Starr v Miller; Starr v Miller (No 2)

Case •

[2021] NSWSC 685

•

16 June 2021

No judgment structure available for this case.

Supreme Court


New South Wales

Medium Neutral Citation: Starr v Miller; Starr v Miller (No 2) [2021] NSWSC 685
Hearing dates: 31 May 2021
Date of orders: 16 June 2021
Decision date: 16 June 2021
Jurisdiction:Equity
Before: Hallen J
Decision:

The Court:

1. Makes no order as to the Plaintiff’s costs to the intent that she is to bear her own costs of the proceedings.

2. Orders that the Defendant’s costs, calculated on the indemnity basis, be paid, or retained, as the case may be, out of the estate of the deceased.

3. Orders that the Plaintiff pay the Defendants’ costs of the application for costs.

Catchwords:

COSTS — Two proceedings heard together – Probate and family provision proceedings – Agreement reached following determination of the family provision proceedings that the Plaintiff’s costs and disbursements of those proceedings, being a specified gross sum instead of assessed costs, of $97,500 (including GST), be paid out of the estate of the deceased – Also agreed that the Defendants’ costs, calculated on the indemnity basis of the family provision proceedings and the Probate proceedings be paid out of the deceased’s estate – Only outstanding issue for determination is whether the Plaintiff’s costs of the Probate proceedings, in which her claim was unsuccessful, should be paid out of the estate of the deceased - Application by Plaintiff that her costs be paid, calculated on the indemnity, rather than on the ordinary basis, or in the alternative, calculated on the ordinary basis, be paid out of the deceased’s estate – Defendants’ seek order that Plaintiff should bear her own costs of the Probate proceedings – Form of orders in both proceedings otherwise agreed and orders made

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Bassett v Cameron (No 2) [2021] NSWSC 419

Bolger v McDermott (No 2) [2013] NSWSC 1330

Boughton v Knight (1873) LR 3 P & D 64

Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343

Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353

Commonwealth of Australia v Gretton [2008] NSWCA 117

Davies v Gregory (1873) LR 3 P& D 28

Di Carlo v Dubois [2002] QCA 225

Evans Shire Council v Richardson (No 2) [2006] NSWCA 61

Fielder v Burgess [2014] SASC 98

Gray v Hart; Estate of Harris (No 2) [2012] NSWSC 1562

Gray v Richards (No 2) (2014) 315 ALR 1; [2014] HCA 47

Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd [2010] FCAFC 5; (2010) 182 FCR 84

King v Hudson (No 2) [2009] NSWSC 1500

Liverpool City Council v Estephan Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan) [2009] NSWCA 161

Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 481; [2008] VSCA 212

Middlebrook v Middlebrook (1962) 36 ALJR 216

Norbis v Norbis (1986) 161 CLR 513; [1986] HCA 17

Oasis Hotel Ltd v Zurich Insurance Company (1981) 28 BCLR 230

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Pates v Craig; Estate of the late Joyce Jean Cole (NSWSC, 5 September 1995, Santow J, unrep)

Perpetual Trustee v Baker [1999] NSWCA 244

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

Photios v Photios [2019] NSWCA 158

Public Service Board of New South Wales v Osmond (1986) 159 CLR 656; [1986] HCA 7

QBE Insurance (Australia) Limited v Hotchin [2013] NSWSC 315

Re: Plant dec'd [1926] P. 139

Re Tsaousis [2019] VSC 511

Re Wilcox; Ex parte Venture Industries (No 2) [1996] FCA 1942

Shorten v Shorten (No 2) [2003] NSWCA 60

Spiers v English [1907] P 122

Starr v Miller; Starr v Miller [2021] NSWSC 426

Sydney Markets Credit Services Co-operative Ltd v Taylor (No. 3) [2015] NSWSC 1236

Tu v Tu Estate of Tu [2008] NSWSC 458

Wainohu v New South Wales (2011) 243 CLR 181; [2011] HCA 24

Wright v Apthorpe [2020] NSWCA 300

Ying v Song [2011] NSWSC 618

Texts Cited:

G E Dal Pont, Law of Costs (4th ed, 2018, LexisNexis Butterworths)

Miller, Probate Practice (Maxwell: 1900 Ed.)

Category:Costs
Parties: Susan Maree Starr (Plaintiff)
Margo Anne Miller (First Defendant & Cross-Claimant)
David Patrick Brough (Second Defendant)
Bradford Frederick McInnes Stuart (Third Defendant)
Representation:

Counsel:
Ms B Regener (Plaintiff)
Mr C Harris SC (Defendants)

Solicitors:
Young & Muggleton (Plaintiff)
Campbell Paton & Taylor (Defendants)
File Number(s): 2019/162571; 2020/34748
Publication restriction: Nil

Judgment

Introduction

  1. HIS HONOUR: This is my judgment on the appropriate order for costs arising out of the trial of Probate proceedings, in which I delivered reasons for judgment on 6 May 2021 that bear the medium neutral citation Starr v Miller; Starr v Miller [2021] NSWSC 426 (“the principal judgment”). (There were also family provision proceedings dealt with in the principal judgment, but the costs thereof were agreed by the parties following it being published.)

  2. In summary, in the principal judgment, I concluded that:

  1. the deceased had testamentary capacity when she made her 2012 Will;

  2. the deceased knew and approved the contents of her 2012 Will;

  3. a family provision order, in the form of a lump sum of $750,000, should be made for the Plaintiff in the proceedings; and

  4. a family provision order should not be made for the first Defendant, who had filed a Cross-Summons, in the Probate proceedings, seeking a family provision order in the event that the Plaintiff succeeded in the Probate proceedings.

  1. I directed the parties to deliver Short Minutes of Order to the Court in respect of both proceedings and this was done.

  2. In the family provision proceedings, the parties, ultimately, agreed upon the form of orders, including the costs orders. I made the following orders on 31 May 2021:

“1. Notes the associated proceedings 2020/34748.

2. Orders pursuant to s 59 of the Succession Act 2006 (NSW) that, in lieu of the provision made for her in the Will dated 16 July 2012 of Nancy Louise Starr (“the deceased”), the Plaintiff receive, by way of provision, a lump sum of $750,000 out of the estate of the deceased.

3. Orders that the Plaintiff’s costs and disbursements of the proceedings, being a specified gross sum instead of assessed costs, agreed in sum of $97,500 (including GST), be paid out of the estate of the deceased.

4. Orders that the provision made for the Plaintiff and the gross sum of costs be paid:

(a)   as to $405,000, within 7 days of the date of the making of these orders; and

(b)   as to $442,500 within 3 months of the date of the making of these orders.

5. Orders that no interest be paid on the lump sum and gross sum of costs if paid in accordance with Paragraph 4; and if not so paid, interest is to be paid on any unpaid part thereof, respectively, at the rate prescribed by s 84A(3) of the Probate and Administration Act 1898 (NSW), from the day after the amount was due, respectively, until it is paid in full.

6. Orders that the provision made for the Plaintiff and the gross sum of costs be provided out of the share of the deceased’s estate passing to the first Defendant, Margo Anne Miller.

7. Orders that the Defendants’ costs, calculated on the indemnity basis, of the proceedings, be paid, or retained, as the case may be, out of the estate of the deceased.

8. Orders that the Exhibits, excepting Ex D3, be dealt with in accordance with the Uniform Civil Procedure Rules 2005 (NSW) (rr 31.16A and 33.10) and Practice Note No SC Gen 18.”

  1. In the Probate proceedings, I made the following orders on 31 May 2021:

“1. Notes the associated proceedings 2019/162571.

2. Orders that the amended Statement of Claim filed on 12 March 2020 be dismissed.

3. Orders that Probate in solemn form of the Will dated 16 July 2012 be granted to Margo Anne Miller (named in the Will Margo Anne Starr), David Patrick Brough and Bradford Frederick McInnes, the executors appointed under the Will and the Defendants in these proceedings.

4. Orders that the matter be remitted to the Senior Deputy Registrar in Probate to attach a copy of the final orders, as made and entered, in these and the associated proceedings, to the original grant of Probate made on 15 October 2018, and, thereafter, to return the original grant of Probate to the Defendants.

5. Orders that the Cross-Claim filed on 14 February 2020 be dismissed.

6. Orders that these proceedings be listed on Monday, 31 May 2021 for the purpose of appointing a hearing date for the determination of the costs of these proceedings with an estimated duration of 2 hours.”

  1. There was no dispute that the Defendants’ costs of the Probate proceedings should be paid, or retained, as the case may be, out of the estate of the deceased. However, there remained an issue, solely in the Probate proceedings, about how the Plaintiff’s costs of those proceedings, should be borne. These reasons deal with that issue and should be read in the context of the principal judgment. At the conclusion of these reasons, I shall make the costs orders that reflect these reasons.

  2. Despite the conclusion reached that the Statement of Claim should be dismissed the Plaintiff sought her costs out of the deceased’s estate. Indeed, she sought an order that those costs, calculated on the indemnity basis, and only, in the alternative, calculated on the ordinary basis, be paid out of the estate of the deceased.

  3. In a letter dated 17 May 2021 from Mr T Young, solicitor for the Plaintiff, to Ms H Baker, solicitor for the Defendants, the following paragraph appeared:

“[The plaintiff] proposes that her costs in respect of the probate suit be paid out of the estate on the ordinary basis, fixed in the amount of $97,500 and that her costs in respect of the cross-claim be paid out of the estate on the indemnity basis, on the basis that she stood in the place of the executor in respect of the family provision cross-claim and would ordinarily be entitled to indemnity costs in respect of that part of the claim. In this respect, [the Plaintiff] seeks an additional $8,125 in costs for the cross-claim, or total costs of $105,625.”

  1. However, on 26 May 2021, counsel for the Plaintiff provided written submissions to the Court, which included the following:

“The Plaintiff seeks the following orders in the probate suit:

1.   that the cross-claim be dismissed;

2.   that her costs be paid out of the estate:

i.   on the indemnity basis, fixed in the amount of $130,000; or

ii.   in the alternative to 2(i), that her costs in respect of the probate suit be paid out of the estate on the indemnity basis from 20 September 2020, fixed in the amount of $92,500.”

  1. In an affidavit sworn on 28 May 2021 by Mr Young, it was confirmed that the Plaintiff would also seek an additional order for the costs of any argument about how the costs of the Probate proceedings should be borne.

  2. The Defendants simply sought an order that there be no order as to the Plaintiff’s costs.

  3. When the matter of the costs of the Probate proceedings was raised on 6 May 2021, the date on which I delivered the principal judgment, both counsel indicated that neither party would require written reasons for judgment on the costs question. Upon that basis, and in order to save the parties further expense and delay, I directed that written submissions should be delivered to the Court, in hard and soft copy, and stated that I would deal with the matter, in Chambers, without the need for oral argument.

  4. However, in the written submissions delivered on behalf of the Plaintiff, to the Court on 26 May 2021, Ms B Regener of counsel stated that “[I]n the event that Court is against her, the plaintiff has requested written reasons for decision, given the significance of the sums involved to her”.

  5. In those circumstances, I considered that I should not deal with the matter in Chambers and should allow the parties the opportunity for oral argument. That argument took place on 31 May 2021. It was conducted remotely, by audio link, and although listed for 2 hours, it took less time.

  6. Subsequently, following the conclusion of the costs argument, the Court received an email from Mr Young which stated that “The Plaintiff no longer requires written reasons for his Honour’s decision on costs in the Probate matter”.

  7. Whilst I am grateful to the Plaintiff and her legal representatives for the change of mind, I decided to provide reasons for my judgment on costs so that all parties understood the reasons for the orders made. Over 35 years ago, the High Court described "the requirement to give reasons ... as an ‘incident of the judicial process’, subject to the qualification that it is a normal, but not a universal, incident": Public Service Board of New South Wales v Osmond (1986) 159 CLR 656 at 667; [1986] HCA 7 (Gibbs CJ).

  8. As it happened, on 4 June 2021, the Court was informed that on 3 June 2021, the Plaintiff had filed a Notice of Intention to Appeal. (That, of course, is a notice that the applicant intends to file (a) a notice of appeal, or (b) if necessary, a summons seeking leave to appeal, within 3 months after the material date or such other period as the Court may order: UCPR r 51.6.) This provides an additional basis for providing reasons for judgment on the issue of costs: Wainohu v New South Wales (2011) 243 CLR 181, at [55] (French CJ and Kiefel J); [2011] HCA 24.

  9. In any event, the Plaintiff is entitled to adequate, and written, reasons on the determination of how the costs of the proceedings should be borne. Importantly, the reasons do not need to be lengthy or elaborate. Indeed, as was written in Luxmore Pty Ltd v Hydedale Pty Ltd (2008) 20 VR 48; [2008] VSCA 212, at [12] (Maxwell P and Kellam JA):

“In the ordinary case, it is both appropriate and desirable that a costs question be decided at the conclusion of argument. Rarely will it be necessary for a judge to give detailed reasons for decision adverting to every matter debated in argument. This court will assume, as should the parties, that every matter addressed in argument on costs has been considered. This court will set its face against any proposition which would require judges disposing of questions of costs to give elaborate reasons.”

  1. The extent of the reasons to be provided must be assessed in the context of the application. In any event, it is enough that the parties and an appellate court understand why the Court has reached the particular outcome.

Submissions based upon an offer made by the Plaintiff

  1. One basis relied upon by the Plaintiff for the application for costs of the Probate proceedings, related to an offer made in the proceedings. (I shall refer to the evidence of the offers made, referring specifically to the offer relied upon.)

  2. On 6 September 2019, the Defendants made a Calderbank offer to settle the proceedings, on the basis that the Plaintiff receive a lump sum of $35,000 (in addition to the provision made for her in the deceased’s Will) and that her costs, as agreed or assessed, be paid out of the estate. It is unclear whether the offer was rejected or lapsed through effluxion of time. Neither party relied upon this Calderbank offer by the Defendants.

  3. On 15 September 2020, the Plaintiff made a Calderbank offer, which was in the following terms:

“We are instructed to make an offer of compromise in the following terms:

1. Judgment for the Defendants in the Probate Proceedings.

2. The costs of the Defendants in the Probate Proceedings be paid out of or retained from the Estate on the indemnity basis.

3. In the Family Provision proceedings:

•   In lieu of the provision made for the plaintiff in the 2012 Will, the plaintiff receive a lump sum of $875,000 (“Lump Sum”) inclusive of:

(i)    all legal costs and other expenses of any nature; and

(ii)   the bequest made for her in the 2012 Will.

No interest be payable on the Lump Sum if it is paid within 28 days of final orders being made in each of the proceedings; otherwise, interest is payable at the rate prescribed by section 84A(3) of the Probate & Administration Act 1898 (NSW), calculated from 28 days from the date of the making final orders in each of the matters until the date of payment.

•   The costs of the Defendants be paid out of or retained from the Estate on the indemnity basis.

4. If required, our client will provide your clients with a release in terms suitable to them. For example: ‘the Plaintiff agrees to irrevocably and unconditionally release the Defendants and the Estate of the late Nancy Louise Starr for any further claims whether present, unascertained, immediate, future or contingent, on any legal basis, in any way connected with the estate of the late Nancy Louise Starr.’

5. The terms of settlement to be kept confidential, if confidentiality is required by your clients.

6. The parties enter into a deed of settlement reflecting the above terms, if required by your clients, to be prepared by your clients.”

  1. It is unclear whether the offer was rejected or lapsed through effluxion of time.

  2. On 12 February 2021, the Defendants made an offer to settle the proceedings upon the basis that the Plaintiff would receive a lump sum of $450,000 payable to the Plaintiff, inclusive of costs in respect of both proceedings. It is unclear whether the offer was rejected or lapsed through effluxion of time. Neither party relied upon the rejection of this Calderbank offer by the Plaintiff.

  3. The Plaintiff relied upon the Defendants’ failure to accept the offer made on 15 September 2020 as a reason for making an order that her costs, calculated on the indemnity basis, be paid out of the estate of the deceased. She submitted that the terms of Paragraph 1 of the offer, if accepted, would have led to the same result as the Court had determined.

  4. The Plaintiff also submitted that the result achieved by the Defendants was no better than the outcome they would have achieved had they accepted the Plaintiff’s offer. Since, in the offer, the Plaintiff was not seeking her costs of the Probate proceedings, the offer made, in respect of the Probate proceedings, was more favourable to the estate. In fact, the Defendants would have been $185,400 better off if they had accepted the offer. It was said that the Defendants’ non-acceptance of the offer resulted in the parties collectively “throwing away” $397,900 in costs.

  5. In relation to Calderbank offers, I cannot do better than repeat what was written, as a short summary of the principles, by Ward J (as her Honour then was) in Ying v Song [2011] NSWSC 618 at [26]:

"The position in relation to offers expressed to be without prejudice except as to costs (and relied upon as being in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333; [1975] 3 WLR 586) differs in that the party seeking to rely on the offer must establish both that it represents a genuine compromise of the dispute and that it was unreasonable for the offeree to reject it. It is recognised that the making of a Calderbank offer is one of the circumstances in which the court may exercise its discretion under Rule 42.1 to make some order other than that costs should follow the event but that it does not automatically follow that simply because the offer was more favourable than the judgment then an indemnity costs order will be made."

  1. (Her Honour repeated the principles again, more recently, in Bassett v Cameron (No 2) [2021] NSWSC 419 at [22] – [25].)

  2. The onus is on the party making a Calderbank offer to satisfy the court that it should exercise the costs discretion in its favour: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61; Commonwealth of Australia v Gretton [2008] NSWCA 117.

  3. I reject the Plaintiff’s submission made, based upon the Calderbank offer, for the following reasons:

  1. There was no suggestion that the Defendants could have accepted only part of the offer, contained in Paragraphs 1 and 2, but reject the balance of the terms. (This was accepted by counsel for the Plaintiff in the argument on costs: Tcpt, 31 May 2021, p 5(07-11). Indeed, on the basis of the form of the offer made, the Defendants could not do so.

  2. Bearing in mind the orders ultimately made in the family provision proceedings, the total amount that the Plaintiff received is $847,500. That is not more favourable than the offer of $875,000 made in the Plaintiff’s Calderbank offer. This, too, was accepted by counsel in argument: Tcpt, 31 May 2021, p 5(21-29).

  1. At the time the offer was made, the Plaintiff’s costs, calculated on the ordinary basis, of the family provision proceedings, were likely to have been less than $97,500, being the gross sum for costs included in the orders that were made.

  1. For those reasons, it could not be said, even if the offer represented a genuine compromise of the dispute, that it was unreasonable for the Defendants to have not accepted the offer. Accordingly, I am not satisfied that the Court should exercise the discretion to order that the Plaintiff should receive her costs calculated on the indemnity basis, based upon the terms of the Calderbank offer of 15 September 2020.

Additional submissions

  1. I next turn to the submissions made going to whether, apart from the offer upon which the Plaintiff relies, there should be the order made that is sought by her.

  2. In the principal judgment, I noted at [35] – [36]:

“Whilst [the Plaintiff] was likely to have been aware of at least some of the facts and circumstances upon which she sought to base her assertions of the deceased’s lack of testamentary capacity, and also lack of knowledge and approval, she had made no attempt to oppose the making of the common form grant of Probate when it was sought by the Defendants. Then, despite the making of the common form grant, she made no attempt to have it revoked, but on the contrary, commenced the family provision proceedings in May 2019, and prosecuted them upon the basis that, because of the terms of the 2012 Will, Probate of which had been granted to the Defendants to those proceedings, she had been left without adequate provision for her maintenance, education or advancement in life.

The matter had been in the Family Provision List (as the Succession List was then called) on 28 June 2019, 30 August 2019 (having, in the meantime, been to a private mediation), and on 27 September 2019. It was not until a directions hearing, held on 19 December 2019, that the Court was first informed, by junior counsel, that [the Plaintiff] intended to commence proceedings challenging the validity of the 2012 Will which had been the subject of a grant of probate made by this Court on 15 October 2018.”

  1. At [365], I wrote:

“Senior counsel also accepted that Susan did not file a caveat to prevent a grant of probate and took a year to bring her claim for revocation of the grant: Tcpt, 3 March 2021, p 340(25-43). Whilst she may not have known all of the particulars that she inserted in her Statement of Claim when it was filed, according to her evidence, the deceased was significantly impaired from 2009. In this regard, she gave evidence of her experience as a speech pathologist and her observations of dementing patients.”

  1. In regard to the failure to lodge a caveat preventing the grant of probate, the Plaintiff submitted, during the costs argument, that she did not receive written advice with respect to the deceased’s estate until after probate was granted and that, without such advice, she was unaware of, and could not file, a probate caveat. No evidence of when she received that advice, or its nature, were given. (Also, I note that the Plaintiff had not referred to the matter of late advice being given in Paragraph 5 of her Statement of Claim filed on 5 February 2020, to which I referred in [37] of the principal judgment.)

  2. The Plaintiff submitted that she had issued a subpoena for medical evidence in November 2019, which provided support for the claims made in the probate suit and included a diagnosis of dementia. It was then, on the next occasion the matter was before the Court, in December 2019, that counsel raised with the Court the Plaintiff’s intention to file a probate claim, the Plaintiff, then, having obtained medical support for such a claim.

  3. The Plaintiff contended that, other than for the delay, her conduct in the Probate proceedings was measured, and proportionate, to the questions to be determined. Further, there was, according to the Plaintiff, no prejudice or costs incurred to the Defendants by reason of the delay.

  4. Counsel referred to Photios v Photios [2019] NSWCA 158, in which Bell P (Gleeson JA and Leeming JA agreeing) held, at [63], that:

“…it was not unreasonable, in my opinion, for the Appellant to defer the making of the allegations as to his father’s lack of testamentary capacity until such time as he had medical support for those allegations.”

  1. The Plaintiff also submitted that her costs of the Probate proceedings should be paid out of the deceased’s estate, because the deceased’s conduct was the cause of the litigation. She contended that she had adduced both lay, and medical, evidence, in the proceedings, which had raised doubts about the deceased’s capacity, including the evidence of the deceased’s treating psychogeriatrician, which evidence related to the period during which the 2012 Will was made and which evidence gave support to the view that the deceased did not have testamentary capacity.

  2. The Plaintiff submitted that the Court should exercise its discretion to order that her costs, calculated on the indemnity basis, be paid out of the estate. She said that the two related family provision suits had operated to increase her costs, requiring correspondence with two sets of solicitors. However, as I noted during the costs argument, there would have been a significant delay in hearing the probate and the family provision proceedings separately, and the costs of all parties would have been, significantly, increased if that had been done: Tcpt, 31 May 2021, p 06(06-09).

  3. I had noted, at [26] of the principal judgment, that a concurrent hearing had been anticipated when the matters were set down for hearing and was made without objection of the parties. In any event, when both matters were set down for hearing, 7 days were allotted as the estimated duration of the hearing, but the hearing was, in fact concluded, in 6 days.

  4. In oral submissions, counsel for the Plaintiff submitted that another basis on which the Plaintiff sought indemnity costs was “in respect of the family provision Cross-Claim, one of the other executors was the cross-claimant and the other two executors… indicated that they didn’t want to take part in any proceedings and didn’t want to incur any costs”: Tcpt, 31 May 2021, p 2(47-50).

  5. However, as pointed out to counsel for the Plaintiff, the usual manner for a party in the Plaintiff’s situation to recover costs, in the event that she is unsuccessful in propounding a Will, or in defending the Cross-Claim, is to seek an indemnity from the parties whose interests are being protected.

  6. In the circumstances, reference should be made to Pates v Craig; Estate of the late Joyce Jean Cole (NSWSC, 5 September 1995, Santow J, unrep) in which it was written, at [4]-[5]:

“… Thus it is said that in probate the executor's title as executor is itself ‘generally in doubt and if he takes the risk of propounding the will, he would be wise to obtain an indemnity from persons beneficially interested, if he is not so interested himself’; Williams, Mortimer and Sunnucks, supra, at 402. Here of course the executor in question was interested herself as, if the will were successfully propounded, she would be the sole beneficiary.

However, that simply means that the risk, of necessity, falls upon the executor so far as the costs are concerned unless within the exception. Thus an executor is prima facie justified in propounding the will, but is not bound to do so, and if an executor must or ought to have known that he is propounding a document that could not be supported, he will be condemned in costs; see earlier authorities cited and Williams, Mortimer and Sunnucks at 412. Nor is it necessary that a positive finding be made that, for example, the executor has acted improperly, such as by the exercise of undue influence. Rather, it is because executors typically have ample opportunity of observing the behaviour of the testator, in propounding the will, they will be condemned in costs if they are unsuccessful; see Williams, Mortimer and Sunnucks at 413 and the authorities there cited.”

  1. Furthermore, it is clear that the Plaintiff’s other two siblings, by having commenced their own proceedings for a family provision order, were not supporting the assertions made by the Plaintiff in the Probate proceedings.

  2. The Defendants, firstly, reminded the Court of the Plaintiff’s failure to file a Probate caveat, or to take any action to prevent Probate of the Will being granted, despite the Plaintiff giving evidence of noting dementing speech patterns in the deceased, so she had said, from as early as 2009.

  3. They submitted that the costs of the litigation had been significantly increased by the late challenge to the deceased’s Will, pointing to the fact that probate was granted in October 2018 and the Statement of Claim in the Probate proceedings was not filed until March 2020. This was undoubtedly true. Indeed, so were the Plaintiff’s costs.

  4. The Defendants also pointed to the fact that the family provision matters were ready to be set down for hearing on 19 December 2019, when the Plaintiff indicated, for the first time, that she proposed to challenge the deceased’s Will. This had also caused a delay in the hearing of those proceedings.

  5. The Defendants submitted that the only expert evidence led by the Plaintiff was that of Dr Cetiner, the psychogeriatrician, who had not been provided with all the relevant information. In particular:

  1. he did not know that the deceased was taking the drug Cafergot (also known as Prontos) – indeed, he had never heard of that drug by either name – and so could express no opinion as to the extent to which it might have affected her mental state, even though she had ultimately been taken off it by her GP because one of its side effects was to cause confusion;

  2. he was not given any affidavits of evidence until asked to swear his affidavit of 19 February 2021, a short time before the hearing commenced;

  3. even then, he was not given, and never saw, the affidavits of Mr Stuart or Mr Brough – the main witnesses for the estate on the question of capacity – and so was unaware, when expressing his opinions, of their evidence of conversations with, and observations of, the deceased at, and prior to, the time the Will was made, or the contemporaneous correspondence that was passing between Mr Stuart and the deceased at that time; and

  4. he was not aware that, at the same time that instructions for the 2017 Will were being given, and then when it was executed, the deceased was involved in an independent legal dispute with her daughter, Emma, in respect of which she was receiving, and considering, legal advice, and providing instructions to her solicitor.

  1. It was unnecessary for senior counsel for the Defendants to make the point that the Plaintiff had been unsuccessful in the Probate proceedings. However, he did not submit that their costs should be paid by the Plaintiff, but that she should be left to absorb her own costs by the making of no order for her costs of the Probate proceedings.

The legislative context

  1. Section 98 of the Civil Procedure Act 2005 (NSW) provides:

“(1) Subject to rules of court and to this or any other Act:

(a) costs are in the discretion of the court, and

(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

(2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court...”

  1. The use of this expression “full power to determine by whom, to whom and to what extent costs are to be paid” in the context of s 98(1)(b) “is to be understood as providing the Court with power (unconstrained except to the extent that it must be exercised judicially and in accordance with the relevant legal principles: Oasis Hotel Ltd v Zurich Insurance Company (1981) 28 BCLR 230 at 237 per Lambert JA), to make a costs order that it regards as just in all the circumstances of the case”: QBE Insurance (Australia) Limited v Hotchin [2013] NSWSC 315, per Bergin CJ in Eq, at [54].

  2. As was written, “[t]he disposition which is ultimately to be made in any case where there are competing considerations will reflect a broad evaluative judgment of what justice requires”: Gray v Richards [No 2] [2014] HCA 47, at [2].

  3. Any exercise of the discretion is to indemnify, or compensate, the successful party, not to punish the unsuccessful party. It is guided by well-established principles in order to promote consistency in decision-making: Norbis v Norbis (1986) 161 CLR 513, at 519 (Mason and Deane JJ, with whom Brennan J generally agreed); [1986] HCA 17.

  4. The fundamental principle which guides the exercise of the discretion contained in s 98 is that costs should follow the event, and that the successful party is, prima facie, entitled to his, or her, costs against the expense of litigation: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67] (McHugh J) (“Oshlack”). The discretion to be exercised has been described as absolute, unconfined, or unfettered, except that it is required to be exercised judicially, that is, not by reference to irrelevant, or extraneous, considerations, or capriciously, but on facts connected with, or leading up to, the litigation: Oshlack at [34] (Gaudron and Gummow JJ).

  5. A successful party may be deprived of a proportion of his, her, or its, costs, or even required to pay costs to the other party, if the successful party succeeded only upon a portion of the claim, or failed on issues that were not reasonably pursued, or where the result of the litigation might be described as mixed.

  6. There is academic commentary, by Professor Dal Pont, that the “central and overriding principle is that of doing justice to the parties in each particular case, it being judicially remarked that there is ‘no better test than the test of what is fair and just between the parties’” (see G E Dal Pont, Law of Costs (4th ed, 2018, LexisNexis Butterworths) at 6.15).

  7. In Commonwealth of Australia v Gretton [2008] NSWCA 117, at [121], Hodgson JA (with whom Mason P agreed) observed that:

"… underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs."

  1. Next, reference should be made to Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). Rule 42.1 of the UCPR states:

“Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.”

  1. UCPR rule 42.2 provides:

“Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis.”

  1. In Wright v Apthorpe [2020] NSWCA 300 at [54], Simpson AJA (with whom Bell P and McCallum JA agreed) wrote:

“Rule 42.2 is directed, not to courts, and not to the manner in which courts are to exercise the 98(1) discretion, but, rather, to costs assessors. In this respect it does create a presumption, or a default position, but it is not one that affects the exercise of the judicial discretion.”

Costs in Probate proceedings

  1. At the outset, it must be remembered that probate litigation is not entirely between parties, because they did not make the will in dispute, and the Court is required to determine whether a document of a will-maker, who is dead, is a valid testamentary instrument. There is a public interest in ensuring that the matter is properly proved: see Tu v Tu Estate of Tu [2008] NSWSC 458.

  2. As was outlined by White J in Gray v Hart; Estate of Harris (No 2) [2012] NSWSC 1562 at [5]:

“There is a public interest in keeping faith with the wishes of a capable will-maker that requires an investigation into the validity of the propounded wills. A grant of probate in solemn form operates in rem, that is, it binds the world, or at least those affected persons who have notice of the proceedings…There is, therefore, a public interest in the incurring of some level of costs in cases where there is genuine doubt about the validity of a will.”

  1. In Petrovski v Nasev; The Estate of Janakievska (No 2) [2011] NSWSC 1474, at [6]-[19], I set out the principles in relation to costs in probate proceedings that apply:

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

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

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

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

Any suggestion that there is a general rule that costs in Probate proceedings are borne out of the estate should be immediately rejected. As long ago as 1926, it was said, in Re Plant [1926] P 139, at 152:

‘I should be reluctant to do anything to create the idea that unsuccessful litigants might get their costs out of the estate, without making a very strong case on facts. The lure of ‘costs out of the estate’ is responsible for much unnecessary litigation.’

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

At pp 709-710, he said:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

  1. The first exception referred to above was applied by the New South Wales Court of Appeal in Perpetual Trustee v Baker [1999] NSWCA 244. In that case, the Court of Appeal ordered that both parties’ costs, on a trustee or indemnity basis, be paid out of the estate. The reasons given were as follows, per Giles JA and Brownie AJA at [13]-[14] and Cole AJA at [43]:

“Costs are in the discretion of the Court, and the established principle on which the discretion as to costs will normally be exercised is that costs follow the event. In probate litigation, in particular, however, exceptions have been recognised, one being that where the testator has been the cause of the litigation the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate, and another being that if the circumstances led reasonably to an investigation concerning the testator's will the costs may be left to be borne by those who incurred them (see for example in the estate of Hodges: Shorter v Hodges (1988) 14 NSWLR 698 at 709).

The two exceptions tend to overlap. As was said by Santow J in In the estate of Moyle: Moyle v Moyle (18 June 1988, unreported), if a testator is by his mental frailty and other circumstances in a position where the circumstances reasonably call for investigation of the validity of the will "in one sense the testator, though usually with no sense of blameworthy fault, has by his or her conduct caused the litigation to occur". A party reasonably but unsuccessfully propounding or challenging the will, and so bringing about the necessary investigation, should no more have to bear his own costs than pay the costs of the other party. So it has been said that where the conduct and habits and mode of life of a testator have given ground for questioning his testamentary capacity the costs of the unsuccessful party should be paid out of the estate, as distinct from being left to be borne by that party (Davies v Gregory (1873) 3 P & D 28; Roe v Nix (1893) P 55; In the will of Millar (1908) VLR 682), and the costs of both sides in testamentary capacity cases have often been allowed out of the estate (In the will of Severs (1887) 13 VLR 572; Phillips v Dundas (Smith J, VSC 4 December 1995, unreported); Redroff v Miegoch (Santow J, NSWSC, 22 April 1996, unreported); re Ryan: Williams v Ryan (1998) VSC, 109; In the will of Ryan: Williams v Ryan (Byrne J, VSC, 23 October 1998, unreported); cf Middlebrook v Middlebrook (1963) 26 ALJR 216 where Dixon CJ and McTiernan, Taylor and Owen JJ ordered that the parties bear their own costs but Menzies J would have ordered that the costs be paid out of the estate).

…

Although I disagree with the trial judge's finding of testamentary incapacity, in light of her Honour's finding it must be held that the respondents had reasonable grounds for seeking to impeach the capacity of the testator. In those circumstances the costs of the appellant and the respondent at the trial should each be paid out of the estate. See Browne v M'Encroe (1890) 11 NSWLR Eq. 134 at 146.”

  1. In Shorten v Shorten (No 2) [2003] NSWCA 60, Mason P, in obiter, at [19], observed that early cases in which the first exception was applied:

“involved testators who left their testamentary papers ‘in confusion’ but the ‘conduct of the testator’ could include irrational actions giving rise to reasonable doubts about testamentary capacity provided they were genuinely held by those opposing the grant (see Davies v Gregory (1873) LR 3 P&D 28 at 31; Clarke v Clarke [1901] NSWStRp 42; (1901) 1 SR(NSW) B & P 25; Johnston v Public Trustee (1929) 24 Tas LR 71).”

  1. In cases where a challenge is made to testamentary capacity, more than mental frailty or the incapacity of the deceased is required to say that the deceased caused the litigation and that the case falls within the first exception: King v Hudson [2009] NSWSC 1500 at [12] (Ward J, as her Honour then was). In order to come within the first exception, and receive the benefit of a costs order, the unsuccessful party needs to show, relevantly, that the deceased was the "cause" of the litigation.

  2. Usually, it is easier for an unsuccessful litigant to bring herself, or himself, within the second exception than the first. What is required in the second exception is that the circumstances led reasonably to an investigation. But in such a case, the unsuccessful party will, often, still be left to bear her, or his, own costs.

  3. Sometimes, what is not referred to in dealing with the exceptions referred to in the authorities, is the observation in Davies v Gregory (1873) LR 3 P& D 28, at 33, that in order to engage the second exception, it is necessary that all proper steps should have been taken by the party challenging the Will as to the facts of the case. But if, having done so, the party opposing the grant, bona fide believed in the existence of the state of things, which, if it did exist, would justify litigation, then each party must bear her, or his, own costs.

  4. More recently, a different view has been expressed in some probate judgements. In Fielder v Burgess [2014] SASC 98 at [65], Kourakis CJ observed that the costs principles in probate litigation were, arguably, anachronistic in modern times in which there is a greater concern with a need for proportionality in litigation and that it may soon be necessary to reconsider it. (His Honour’s view was based upon the fact that the probate exceptions were 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 have it admitted to probate.)

  5. In Re Tsaousis [2019] VSC 511, at [32] – [33], McMillan J noted:

“Although the prima facie rule is that costs follow the event, where the litigation concerns probate, the costs are usually paid out of the estate if the litigation has been caused, or contributed to, by the way in which a testator made his or her testamentary intentions known or alternatively by the conduct of the residuary beneficiaries. Where the testator is not the cause of the litigation, but circumstances exist that reasonably call for an investigation, there is either no order as to the unsuccessful party’s costs or costs are paid out of the estate. For there to be reasonable grounds that call for an investigation, it must be established that, when proceedings were commenced, all proper steps were taken to inform the challenger as to the facts of the case and, having done so, the challenger has been led reasonably to the bona fide belief that there was good ground for impeaching a will. If there is no reasonable cause for investigation — that is, if the unsuccessful party has not acted reasonably — then the costs will usually follow the event.

The usual rules relating to probate litigation are founded on the public interest in ensuring, on the one hand, that doubtful wills are not lightly admitted to proof by reason of the cost of opposing them and, on the other, the importance of parties not entering into ‘fruitless litigation’ on the basis that their costs will be paid by others. If the litigation is adversarial litigation, it is common for the Court to apply the usual rule as to costs and order that the unsuccessful party pay the other party’s costs. This means that in respect of costs in probate litigation, it can no longer be assumed that the costs will be allowed either wholly or partly out of the estate. This approach reflects the need to ensure that litigation not be encouraged, particularly if it is adversarial litigation between disunited families battling for their perceived true inheritance, together with the concerns frequently expressed on the proportionality of costs in litigation.”

  1. (Her Honour, in fact referred to Davies v Gregory in a footnote in this decision.)

  2. A perusal of cases where costs orders have been made in favour of the unsuccessful propounder of a will reveals that there is no invariable practice.

  3. As was said over a century ago in Miller’s Probate Practice (Maxwell: 1900 Ed.), at 438-439:

“Two questions are to be considered with reference to an application for costs of the unsuccessful party: (1) Was there reasonable ground for litigation? (2) Was it conducted bona fide? Where both these questions can be answered in the affirmative it is the usual practice of the Court, without having regard to the amount or the ownership of the property, to order the general costs to be paid out of the personal estate.”

  1. Ultimately, however, any costs order should reflect the way in which the proceedings were conducted and dealt with, or as was noted by Slattery J in Sydney Markets Credit Services Co-operative Ltd v Taylor (No. 3) [2015] NSWSC 1236 at [32], “[t]he costs order should reflect the reality of the contest”.

Application for Indemnity Costs

  1. Section 98(1)(c) of the Civil Procedure Act distinguishes between costs awarded “on the ordinary basis” or “on an indemnity basis”. In Wright v Apthorpe, Bell P wrote at [3]:

“The word ‘ordinary’ implies that the award of costs will usually be other than on an indemnity basis, and I do not consider that the wording of Uniform Civil Procedure Rules 2005 (NSW) r 42.2 is intended to reflect anything more than that fact. There is a well-established body of case law identifying the circumstances where it will be open and may be appropriate for a Court to award costs on the indemnity basis but the statutory discretion is a broad one in respect of ‘by whom, to whom and to what extent costs are to be paid’: see s 98(1)(b). I agree with Simpson AJA that neither the Civil Procedure Act nor the Uniform Civil Procedure Rules establish a presumption or default rule as to the basis of the award of costs.”

  1. At [58] – [61], Simpson AJA also noted:

“There are two aspects to an order of costs. They are distinct from one another. The first concerns on whom the burden of costs is to fall. In that respect there is a ‘general rule’, stated in Milne v Attorney General for the State of Tasmania (1956) 95 CLR 460 at 477; [1956] HCA 48:

‘It is a general rule that a wholly successful defendant should receive his costs…’

The common law ‘general rule’ is formalised in r 42.1, and is reflected in what is commonly known as ‘the usual order as to costs’ (see Oshlack, at [67], per McHugh J) or the order that ‘costs follow the event’ (as in r 42.1). The second aspect of an order as to costs concerns the basis on which the costs are to be assessed. The ‘general rule’ says nothing about the basis on which the costs ordered are to be assessed. That function is performed by s 98(1), which confers a discretion in the widest possible terms.

Section 98(1) is cast in terms commonly used in statutes conferring a costs discretion. Paragraphs (a) and (b) effectively reproduce s 76(1)(a) and (b) (now repealed) of the Supreme Court Act 1970 (NSW). Paragraph (c) of s 76(1), while to the same effect as par (c) of s 98(1), provided at the date of introduction:

the Court may order costs to be taxed or otherwise ascertained on a party and party basis or on any other basis.

I see no difference in substance between par (c) of s 76(1) and par (c) of s 98(1). The different language reflects differences in the terminology used with respect to the assessment of costs at different times.

In a context which need not be elucidated, the High Court said that it would not be right to give s 76 a narrow interpretation, and rejected a submission that the section:

‘does no more than change the rule that the costs follow the event…’.

The High Court said that the section:

‘… confers a wide discretion on the Court to decide whether any and which party to proceedings shall pay costs to another party …’: Wentworth v Attorney-General for the State of New South Wales (1984) 154 CLR 518 at 528; [1984] HCA 70.

Nothing was said about the par (c) discretion as to the basis on which costs may be ordered to be assessed (or ascertained).”

  1. Because of s 98(1)(c) of the Civil Procedure Act, and UCPR rule 42.2, the Court does have the power to make an order that the costs of the Plaintiff be calculated on the indemnity basis. The decision to award such costs will depend on the exercise of the Court’s discretion in light of the particular circumstances of the case. Again, ultimately, the question is whether the justice of the case requires the costs to be calculated on that basis: Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343, at [10] (Allsop P, Basten & Young JA).

  2. UCPR rule 42.5 provides:

“If the court determines that costs are to be paid on an indemnity basis:

(a) in the case of costs payable out of property held or controlled by a person who is a party to the proceedings:

(i) in the capacity of trustee, executor, administrator or legal representative of a deceased estate, or

(ii) in any other fiduciary capacity,

all costs (other than those that have been incurred in breach of the person’s duty in that capacity) are to be allowed, and

(b) in any other case, all costs (other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount) are to be allowed.”

  1. Black CJ, in Re Wilcox; Ex parte Venture Industries (No 2) (1996) 72 FCR 151; [1996] FCA 1942, at 152 and 153, wrote:

“... indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the Court exercising its discretion in that way. See John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 at 203 per Hill J, referring to the judgment of Sheppard J in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. But as Hill J pointed out in John S Hayes (at 203):

‘... care must be taken not to circumscribe the discretion by reference to closed categories. It is not a necessary condition of the power to award costs that a collateral purpose be shown. The categories warranting the exercise of the discretion are not closed: Colgate-Palmolive at 233; Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, 3 May 1991) per French J at p 8; Regata Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court, 5 March 1993) per Davies J at p 6. In each case it will be necessary to look at the particular facts and circumstances to see whether an exercise of discretion to order costs on an indemnity basis is warranted.’”

  1. In Di Carlo v Dubois [2002] QCA 225, the Queensland Court of Appeal also referred to a reason to justify departure from the usual rule of costs being calculated on the ordinary basis, as and when the justice of the case might so require, also noting, at [37], that the categories in which the discretion may be exercised are not closed.

  2. In Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353, Basten JA (with whom Giles JA and Young CJ in Eq agreed on this point), wrote, at [106]-[113]:

“The modern approach to the question of awarding indemnity costs is often sourced to the judgment of Holland J in Degmam Pty Ltd (In liq) v Wright (No. 2) [1983] 2 NSWLR 354. In cases where the winning party has acted extravagantly, thus running up unnecessary costs, it may be inappropriate to require the losing party to pay all of the winner's costs. However, the question of indemnity costs will usually arise in circumstances where it is the losing party which has behaved inappropriately. Degmam itself was a case in which the unsuccessful defendant made factual allegations which were ‘false and deliberately concocted by her in an attempt to deny the plaintiff its rights and to shift all blame and legal liability ... from herself’: at 358. His Honour continued:

‘As well as that, she so conducted herself in the proceedings, by multiplying allegation upon allegation, and by prevaricating in the witness box, as grossly to prolong the litigation, thereby to cause the other parties to incur liability for solicitor and client costs far beyond what they could reasonably have expected to incur in litigation of genuine issues.’

These principles were applied in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd [1988] FCA 202; 81 ALR 397 at 400-401, by Woodward J. His Honour referred to the case where an action had been commenced or continued in circumstances where ‘the applicant, properly advised, should have known that he had no chance of success’: at 401. His Honour explained:

‘In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.’

In later cases it has been emphasised that the circumstances identified in Degmam and Fountain are not to be treated as exhaustive of the cases in which indemnity costs may be awarded: see, eg, J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers (WA Branch) (No. 2) [1993] FCA 42; 46 IR 301 at 303 (French J). It was sufficient, his Honour said, to enliven the discretion to award such costs that ‘for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case’. An indemnity costs order will be warranted where proceedings were maintained by a party having ‘no reasonable prospect of success’: see, eg, Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 (Powell J); Huntsman Chemical Co Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242 at 273 (Mahoney JA).

The Pilbara Infrastructure Pty Ltd v BGC Contracting Pty Ltd [2007] WASCA 257(S) (Pullin and Buss JJA, and Newnes AJA) held that an indemnity costs order must be justified by ‘some special or unusual feature of the particular case’: at [5]. Nevertheless, in declining to make such an order, the Court merely held that the respondent could not be accused of ‘having some ulterior motive, or wilfully disregarding the facts or the law’: at [7].

In Colgate-Palmolive, Sheppard J sought to elucidate the principles to be derived from the earlier cases: at pp 232-233.

Nevertheless, more recent case-law generally shows a tendency to grant indemnity costs orders more readily than was the case in the past. That may be seen to be an element of a broader policy directed to limiting the litigation of cases where there are no reasonable prospects of success: see, eg, Legal Profession Act 2004 (NSW), Part 3.2, Div 10. Such a policy is also reflected in the presumption in favour of an order of indemnity costs where an offer of compromise in accordance with court rules has been made by one party but not accepted by the other and where the offeror has bettered the offer in the litigation. Although the court may otherwise order, the fact that the offeree may be at substantial risk as to an adverse costs order, to be assessed on an indemnity basis, if the offer is bettered, places a significant financial incentive favouring careful consideration of such offers and careful assessment of the benefits of settlement.

As appears from the discussion in Commonwealth of Australia v Gretton [2008] NSWCA 117 (Beazley JA, Mason P agreeing) at [48]ff, the test of unreasonableness, applied with respect to the consequences of refusing a Calderbank offer are likely to operate also with respect to other aspects of a party's conduct of litigation: see also Gretton at [117] (Hodgson JA), referring to Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616 (Mason P, Clarke AJA agreeing).

While the general rule remains that costs should be assessed on a party and party basis, it is important that the standard to be applied in awarding indemnity costs not be allowed to diminish to the extent that an unsuccessful party will be at risk of an order for costs assessed on an indemnity basis, absent some blameworthy conduct on its part. A test of unreasonableness should not be upheld on other than clear grounds. Nevertheless, the evaluative judgment thus engaged was satisfied by the findings of fact made by the trial judge and not directly challenged on appeal, except on the basis of other grounds referred to above. In those circumstances, the discretionary power to award costs on an indemnity basis was engaged and it was not demonstrated on House v The King principles that the discretion had miscarried."

  1. In Liverpool City Council v Estephan Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan) [2009] NSWCA 161, the Court of Appeal stated, at [100]-[101]:

"Section 56 of the Civil Procedure Act now adds emphasis to occasion to depart from costs on the ordinary basis where failure properly to conduct the proceedings had caused costs to be incurred unnecessarily. But it does not override the need for a rational connection between the reason for departure and the extent of the departure.

There may no doubt be cases in which the effect of the misconduct is so pervasive that, in a proper exercise of the general discretion, the higher level of reimbursement can extend to the entire costs of the proceedings. That is perhaps the explanation for Adelaide Congregation Jehovah's Witnesses Incorporated v Pegasus Leasing Ltd (Olsson J, SASC, 24 December 1996, unreported), where the defence was described as unrealistic and uncompromising as to all issues and leading to a very protracted trial. It is necessary to remember that the trial judge was exercising a discretion, and a discretion in relation to costs as to which this court is particularly cautious in its intervention; a trial judge is in an advantageous position in arriving at the just disposition of costs. However, the trial judge did not express a pervasive effect of the Council's conduct of which he was critical, or say that the Council acted unreasonably in defending at all."

  1. In Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd (2010) 182 FCR 84; [2010] FCAFC 5, Gray J, in the Full Court, wrote, at [17]:

“The overriding principle that costs are in the discretion of the Court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case. Attention must always be paid to the particular circumstances of the individual case. The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding.”

  1. The mere existence of facts and circumstances capable of warranting an order for costs calculated on the indemnity basis does not mean that the Court is obliged to make such an order, as costs, ultimately, remain in the discretion of the Court: Bolger v McDermott (No 2) [2013] NSWSC 1330 at [45].

  2. There is no suggestion that the Civil Procedure Act, and the UCPR do not apply to probate proceedings.

Determination

  1. Questions of costs, ultimately, require the exercise of discretion, which, in turn, usually requires assessment of a wide range of factors. Ultimately, in the light of all of the circumstances of the particular case, the Court must decide which costs order better achieves justice between the parties.

  2. Before turning to the question of the basis for the calculation of any costs order, the Court should consider whether any costs order should be made in favour of the Plaintiff.

  3. This is not a case where persons (the Defendants) obtained probate in common form of the 2012 Will and the grant was revoked, and probate in solemn form was granted of an earlier will (the 2006 Will). To the contrary there was a grant of Probate in solemn form of the 2012 Will (which effectively confirmed the earlier grant).

  4. Following the commencement of the hearing, it was only the Plaintiff and the Defendants who were interested in the deceased’s estate under the terms of the 2006 Will. In other words, practically speaking, the Plaintiff was continuing the probate case to establish, for her own benefit, an enhanced basis for a greater share of the deceased’s estate (other than by way of her family provision claim). Subject to what has been said above, the Plaintiff’s probate claim was made by a beneficiary, adverse to the only other relevant beneficiary, and as such, the proceedings could be characterised as adversary litigation.

  5. As I have stated, none of the other executors named in the 2006 Will propounded that Will with the Plaintiff. Indeed, the Defendants, one of whom (the first Defendant) was an executor named in that Will) opposed the Plaintiff’s application, and the Plaintiffs in the associated proceedings, who were also named as executors in the 2006 Will, accepted the validity of the 2012 Will, asserting, until the commencement of the proceedings, that adequate and proper provision had not been made for each of them.

  6. That the Plaintiff opposed the first Defendant’s claim for a family provision order, which was the subject of a Cross-Claim filed in the Probate proceedings, cannot conceal the self-interested nature of the part the Plaintiff played in the proceedings. Her position in the Probate proceedings cannot be analysed as one where she was acting on behalf of the estate.

  7. However, I bear in mind that there was no suggestion made during the Probate proceedings, that the Plaintiff, as one of four executors named in the 2006 Will, must have known from the outset that she was attempting to obtain the Court’s sanction to a document that could not be supported because there was a later valid Will of the deceased, of which Will Probate had been granted, and for that reason, she should be liable for costs of the proceedings: Boughton v Knight (1873) LR 3 P & D 64, per Sir James Hannen, at 77.

  8. I have earlier referred to the Plaintiff’s delay in bringing the Probate proceedings. I take this into account in determining the costs orders that should be made, even though the delay in making the application to bring the Probate, whilst regrettable, was not, in my opinion, egregious. However, until that application was made, the Defendants were proceeding upon the basis that the claim by the Plaintiff was limited to one for a family provision order. Perhaps the real prejudice related to the significant costs that were incurred as a result of commencing those proceedings and continuing them to a final hearing.

  9. Merely because the deceased’s medical condition raised triable issues as to her testamentary capacity and lack of knowledge and approval, does not require the Court to conclude that the deceased had been the “cause” of the litigation. Furthermore, it cannot be said that the deceased left her testamentary papers "in confusion" or that her conduct, in the form of irrational actions, gave rise to reasonable doubts about her testamentary capacity in 2012, and, thereby, was sufficient to make the deceased the "cause of the litigation" in the relevant sense.

  10. In my view, there was insufficient evidence that the deceased conducted her life in such a way as would naturally lead others to suppose that she was of unsound mind, such as by acting strangely, or engaging in threatening, or violent, behaviour. This is not to say that the deceased’s cognitive abilities, throughout the period, were quite as good as depicted by the first Defendant.

  11. I have not forgotten in stating the above, the Plaintiff’s evidence about her observations of the deceased. However, as I concluded at [314] of the principal judgment that:

“Overall, I tend to the view that [the Plaintiff] exaggerated the severity of the deceased’s condition in the period before July 2012. This is not to say that the deceased did not suffer from some cognitive difficulties in 2011 and in the first half of 2012. From all that I have read, I do not think her condition, at all times, during this period, was as bad as [the Plaintiff] stated.”

  1. I also referred to the conclusions regarding the medical evidence at [351] – [357] of the principal judgment. There was evidence, which was really not the subject of dispute, that at the time she made the Will in 2012, the deceased was suffering from dementia. This is a fact that is more cogent in determining how the costs of the Probate proceedings should be borne.

  2. Furthermore, I had noted at [4]:

“In Boyse v Rossborough (1857) 6 HL Cas 2 at 45; (1857) 10 ER 1192 at 1210, Lord Cranworth LC observed:

‘There is no possibility of mistaking midnight for noon; but at what precise moment twilight becomes darkness is hard to determine.’”

  1. In my judgment, this is a case in which the available material could have reasonably led the Plaintiff to the belief that the 2012 Will was invalid. Her doubts as to the deceased’s capacity may be considered to have been reasonably held, at least until the Defendant’s evidence was completed, particularly the evidence of Mr Stuart, Mr Brough and Mr Hodges.

  2. The Plaintiff ought to have given more detailed consideration to the evidence of the independent witnesses who had observed the deceased at the time she gave instructions for, and then executed, the 2012 Will. The contemporaneous correspondence addressed to the deceased by Mr Stuart did not suggest any lack of capacity. By the commencement of the hearing, the Plaintiff was the only person interested in propounding the 2006 Will. Furthermore, as submitted by the Defendants, the expert medical evidence was based on incomplete documentation, and the failure of the Plaintiff to provide that documentation to Dr Cetiner.

  3. As found in [505] and [507] of the principal judgment, there was no evidence for a successful case to be based upon suspicious circumstances surrounding the execution of the 2012 Will. The deceased had provided clear instructions to Mr Stuart and others, as to her testamentary intentions and the reasons for them, which were recorded.

  4. There was nothing particularly unusual about the probate litigation. By the time of the commencement of the hearing, it was a contest between two daughters of a parent who had revoked an earlier Will favouring all of her children equally, upon making a later will favouring one of her daughters, who had for a number of years provided care and support to her. There had been a change of circumstances which explained the deceased’s change of heart and there was both medical, and objective lay, evidence as to her testamentary capacity, as well as her knowledge and approval of the 2012 Will at the time.

  5. In my view, the Calderbank offer in which she offered to have the Probate proceedings dismissed, perhaps, reflected that the Plaintiff (and her lawyers) considered that she was more likely to succeed in the family provision proceedings rather than in her claim made in the Probate proceedings. That, of course, is what occurred.

  6. It would be most unjust, in circumstances where the first Defendant was entitled to the most significant share of the deceased’s estate and where the Defendants were successful in obtaining the grant of Probate in solemn form, (having previously obtained the grant in common form), for the estate (which practically speaking means the first Defendant), to bear not only the Defendants’ costs of the Probate proceedings, but also the Plaintiff’s costs thereof. Such an order would not ameliorate the expenses incurred by the successful party as a result of having been required to participate in the Probate proceedings.

  7. I have considered whether I should order the Plaintiff to receive part of her costs of the Probate proceedings and order her to pay part of the Defendants’ costs of those proceedings. However, in order to avoid the parties incurring further costs in establishing the quantum of the parts of the costs, and in the interests of justice, I am satisfied that I should not do so.

  8. Taking into account all of the matters set out above, and in the principal judgment, I am not satisfied that the Plaintiff has established an entitlement to costs, let alone indemnity costs, of the Probate proceedings in her favour out of the estate of the deceased. Accordingly, I decline to make any costs order of the Probate proceedings in her favour.

  9. In my judgment, the proper course is to apply the principle enunciated by Sir Gorrell Barnes P that “if the circumstances lead reasonably to an investigation of the matter, then the costs may be left to be borne by those who have incurred them”: Spiers v English [1907] P 122 at 123; Middlebrook v Middlebrook (1962) 36 ALJR 216 at [217. I, too, am reluctant to do anything to create the idea that an unsuccessful litigant might get her, or his, costs out of the estate, without making a very strong case on facts. The lure of “costs out of the estate” is responsible for much unnecessary litigation: Re: Plant dec'd [1926] P. 139 at 152 (Scrutton L.J.). Whilst doubtful wills should not pass easily into proof by reasons of their costs, parties should not be tempted into fruitless litigation by the belief that their costs will be defrayed by others. This is not to say that a party should be punished for making such an application for invoking this Court’s supervisory jurisdiction in probate.

  10. It is, therefore, unnecessary to consider the Plaintiff’s application for costs on the indemnity basis. Had I needed to do so, I would have rejected that part of her application for costs. There is simply nothing in the particular facts and circumstances of the case that enlivens the making of such an order for costs in the Plaintiff’s favour. Furthermore, it cannot be forgotten that the Plaintiff failed in her claim for the revocation of the Probate of the 2012 Will. Taking into account the whole of the evidence in the case and all its circumstances, some of which I have mentioned above, but remembering also my findings of fact detailed in the principal judgment, and also the submissions, the justice of the case does not warrant such an order.

  11. In the Probate proceedings, the Court:

  1. Makes no order as to the Plaintiff’s costs to the intent that she is to bear her own costs of the proceedings.

  2. Orders that the Defendant’s costs, calculated on the indemnity basis, be paid, or retained, as the case may be, out of the estate of the deceased.

  3. Orders that the Plaintiff pay the Defendants’ costs of the application for costs.

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Decision last updated: 16 June 2021

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Cases Citing This Decision

8

Knox v Peacock (No 2) [2024] NSWSC 1372
Alexakis v Masters (No 3) [2023] NSWSC 694
Wild v Meduri & Ors; Meduri & Anor v Neal & Anor; Meduri v Meduri & Ors No 2 [2023] NSWSC 669
Cases Cited

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Statutory Material Cited

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Bassett v Cameron (No 2) [2021] NSWSC 419
Bolger v McDermott (No 2) [2013] NSWSC 1330
Bullabidgee Pty Ltd v McCleary (No 2) [2011] NSWCA 343