].
Therefore, I consider that this application should be regarded as adversarial litigation, and that costs should follow the event, that is, that there should be an order that the unsuccessful plaintiff pay the successful defendant’s costs.
Although the plaintiff’s counsel raised the question of the defendant’s bankruptcy and submitted that it would be inappropriate to make a costs order in her favour when the costs if paid would simply have to go to her trustee in bankruptcy, she acknowledged that this was put on a speculative basis because the terms of the defendant’s engagement of her solicitors was not known. In the circumstances, I consider that the fact that the defendant is bankrupt should not impinge on the orders for costs that I would otherwise make.
The second issue I have to consider is on what basis the defendant’s costs should be ordered to be paid. Counsel for the defendant submitted that the costs should be on a solicitor and client basis because it could not be said that the plaintiff had any reasonable basis for bringing his application, particularly after the defendant’s affidavit had been received. Counsel referred to the plaintiff’s lack of contact with the defendant prior to bringing the application, the plaintiff’s knowledge of the defendant’s existence and of the relationship between the defendant and her grandparents, including the fact that there were photographs of their granddaughter in the Macquires’ home, and that the defendant’s attendance at the VCAT hearing indicated her interest in her grandparents’ welfare. It is probably sufficient if I simply state that I do not agree that the plaintiff’s application was so unreasonable or unlikely to succeed, even after receipt of the defendant’s affidavit, that there should be an order for the costs to be assessed on a higher basis.[15]
[15]See Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, 233-234 (Sheppard J); Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [7] (Harper J).
Therefore, I do not consider that there is any valid reason for ordering that the defendant’s costs be paid by the plaintiff on a solicitor and client basis. This conclusion leads to the next issue which is whether the difference between the amount of the defendant’s costs on a solicitor and client basis and the amount of her costs on a party and party basis should be recovered from the estate of Mr Macquire. Counsel for the defendant submitted that the defendant effectively stepped into the shoes of State Trustees by defending the proceeding in circumstances where State Trustees was content to abide by any order made by the Court. It was further submitted that had State Trustees defended the application by relying on Ms Pedemont’s evidence, it would in all likelihood have been awarded solicitor and client costs from the plaintiff, alternatively party and party costs from the plaintiff with the balance of its costs being awarded from the estate of Mr Macquire on an indemnity basis. A statement from the judgment of Balmford J to the effect that “an independent administrator would always be entitled to costs out of the estate”, [16] was cited as authority for this proposition, but in that paragraph her Honour was merely reciting a submission by counsel. She was not necessarily adopting it, and in fact did not do so because in that case State Trustees sought no order for costs in its favour.
[16][2003] VSC 409, [6].
I do not consider that the assets of Mr Macquire, who may yet survive for a few more years, should be diminished by such a costs order. It was in the defendant’s own interest to oppose the plaintiff’s application, which she successfully did and she will receive the benefit of a costs order in her favour. In my opinion, the defendant is in no different situation from any party to adversarial litigation with respect to the fact that costs ordered to be taxed on a party and party basis do not normally provide the recipient of such an order with a full recovery. She has no entitlement to recover the balance of her costs from the estate of Mr Macquire.
I turn then to the question of the costs of State Trustees as the administrator of Mr Macquire. I consider that there should be an order that the plaintiff pay State Trustees’ costs, even though it was never formally made a party.[17] Once it was clear that the person with the greatest interest and relevant knowledge was going to oppose the application, State Trustees sensibly did not duplicate costs by seeking to be added as a defendant and participating in the hearing. Instead, it limited its involvement in the proceeding, thereby keeping down the amount of costs it would incur. But it was obliged, in my opinion, to protect Mr Macquire’s estate from costs orders and as such it was appropriate for it to be represented at the directions hearing, the start of the trial and the argument about costs. Had the plaintiff not made the application for a statutory will, those costs and the costs of preparing Mr Misale’s affidavit and any other costs relating to the proceeding would not have been incurred. I see no reason why the plaintiff should not, therefore, be ordered to pay State Trustees’ costs rather than there being an order that all of State Trustees’ costs be paid from the estate of Mr Macquire.
[17]Burns Philp & Co Ltd v Bhagat [1993] 1 VR 203; Bischof v Adams [1992] 2 VR 198.
The fifth issue is whether the plaintiff should be ordered to pay State Trustees’ costs on a solicitor and client basis. Counsel for State Trustees agreed that the sole basis for such an order was a letter written by State Trustees to the plaintiff’s solicitor on the afternoon of 17 September 2012, the first day of the trial, requesting the plaintiff to agree that he would not seek a costs order against Mr Macquire, in which case State Trustees would agree that it would not seek a costs order against the plaintiff for Mr Macquire’s costs to date. Counsel submitted that had that offer been accepted, there would have been no need for any appearance by State Trustees at the costs hearing. At best, this offer would only justify an order that State Trustees’ costs incurred after 17 September 2012, and not all of its costs, be awarded on a solicitor and client basis. But even that limited order would not be appropriate, in my opinion, because as counsel for the plaintiff pointed out that there still would have been live issues necessitating State Trustees’ attendance at the costs hearing – the plaintiff’s submission that the defendant’s costs should be paid from Mr Macquire’s estate, and the defendant’s alternative submission that any shortfall in costs received by the defendant be paid from Mr Macquire’s estate. The strength of this submission was not really reduced by the observation by counsel for the defendant that had the plaintiff accepted State Trustees’ offer, she may have reconsidered her alternative submission and not sought any costs from the estate of Mr Macquire.
My conclusion on the last two issues raises a further issue which was not really addressed in the costs hearing, and that is whether State Trustees can recover from the estate of Mr Macquire any difference between its actual costs and the party and party costs it recovers from the plaintiff. Section 47B(2) of the Guardianship and Administration Act 1986 provides that:
In any proceeding, a court or tribunal may order that an administrator be reimbursed for all or part of the administrator's costs of the proceeding from the estate administered by the administrator.
It may be that State Trustees can recover the difference in costs as part of the normal costs of administering Mr Macquire’s affairs, but given the existence of s 47B(2) I consider that I should remove any doubt about its entitlement. Although such an order would have the regrettable consequence that Mr Macquire’s estate will be slightly diminished if there is in fact any shortfall on costs, it seems to me to be an appropriate step to make such an order. It will in effect follow the order made by Hallen AsJ (as he then was) in the similar situation considered in Re Will of Jane (No 2)..[18]
[18][2011] NSWSC 883.
Finally, it was not disputed by the plaintiff that he should have to bear his own costs of the proceeding.
The Orders for Costs
I therefore propose to order that:
(a)The plaintiff pay the defendant’s costs of the proceeding, such costs, if not agreed, to be taxed on a party and party basis.
(b)The plaintiff pay the costs of the proceeding of State Trustees Limited, the administrator of Ronald Ernest Macquire, such costs, if not agreed, to be taxed on a party and party basis.
(c)State Trustees Limited be reimbursed from the estate of Ronald Ernest Macquire the difference between the amount of its costs of the proceeding on a solicitor and client basis, such costs, if not agreed with both the plaintiff and the defendant, to be taxed on a solicitor and client basis, and the amount of its costs of the proceeding on a party and party basis.
(d) Otherwise there be no order as to costs.
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