The Legal Principles - Probate Proceedings
48The Civil Procedure Act 2005 (NSW), s 98(1), provides that, subject to the rules of court, and that, or any other, Act, costs are in the discretion of the court. The discretion is broad but not unconfined. It is a judicial discretion to be exercised on a principled basis.
49The Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), r 42.1, provides that costs should follow the event, unless it appears to the court that some other order should be made as to the whole, or any part, of the costs.
50UCPR r 42.20(1) provides that, if the court makes an order for the dismissal of proceedings, then, unless the court orders otherwise, the Plaintiff (which includes the Cross-Claimant) must pay the Defendant's (which includes the Cross-Defendant) costs of the proceedings to the extent to which they have been dismissed.
51The court can only order otherwise if it makes a discretionary decision to depart from the default costs order provided for in r 42.20. This means that there is an onus on the party whose proceedings have been dismissed to make an application in respect of costs if it does not propose to pay the costs of the other party. It also means that there must be some positive ground or good reason for departing from the ordinary course.
52In McNamara v Bao San [2010] NSWSC 809, I wrote:
"The following principles may be regarded as relevant in determining who is to bear the burden of costs in a case where the proceedings are dismissed before a final hearing
...
(f) Where the proceedings are dismissed prior to any hearing on the merits, 'the Court cannot try a hypothetical action between the parties' to determine the question of costs: Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194 at 201; Minister for Immigration and Ethnic Affairs; ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624; Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd [2007] NSWSC 1120 at [35];
(g) It may be necessary to analyse the whole of the proceedings to determine the appropriate costs order: Fordyce at [67] per McColl JA. A relevant consideration is whether the Plaintiff acted reasonably in commencing the proceedings and whether the defendant acted reasonably in defending them: Australian Securities Commission v Aust-Home Investments Ltd at 201 (cited with approval in Foukkare); all the relevant circumstances, and not just the fact of dismissal, should be considered;
(h) It is also important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event, or settlement, so removes, or modifies, the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the court's discretion otherwise than by an award of costs by the successful party. It is the latter type of case that usually creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs: One.Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 at 553; cited with approval in Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 per Davies AJA (with whom Mason P and Meagher JA agreed) at [5];
(i) The distinction between the two categories referred to above is often helpful in exercising the costs discretion, notwithstanding that neither category can be precisely defined, the boundary between them is unclear and other factors may be relevant: Bitanniaper Basten JA at [79]-[81]; Perre v State of New South Wales [2009] NSWLEC 51 at [49];
(j) The rule requires the court to make such order as it thinks just in the particular circumstances of the case."
53In probate suits, there are considerations that more readily affect the application of the Civil Procedure Act and the UCPR than in most other forms of litigation. These considerations act as guides to the exercise of discretion, but they are not inflexible.
54Before turning to the considerations, two principles that are of importance in litigation of this type should also be referred to. The first is that "parties should not be tempted into a fruitless litigation by the knowledge that their costs will be defrayed by others", and the other is that "doubtful wills should not pass easily into proof by reason of the cost of opposing them": Mitchell v Gard (1863) 3 Sw & Tr 275, at 279; 164 ER 1280, at 1281-1282.
55Any suggestion that there is a general rule that costs in Probate proceedings are borne out of the estate should be immediately rejected. As long ago as 1926, it was said, in Re Plant [1926] P 139, at 152:
"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. The lure of 'costs out of the estate' is responsible for much unnecessary litigation."
56In Middlebrook v Middlebrook (1962-1963) 36 ALJR 216, Dixon CJ said, at 217:
"No doubt in probate suits the prima facie rule is that, as in other litigation, costs follow the event. But in probate suits there are considerations which more readily affect the application of this rule than in most other forms of litigation. See Re Keane [1909] VLR 231, at p 239. An examination by Hood J of the more important English cases decided up to the date of his judgment will be found in Re Millar [1908] VLR 682. There are in the present case circumstances which would naturally lead the caveator to think that an investigation of the validity of his father's last will was justified. If this case were judged on its general circumstances only, I think that adequate reasons would be seen for entertaining some doubt as to the validity of the will. It is only as a result of investigation that the reasons for finding affirmatively in favour of the testator's testamentary capacity distinctly appear. In these circumstances the proper course is to apply the principle enunciated by Sir Gorrell Barnes P. that 'if the circumstances lead reasonably to an investigation of the matter then the costs may be left to be borne by those who have incurred them.'"
57In relation to the question of costs, Powell J (as his Honour then was), in Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698, recorded the principles generally to be applied when determining how, in Probate proceedings, the court's discretion as to costs may be exercised. At pp 709-710, he wrote:
"... 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 ...
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/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."
58This passage was approved by the Court of Appeal in Shorten v Shorten (No 2) [2003] NSWCA 60 at [15]. However, it is clear that neither of the guidelines set out in the passage is exhaustive or prescriptive. The two categories of exception tend to overlap, but they are not coterminous. See also, in that respect, Perpetual Trustee Co Ltd v Baker [1999] NSWCA 244, [13] - [15].
59In the first of the exceptions referred to, although the word "fault" is sometimes used, it does not necessarily mean moral fault or culpability. Rather, the touchstone is whether it was the deceased's conduct which had led to his, or her, will "being surrounded with confusion or uncertainty in law or fact": Kostic v Chaplin [2007] EWHC 2909; [2007] All ER (D) 119.
60In respect of the second exception, Dixon J, in Middlebrook v Middlebrook, in the course of determining a challenge to a will founded upon lack of testamentary capacity, observed:
"It is only as a result of investigation that the reasons for finding affirmatively in favour of the testator's testamentary capacity distinctly appear. In these circumstances the proper course is to apply the principle enunciated by Sir Gorrell Barnes P that 'if the circumstances lead reasonably to an investigation of the matter then the costs may be left to be borne by those who have incurred them.' Spiers v English [1907] P 122 at 123."
61Campbell J (as his Honour then was) in Re Estate of the late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311, at [32], wrote:
"... in the caselaw concerning probate litigation, it can safely be said that a consistent theme in the cases is that the principles concerning costs which are applied to a person who seeks probate (whether successfully or not) are not the same as the principles which apply to the costs of a person who opposes probate (whether successfully or not). In probate litigation, it is not only who succeeds in the litigation which matters - which is the only factor operating in the 'costs follow the event' rule. As well, the role which a particular party has played in litigation, whether as plaintiff or defendant, is relevant. Further, facts about the knowledge available to parties, and the reasonableness of their conduct in conducting the litigation, can be taken into account."
62However, I note, in that case, the parties agreed upon all the orders to be made, other than costs.
63I have not forgotten what was said by White J in Gray v Hart; Estate of Harris (No 2) [2012] NSWSC 1562, at [5] - [8], even though this was a case in which the costs question was decided after a full hearing:
"The reason for the difference is that in a probate suit the court is concerned to give effect to the last will of a free and capable testator or testatrix. There is a public interest in keeping faith with the wishes of a capable will-maker that requires an investigation into the validity of the propounded wills. A grant of probate in solemn form operates in rem, that is, it binds the world, or at least those affected persons who have notice of the proceedings. Irrespective of what the parties might want, the court will not pronounce against a will unless there is material to satisfy it that the deceased did not have capacity, or that there is some other reason why the will is invalid. A grant is not made or withheld solely by the consent of the parties. There is, therefore, a public interest in the incurring of some level of costs in cases where there is genuine doubt about the validity of a will.
In 1863, Sir J P Wilde established the principles that have been generally followed ever since and did so for the avowed purpose of assisting a suitor to foresee the penalties under which he or she launched litigation (Mitchell v Gard (1863) 3 Sw & Tr 275 at 277; 164 ER 1280 at 1281). His Lordship said that the basis of the principles:
'... should rest upon the degree of blame to be imputed to the respective parties; and the question, who shall bear the costs? will be answered with this other question, whose fault was it that they were incurred? If the fault lies at the door of the testator, his testamentary papers being surrounded with confusion or uncertainty in law or fact, it is just that the costs of ascertaining his will should be defrayed by his estate.'
His Lordship then referred to its being:
'... the function of this Court to investigate the execution of a will and the capacity of the maker, and having done so, to ascertain and declare what is the will of the testator',
and that:
'If fair circumstances of doubt or suspicion arise to obscure this question, a judicial inquiry is in a manner forced upon it.'
It was for this reason that it had become common to relieve the losing party from costs, if the losing party was chargeable with no other blame than that of having failed in a suit which there was reasonable grounds to bring."
64However, his Honour added at [15]:
"Again, with the greatest respect, the proposition that a party who reasonably but unsuccessfully propounds or challenges the will and so brings about the necessary investigation should no more have to bear his own costs than pay the costs of the other party focuses on only one of the reasons for policy described in Mitchell v Gard rather than giving weight to the other important policy consideration that parties not be tempted into fruitless litigation by the knowledge that their costs will be defrayed out of the estate."
65And then at [19]:
"It is where the testator is not the cause of the litigation, but an investigation is reasonably called for, that there is usually no order as to the unsuccessful party's costs. Of course if there is no reasonable cause for investigation, that is, if the unsuccessful party has not acted reasonably, then he or she will pay the costs."