Public Trust v Dollimore
[2019] NZHC 607
•27 March 2019
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IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV 2016-485-548
[2019] NZHC 607
BETWEEN PUBLIC TRUST
Plaintiff
AND
ANNA DEANE DOLLIMORE
First Defendant
AND
MICHELLE PATRICIA SOWMAN
Second Defendant
Hearing: On Papers Counsel:
J O Upton QC for Plaintiff
A J D Bamford and L S B Acland for First Respondent A Douglass and A C Crehan for Second Respondent
Judgment:
27 March 2019
JUDGMENT OF SIMON FRANCE J
(Costs)
[1] This is a costs decision arising from a case concerning testamentary capacity. A significant issue is the correctness of the stance adopted by Public Trust as executor, and so a much fuller background than is normal for a costs ruling is required.
[2] Ms Annette Dollimore made wills in 2009 and 2010. On both occasions the instructions were given to an officer of Public Trust, and wills were duly executed. Under each will Public Trust was nominated as executor.
[3] Ms Dollimore passed away in 2015. Public Trust issued proceedings seeking an order that the earlier 2009 will be admitted to probate as the last will of Ms Dollimore, and a declaration that the will of 2010 is invalid. The pleaded grounds were testamentary incapacity and undue influence.
PUBLIC TRUST v DOLLIMORE [2019] NZHC 607 [27 March 2019]
[4] At the time Ms Dollimore passed away, it is apparent Public Trust intended to propound the 2010 will. However, there was a reference in the death certificate to dementia and seemingly Public Trust has a policy that where a testator has passed away within five years of making a will, and where the testator was suffering from dementia at the time of death, it will inquire further into the circumstances. In this case that inquiry led Public Trust to conclude Ms Dollimore lacked testamentary capacity at the time of making the 2010 will. Hence, it sought the orders described.
[5] Ms Dollimore never married and had no dependants. She lived alone and independently, until late 2009 when early signs of dementia sparked changes. A niece of hers, the second defendant Michelle Sowman, was asked by Ms Dollimore’s brother to assist. Mrs Sowman did, and the outcome was that Ms Dollimore moved from independent living in Wellington to residential care in Nelson where much of the Dollimore family resided.
[6] This shift coincided with Ms Dollimore exhibiting a keen interest in making a new will, notwithstanding the existing will had only been made in February 2009. Ms Dollimore spoke openly to family members of wanting to leave her estate to Mrs Sowman, who was by now her attorney and also her primary caregiver (outside of the living arrangements).
[7] The 2009 will was a mixture of specific gifts to some family members and institutions, together with the residue being divided amongst some of the great nieces and nephews. Mrs Sowman’s generation was largely by-passed. The 2010 will was the opposite – the individual legacies all went, and the estate was divided amongst Mrs Sowman and her siblings. Half was left to Mrs Sowman and half to the other siblings. So, on its face Mrs Sowman went from nothing to half. To put that in perspective, however, if one viewed the matter from a family unit viewpoint, that is, across all the generations of a sibling, the change was much less significant.
[8] Up to the time of Ms Dollimore’s death it seems the family was reasonably united. However, Public Trust’s assessment of the situation led to the family taking sides and deep divisions grew. By the time of the hearing Mrs Sowman was isolated. The first defendant was in effect the balance of the family, and it supported the
applications of Public Trust. The first defendant considered Mrs Sowman had exploited her position as carer to obtain the bulk of Ms Dollimore’s estate.
[9] The way the hearing was conducted is important. Public Trust maintained at the hearing, and repeats on costs, that its duty was to promote the last will it believed to be valid (the 2009 will), and to place before the Court any information it had in relation to the issue. What occurred as a consequence, however, was a complete alignment of the plaintiff and first defendant, with the plaintiff taking the carriage of the testamentary capacity argument, and the first defendant the undue influence argument. In terms of pleadings both grounds of challenge to the 2010 will are to be found in Public Trust’s claim, with the first defendant just pleading admissions to the Statement of Claim.
[10] Mrs Sowman disputed both grounds and countered seeking a declaration as to the validity of the later 2010 will. Mrs Sowman succeeded in all aspects.
[11] Some explanation of the evidence is required in order to understand Public Trust’s approach. It transpired that several things were happening in Ms Dollimore’s life around the time of making the will. She was purchasing a unit at the retirement home selected for her and where she was already resident in a temporary room. However, the retirement home became concerned that Ms Dollimore was wandering off without notifying the home, and seemingly becoming confused. It considered she needed to be in a secure facility, and initiated steps for that to occur. As part of this, the home organised for a doctor with experience working with the elderly to re-assess Ms Dollimore in terms of the necessary level of care. Finally, there was the ongoing issue of Ms Dollimore wanting a will.
[12] Matters came to a head on a particular day – 14 January 2010. In the morning, Mrs Sowman took Ms Dollimore to the lawyer who had organised the power of attorney when Ms Dollimore first came to Nelson two months earlier, and who was looking after the conveyancing. The idea was to make a will, but the lawyer did not do so because of doubts she held about Ms Dollimore’s capacity. That same day, in the afternoon, the doctor assessed Ms Dollimore for the appropriate level of care, and concluded she needed secure care. Mrs Sowman was present and, obviously prompted
by the morning’s events, asked the doctor about capacity. The doctor replied, and then wrote, that Ms Dollimore lacked testamentary capacity. It was his assessment of her on the day based on his experience, but the doctor accepted in evidence his assessment did not involve any questions or analysis targeted at testamentary capacity.
[13] A week later, with the lawyer’s encouragement, Mrs Sowman took Ms Dollimore to the Public Trust. The events of a week prior were not explained to the interviewing officer. For reasons not entirely clear the Public Trust officer noted an address for Ms Dollimore that was not the dementia facility in which she was living. Accordingly, he did not appreciate this diagnosis was present. Instructions were taken, a will drafted and signed a few days later.
[14] For its conclusion about a lack of testamentary capacity, Public Trust relied on the events of the week prior and particularly the assessment of the lawyer and doctor, together with the fact that the officer taking instructions did not know of these events or her dementia status. Late in the piece, shortly before trial, Public Trust obtained an expert opinion contradicting the expert for the second defendant who had given the opinion Ms Dollimore had not been shown to lack capacity.
The costs issues
[15] The general approach to costs in these cases of will disputes is well settled. A passage from Re Paterson (Deceased) is most often cited:1
The Court has a general discretion as to costs in all actions and proceedings before it, but there are certain well-established principles upon which that discretion should be exercised in cases of contested wills. They are as follows: (i.) If the litigation originates in the fault of the testator – eg by the estate 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[.]
1 Re Paterson (Deceased) [1924] NZLR 441 at 442–443.
[16] As can be seen, the core rule that costs follow the event still applies. However, it may often be the case that the costs of the winning party come not from the losing party but the estate; further, sometimes an unsuccessful party which has acted reasonably may not only be relieved of the obligation to pay the successful party’s costs, but its own costs may also be met from the estate.
[17] Although largely repetitive of the Re Paterson statement, the fuller summary provided by Dal Pont provides a helpful introduction to the issues raised in this dispute:2
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 met 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.
The authors go on to note that some courts have resisted the proposition that the general outcome in such litigation is that the estate bears the costs.3 The concern is that less discipline will be brought to the litigation exercise if it is thought to carry little financial risk.
[18] Public Trust seeks what it says are the “normal” principles (that is, Dal Pont 3. above) to be applied, namely that the estate bears the litigation costs. It also submits its litigation costs should be a first charge on the estate (although the estate is likely sufficient to meet all costs).
[19]The first defendant seeks its costs from the estate.
2 G E Dal Pont and K F Mackie (eds) Law of Succession (2 ed, LexisNexis, New South Wales, 2017) at [23.5] (footnotes omitted).
3 At [23.5].
[20] The successful second defendant, who is the major beneficiary under the will, takes a different approach. In the course of submissions filed on this matter, the second defendant appears to have modified her position between her original submissions and her reply. Initially orders were sought that the parties rather than the estate pay her costs, but that is no longer maintained. Now the claim is for the second defendant’s costs to be met by the estate, and for the plaintiff and first defendant to bear their own costs.
[21] I understand there to be no dispute concerning the second defendant recovering her costs from the estate. Mr Upton QC in the submission for Public Trust queries the quantum but nothing is advanced that causes me to question the amount identified.
[22] The issue therefore is whether the costs of Public Trust and the first defendant be met from the estate. A secondary issue is the priority accorded Public Trust’s costs.
Public Trust’s costs
[23] Public Trust says it acted reasonably in bringing the proceeding. Another way of putting this is that the litigation costs it has incurred were not improperly incurred. Hammond J set the test out this way:4
The classical Chancery principle was, from the outset, that it is only expenses which are “properly incurred” which are the subject of a trustee’s indemnity. The authority most often cited for this is Re Beddoe [1893] 1 Ch 547 at p 558; but the principle still obtains today – see Holding and Management Ltd v Property Holding and Investment Trust plc [1990] 1 All ER 938 (CA). The direct consequence of this principle is that improperly incurred expenses fall upon a trustee personally. In that sense, a trustee is always at risk when he or she incurs expenses.
There is a respectable volume of case law authority around in the British Commonwealth as to what may be regarded as “not improperly incurred expenses”. Necessarily, given the principle, these cases all appear to be determinations on the factual position arising in a particular case. But the principle that expenses must be properly incurred necessarily requires a trustee, if called upon, to demonstrate that the expenses arose out of an act falling within the scope of his trusteeship; whether it was something that his or her obligations required the trustee to undertake; and whether the expense incurred was, in all the circumstances, “reasonable”.
4 Re O’Donoghue [1998] 1 NZLR 116 at 121.
[24] In this decision Hammond J further notes the burden of proving unreasonableness lies on the party alleging the trustee has so acted, unless on the face of things the conduct is obviously unreasonable.5
[25] A focus throughout of the second defendant has been the role played by Public Trust in the proceeding. Mrs Sowman accepts Public Trust was entitled to bring the issue to Court but submits Public Trust has inappropriately taken a partisan approach by supporting the 2009 will, and by aligning itself with the first defendant. The consequence is that much of the cost Public Trust seeks to recover should have fallen on the first defendant which would have had to make its own litigation decisions. Although not a point made by the second defendant I note evidence of these alleged consequences can be seen in the fact that the first defendants claimed costs and disbursements are less than half those of Public Trust.
[26] The parties disagree as to what the authorities say was the correct approach for Public Trust to have taken, although agreeing the starting point is Re Young, Hobbs v Christchurch City:6
It is the duty of an executor of any will which he believes may be the valid last will of the testator to profound it and to take all proper steps to prove its validity. It is not his duty to decide, in any doubtful case, whether or not he should do so, it being the function of the Court to resolve such doubt. If he is not prepared to propound a will which appoints him executor he should renounce his right as such. If a person is named as executor in more than one will and he is uncertain which is the last valid will he should propound each one, as alternatives.
[27] Mr Upton QC relies on a later passage from Re Watson, an on-papers decision where Gilbert J, in citing Re Young, states that the duty is to propound any will the executor believes may be the last valid will,7 which in this case was the 2009 will. Thus Public Trust maintains that having formed the view the 2010 will was invalid, its duty was to advance the 2009 will. I do not agree that Gilbert J was intending to modify Re Young so set out a fuller extract from the Re Watson judgment:8
5 At 122.
6 Re Young, Hobbs v Christchurch City [1968] NZLR 1178 at 1179 (emphasis added).
7 Re Watson [2014] NZHC 874 at [10].
8 Re Watson [2014] NZHC 874 at [10]–[13] (footnotes omitted).
[10] An executor is duty bound to carry out the testator’s wishes by taking all proper steps to prove the validity of the last potentially valid will. An executor is not free to choose which will to seek probate for in circumstances where testamentary capacity is in doubt. The testator’s duty to propound any will be believes may be the last valid will of the testator is not discharged by the consent of affected beneficiaries. As Sir Herbert Jenner said in Re Goods of Watts:
The consent of parties interested proves nothing; no person’s consent can make a will no will.
[11] In Re Young, Wilson J stated that the proper course to follow in cases like the present, where the same executor is appointed under two wills and there is doubt about testamentary capacity at the time the later will was made, is to seek to admit both wills to probate so that the Court can determine which is the last valid will:
It is the duty of an executor of any will which he believes may be the valid last will of the testator to propound it and to take all proper steps to prove its validity. It is not his duty to decide, in any doubtful case, whether or not he should do so, it being the function of the Court to resolve such doubt. If he is not prepared to propound a will which appoints him executor he should renounce his right as such. If a person is named as executor in more than one will and he is uncertain which is the last valid will he should propound each one, as alternatives.
[12] While I am sympathetic to the beneficiaries’ wish to take a pragmatic approach, the Court is not entitled to disregard Ms Watson’s wishes and grant probate for a will that may well not be her last valid will. Any final order for probate will have to await determination of the issue of testamentary capacity.
[13] Accordingly, I make an order pursuant to r 27.5(4) of the High Court Rules directing the applicant to apply for probate of both wills in the alternative. This will enable the Court to determine whether Ms Watson had testamentary capacity at the time she signed her last will.
[28] It is apparent from these passages, and particularly the final direction, that Gilbert J agrees that the executor’s task is seek probate in the alternative and allow the Court to decide. I do not see in these authorities warrant for the more partisan approach taken here by Public Trust. It has positively promulgated one will and sought to disprove the other.
[29] I accept Public Trust reasonably could take the view that testamentary capacity was in issue. Near the time of the will, and unknown to the Public Trust officer taking instructions, a lawyer and a doctor experienced with the elderly had queried Ms Dollimore’s capacity, and she had been moved to a secure dementia facility. Further, in advancing the 2009 will, Public Trust was not, as has been suggested,
protecting its own back. To the contrary promoting the 2009 will was an implicit admission that Public Trust’s will taking instruction process had not enabled it in 2010 to detect that a client had dementia and lacked testamentary capacity.
[30] The authorities say, in this circumstance, that the executor should advance both this will and the one prior and enable the Court to decide. They do not say the executor should itself make the call (by its pleadings) and then conduct the case in a manner supportive of the pleadings. Public Trust took an adversarial stance. I accept it was done in good faith and in what it believed was the discharge of its duty as executor to advance the will it thought valid. But it was adversarial, and it was targeted against the 2010 will of which it was also executor.
[31] The second ground of challenge pleaded by Public Trust against the 2010 will was undue influence. The judgment emphatically rejects this, noting amongst other things that Mrs Sowman took Ms Dollimore to professionals for the making of a will
– first to Ms Dollimore’s lawyer, and second to Public Trust which had done all Ms Dollimore’s previous wills. Both these persons could be expected to be capable of making a capacity assessment and expected to do so. Further, the visit to Public Trust was with the encouragement of the lawyer who believed Public Trust, with its expertise, would be able to make a proper assessment of capacity.9 It was also noted in the judgment, a fact accepted by the first defendant’s witnesses, that Ms Dollimore had been open for some time about her desire to leave the estate of Michelle. Finally, the evidence of the Public Trust officer was that at the time of the instructions Ms Dollimore instructed him to leave all the estate to Mrs Sowman, and that it was Mrs Sowman who insisted on that being reduced to the 50 per cent it finally ended up as. This was the evidence of Public Trust’s own witness.
[32] I am not satisfied on the facts that it was reasonable for Public Trust to advance the 2009 will and seek a declaration of invalidity on the 2010 will on the basis of undue influence. Whilst it would have been correct to place the two wills before the Court because of the incapacity issue, it should have left any issue of undue influence to be advanced by the first defendant if it chose.
9 By this point the lawyer was second guessing her own assessment of a week earlier.
[33] I see it as no answer that the primary running of this aspect of the case was left to the first defendant. Public Trust pleaded undue influence and led evidence on the issue both by evidence-in-chief (to a small extent) and evidence by cross-examination of witnesses (both those of the first defendant and the second defendant). I accordingly consider an adjustment to the costs recoverable is required in that any expenditure related to undue influence was not properly incurred.
[34] To summarise to this point, I consider Public Trust reasonably had concerns about the validity of the 2010 will because of concerns around testamentary capacity. However, it followed an incorrect approach by advocating for the 2009 will and seeking a declaration of invalidity for the 2010 will. The authorities indicate the correct approach is to place the two wills before the Court and ensure the Court has available the necessary evidence. It is difficult to assess the impact of this error on the costs. It has certainly meant that costs which would have been borne by the first defendant have fallen on Public Trust. I doubt it has prolonged the hearing, and consider the same issues were always likely to arise. It is difficult to know, however, exactly what steps the first defendant would have take, for example, whether it would have called expert evidence. It cannot be known, but it can be said that the expenses incurred in briefing an expert to disprove the 2010 will were not properly incurred by Public Trust as executor of that will, or of the 2009 will.
[35] Concerning undue influence, expenses incurred by Public Trust in promulgating and supporting the challenge to the 2010 will were not properly incurred by Public Trust as executor of that will, or of the 2009 will.
[36] A further point raised by the second defendant is the general contribution of Public Trust to the incapacity issue. It is submitted, and is undoubtedly correct, that Public Trust’s processes at the time of taking instructions were poor. The uncertainty surrounding Ms Dollimore’s capacity at the time she gave instructions and subsequently signed the will was in large part due to the failings of the Public Trust officer who neither followed Public Trust practices (using the electronic instruction taking form) or kept his own adequate notes. I consider, when assessing in my discretion what costs Public Trust as executor should be reimbursed from the estate, it
is correct to have regard to the fact that the issue was made much more difficult by Public Trust’s own deficits.10
[37] The second defendant also refers to Calderbank letters sent at various times in an effort to resolve matters. I accept Mr Upton’s submission there was little Public Trust could do in this regard other than encourage the parties to a resolution. The letters do not impact on Public Trust’s ability to recover.
[38] My assessment is that Public Trust was correct to place the two wills before the Court because of incapacity concerns. However, it adopted the incorrect approach and took too active a role. It should not have eschewed the 2010 will as it did but should have been more neutral. This does not prevent it identifying its concerns, but the approach was too adversarial and led to the improper incurring of expenditure. Further, on the testamentary capacity issue, the actions of its staff at the time of taking the will were a significant contributor to the difficulty of resolving capacity. In relation to undue influence, I consider all expenditure in relation to that was improperly incurred.
[39] Public Trust should receive some costs as it would have needed to initiate proceedings, assess whether the other parties were presenting the Court with the right information, and attend. In what can only ever be a broad assessment, I award Public Trust one third of its actual costs, to be recoverable as a first charge on the estate.11 There is no basis to depart from this priority. All other litigation costs are to be borne by Public Trust personally.
The first defendant
[40] I can state briefly my reasons why the first defendant should bear her own costs. First, the case for undue influence was not strong. It was advanced contrary to the first defendant’s (as a group) views at the time of the events and paid too little regard to the objective facts. Second, the second defendant made a constructive settlement offer, on12 October 2016, which was rejected out of hand based on a
10 I note for the record that I made these concerns plain at the trial.
11 Pursuant to the Trustee Act 1956, s 38(2).
misconceived view of the strength of the first defendant’s case. The first defendant expressly rejected making any counter offer. Finally, other than the necessary calling of family members, the first defendant did not have the carriage of the incapacity argument and did not add to matters on that issue.
Orders
[41] Public Trust is entitled to an award as a first charge on the estate of one third of its litigation costs. The other two-thirds are to be borne by Public Trust and are not recoverable from the estate. Public Trust may also recover from the estate all its costs on this costs matter.
[42] The second defendant is entitled to recover full costs from the estate, after Public Trust costs (as above and including any other Public Trust costs properly incurred in administering the estate) but otherwise before distribution. The sum identified in [11] of the second defendant’s submission as incurred to date is reasonable and may be recovered.
[43]The first defendant is to bear her own costs.
Simon France J
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