Clocchiatti v Pierobon; Estate of John Pierobon

Legal Principles

1. The general principle in adversary litigation on which the discretion as to costs will normally be exercised is that costs follow the event. However, in probate litigation, Powell J recognised two exceptions to that principle in Re Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 ("Re Estate of Hodges") at 709. The exceptions are: (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 investigation of the document propounded, the costs may be left to be borne by those who respectively incurred them…
2. These exceptions are, it must be noted, only guiding principles and do not remove the court's inherent jurisdiction as to costs: King v Hudson [2009] NSWSC 1500 at [17] per Ward J; Yazbek v Yazbek (No 2) [2012] NSWSC 783 at [33] per Slattery J.
3. The exceptions were further reiterated in Clocchiatti v Pierobon; Estate of John Pierobon [2014] NSWSC 488 in which White J stated [78] The relevant principles were laid down as long ago as 1863 in Mitchell v Gard (1863) 3 Sw & tr 275 at 277; 164 ER 1280 at 1281, and see Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709. In Mitchell v Gard, principles were laid down for the express purpose of providing guidance in the face of conflicting issues of public policy: namely, the importance that doubtful wills not pass too easily into proof by reason of the cost of opposing them and, on the other hand, that parties not be tempted into a fruitless litigation by the knowledge that their costs will be defrayed out of the estate. [79] The principle established was that if the fault that occasioned the litigation lies at the door of the testator, in other words, if the testator was the cause of the litigation, the costs of ascertaining his will should be defrayed out of the estate. On the other hand, if there are merely circumstances that require an enquiry to ascertain whether the will is that of a free and capable testator, an unsuccessful party who nonetheless acts reasonably in opposing the grant, should be left to bear his or her own costs.
4. In many cases the distinction between these categories will be clear. In Dawson v Peters (No 2) [2007] NSWSC 1421, Bryson AJ held that a party to contested probate litigation was disentitled to an order for costs because of "the way she participated in the events leading to the creation of the informal [testamentary] document [giving rise to suspicious circumstances], and because of her lack of success at hearing": [11], see also [12].
5. Justice Campbell confirmed that this is a recognised circumstance in which a party will be disentitled to costs in the principles discussed in Re Estate of the Late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311 ("Page v Sedawie") at [35]-[38]. (See also, generally Shorten v Shorten (No 2) [2003] NSWCA 60 at [14]-[26] (Mason P, Meagher and Sheller JJA agreeing).
6. In Redroff v Miegroch (unreported, NSWSC, Santow J, 22 April 1996), Santow J stated that there are also often situations where these are overlapping exceptions and any distinction between them should not be taken to the point where under the second category there is automatically never any order that costs be paid out of the estate as this "could be quite unfair in some cases". It was further noted that There are many cases where circumstances reasonably call for an investigation to be made before the court could properly pronounce in favour of (or against) a will. They would involve serious hardship for the contesting party who thereby performs a public service, if that unsuccessful party were nonetheless required to pay his or her own costs. I do not consider, therefore, that this should be an inevitable consequence of coming within the second exception, though in some cases that may be the proper order.
7. In cases where this overlap exists it remains a matter for the court, in light of the circumstances of the case, to determine which costs order is most just: Page v Sudawaie per Campbell J at [30].

The Plaintiffs' Submissions

1. The Plaintiffs sought an order that their costs of the proceedings, calculated on the ordinary basis, be paid out of the estate of the deceased, relying on the principles in Re Estate of Hodges as set out above.
2. The Plaintiffs submitted that the conduct of the deceased rendered the case one in which the circumstances led reasonably to an investigation of the deceased's testamentary instruments that post-dated 2010.
3. It was argued that the detailed chronology, which charts the deceased's cognitive decline, revealed a testator with a complex history, whose presentation fluctuated. The Plaintiffs reiterated the evidence of Associate Professor Brodtmann who opined that the deceased's stroke destroyed parts of the deceased's brain essential to executive function, and that such defects might not have been noted by the inastute or unskilled, especially those relying on MMSE scores alone.
4. It was further submitted that it was the deceased's own conduct during his lifetime (especially between 2010 and 2014) that was the cause of the litigation.
5. Firstly, the deceased was a prolific will-maker, making at least 11 wills after the death of his wife in 2000, and 7 after 1 February 2010 (being the will that is to be admitted to probate); and
6. Secondly, the deceased had a practice of making notes and faxing them to his advisors and family members over his lifetime (Judgment at [1166]). It was submitted that while I considered those notes in the context of expert medical opinion as to the deceased's cognition, they provided a reasonable basis on which the plaintiffs considered that the deceased was capable of managing his own affairs. The fact that I did not make a finding to that effect (and, in fact, considered that the notes, to some extent, supported a finding as to a lack of capacity) was said not to change the fact that the deceased, by his conduct, armed the plaintiffs with emotive evidence of his testamentary intentions.
7. Additionally, it was submitted that the conduct of Mr White (as the deceased's solicitor) is relevant to costs, because this conduct did nothing to dispel any doubts about the deceased's capacity (notwithstanding a duty to take particular care to gain reasonable assurance as to the testamentary capacity of the testator) (Judgment at [717]-[718]). Particular care must be exercised when taking instructions from an obviously enfeebled testator, where capacity is potentially in doubt: Petrovski v Nasev; The Estate of Janakievska [2011] NSWSC 1275 at [89] per Hallen AsJ; Pates v Craig; The Estate of Cole (unreported, NSWSC, 28 August 1995, Santow J).
8. The Plaintiffs highlighted that I held that Mr White did not "…test, in the deceased's own interest as it were, his understanding of what he was doing in making his multiple post 2012 wills" (Judgment at [1167]).
9. It was submitted that the necessity for the present proceedings was caused, in part, by Mr White because if he had taken instructions from the deceased in a less casual manner, and retained a proper record of those instructions, there may have been less cause to investigate the deceased's testamentary capacity. That is because a principle is responsible for the acts and omissions of their agent in the course of the agent's authority. If it is accepted that the omission of the solicitor that was, at least in part, the cause of the litigation, the deceased by reason of the relationship of agency should be seen as the cause of the litigation.

The Defendant/Cross Claimant's Submissions

1. The Defendant submitted that the starting point is that the Plaintiffs have already paid most of their costs of the proceedings out of an account styled in the name of the Estate, which Dr Gooley contended contains Estate funds, and which contention it was submitted the Plaintiffs have failed to refute. Therefore it was submitted that making an order in the Plaintiffs' favour would result in them making a profit from the proceedings by "double-dipping" into the Estate a second time.
2. The Defendant further submitted that in any event this is a case where the Plaintiffs are disentitled to any indemnity from the Estate. He referred to my findings in the Judgment at [1017] in which I commented on the Plaintiffs' sanitisation of material and consequently held at [1178] that the suspicious circumstances arising from the conduct of the Plaintiffs attended the making of the September 2012 will and each subsequent will which had not been allayed by the Plaintiffs.
3. The Defendant submitted that had it not been for the Plaintiffs' sanitisation campaign and progressive success in isolating the deceased from the rest of his family so that they could benefit financially, this litigation would not be necessary, and it is therefore appropriate that the Plaintiffs bear their own costs of the proceedings.

Consideration

1. The Plaintiffs have lost this case. That is none of the wills they propounded are ones in respect of which the deceased as I saw the case had testamentary capacity.
2. Because of this case there has been no grant of Probate. There has not therefore been formally appointed any Trustee or Executor.
3. The usual rule governing the outcome on costs would be that such costs as may have been incurred by the Trustee or Executor would be paid by the Estate.
4. I do not consider here that it could be suggested that the testator was the only cause of litigation because of multiple wills he had made.
5. The Plaintiffs purported to propound numerous wills which supported their interests. The essence of their case was that the deceased had testamentary capacity when he made each will they wished to propound and because of the size and complexity of the estate, coupled with the family factional feud, it was legitimate for him to have made so many. Further, that he had left detailed instructions and directions which were only consistent with a person of testamentary capacity carefully and regularly considering his bounty.
6. In my view the Plaintiffs therefore fall into the second exception to the general rule, in part because the multiple wills are merely circumstances that required an inquiry into which of those wills was the last will and testament of a free and capable testator.
7. However, in addition by reason of my findings, I found there were suspicious circumstances that warranted the investigation into whether the deceased knew and approved of the contents of various wills (Judgment at [1176-1178]).
8. I made certain findings which were adverse to the Plaintiffs. In particular, the Plaintiffs brought this case in my view largely, if not entirely, driven by self-interest. I was particularly unimpressed with their attempts to sanitise certain aspects of the evidence. I also formed the view as I have said that the Plaintiffs behaved suspiciously in particular in relation to the deceased's will of 4 September 2012.
9. Objectively viewed I consider that the predominant purpose of the litigation was to vindicate the Plaintiffs' choice of will which they each had more than a hand in procuring and by which each had much to gain. I consider it fair in all the circumstances that they pay the costs of the litigation agreed or taxed personally on an ordinary basis.

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