Harris v Taylor

[2016] NZHC 483

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2015-409-00120 [2016] NZHC 483

IN THE MATTER

of an application pursuant to section 14 of

the Wills Act 2007 declaring a Will to be valid

AND IN THE MATTER

of the Estate of the late LEONARD DEREK TAYLOR

BETWEEN

ANNE LOUISE HARRIS Applicant

AND

LEONARD CHARLES TAYLOR First Respondent

AND

ANNE LOUISE HARRIS Second Respondent

Hearing:	(On the papers)
Counsel:	J M Moran for Applicant T W Sage for First Respondent J S Fairclough for Second Respondent
Judgment:	22 March 2016

JUDGMENT No. 2 OF DAVIDSON J (costs)

Introduction

[1]      Judgment validating a document as the last Will of Leonard Derek Taylor was delivered on 14 December 2015, reserving leave to address costs.1 This costs judgment  addresses  the  applications  for  costs  by  children  of  the  deceased  who

adopted contested positions in the litigation.

1      Harris v Taylor, Re Taylor [2015] NZHC 3190.

HARRIS v TAYLOR & ANOR [2016] NZHC 483 [22 March 2016]

Anne Harris’ application for costs against Leonard Taylor

[2]      The testator’s daughter, Ms Harris, in her capacity as a beneficiary seeks an award of costs against her brother, Mr Leonard Taylor Jr (‘Mr Taylor’), because she says she was required to engage counsel to represent her, given his opposition to the application for validation of a document as a Will. She is the principal beneficiary under the Will.

[3]      In her capacity as executor and trustee in the Estate, Ms Harris does not seek an award of costs. The proper and helpful representation by Mr Moran for the Estate becomes a cost indirectly but properly borne by her as a beneficiary.

[4]      She says through counsel that Mr Taylor should have consented to or not opposed validation, so the application could have been dealt with on the papers. This can be answered immediately. Evidential findings and detailed submissions were needed to reach judgment.

[5]      In particular, Ms Harris seeks a costs order against Mr Taylor to abate her own costs because she says his evidence was not accepted. Her application is for costs on a Scale 2B basis of $12,488 plus disbursements of $110, a total of $12,598. Solicitor/client costs were $15,716.50 (GST exclusive), and an uplift of Scale costs to $15,000 plus GST (inferentially) is sought. That uplift is said to be warranted because she has been “doubly penalised” as a beneficiary in the Estate through necessary representation of the executor and trustee, and because there were adverse evidential findings made against Mr Taylor.

[6]      Mr Sage for Mr Taylor resists Ms Harris’ application that Mr Taylor should pay or contribute to Ms Harris’ costs, and after adjustment to reflect an amendment to Schedule 2 of the High Court Rules on 1 July 2015, her claim is reassessed at

$11,744. Mr Sage submits that these costs should come from the Estate and that Ms Harris needed to be separately represented because of her inherent conflict of interest in advancing the draft Will for validation. He submits that although there have been adverse findings against Mr Taylor’s credibility, these do not detract from the proposition that it would be “highly unusual for costs to be awarded as a result”, and that her costs should be met by the estate.

[7]      Mr Sage as counsel not only opposes a costs order in favour of Ms Harris in her personal capacity but also seeks an order for payment of Mr Taylor’s solicitor/client costs from the Estate. He submits that his opposition to validation was reasonable, that he took no more steps than necessary, an application to the Court was required for validation in any event, and that his contribution to the litigation was worthwhile by his evidential opposition, and what he describes as “robust submissions”.

[8]      The latter submission is warranted because Mr Taylor’s evidence on the one hand, and the submissions and conduct of the case on his behalf on the other, are distinguishable, the latter being thorough and helpful, while his evidence was held not credible.

[9]      Mr Sage addresses the discretion of the Court under r 14.1 of the High Court Rules and the principle that costs will ordinarily follow the event, with some exception for probate proceedings when indemnity costs are often, but not always, paid  out  of  the  Estate.  Otherwise Mr Sage  raises a question  as  to  whether the principles which apply to costs in probate proceedings should apply to applications for validation under s 14 of the Wills Act 2007. In principle, I consider they should, as those principles have a common thread of inquiry into the circumstances in which Wills are made, and their dispositions.

[10]     Leaving aside Mr Taylor’s conduct, which the judgment held as directly leading to his father’s testamentary change of heart, his opposition to the application was warranted, according to Mr Sage, as Mr Taylor was not to know that Ms Harris would be held a credible witness for the purpose of determining the way in which the document validated came into being.

[11]     Secondly, Mr Sage says that Mr Taylor sought to resolve the litigation, but was rebuffed. There is nothing in this point. Mr Taylor took an evidential position which was unsustainable and resolution on such basis could not reasonably have been anticipated. Thirdly, Mr Sage submits that it was reasonable for Mr Taylor to raise the question of his father’s capacity, and that is accepted.

[12]     Therefore, adopting the theme evident in the authorities referred to, Mr Sage submits that costs on an indemnity basis should be ordered, what he calls “common practice in such proceedings”, as in Keeland v Peach,2 Paewai-kohe v Paewai,3 and Wood-Luxford  v Wood.4  He puts it that the legal costs and disbursements were reasonably incurred in the “unique circumstances” that gave rise to this proceeding.

[13]     Mr Sage seeks indemnity costs for Mr Taylor of $23,600 plus GST and $110 for filing fees, or costs on a Scale 2B basis of $13,281.

Discussion

[14]     Mr Sage cited a number of costs judgments which reflect the Court being assisted by the engagement of a party in the proceeding. These include:

(a)      In Re Donnellan where questions of capacity were properly raised and a significant contribution to costs was ordered from the estate;5

(b)In Gladwin v Public Trust one party bore more of the costs having put the applicants to proof, but the applicant’s costs were then split on a Scale 2B basis between the estate and another party; 6

(c)      In  Kirner  v  Falloon  a  s 14  application  was  rejected  because  the evidence fell short, but the application was held to have been properly made  given  an  obligation  to  bring  the  matter  before  the  Court.7

A small order for costs was made;

(d)In Fraser v Chalmers a challenge to the validity of a Will was held justified even though unsuccessful.8  Costs were not ordered against the challenger parties, but their costs were not ordered out of the

estate.  Giles  J  adopted  the  principle  that  where  the  Court  has  an

2      Keeland v Peach [costs] [2003] NZFLR 727 (CA).

3      Paewai-kohe v Paewai [2014] NZHC 3137.

4      Wood-Luxford v Wood [2012] NZCA 377, [2013] 1 NZLR 31.

5      Wilson v Donnellan, Re Donnellan [2014] NZHC 1609.

6      Gladwin v Public Trust [2011] 3 NZLR 566 (HC).

7      Kirner v Falloon [201] NZHC 2876.

8      Fraser v Chalmers (1997) 11 PRNZ 348 (HC) at 352.

obligation to ensure that legitimate concerns about testamentary capacity are investigated by the Court, then the presumption that costs follow the event can be displaced;

(e)      In Woodward v Smith the Court of Appeal upheld the High Court that the deceased had testamentary capacity, but the challenge made was justified.9   The challenger was not liable to pay the successful party’s costs, and received some award of costs out of the estate;

(f)      In Squires v Nijssea Will made in hospital was declared valid.10   This was a finely balanced decision, where the proceedings were warranted so that both parties’ costs, on a Scale 2B basis, were paid out of the estate.

[15]     Authorities and commentary elsewhere also have application in this case.

[16] The authors of Law of Costs identify three general rules to strike the appropriate balance between ensuring that “doubtful wills should not pass easily to proof by reason of the cost of opposing them” but also ensuring that parties will “not be tempted into fruitless litigation by the knowledge that the costs will be defrayed by the estate of the testator”.11 These are:12

1.Where the opposition to a will was made without proper inquiry into the facts, or without reasonable ground so as to make it unjustifiable opposition, a costs order lies against the party opposing the will.

2.Where the testator has, by his or her own conduct, in effect caused the litigation, the costs of the unsuccessful party are to be paid out of the testator’s estate.

3.If the facts reveal that neither the testator, the executor or persons interested in the residue have been to blame, but that the opponents of the will have taken proper steps to acquaint themselves of the facts and have been led reasonably to the bona fide belief that good ground existed for impeaching the will, either no order as to costs will be made or costs will be allowed, whether wholly or partly, out of the estate.

9      Woodward v Smith [2009] NZCA 215.

10     Squires v Nijsse HC Auckland CIV-2002-404-1618, 6 July 2004.

11     G E Dal Pont Law of Costs (3rd ed, Lexis Nexis, Australia, 2013) at [10.17] citing Mitchell v

Gard (1863) 3 Sw & Tr 275 at 279; 164 ER 1280 at 1282.

12     At [10.17] (footnotes omitted).

[17]     In the New Zealand context, Stringer J, in In re Paterson (dec’d), enunciated principles, applied by the Court in Squires v Nijsse, relating to matters of probate where the costs of an unsuccessful party may be ordered to be borne by the estate itself:13

(i.) If the litigation originates in the fault of the testator – e.g., by the state in which he left his testamentary writings, or by his eccentric or irrational habits and mode of life – or of those interested in the residue, the costs may properly be paid out of the estate.

(ii.) If there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator, or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent.

(iii.) Unless the circumstances of the case are such as to bring it within one of the foregoing exceptions, the general rule that costs should follow the event ought to prevail …

[18]     These principles emphasise the High Court’s discretion to award costs to achieve justice between the parties. Although costs may be ordered to be paid out of the estate, judges have made it clear that this is not always the case, Scrutton LJ stating, “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”.14    To that end, it must be remembered that one of the general principles of

costs is that they follow the event, and this is not to be departed from solely on the

basis that the proceedings involved a deceased’s estate.15

[19]     The courts have recognised that where there is evidence of undue influence this may provide sufficient and reasonable grounds to question the execution of the Will, and an unsuccessful challenger may be properly relieved of costs.  If such an allegation proves unsuccessful, the costs of that issue would still ordinarily be borne by the party who raised it.16     However, this may be avoided if, on the evidence

available, a reasonable person would have been led to inquire whether a testamentary

13     In re Paterson (dec’d) [1924] NZLR 441 (SC).

14     Wild v Plant [1926] P 139 at 152.

15     High Court Rules, r 14.2(a).

16     Wild v Plant [1926] P 139; Re Cutcliffe’s Estate [1959] P 6; Wharton v Bancroft [2012] EWHC

91 (Ch).

disposition was a free and independent exercise of the testator’s will.  In such a case,

the costs of the challenge may be met by the estate.17

[20]     Where, for example, a beneficiary has behaved in such a way that raises questions as to whether a bequest was a result of the testator’s free and independent will, the court may consider it appropriate to order costs out of the particular bequest even where the undue influence claim is not sustained.   Such a case has arisen in circumstances where a solicitor-defendant had obtained instructions to prepare a will under which they were to receive a substantial and ostensibly remarkable benefit and

where no independent solicitor checked the instructions or the Will.18

[21]     Spiers v English, a decision of the Probate Divorce and Admiralty Division, was  similar  to  the  case  at  hand  but  distinguishable  in  one  important  respect.19

It involved a claim for the revocation of probate of a will obtained by the defendant. The plaintiff alleged that the Will was not duly executed, that the deceased did not know or approve of the contents of the Will, and that execution of the Will was obtained by the undue influence of the defendant.  The jury found in favour of the defendant on all issues and the Court pronounced for the Will.

[22]     The unsuccessful plaintiff made application for costs to be paid out of the estate on the basis that the defendant, who was the main beneficiary under the Will, was required to discharge the onus of proof and it did not make a substantial difference that the plaintiff had made an allegation of undue influence against the defendant.  Further, the plaintiff asserted that the plea was in fact necessary in order to bring out all the facts in regard to the execution of the Will.

[23]     Sir Gorell Barnes P, in determining the issue of costs, stated:20

In deciding questions of costs one has to go back to the principles which govern cases of this kind. One of those principles is that if a person who makes a will or persons who are interested in the residue have been really the cause of the litigation a case is made out for costs to come out of the estate. Another principle is that, if the circumstances lead reasonably to an

17     Goodacre v Smith (1867) LR 1 P & D 359; Estate of Osment [1914] P 129.

18     Trust Company of Australia v Daulizio (No 2) [2003] VSC 381.

19     Spiers v English [1907] P 122.

20     At 123.

investigation of the matter, then the costs may be left to be borne by those who have incurred them.

[24]     The entire case, in the Court’s mind, turned upon the truthfulness of the defendant, and when he came through cross-examination unscathed, the case was practically at an end.  He went on to find that the plaintiff had not shown any ground on which costs for the plaintiff ought to have been ordered out of the estate, or to interfere with the ordinary rule that costs follow the event.

[25]     The instant case is not  the same, as the entire case did not turn on  the evidential issue on which Mr Taylor was not held credible.

[26]     There is no one course to disposition in the exercise of discretion. This case involved  each  party facing  evidential  scrutiny.  Ms Harris  would  be  the  primary beneficiary under the new will, and at the same time she was the main conveyor of information to the instructing solicitor about a new Will, never executed, and was party to a unilateral departure from the testator’s expressed wishes in the document validated to her benefit. Legitimate questions of testamentary intent, capacity and undue influence arose and were tested.

[27]     If these considerations were the extent of the contested circumstances relating to the making of the Will, I would find that costs of Mr Taylor should be borne in part out of the estate as he properly tested those issues through counsel. Legitimate contest about a Will or validation of a document as a Will normally means that costs or some costs will be ordered from the estate. The Court should be put in the best position by way of evidence and submissions to determine questions of validity, and in this case, that extended to the question of testamentary capacity. In some cases the parties will properly not just make submissions, but bring evidence to bear. The principle will not reward those who unnecessarily engage in proceedings, and in particular where the administrators take up the cause, if there is unnecessary replication of the case.

[28]     In this case, a great deal of the hearing was taken up by the pleadings, and the evidence, contesting those circumstances in which the testator changed his mind, so as to exclude Mr Taylor as one of the principal beneficiaries. For his evidence and

engagement in that context Mr Taylor can have no entitlement to costs. His contest was unwarranted, and he cost the estate, and thus indirectly Ms Harris, a good deal of time and expense.

[29]     His  engagement  in  the  hearing  through  Mr  Sage  is  distinguishable.  In cross-examination and submissions, Mr Sage’s contribution to the hearing process was neither excessive nor superfluous to the submissions for other parties. His representation  was  thorough  and  helpful.  A contribution  such  as  that  might  be reflected in some order as to costs.

[30]     The supervening factor which directs this costs judgment is that Mr Taylor made an unjustified incursion into the evidential background to his late father’s change   of   mind   regarding   his   testamentary   disposition.   In   the   substantive December 2015  judgment  I  found  that  the  impetus  for  the  Will  variation  was Mr Taylor’s own conduct.  I found Mr his account in that regard not to be in the least credible and that his motivations were not protective of his father as he asserted, but for his own benefit.  If I were to consider this factor alone I would not hesitate to order Ms Harris some costs against Mr Taylor.

[31]     It is not appropriate to consider either party’s position in isolation when determining costs.   The Court must take account of all relevant consideration and order costs in a way to do justice to all of the parties.  I consider that justice is best achieved by ordering that costs should lie where they fall.  Ms Harris is not entitled to costs because her actions, although not blameworthy, raised difficult questions as to the legitimacy of the document created, which touched on testamentary capacity. While I held her to be a witness of truth, there were elements of the way in which the document  validated  came  into  being,  with  its  explanatory material,  which  were unsatisfactory and  in  particular,  the  unilateral  alteration  to  the  late  Mr Taylor’s expressed intent with which Ms Harris was associated.

[32]     Equally, Mr Taylor is not entitled to costs because it was his conduct which brought about what became the new Will in the first place, and he determinedly advanced an evidential case and submissions on that basis.

Formal Order

[33]     Costs will lie where they fall. No order for costs is made in the Estate other than to recognise that Mr Moran’s costs and those of his firm are properly charged on an indemnity basis.

………………………………….

Davidson J

Solicitors:

Meares Williams, Christchurch

Cavell Leitch, Christchurch

Duncan Cotterill, Christchurch