Trust Company of Australia Limited v Daulizio (No 2)

[2003] VSC 381

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
IN ITS PROBATE JURISDICTION

COMMERCIAL AND EQUITY DIVISION

Prob. 6 of 2002

IN THE MATTER of the Will of Edith Grizelda Gastineau Tennent, deceased
TRUST COMPANY OF AUSTRALIA LIMITED	Plaintiff
v
CATHY DAULIZIO	First Defendant
and
ELIZABETH FENSHAM	Second Defendant
and
ATTORNEY-GENERAL FOR THE STATE OF VICTORIA	Third Defendant

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	8 October 2003
DATE OF JUDGMENT:	10 October 2003
CASE MAY BE CITED AS:	Trust Company of Australia Limited v Daulizio & ors (No. 2)
MEDIUM NEUTRAL CITATION:	[2003] VSC 381

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Costs – probate proceeding – suspicious circumstances – will prepared by person obtaining large benefit thereunder – whether costs should be paid out of that person’s share or out of the residue of the estate

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A.G. Southall QC Mr S.G.E. McLeish	Abbott Stillman & Wilson
For the First Defendant	Mr R. Phillips	G.C.F. Mier & Associates
For the Second Defendant	Mr R. Miller	Maddocks
For the Third Defendant	Mr R. Wells	Victorian Government Solicitor

HIS HONOUR:

1. These reasons are concerned with the question of costs in this proceeding, and should be read together with the reasons for judgment in Trust Company of Australia Limited v Daulizio & ors [2003] VSC 358.

1. Senior Counsel for the plaintiff executor submitted that the plaintiff’s costs and those of Mrs Fensham and the Attorney-General should be paid out of the legacy granted to Ms Daulizio under the will.  Counsel for the Attorney-General supported that submission.  Counsel for Mrs Fensham submitted that his client’s costs should be paid out of the residuary estate, alternatively from Ms Daulizio’s legacy.  Counsel for Ms Daulizio submitted that the costs of all parties should be paid out of the residuary estate.

1. It was common ground that each of the plaintiff, Mrs Fensham and the Attorney-General should have their costs paid out of the estate.  The principal dispute was whether those costs should be paid out of, or charged upon, Ms Daulizio’s legacy, or should be paid out of the residue.  As to Ms Daulizio’s costs, the debate was whether she should have her costs out of the residue or bear her own costs.

1. It was also common ground that the prima facie rule as to costs, namely that costs follow the event, also applied in probate suits,[1] but that, in probate cases, there were a number of recognised exceptions.[2] 

   [1] See Middlebrook v Middlebrook (1962) 36 ALJR 216, 217 per Dixon CJ; Re Green [1969] WAR 67, 83.

   [2] See for example, Middlebrook v Middlebrook (1962) 36 ALJR 216, 217 per Dixon CJ; Re Hodges (1988) 14 NSWLR 698, 709 per Powell J; Re Herbert Brothers (deceased) (1990) 101 FLR 279, 304 - 306

1. Senior Counsel for the plaintiff submitted, without dissent from any other party, that it was sufficient to justify departure from the rule that costs follow the event to show that there was “adequate reason for an order of a different character”.[3]

   [3] See Re Herbert Brothers (deceased) (1990) 101 FLR 279, 304 - 306

1. More particularly, Counsel for Ms Daulizio did not dispute what Isaacs J considered in Nock v Austin (1918) 25 CLR 519, 529 would ordinarily be the case , when he said:

“…that where a party having created suspicion in relation to a will under which he benefits is under the burden of clearing away that suspicion, then, as justice requires him to do so in the presence of any person interested should the suspicion be justified, he must, though eventually successful, ordinarily pay the costs of the person whose presence he has made necessary so far as his benefit extends.”

1. Nock v Austin is illustrative of circumstances in which it was considered that the court costs of investigating the testator’s knowledge and approval of the contents of the will should be borne by those beneficiaries whose conduct was largely responsible for the creation of the suspicious circumstances which led to such investigation. In that case the successful propounders of the will were substantial beneficiaries who had also prepared the will. Barton and Gavan-Duffy JJ said (at 525) that the circumstances led reasonably to an investigation in regard to the will and that those interested in the residue (the propounders) had been in large measure the cause of the litigation. They said that one of the executors (a solicitor) should not have prepared a will which gave him a large share in the estate, and the other executor (who had obtained instructions) had acted somewhat indiscreetly in not asking the testator to let him take the instructions to some uninterested solicitor. They said that these matters constituted suspicious facts deserving consideration not only on the merits, but on the question of costs.

1. I have referred above to Isaacs J’s statement of the ordinary rule which applied in such circumstances, in support of which reference was made by him to In the estate of Osment [1914] P 129. In that case, the court ordered, having regard to the suspicious circumstances created by the executors, that the costs of all parties should come out of that portion of the estate (namely, specific legacies) given to the executors as beneficiaries under the will.

1. Senior Counsel for the plaintiff, relying inter alia on the reasons for judgment herein, submitted that the conduct of Ms Daulizio had been the substantial cause of the present litigation, referring to the passage in those reasons where I said:

“The conduct of Ms Daulizio was subjected to sustained attack, both in cross-examination and in submissions, and there can be no doubt that it is her conduct which has substantially brought about this litigation.” 

1. Senior Counsel referred in particular to Ms Daulizio’s conduct in excluding Trust Company from access to Miss Tennent, her failure to obtain a solicitor to prepare a will for Miss Tennent either prior to her admission to the Austin Hospital, or at the time of the emergency which arose when she was in the Austin Hospital.  He also referred to her failure to have the will re-executed after Miss Tennent’s discharge from the Austin Hospital, or to provide a copy of the will to Miss Tennent, or to advise Trust Company of the new will.  

1. While accepting the above submissions, I consider that the essence of the matter is that it was the conduct of Ms Daulizio, in obtaining instructions and preparing a will under which she received a substantial and prima facie very remarkable benefit, and doing so in circumstances where no independent solicitor was involved to check the instructions or the will, that created the highly suspicious circumstances which gave rise to this litigation.  The suspicious circumstances were such that it was reasonable for Trust Company to obtain an order that the will be proved in solemn form, and it was eminently reasonable for each of the parties who did appear to be represented in this litigation. 

1. Counsel for Ms Daulizio did not, and could not, really dispute that Ms Daulizio had by her conduct created the suspicious circumstances which led to this litigation.  Rather he emphasised what he called his client’s emphatic success on all questions in the case.  After a vigourous attack on her evidence, she had succeeded (corroborated by honest witnesses) in satisfying the Court of the matters necessary for probate of the will of 2 September 2000 to be granted.  He therefore urged that all costs should be paid out of the residue of the estate.  Counsel for Ms Daulizio contended, not only that his client had emphatically succeeded, but that other persons had contributed to the creation and continuation of the litigation.  He suggested that Trust Company had failed to maintain an adequate interest after November 1998, a suggestion which I reject, having regard to the role played by Ms Daulizio with Ms Tennent after that time.  He also contended that it was unreasonable of Trust Company to persist in the litigation after affidavits of Ms Daulizio, Mr Ryan and Ms Box had been filed.  I disagree.  Trust Company was entitled, given the highly suspicious circumstances, to test that evidence in Court.  Counsel for Ms Daulizio further submitted that it was unreasonable of Trust Company to oppose the making of an order for a mediation in this proceeding because a compromise was possible and would have saved substantial costs.  However, I note that Master Kings refused to order a mediation and, in my opinion, while attempts to compromise litigation are almost always desirable, it was not unreasonable to refuse to go to mediation in this case given the highly suspicious circumstances which existed and the difficult position involved in reaching any compromise on behalf of the charities.  Further, although there was evidence before the Court that Trust Company had opposed a mediation, there was no evidence of the approach of the other parties involved, save for an assertion by Counsel for Ms Daulizio that his client had favoured a mediation.  The case is very different from the negligence claim in Dunnett v Railtrack plc [2002] 2 All ER 850, a case cited by Counsel for Ms Daulizio.

1. In my opinion, this is a classic case for the application of the principle stated by Isaacs J in Nock v Austin.  Ms Daulizio, having created great suspicion in relation to a will under which she substantially benefited, was under the burden of clearing away that suspicion, and was obliged to do so in the presence of the other interested parties.  I would add that she was, as a result of her previous employment, somewhat experienced in relation to wills, and should have known better and, I think, did know better than to prepare and obtain a will under which she obtained such a large benefit without any intervention by an independent solicitor.  It is true that Mr Ryan and Ms Box were independent, but they were very inexperienced and did not know Miss Tennent. 

1. In my opinion, it is just and reasonable, in the Court’s discretion, that the costs of the other parties should be paid out of Ms Daulizio’s legacy.  It would be quite unfair to place the burden of any of those costs upon the residuary charitable trust.  It would also be unfair to place any costs burden upon that part of Ms Daulizio’s legacy which, it was common ground, she is to hold on trust for distribution to Mrs Byers. 

1. It was accepted that the costs of all parties, other than Trust Company, should be taxed on a solicitor and client basis.  In the case of Trust Company, it was accepted that a taxation on a solicitor and client basis was prima facie the applicable basis under O 63.32, but that the Court might, in an appropriate case, award costs on an indemnity basis to a trustee under O 63.28.  I note that the only difference, as the rules are currently framed, between a solicitor and client basis and an indemnity basis is that the onus of proving reasonableness is reversed in the case of an indemnity basis (see O 63.30.1).  However, I see no reason to reverse the onus in the case of Trust Company.  It is not unreasonable that it be required to show that its costs and expenses, as with other parties, were “reasonably incurred and of reasonable amount”. 

1. For the foregoing reasons, orders will be made as follows:

1.The costs and expenses of the plaintiff executor (including any reserved costs) of and incidental to this proceeding be taxed on a solicitor and client basis and be paid out of the estate of Edith Grizelda Gastineau Tennent deceased (“the deceased”), and, in the first instance, be paid out of the legacy of the first defendant under clause 3.09 of the will of the deceased (but not from the amount of $50,000 to be held by the first defendant on trust for Alice Byers) and thereafter, if the said legacy is insufficient, out of the residue of the said estate.

2.The costs of each of the second and third defendants (including any reserved costs) of this proceeding be taxed on a solicitor and client basis and be paid out of the estate of the deceased, and, in the first instance, be paid out of the legacy of the first defendant under clause 3.09 of the will of the deceased (but not from the amount of $50,000 to be held by the first defendant on trust for Alice Byers) and thereafter, if the said legacy is insufficient, out of the residue of the said estate.

3.No order as to the costs of the first defendant.