SUCCESSION - Statutory Wills - Unsuccessful application for statutory will - Costs - Principles
Source
Original judgment source is linked above.
Catchwords
SUCCESSION - Statutory Wills - Unsuccessful application for statutory will - Costs - Principles
Judgment (3 paragraphs)
[1]
Solicitors:
Plaintiff: Dukes Lawyers
First Defendant: David Landa Stewart
Second Defendant: Glass Goodwin
Third Defendants: Brown Wright Stein
Fourth Defendant: MJM Lawyers
NSW Trustee: J Brouwer, Solicitor
File Number(s): 2018/00373426
[2]
Judgment
In delivering reasons for judgment published as Re MP's Statutory Will [2019] NSWSC 331, and in making orders dispositive of an application (under Division 2 of Part 2.2, sections 18-26, of the Succession Act 2006 NSW) for a statutory will, I reserved the question whether any (and, if so, what) orders for costs should be made consequential upon dismissal of the plaintiff's summons.
The parties to these proceedings have now made submissions on that question.
In the context of a debate about costs, distinctive features of the case, apart from the fact that the plaintiff's summons was dismissed, are the following:
1. The person lacking testamentary capacity on whose behalf the plaintiff ostensibly applied for a statutory will (MP, the fourth defendant) is possessed of a large, complex estate, presently under protected estate management by her two children (the first and second defendants in their personal capacities, joined in the proceedings as the third defendants in their representative capacity), with conflicts between interest and duty that necessitated the appointment of a tutor to represent the fourth defendant's interests in these proceedings and the close oversight of the NSW Trustee in discharge of its supervisory functions under the NSW Trustee and Guardian Act 2009 NSW.
2. Before the fourth defendant was incapacitated by a stroke, she engaged in a prolonged process of estate planning activities which produced a draft will (favouring her grandson, the plaintiff),prepared by professional advisers but emphatically rejected by the fourth defendant in bringing the process to an end.
3. Possibly overlooking a will made long ago not reflective of her current-day expressions of testamentary intention, the fourth defendant had no settled testamentary intentions at the time of her stroke and, despite a degree of estrangement between herself and one of her children, she was demonstrably unfazed by the prospect of dying intestate, a consequence of which would be that her deceased estate would pass to her two children in equal shares.
4. With a hope, if not expectation, of being a major beneficiary of any will made by, or on behalf of, the fourth defendant, the plaintiff applied for a statutory will for her, in substantially the same terms as the draft will rejected by the fourth defendant or some modification of that draft.
5. A central focus of the proceedings was whether the Court could properly be satisfied (in terms of section 22(b) of the Succession Act 2006) that the draft will promoted by the plaintiff, or any other proposal for a will, "is, or is reasonably likely to be, one that would have been made by [the fourth defendant if she] had testamentary capacity".
6. During the course of the proceedings the plaintiff was, more than once, placed on notice of substantial obstacles in the way of any prospective order for the authorisation of a statutory will but, nevertheless, he persisted at his own risk as to costs.
The starting point for consideration of competing submissions about the costs of the proceedings is recognition that those costs are in the discretion of the Court (as provided for in section 98 of the Civil Procedure Act 2005 NSW), and that (as provided for in rule 42.1 of the Uniform Civil Procedure Rules 2005 NSW) the general rule, across the Court's several jurisdictions, is that "if the Court makes any order as to costs, the Court is to order that the costs 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".
This starting point was recognised by Hallen AsJ in The Will of Jane [2011] NSWSC 624 at [100] in the following terms:
"The [Succession Act 2006, which, in Division 2 of Part 2.2, confers upon the Court jurisdiction to authorise a will to be made for a person lacking testamentary capacity] provides no guidance as to what should happen in relation to the costs of an application for approval of a proposed statutory will. In a case where the application fails, the general principle that costs follow the event might be appropriate, especially if the application is opposed and the person making the application seeks to benefit under the will that has been proposed. However, the burden of costs remains in the discretion of the Court".
An exercise of the Court's costs jurisdiction on an application for a statutory will must take into account that, as governed by the Succession Act, the proceedings are in character protective of the person lacking testamentary capacity in respect of whom a court-authorised will has been sought: Re Fenwick (2009) 76 NSWLR 221 at [132]; GAU v GAV [2016] 1 Qd R 1; [2014] QCA 308 at [48]; Re K's Statutory Will (2018) 96 NSWLR 69 at [28]-[30].
As noted in the principal judgment, Re MP's Statutory Will [2019] NSWSC 331, at [129]-[130]:
"[129] In accordance with the practice of the Court upon an exercise of protective jurisdiction, orders for costs do not ordinarily "follow the event" but are made, or not, in response to the question, "What, in all the circumstances, is the proper order for costs to be made?": see Civil Procedure Act 2005 NSW, section 98; Uniform Civil Procedure Rules 2005 NSW, rule 42.1; CCR v PS (No. 2) (1986) 6 NSWLR 622 at 640 E-F; Re K's Statutory Will (2017) 96 NSWLR 69 at [14]-[18].
[130] This question gives due recognition, inter alia, to the fact that the Court needs to be alive to the possibility that private individuals who would otherwise be concerned to act to protect a person in need of protection might be deterred from acting if bound to submit to a costs order on an unsuccessful application made by them to the Court, even though reasonably made".
The concern of the Court not to discourage meritorious applications is sometimes articulated by reference to the public interest served by the Court's jurisdiction. In Re the Will of Bridget [2018] NSWSC 1509 at [189] Hallen J, in determining the burden of costs on an unsuccessful application for a statutory will, expressly noted that the jurisdiction to authorise the making of a statutory will "involves a public benefit, and imposing a liability for costs in the event that the Court does not accede to an application should not discourage its invocation".
The approach of the Court in dealing with the costs of a statutory will application is not on all fours with its approach in dealing with the costs of probate proceedings. That said, drawing on experience in the disposition of probate proceedings (commonly described by reference to Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709F; but, historically, grounded upon Mitchell v Gard (1863) 3 Sw & Tr 257; 164 ER 1280, as explained by White J in Gray v Hart; Estate of Harris (No. 2) [2012] NSWSC 1562) it may be appropriate, in a particular case, to make an allowance for the possibility that: (a) an application for a statutory will might reasonably be justified as a product, at least in part, of conduct of the incapacitated person on whose behalf a court-authorised will is sought; or (b) a determination of the question whether a statutory will should be authorised might reasonably have required the conduct of an investigation attended with costs.
In the present proceedings some allowance should be made for uncertainties possibly arising from the estate planning activities of the incapacitated person (the fourth defendant) and a perceived need to investigate her testamentary arrangements. However, the plaintiff's pursuit of his application for a statutory will (largely in his own interests) moved beyond what was reasonable having regard to the protective character of the proceedings.
The evidence adduced at the final hearing of the proceedings included an affidavit from a solicitor who had acted for the fourth defendant across a broad range of matters: see [2019] NSWSC 331 at [73]. The solicitor's affidavit, read objectively, cast substantial doubt upon attribution to the fourth defendant of any testamentary intention along the lines for which the plaintiff contended.
That affidavit was served on the plaintiff on or about 25 January 2019.
Concerned about the course that had been taken by the plaintiff in the service of subpoenas for the production of documents and notices to produce, on 29 January 2019 I made an order in the following terms:
"ORDER that the plaintiff, no later than 13 February 2019, file and serve written submissions in support of his amended summons (filed 20 December 2018) setting forth the nature of the case he seeks to make on the amended summons, including the contentions he seeks to advance as to why a statutory will (in particular, the will he seeks to have made) is in the interests of the protected person [the fourth defendant] and for her benefit; and why the documentation he has sought for production on compulsory process is necessary".
The plaintiff complied with that order by filing and serving written submissions (marked for identification "P1"), dated 13 February 2019, signed by senior and junior counsel.
Objectively, by that date the plaintiff had enjoyed a reasonable opportunity to reflect on the nature, purpose and prospects of the proceedings.
On 15 March 2019 all parties to the proceedings (including the plaintiff) were provided with a copy of a Report to Court prepared by senior counsel retained by the fourth defendant's tutor following his review of documentation produced to the Court in answer to the subpoenas and notices to produce issued by the plaintiff.
Objectively, that report cast further doubt on attribution of any testamentary intention to the fourth defendant.
Notwithstanding objective concerns about the merits of the plaintiff's case arising from the solicitor's affidavit and senior counsel's Report to Court, the plaintiff persisted in his application for a statutory will to the point of a full contest on a final hearing. His determination to press on, regardless of obstacles, was beyond heroic.
In my assessment, the plaintiff had sufficient forensic material, by at least the date of his counsels' written submissions (13 February 2019), to make a considered decision about his prospects of persuading the Court (in terms of section 22(b) of the Succession Act 2006) that it should be satisfied that a draft will - particularly, but not only, the will primarily promoted by him - was a will that was, or was reasonably likely to be, one that would be made by the fourth defendant if she had testamentary capacity. The plaintiff pressed on with little, if any, regard for objective impediments to his summons.
Allowing to the plaintiff the benefit of any doubt about the fourth defendant's testamentary arrangements, and assuming in his favour a need for formal investigation of those arrangements, in my assessment 13 February 2019 is the date after which it would be unreasonable to burden the fourth defendant's estate of with the costs of these proceedings. The plaintiff pressed on at his own risk as to costs.
The fact that fourth defendant's estate is large, and sufficient to pay the costs of all defendants without any significant impact on her personal welfare, is a factor to be taken into account; but it is not a factor justifying an order that the costs of the proceedings, as a whole, be paid out of her estate, unattended by an order for costs against the plaintiff: Re The Will of Jane [No. 2] [2011] NSWSC 883 at [42]; Re the Will of Bridget [2018] NSWSC 1509 at [187]-[188].
The participation in the proceedings of the third defendants (the protected estate managers of the fourth defendant), the tutor for the fourth defendant and the NSW Trustee was considered necessary to represent the welfare and interests of the fourth defendant having regard to the complexity of her estate and associated conflicts between interest and duty. The third defendants have day to day carriage of management of that estate. Having regard to the personal interests of the managers (separately joined in the proceedings as the first and second defendants), the appointment of a tutor specifically to represent her interests in these proceedings was deemed necessary. The NSW Trustee's active oversight of management of her estate necessitated its participation in the proceedings.
Each of these parties, in a capacity representative of the fourth defendant, should have costs out of the fourth defendant's estate assessed on the indemnity basis. By way of analogy, this is consistent with a trustee's entitlement to indemnification out of an estate in administration proceedings, and with the practice of the Court in making orders for indemnity costs in favour of executors and administrators in family provision proceedings.
The first and second defendants (the third defendants in their respective individual capacities) should have their costs paid out of the estate of the fourth defendant on the ordinary basis. This too is consistent with the practice of the Court in making orders for the costs of beneficiaries to be paid out of an estate in administration, or family provision, proceedings.
The plaintiff should have his costs paid out of the estate of the fourth defendant, on the ordinary basis, up to and including 13 February 2019. Thereafter, he should pay or bear his own costs personally. This is consistent with themes found in awarding costs in probate proceedings. A limited grant to the plaintiff of costs out of the estate of the defendant reflects an allowance for the possibility that conduct of the fourth defendant may have contributed to a perceived need for a statutory will application, with an allowance also made for the costs of an investigation of the fourth defendant's testamentary arrangements. There is an element of generosity to the plaintiff in making these allowances in his favour rather than simply leaving him to bear the entirety of his own costs, an option available by analogy with an exercise of costs jurisdiction in probate proceedings.
The hard edge of costs orders affecting the plaintiff must be faced in connection with the costs of the proceedings after 13 February 2019. In my assessment, the appropriate order, in all the circumstances of the case, is that the plaintiff should bear the whole of the costs of the proceedings on and from 14 February 2019. That should be done by requiring him to reimburse the fourth defendant for the costs payable out of her estate referable to proceedings on and after 14 February 2019. That means, that he should ultimately bear the costs of the first, second and third defendants, the costs of the tutor for the fourth defendant, and the costs of the NSW Trustee.
The fourth defendant's estate should not be required to bear the burden of the costs of proceedings after the point at which, objectively, the plaintiff had sufficient forensic material to make a considered decision about the likelihood that the Court would be satisfied of the critical element of "actual or presumed testamentary intention" fixed by the Succession Act, section 22(b), as a threshold requirement for his success. After that time it was unreasonable, in the factual setting of these proceedings, for the plaintiff to persist in what was essentially an adversarial pursuit of orders for his own benefit, not in any meaningful way in the interests, and for the benefit, of the fourth defendant.
In making an order for costs against the plaintiff (or, more particularly, an order for him to pay or bear costs assessed on the indemnity basis) it is not necessary to make a finding that he engaged in some form of misconduct. As to the incidence of a costs order, the starting point remains an order that costs follow the event of the proceedings: dismissal of the plaintiff's summons. As to the assessment of costs on the indemnity basis, the critical factor is a determination that the estate of the fourth defendant should not be required to bear costs beyond a particular point; if those costs are not to be borne by the fourth defendant, the plaintiff must bear them as the party primarily responsible for them being incurred beyond what was, in all the circumstances, reasonable. The conduct of other parties to the proceedings, brought to court by the plaintiff, does not warrant imposition of an order for costs on them.
A particular concern underlying all the orders for costs to be made is a need to have the estate of the fourth defendant bear costs reasonably incurred in her interests, and for her benefit, whilst, at the same time, protecting her estate from costs unreasonably incurred, albeit purportedly in aid of her welfare and interests.
In considering "what, in all the circumstances, is the proper order for costs to be made", the Court cannot embrace the plaintiff's invitation that all costs be borne by the fourth defendant's estate. In proceedings protective of the welfare and interests of the fourth defendant, her estate needs to be preserved beyond the point that a costs burden can reasonably be laid to her charge.
For these reasons, I make the following orders for costs:
1. ORDER that the costs of the first and second defendants of these proceedings be paid out of the estate of the fourth defendant on the ordinary basis.
2. ORDER that the costs of the third defendants, the tutor for the fourth defendant and the NSW Trustee be paid out of the estate of the fourth defendant on the indemnity basis.
3. ORDER that the plaintiff pay the costs of the fourth defendant (that is, costs of the first, second and third defendants, the costs of the tutor of the fourth defendant and the costs of the NSW Trustee payable out of the estate of the fourth defendant) on and from 14 February 2019.
4. ORDER that the costs of the plaintiff:
1. up to and including 13 February 2019, be paid out of the estate of the fourth defendant on the ordinary basis; and
2. otherwise be paid or borne by the plaintiff personally.
1. ORDER that these orders be entered forthwith.
[3]
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Decision last updated: 02 May 2019