Vincent Zang v Deborah Middleton
[2011] NSWSC 881
•25 July 2011
Supreme Court
New South Wales
Medium Neutral Citation: Vincent Zang v Deborah Middleton; The estate of Keith Joseph Cook, late of Balgowlah [2011] NSWSC 881 Hearing dates: 25 July 2011 Decision date: 25 July 2011 Jurisdiction: Equity Division Before: Slattery J Decision: Declaration that the instrument dated 1 April 2007 attached to the Court's orders is the last will and testament of the deceased, Keith Joseph Cook; proceedings otherwise dismissed; the parties' agreements as to costs are noted.
Catchwords: SUCCESSION - wills, probate and administration - probate and letters of administration - 1 April 2007 instrument propounded as a will of the deceased does not comply with the Succession Act, s 6 formal requirements for a will - whether the Court should under Succession Act, s 8 dispense with the requirements for execution of the instrument as a will - proceedings settled - analysis of whether the circumstances justify the making of a Succession Act, s 8 order - HELD: the April 2007 instrument is a document that purports to state the testamentary intentions of the deceased and the deceased intended it to form his will - COSTS - agreement as to costs upon an exchange of correspondence - dispute as to whether costs agreed to be paid on the ordinary basis or on the solicitor and client basis - HELD: upon the true construction of the terms agreed in the correspondence the parties agreed that the costs of Deborah Middleton and Sharon Cook be paid out of the deceased's estate on the solicitor and client basis. Legislation Cited: Civil Procedure Act 2005 (NSW), s 73
Family Provision Act 1982 (NSW)
Probate and Administration Act (NSW) 1898, s 18A
Succession Act 2006 (NSW), ss 6, 8
Uniform Civil Procedure Rules 2005, Rule 42.2Cases Cited: Brown v M'Encroe (1890) 11 LR (NSW) Eq 134
Calderbank v Calderbank [1975] 3 All ER 333
Hatsatouris v Hatsatouris [2001] NSWCA 408
In the estate of O'Dell [2010] NSWSC 678
Perpetual Trustee Co Ltd v Baker [2011] FMCA 264
PMT Partners Pty Limited (In Liquidation) v Australian National Parks and Wildlife Services (1995) 184 CLR 301
Re estate of Paul Francis Hodges Deceased; Shorter v Hodges (1988) 14 NSWLR 698Category: Costs Parties: Defendant/Cross Claimant - Deborah Middleton
Cross-Defendant - Vincent Zang
Second Cross-Defendant - Yan ZhaoRepresentation: Plaintiff/Cross Defendants - J.S. Emmett
Defendant/Cross Claimant - R.N. O'Neill
Plaintiff/Cross Defendants - Esplin Solicitors
Defendant/Cross Claimant - Coleman Greig Lawyers
File Number(s): 2010/109397; 2010/142352 Publication restriction: No
EX TEMPORE Judgment
HIS HONOUR : I have been asked to make consent orders and a declaration in two proceedings, numbered 2010/109397 and 2010/142352, and to resolve a question of costs. The declaration is that the document signed by Keith Joseph Cook dated 1 April 2007 and appearing as Annexure A to the orders, is the last will and testament of Keith Joseph Cook. To make this declaration the Court must examine the evidence and determine under Succession Act 2006, s 8 whether this document formed Keith Cook's will. I will then consider the costs issue.
Keith Cook's Will
Keith Cook died in unfortunate and violent circumstances in Angeles City in the Philippines in May of 2008. His death was after the commencement of the Succession Act on 1 March 2008, which therefore applies in respect of these proceedings, rather than Probate and Administration Act 1898 (NSW), s 18A: Succession Act , Schedule 1, Clause 3(3).
The evidence shows that the deceased did not execute the testamentary instrument dated 1 April 2007 with the formalities required by s 6 of the Succession Act . The reason the 1 April 2007 instrument was not compliant with the Succession Act was that a mistake appears to have been made by the testator, his de facto wife and members of their family about the requirements for the execution of wills.
The deceased executed the April 2007 instrument and the witnesses signed it when it was only an otherwise blank will form. The deceased declared to the witnesses his intention of filling out the contents of the April 2007 instrument later above his signature. One of the persons present at the time, the deceased's de facto wife Ping Zhou, confirms that this is what happened. A completed form of the will was not signed and witnessed by the testator and the witnesses in the presence of each other. The testator did not give his assent to the contents of the whole document at that time. The filling out of the contents of the will at a time after execution does not conform with the requirements of Succession Act , s 6.
But the events on the date of signature of this April 2007 instrument signify that the deceased wished it to embody his testamentary intention and that he intended it to operate as his will. I will briefly state the applicable legal principles, some more facts and then the reasons why I have reached this conclusion.
Succession Act s 8 provides as follows:-
"When may the Court dispense with the requirements for execution, alteration or revocation of wills?
(1) This section applies to a document, or part of a document, that:
(a) purports to state the testamentary intentions of a deceased person, and
(b) has not been executed in accordance with this Part.
(2) The document, or part of the document, forms:
(a) the deceased person's will - if the Court is satisfied that the person intended it to form his or her will, or
(b) an alteration to the deceased person's will - if the Court is satisfied that the person intended it to form an alteration to his or her will, or
(c) a full or partial revocation of the deceased person's will - if the Court is satisfied that the person intended it to be a full or partial revocation of his or her will.
(3) In making a decision under subsection (2), the Court may, in addition to the document or part, have regard to:
(a) any evidence relating to the manner in which the document or part was executed, and
(b) any evidence of the testamentary intentions of the deceased person, including evidence of statements made by the deceased person.
(4) Subsection (3) does not limit the matters that the Court may have regard to in making a decision under subsection (2).
(5) This section applies to a document whether it came into existence within or outside the State."
The authorities relevant to the operation of Succession Act , s 8 are conveniently summarised in my decision: In the estate of O'Dell [2010] NSWSC 678 where I stated at [30] to [33] :-
"[30] The authorities relevant to s 8 Succession Act were principally decided under its predecessor provision, Probate and Administration Act 1898 (NSW) s 18A. Although their structures differ, there is no difference of substance between Probate and Administration Act 1898 s 18A and Succession Act s 8. The test in s 18A was whether the court "is satisfied that the deceased person intended for the document to constitute the person's will". Under the Succession Act , the question is whether "the Court is satisfied that the person intended [the document] to form his or her will." The near identity of language allows the authorities in respect of the former Act to be used in respect of the later Act.
[31] The matter for determination is whether the testator intended the informal document 'to form' his will. The authorities on s 18A Probate and Administration Act 1898 identify three questions that must be asked upon such a determination. Powell JA explained in Hatsatouris v Hatsatouris [2001] NSWCA 408 at [56] these questions are:
(a) Is there a document?
(b) Does the document embody the deceased's testamentary intention?
(c) Did the deceased intend the document, without more, to operate as a will or codicil?
[32] In the present case the document is the document which may be the subject of a s 8 Succession Act order. The issues in these proceedings, as they usually do, relate to the second and third of Powell JA's questions in relation to the first version and then the second and third versions.
[33] Succession Act s 8 should not be applied with too stringent a requirement of proof that a propounded document otherwise clearly embodying the testamentary intentions of the deceased does constitute his will: Re estate of Masters; Hill v Plummer (1994) 33 NSWLR 446 at 452V per Kirby P. It would be a mistake to regard the third element of Powell JA's elements as requiring evidence that the deceased consciously set his or her mind to the legal formalities for will making. It is now necessary to analyse the evidence. The law in relation to the application of Probate and Administration Acts 18A was by the Court of Appeal in Costa v Public Trustee [2008] NSWCA 223 ."
Some background assists in applying these principles in the present case. The deceased executed two testamentary instruments, one in May 2002 and the other in April 2007. There were a number of witnesses to these two instruments and a number of persons referred to in them, who are family members or acquaintances. I will briefly explain who they are.
Keith Cook's Family and the 2002 Will
Ping Zhou was born in China in 1949 shortly before the People's Republic of China was proclaimed but emigrated to Australia. She has two younger sisters Yan Zhou and Fang Zhou.
The deceased was married in the early 1960s and had two daughters, Deborah and Sharon, by that marriage. He met Ping Zhou in the early 1990s.
The execution of the will on 26 May 2002 is of some relevance in ascertaining the intention of the deceased in relation to the April 2007 instrument. The 26 May 2002 will gave the whole of his estate to Ping Zhou. It was an uncomplicated will which made no other dispositions of property and appointed Vincent Zang, the son of Ping Zhou by her earlier marriage, as executor. It appears on the evidence to have been executed in accordance with the requirements for the making of a valid will. The witnesses were Fang Zhou and Hai Han Zhang. Fang Zhou is the youngest sister of Ping Zhou. Hai Han Zhang was in 2002 the girlfriend of Vincent Zang.
The 1 April 2007 Instrument
The parties established the circumstances of the execution of the testamentary instrument dated 1 April 2007. First, there is the question of the date of the instrument. It seems clear from the evidence that in fact it was not executed on 1 April 2007 but was executed on 31 March 2007 and that a mistake was made in relation to its dating. It will be convenient in these reasons to simply describe it, as I will, as the "1 April 2007 instrument", as that is the date that it bears.
Yan Zhou and Fang Zhou, the two younger sisters of Ping Zhou witnessed the 1 April 2007 instrument. It was essentially the same in its primary gift as the earlier will. But it contemplated the possibility that Ping Zhou might predecease Keith Cook, in which case the estate was given to the 3 children, described as, "our three children". Sharon, Deborah and Vincent are the children of the respective prior marriages of the deceased and Ping Zhou. The 2007 will (Exhibit A in these proceedings) is as follows:-
"This is the last will and Testament of me, KEITH JOSEPH COOK of [address not published] BALGOWLAH in the State of NEW SOUTH WALES
1. I revoke all wills and other documents of testamentary intent previously made by me; this is my last will and Testament.
2. I appoint YAN ZHAO of [address not published] TOOWOOMBA QLD to be Executor or Executrix and Trustee of this my will.
I give My whole estate to my de facto wife Penny Zhao. If she dies before me or at the same time, I give my whole estate in equal shares to our three children, Sharon Langelaar, Deborah Middleton and Vincent Zang.
Dated this FIRST day of APRIL in the year two thousand AND SEVEN.
SIGNED by the Testator/Testatrix as
and for his/her last will and Testament
in the presence of us both present at the same time
who at his/her request in his/her presence
and in the presence of each
other have hereunto subscribed
our names as attesting witnesses [signed]
[signature of witness [signature by witness
1 April 2007] 1 April 2007]"
The 1 April 2007 instrument had been discussed between the deceased and Ping Zhou for a little time before late March 2007. Its execution was arranged to coincide with a visit by Yang Zhou to Sydney. There were discussions between Ping Zhou, Yang Zhou and Fang Zhou at a concert which took place on the evening of 30 March 2007, during which the younger sisters advised their older sister a little about the formalities of executing wills. An arrangement was finally made for the instrument to be executed the next morning before Yang Zhou flew back to Brisbane.
The parties were not as organised the following morning as they had expected. Yang Zhou was required to catch a plane by about the middle of the day. The parties gathered at Fang Zhou's apartment building in Neutral Bay about mid morning. The deceased and Ping Zhou came to Fang Zhou's apartment, where Yang Zhou was staying with Fang Zhou. But when they all met that morning the deceased had not completed the text of the 1 April 2007 instrument. So the parties decided to execute the blank instrument in the manner described earlier in these reasons, allowing the deceased to fill it out later on.
Ping Zhou also attempted to make a will on this occasion but it seemed to have suffered from the same defect. Everyone was short of time, so it was decided that she too would fill out her will later. Indeed, the evidence shows that Ping Zhou said to the witnesses about this problem, "Keith and I will write on them when we get home." The deceased's and Ping Zhou's 1 April 2007 instruments were signed in blank and the parties then went their separate ways.
I am asked in these circumstances and the further facts, mentioned below, whether or not the 1 April 2007 instrument satisfies Succession Act , s 8.
In my view, it does. Looking at Powell JA's first requirement in Hatsatouris v Hatsatouris [2001] NSWCA 408, it is clear that there is a document, being the 1 April 2007 instrument, which I have identified. The two remaining questions can be considered together. Does the document embody the deceased's testamentary intention, and did the deceased intend the document to operate as a will? These can both be considered together. The same facts allow the Court to draw the inference affirmatively of both those matters.
Embody Testamentary Intention and Operate as a Will
Does "the instrument" embody the deceased's testamentary intention and did the deceased intend "the instrument" to operate as a will? There are eight matters that seem to me to be strong indicators that both these inferences should be drawn.
Firstly, the events of 26 May 2002 when the first will was made, show that the deceased was well aware of the proper formalities of will making and carried them through when he had the time to do so. The only difference in 2007 that stopped him from satisfying those formalities was that he was short of time.
Second, there is a strong consistency between the content of the later will and the earlier will, the giving of the estate to Ping Zhou being the central feature of the document. The fact that the 2002 will was executed with the proper formalities with that gift assists the inference that the 1 April 2007 instrument with that same gift: (1) embodies the deceased's testamentary intentions; and, (2) that it was to operate as a will.
Third, the 1 April 2007 instrument was written up by the deceased with the formal language that was provided for in the instructions in the will kit from which it was taken, showing that he was seeking to follow a set of instructions to make a will.
Fourth, arrangements were made by the deceased and Ping Zhou and her two sisters all to go through with a witnessing ceremony, which indicates that the deceased (and Ping Zhou) did wish to engage in the formalities consistent with the making of their wills. Not just one will, but two wills were made as part of this occasion. This was all attended by the degree of ceremony which, in my view, clearly infers that the document was designed to embody the deceased's testamentary intention and to operate as a will.
Fifth, the lack of compliance with Succession Act , s 6 in the form of the 1 April 2007 instrument is well explained by the parties' evidence that they made a mistake about the formal requirements for the execution of a valid will.
Sixth, the deceased described the 1 April 2007 instrument as his "will", especially when he was talking about it to Ping Zhou, after he had executed it. He adopted it as his will.
Seventh, the deceased's intention, as expressed to Ping Zhou, was that her sister Yang Zhou should be the custodian of the 1 April 2007 instrument. She was apparently to be specially trusted to undertake this task. Some effort was made to at least plan for the 1 April 2007 instrument, described as his "will", to be placed into Yang Zhou's hands for safe keeping. This is also a basis to infer that it embodied the deceased's testamentary intention and that he intended it to operate as a will. As it turned out, the deceased was not able to put this intention into effect before he died in May 2008. But that does not detract from the inference from these arrangements that he was planning for the safe custody of his will.
Finally, before the ceremony took place among the deceased, Ping Zhao and her sisters, on 31 March 2007 they described themselves as planning for the making of the deceased's and Ping Zhao's "wills".
For all these reasons I infer that the 1 April 2007 instrument does embody the deceased's testamentary intention and was intended to operate as a will. I will make the declarations set out in the consent orders.
Costs
I turn now to the issue of costs. The parties have compromised both sets of proceedings. But there is a lack of complete agreement between them. The parties disagree about how a term as to costs in the settlement correspondence should be interpreted and have put before the Court competing arguments about their agreement.
The Court can consider this kind of issue within these proceedings to ensure finality of the proceedings: Civil Procedure Act 2005 (NSW), s 73. Despite earlier doubts about the jurisdiction, the Court is now able to decide, in the one proceedings, the terms upon which the proceedings have been settled.
In proceedings 2010/142352 Deborah Middleton and her sister seek grant of administration of the estate on the basis that the deceased died intestate by reason of the deficiencies that I have described earlier in these reasons. In the alternative they sought relief under Family Provision Act 1982 (NSW) against the estate of the deceased. In those proceedings Ping Zhou cross-claimed, seeking administration of the estate on the basis that the deceased was intestate, and in the alternative, relief under the Family Provision Act .
In the parallel proceedings 2010/109397, the plaintiffs were Mr Vincent Zang and Ms Yang Zhou. In those proceedings they sought probate of the deceased's will of 26 April 2002. Ms Middleton was joined as a defendant and she also cross-claimed in those proceedings to advance a claim almost identical to the one which she prosecuted as plaintiff in proceedings 2010/142352.
The costs issue arise out of the form of two letters that were to be exchanged to achieve the settlement of the proceedings. The first of the two is a letter of 9 June 2011 from Messrs Esplins, solicitors who were acting for Ms Middleton, to Coleman & Greig Solicitors & Notaries who were acting for Mr Zang and Ping Zhou. The letter was quite lengthy and is set out in full below:-
"WITHOUT PREJUDICE SAVE AS TO COSTS
Dear Madam
RE: ESTATE OF THE LATE KEITH JOSEPH COOK
SUPREME COURT PROCEEDINGS NO. 2010/109397
SUPREME COURT PROCEEDINGS NO. 2010/142352
We refer to the above two proceedings and the estate of Keith Joseph Cook ("the estate").
We are instructed to make the following alternative offers of compromise, with the intention that any one of the offers only may be accepted;
Offer 1
1. Probate of the alleged will dated 1 April 2007 be granted to Yan Zhao;
2.Ping (Penny) Zhao provide a written undertaking
(i) that her will dated 1 April 2007 is in effect or be put into effect;
(ii) not to change her will dated 1 April 2007;
(iii) the property at [address not published] Balgowlah in the state of New South Wales 2093 (folio identifier 1/962787) will not be sold or encumbered in any way;
3. Deborah Middleton and Sharon Cook's costs in relation to proceedings 2010/109397 and 2010/142352 be borne by the estate; and
4. This offer is open for 28 days after the date of receipt of this offer and acceptance is to lead to consent court orders by the parties encapsulating the agreement.
Offer 2
1. Probate of the alleged will dated 26 May 29992 be granted to Vincent Zang;
2. Deborah Middleton and Sharon Cook to receive collectively the following assets from the estate;
a. All shares in the late Mr Cook's name;
b. Cash of $200,000;
c. Motor Vehicle of the late Mr Cook; and
3.Motor Bike of the late Mr Cook,
3. The balance of the estate of the late Keith Cook to belong to Ping (Penny) Zhao.
4. Deborah Middleton and Sharon Cook's costs in relation to proceedings 2010/109397 and 2010/142352 be borne by the estate; and
5. This offer is open for 28 days after the date of receipt of this offer and acceptance is to lead to consent court order by the parties encapsulating the agreement.
Offer 3
1. Deborah Middleton and Vincent Zang are to make a joint application to be co-administrators of the estate;
2. Deborah Middleton and Sharon Cook are to receive collectively assets from the estate to the value of $600,000 at the time of transfer;
3. The parties each bear their own costs in relation to proceedings 2010/109397 and 2010/142352; and
4. This offer is open for 28 days after the date of receipt of this offer and acceptance is to lead to consent court orders by the parties encapsulating the agreement.
Offer 4
1. Probate of the alleged will dated 26 May 2002 be granted to Vincent Zang;
2. Deborah Middleton and Sharon Cook are to receive collectively assets from the estate to the value of $500,000 at the time of transfer pursuant to the Family Provision Application in Proceedings number 2010/142352;
3. Deborah Middleton and Sharon Cook's costs in relation to proceedings 2010/109397 and 2010/142352 be borne by the estate; and
4. This offer is open for 28 days after the date of receipt of this offer and acceptance is lead to consent court orders by the parties encapsulating the agreement.
Should your clients not accept any one only one of the above offer, then they need to be aware that our clients are making these offers in accordance with the principles in the case of Calderbank v Calderbank [1975] ALL ER 333, ie. your clients will need to achieve a better result by judgment of the Court, failing which our clients will rely on this letter in an application to the Court for an order for indemnity costs against your clients.
Yours faithfully,
ESPLINS
[signature]"
Esplins' letter was designed to advance a series of possible alternatives to resolve the proceedings. As I observed in the course of argument, this letter was a quite creative attempt to achieve settlement by covering many possibilities, one of which might be acceptable to the opposing parties. Indeed, one of the alternatives was acceptable to the opposing parties. By letter dated 21 June 2011 Messrs Coleman & Greig responded on behalf of Mr Zang and Ping Zhou, accepting Offer 1 as detailed in the 9 June 2011 letter set out below:-
"Dear Mr Esplin
The estate of the late Keith Joseph Cook
Supreme Court Proceedings Numbers 2010/109397 & 2010/142352
I refer to your dated 9 June 2011 and advise I am instructed to accept Offer 1 as detailed in that letter, being:
1. Probate of the alleged will dated 1 April 2007 be granted to Yan Zhao;
2. Pin (Penny) Zhao provide a written undertaking:
(a) That her will dated 1 April 2007 is in effect or be put into effect;
(b) Not to change her will dated 1 April 2007; and
(c) The property at [address not published], Balgowlah in the State of New South Wales 2093 (folio identifier 1/962787) will not be sold or encumbered in any way.
Accordingly, in accordance with the above offer, please provide me with draft Consent Orders."
The key issue now between the parties is what paragraph 3 of Offer 1 means in relation to the burden of costs. Mr O'Neilll, instructed by Messrs Coleman & Greig, contends that the costs referred to in Offer 1, paragraph 3 of the 9 June 2011 letter are costs which should be assessed and recovered on the ordinary party/party basis. Mr Emmett, who appears for Ms Middleton, argues that the costs referred to in Offer 1, paragraph 3 are solicitor and client costs.
I can understand how the argument has arisen between the parties. The issue is finely balanced. The arguments put by both sides are reasonably constructed from the correspondence that has passed between them.. But as there is no consensus, the Court must decide what they have actually agreed.
Some of Mr O'Neill's arguments to the Court had greater strength than others. His first argument was that the agreement that the parties made should really be construed on the basis of a presumption that springs from Rule 42.2 of the Uniform Civil Procedure Rules:-
"42.2 General rule as to assessment of costs
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."
The difficulty with this argument in my view is that UCPR, Rule 42.2 applies to the way the Court's orders should be interpreted. But Clause 3 of the 9 June 2011 Offer 1, is not expressed in the form of an order of the Court. It might later be perfected into an order of the Court if accepted. But I do not think that Rule 42.2 is directly applicable.
Mr O'Neill's next point is that the reference to Calderbank v Calderbank [1975] 3 All ER 333 in the last paragraph of the 9 June 2011 letter imports the idea that ordinary Calderbank principles, should be brought to bear on the way the rest of the letter is construed. The costs of the party to whom the Calderbank offer is made and accepted would, he submits, normally be paid on the ordinary basis And so, he says, that is how the costs orders throughout the letter should be construed.
There is a difficulty with this argument. If the Calderbank letter is not accepted within the time specified, then costs may be payable on an indemnity basis if all the Calderbank conditions are met. The last paragraph of the letter is introduced by the words "should your clients not accept any one only of the above offers." That paragraph is dealing with the situation in which none of the offers were accepted. The paragraph only bears, in my view, a very loose association with the costs elements of an offer that would only operate on acceptance. That paragraph is not useful source for construing the offer that was accepted, Offer 1. Rather the wording of the accepted offer itself contains indications, as to what the parties agreed.
Mr O'Neill's next point is to say that in effect the solicitor/client costs Ms Middleton claimed were sought only as something of an afterthought. He says this distinction was only really brought to attention in mid July 2011 when a draft deed was forwarded for consideration some time after the exchange of the two letters between solicitors on 9 and 21 June 2011. His point is that if Ms Middleton's construction was one in which her side believed, then that it should have been raised immediately.
This point is not persuasive. It is to be expected that the parties would only be attending to the precise basis upon which costs would be paid when the deed to give effect to that agreement was being drafted. The delay in raising the indemnity costs issue is well explained.
It seems to me that Mr O'Neill's best point for the estate is his last point. He submits that Offer 1, Clause 3 does not expressly identify that it is solicitor/client costs that are to be paid and, he says, orders for solicitor/client costs are less usual in inter-parties proceedings than costs, as the expression aptly says, on the ordinary basis; and "costs" in Clause 3, without any more refined description, must mean costs on the ordinary basis.
To answer that contention Mr Emmett says that in construing the offers of settlement it is necessary to appreciate that these offers are made in the context where there is a competition between the two interests, Ms Middleton on the one side and on the other Ms Zhou and other persons. This competition is about: firstly, the validity of the 1 April 2007 instrument as the deceased's will; and consequently, about who will be appointed as executor/administrator of the estate. Mr Emmett says first that this whole dispute was created by the deceased himself through the circumstances in which he executed the 1 April 2007 instrument. Mr Emmett says that when an agreement such as this is made by parties who have engaged lawyers who are dealing with, in effect, a contest about who will be the executor or administrator of the estate, that the parties must have had or can reasonably be assumed to have in mind the law that would apply whether one or other party succeeded in the proceedings.
The essential task before me on this application is objectively to construe the language of the parties to ascertain what they agreed. I am entitled to look at the surrounding circumstances known to both parties at or before the date of contract for the purposes of undertaking this task. The state of the law relating to costs applications in the event of success or failure on the contest about the validity of the will and who would become the administrator, is one common matter with which both parties can be assumed to be familiar.
The principles are clear. In probate litigation, the general rule of contested adversary litigation, that costs follow the event applies as does the rule that those costs are ordinarily assessed on a party/party basis. An exception to that rule, recognised in probate litigation, is that where the testator has been the cause of the litigation, the costs of unsuccessfully opposing probate may, in the Court's discretion, be ordered to be paid out of the estate. In Re estate of Paul Francis Hodges Deceased; Shorter v Hodges, (1988) 14 NSWLR 698 and at 709 Powell J summarised these principles and said:-
"Costs are, of course, in the discretion of the court, but that discretion, being a judicial, and not an unfettered, one must be exercised in accordance with established principle.
The general principle to be applied in adversary litigation is that costs follow the event, those costs being taxed on a party and party basis. However, 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: see, eg, Mitchell and Mitchell v Gard and Kingwell (1863) 3 Sw & Tr 278; 164 ER 1280; Orton v Smith (1873) LR 3 P & D 23; Wilson v Bassil [1903] P 239; Spiers v English [1907] P 122; Kenny v Wilson ; In the estate of Holtam; Gillett v Rogers (1913) 108 LT 732.
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 and 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.
While, in the present case, I do not think that the Deceased can be regarded as having been the 'cause of the litigation', in the sense in which that phrase seems to have been used in the cases (see, eg, Orton v Smith ); nonetheless, it seems to me that the facts were such as might be said 'to lead reasonably to an investigation'. This being so, it seems to me that the appropriate course to adopt in regard to costs is to make no order, but, instead, to leave them to those by whom they were incurred."
Mr Emmett says that whatever would have been the result of this case, the successful party would have been likely to have been entitled to an indemnity in respect of its costs out of the estate. The unsuccessful party could have sought for this principle to be applied to have its costs paid. So the unsuccessful party would at least have had the opportunity of seeking solicitor/client costs from the estate, because of the deceased's conduct and the nature of the matters in issue between these parties. Mr Emmett says in light of those principles that, although the first offer grants probate of the 1 April 2007 will to Yang Zhou, clause 3 should be construed as embracing solicitor/client costs.
Mr O'Neill answers that point with an observation. He points to Offer 3 in the range of offers made in the Esplins letter of 9 June 2011. He submits that had Offer 3 been accepted, and had Deborah Middleton and Vincent Zang been made co-administrators of the estate, that they were to bear their own costs in relation to the proceedings. He says that looking at this document as a whole, it deals with Deborah Middleton and Vincent Zang's costs in the event they were successful, by limiting their costs recovery against the estate. He says this is consistent with costs recovery being provided for elsewhere in the letter only on the ordinary basis.
I think there are two problems with this interesting argument. The first is that I do not think that it is easy to separate out what Clause 2 in Offer 3 means from Clause 3 in Offer 3. The provisions of Clause 2 in Offer 3 identify that a specific sum be given to Sharon Cook and Deborah Middleton from the estate. That sum was undoubtedly large enough to encompass all their solicitor and client legal costs. That blunts somewhat any argument that Offer 1, Clause 3 is not intended to give any costs recovery to Ms Middleton.
Secondly, the agreement between the parties is in fact the product of the acceptance of Offer 1, not the acceptance of Offer 2, 3 or 4. Offer 1 as accepted is the focus of the Court's present exercise in construction, although the other offers were communicated between the parties before agreement. So it is to Offer 1 that that I now turn.
Offer 1, Clause 3 does not use the words "solicitor/client costs". But there are two indications in the language used that seem to me to infer that the costs which are contemplated by Clause 3 are wider than ordinary costs.
The ordinary costs order is that one party's costs of the proceedings be paid by the other. But the draftsperson of Offer 1 has used the expression "costs in relation to proceedings" in Clause 3. And of course, there are two sets of proceedings in which Deborah Middleton and Sharon Cook play different roles, one as plaintiff and one as defendant cross-claimant.
The proceedings identify the offer, if Deborah Middleton and Sharon Cook were successful, in gaining administration of the estate on the basis of the identified deficiencies in the 1 April 2007 document the result would probably have involved the payment of their solicitor/client costs out of the estate. On the other hand if they were unsuccessful, they might nevertheless be able, in the exercise of the Court's discretion, to apply for solicitor/client costs out of the estate, but would have had a strong argument for costs on the ordinary basis.
An essential component of the expression "in relation to" is that there are two subject matters that are to some extent connected: PMT Partners Pty Limited (In Liquidation) v Australian National Parks and Wildlife Services (1995) 184 CLR 301, at 328 per Toohey and Gummow JJ. Here it encompasses, in my view, a wide scope of costs connected with the proceedings, that might be incurred, including costs which, on one outcome of the proceedings, would have been likely to have been recovered on a solicitor/client basis.
Also the expression "borne by the estate" in Offer 1, Clause 3 picks up the language of cases such as Re estate of Paul Francis Hodges Deceased; Shorter v Hodges, (1988) 14 NSWLR 698, Perpetual Trustee Co Ltd v Baker [2011] FMCA 264, and the old case of Brown v M'Encroe (1890) 11 LR (NSW) Eq 134 and 146. It is an expression which is ordinarily used to mean " also paid out of the estate ", or " borne or paid out of the estate ", which is apt, in my view, to describe the indemnification of the party by the payment of the party's solicitor/client costs from the estate; this being the order commonly made, when either: (1) a trustee obtains indemnity out of the trust assets; or (2) a special order is made of that kind in favour of the party who has unsuccessfully opposed a grant of probate where the dispute, as it was here, is created by the conduct of the deceased.
In my view, those several indicators are sufficient for the Court to infer that the parties agreed in the accepted Offer 1, Clause 3 that the estate will bear costs of Deborah Middleton and Sharon Cook on a solicitor/client basis.
Conclusions and Orders
In the matter of 2010/109397 I make orders in accordance with the short minutes of order, which are initialled, dated and placed with the papers, which are the following:-
1. Declares that pursuant to section 8 of the Succession Act 2006 (NSW) the document signed by Keith Joseph Cook dated 1 April 2007 appearing as annexure 'A' to these orders is the last will and testament of Keith Joseph Cook.
2. Grants Probate of the will dated 1 April 2007 referred to in order 1 above to Yan Zhao, the second plaintiff.
3. The plaintiffs provide to the defendant a written undertaking from Ping (Penny) Zhao:
(i) that she acknowledges that her will dated 25 July 2011 appearing as annexure 'B' to these orders is in effect;
(ii) that if a question arises in the future about the validity of her will dated 25 July 2011, she will execute a new will in the same terms;
(iii) that she will not change her will dated 25 July 2011 or such later will as is made in accordance with paragraph (ii) above; and
(iv) the property at 41 Boyle Street, Balgowlah in the State of New South Wales 2093 (folio identifier 1/962787) will not be sold or encumbered in any way.
4. Deborah Middleton's costs of these proceedings be borne by the estate on a solicitor-client basis.
5. The Cross claim is dismissed.
In the matter of 2010/142352 I make orders in accordance with the short minutes of order, which are initialled, dated and placed with the papers, which are:-
1. The proceedings are dismissed.
2. The Cross-Summons is dismissed.
3. Deborah Middleton's and Sharon Cook's costs of these proceedings be borne by the estate on a solicitor-client basis.
Further Communications with the Parties took place about the form of Order 2.
The Court has communicated with the parties about Order 2 which by consent was varied on 15 August 2011 to provide:-
2. Refer these proceedings to the Registrar in Probate with a view to the Registrar proceeding in accordance with the Rules of Court to the grant of Probate of the document the subject of declaration 1."
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Decision last updated: 16 August 2011
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