Giarrusso v Veca and Michielin [2015] VSCA 214

1 For the reasons given by Garde AJA, I agree that leave to appeal should be granted and the appeal allowed.

2 This application for leave to appeal, and the substantive appeal if leave is granted, arise from a costs ruling following the withdrawal of a caveat in a contested probate application.

3 Vincenza Veca ('the testator') died on 22 March 2014 leaving a will dated 31 March 2011 ('the will'). At the date of her death the testator was aged 83 years and was not in good health. She had four adult children - Antonino ('Antonio'), Rosalba ('the applicant'), Joseph and Silvio (both disabled). In October 2010, a social worker made a guardianship application to VCAT concerning the testator. On 1 December 2010, VCAT set aside an enduring power of attorney, and made an order appointing the applicant and her brother Antonio as joint administrators of the testator's estate. Following disputes between the applicant and Antonio, State Trustees Limited ('STL') was appointed the administrator of the testator's estate on 21 February 2011. STL was subsequently reappointed by VCAT.

4 By her will, the testator named her daughter-in-law, Ms Anna Veca, and her grand-daughter, Ms Luisa Michielin, ('the respondents') as executors and trustees of her estate. The estate is valued by the executors at $994,260.06. The principal asset of the estate is a property at 347 Moreland Road, Coburg valued at $800,000. The testator left her property to be held on trust in four equal shares. Two shares were to go to Antonio, with one share each for Joseph and Silvio. The testator made various legacies and bequests including to the applicant. She left the residue of her estate to Antonio.

5 On 16 May 2014, the applicant's solicitors filed a caveat in respect of any application for a grant of probate of the will at the Probate Registry of the Supreme Court. On 19 May 2014, the applicant's solicitors wrote to the solicitors for the estate informing them that the applicant 'is currently considering her rights in relation to contesting your clients' application for probate and, furthermore, in relation to a Part IV claim pursuant to the Administration and Probate Act 1958'. Among other things, the applicant's solicitors sought confirmation from the estate's solicitors that 'as you are now aware of a potential claim against the estate, the estate will not be distributed until 6 months has expired from the date that probate had been granted on the [w]ill'.

6 On 26 September 2014, the executors filed an originating motion seeking probate of the will. On 30 September 2014, the Registrar of Probates ('Registrar') raised requisitions concerning the appointment of STL as administrator. These were answered on 7 October 2014. On 9 October 2014, the Registrar requested that the solicitors for the estate file medical evidence on oath to establish testamentary capacity at the time when the will was executed.

7 On 14 October 2014, the applicant's solicitors searched the probate file at the Probate Registry. They obtained a copy of the Registrar's requisition dated 9 October 2014, and an affidavit of Mr Massimilliano Aiello ('Mr Aiello') sworn on 31 March 2011. This was the date of the will. The affidavit deposes that the testator's solicitor saw the testator concerning her desire to make a new will on two occasions. On the first occasion, she understood the questions put to her, provided answers to them, detailed her assets, her family circumstances, and communicated her wishes and instructions for a new will. On the second occasion, the testator seemed 'to fully understand' the terms of her will, and its nature and effect. The testator confirmed that the will was in accordance with her wishes and that she approved its contents.

8 On 17 October 2014, the applicant, her husband and solicitor attended on counsel. Counsel subsequently drew three grounds of objection to the grant of probate of the will:

(1) the testator lacked testamentary capacity during the period shortly before and at the time of the execution of her will;

(2) the testator did not know and approve the contents of the will; and

(3) the testator acted under the undue influence of Antonio Veca, who takes a benefit under the will.

9 The first and third grounds are in the form specified in Rule 8.06 of the Supreme Court (Administration and Probate) Rules 2014 (Vic).[1] The grounds of objection were filed on 27 October 2014.

10 On 5 November 2014, the solicitors for the estate filed but did not serve on the applicant's solicitors an affidavit of Dr Roger Chau, a consulting psychiatrist, sworn 29 October 2014. Dr Chau deposed that the testator was referred to him in early March 2011 for a cognitive assessment. He assessed the testator, concluding that her cognitive ability was sufficient to give her adequate testamentary capacity to make a new will.

11 At the first directions hearing on 14 November 2014, directions were given for discovery and mediation. The applicant's counsel was provided with a copy of Dr Chau's affidavit after the hearing.

12 At the second directions hearing on 28 November 2014, counsel for the applicant informed the Court that the applicant had agreed to withdraw the caveat. Subject to the requirements of the Registrar, the parties had agreed that the applicant's reasonable costs as caveator would come out of the estate. Counsel for the applicant stated that the claimed costs amounted to $14,700 and submitted that both parties' costs be assessed on a standard basis by a costing service. Counsel for the respondents submitted that if costs were to be assessed by a costing service, the Law Institute of Victoria's costing service should be preferred.

13 The third directions hearing occurred on 18 December 2014. The parties restated their positions on costs in similar terms. The costs issue was deferred to a hearing on 27 February 2015. Following the withdrawal of the caveat, probate of the will was granted to the respondents on 19 December 2014.

14 At the hearing on 27 February 2015, the position was essentially the same. The parties agreed that the caveator's costs should be paid from the estate when assessed on the standard basis but disagreed on quantum. Counsel for the applicant relied on an affidavit sworn by the applicant's solicitor on 24 February 2015, and contended for an amount of $14,700. A costs assessment obtained by the applicant from a costs consultant showed the applicant's costs in the amount of $17,347.19. There were professional costs of $12,661.89 and disbursements of $4,685.30.

15 The respondents submitted that the amount of $14,700 was excessive. They considered that an amount of $7,500 should be sufficient.

16 The Court gave judgment on 6 March 2015 ordering that the caveator's application for her costs to be paid out of the estate of the testator be refused. The Court also ordered that the applicant pay the estate's costs of the contested application for costs, including any reserved costs.[2] In making these orders, the judge referred to four matters. The first was the nature of the grounds of the applicant's objection, which was said to require the application of the principles expressed in Briginshaw v Briginshaw.[3] Secondly, the judge referred to the fact that the applicant's solicitors were on notice, through Mr Aiello's affidavit and by the Registrar's inquiry as to testamentary capacity, that capacity was not a strong ground to rely on in a challenge to the will. Thirdly, the judge referred to the foreshadowed claim under Part IV, expressing concern about the costs of such a claim on an estate of this size. Finally, the judge considered that there may not have been a proper basis for the allegations made by the applicant.[4]

17 The applicant now seeks leave to bring an appeal against the decision below and, if successful, seeks orders from this court that the applicant's costs of the proceeding be paid from the estate of the testator on the standard basis. For their part, the respondents agree to an order that the applicant's costs of the proceeding until the caveat was withdrawn be assessed and paid out of the estate, as they did before the judge. As a number of the grounds of appeal are essentially agreed or not seriously disputed, they can be dealt with relatively shortly. If error is shown by the applicant, the discretion of the court as to the costs of the proceeding is enlivened and stands to be exercised again.

18 Since the commencement of ss 14A-14D of the Supreme Court Act 1986 (Vic), leave has been required to bring a civil appeal to the Court of Appeal. Section 14C provides that such leave will be granted only where the Court is satisfied that the proposed appeal has 'a real prospect of success', that is to say, the prospects of success are not 'fanciful'.[5] The Court retains a discretion to refuse leave.[6] For reasons which will emerge, I am of the opinion both that the appeal has a real prospect of success and that the decision below is attended with sufficient doubt as to justify the grant of leave to appeal.

19 In her application for leave to appeal, the applicant relies on five grounds. They are in substance that the judge:

(1) applied a wrong principle of law by elevating the standard of proof at the caveat stage, or at all, to the Briginshaw standard without otherwise considering the burden of proof in probate cases;

(2) failed to take into account a material consideration, being that there was evidence before the Court which would raise a doubt as to the testator's capacity and as to her 'knowledge and approval' of the contents of the will, and which would found the grounds of an objection and shift the burden of proof to the propounder. The evidence available to a caveator at the caveat stage is not required to go further and prove the case. The judge also failed to take into account the fact that an affidavit as to capacity was not on the court file nor provided to the caveator by the propounder;

(3) misdescribed the requirements of the 'undue influence' ground as requiring an allegation of 'fraudulent conduct';

(4) took into account extraneous matters, being the foreshadowed family provision claim; and

(5) if such a claim was relevant, the judge failed to allow the applicant to provide evidence on it or to be heard, thus pre-judging the question.

20 The applicant contended that the judge was in error in exercising her discretion as to costs when she said that 'the nature of the grounds of the grounds [sic] of objection filed by [the applicant] are such that they are required to be determined by applying the principles expressed in [Briginshaw] as that standard is applied under s 140(2) of the Evidence Act 2008'.[7] In a subsequent sentence, the judge referred to the issue of whether the applicant had a proper basis to object to a grant of probate on the three grounds alleged.[8]

21 The respondents accepted that in an application for a grant of probate, the burden of proof remains with the propounder of the will. However, they contended that where the propounder establishes, on the balance of probabilities, that the will is prima facie valid, the evidentiary burden then swings to the caveator to establish the grounds set out in the caveat.

22 Where there is an allegation of a want of capacity or a lack of knowledge and approval of the will's contents, the burden of proof is upon the propounders of a will. As Ormiston JA said in Kantor v Vosahlo:[9]

There has never been the slightest doubt that those who seek to propound a will for probate bear the burden of establishing to the court that probate should be granted to them and that this ultimate burden remains upon them throughout the trial, although particular circumstances may in practice make that burden harder or easier to satisfy: see generally Bailey v. Bailey; Landers v. Landers and Timbury v. Coffee. From time to time it may be sufficient to show by the calling of appropriate evidence that the will was duly executed and that it is rational on its face: see Symes v. Green as cited by Dixon J in Timbury. On the other hand, if circumstances are shown to have existed which throw doubt on the capacity of a testator or testatrix validly to have executed a will, whether raised by evidence of old age, mental infirmity, suspicion of undue influence or of fraud, or the like, then that prima facie case of the propounder will be held not to be sufficient to justify a grant to the propounder. As the High Court said in Worth v. Clasohm:

'A doubt being raised as to the existence of testamentary capacity at the relevant time, there undoubtedly rested upon the plaintiff the burden of satisfying the conscience of the court that the testatrix retained her mental powers to the requisite extent.'[10]

23 As to the standard of proof resting on the propounder in a probate suit, Ormiston JA concluded:

One must first examine what is the standard of proof which rests on a propounder in proceedings in which the validity of a will is in issue. Leaving aside for the present what has been intended by the cautionary test laid down in the High Court in decisions up to and including Boreham, there can be no doubt that the civil standard of proof on the balance of probabilities has been accepted and that the burden rests on the propounder. It would seem, indeed, that the proposition is so obvious that it has rarely been adverted to by the High Court.[11]

24 Buchanan and Phillips JJA were of the same view, and held:

As a general principle, then, it will be sufficient to say, once a doubt has been raised about the testator's testamentary capacity, that the Court must be satisfied affirmatively that the testator was of sound mind, memory and understanding, when executing the will; for that was how the High Court described the onus in Bull v. Fulton and Boreham. The expression 'satisfied affirmatively' says all that need be said and any further description of the onus can only distract and may mislead: compare Neat Holdings Pty Ltd v. Karajan Holdings Pty Ltd.[12]

25 It is clear that the burden of proof was on the respondents as propounders of the will, and that the Briginshaw principle had no application to the first and second grounds. When the judge referred to the Briginshaw standard as applied under s 140(2) of the Evidence Act 2008 (Vic) ('Evidence Act'), it is very likely that she had in mind the third ground of the caveat alleging undue influence. In a case where the propounders of a will sufficiently discharge the burden on them of showing that the testator had testamentary capacity and that the will is otherwise in due form, the evidential burden may shift to the caveator to show that the ground of undue influence is made out.[13] In such a case, s 140(2) of the Evidence Act, particularly the nature of the cause of action and subject matter and the gravity of the matters alleged, would require proof to a standard akin to that described in Briginshaw.

26 In Chong & Neale v CC Containers Pty Ltd,[14] this Court recognised that the standard of proof in civil proceedings where serious allegations made under s 140(2) of the Evidence Act equated with the principle developed in Briginshaw.[15]

The common law has never recognised the existence of a third standard of proof. It is not in issue that s 140 of the Evidence Act 2008 now prescribes the standard of proof in civil proceedings. As this Court stated in NOM v DPP, it is settled that the conceptual effect of s 140(2) of the Evidence Act equates with the principle developed in Briginshaw. The Court said in NOM:

Mere mechanical comparison of probabilities independent of a reasonable satisfaction will not justify a finding of fact. The fact finder must feel an actual persuasion of the occurrence or existence of the fact in issue before it can be found. Where, as in the present case, the standard of proof is to be applied to circumstantial evidence, satisfaction as to a reasonable and definite inference is required.[16]

27 As a result, the first ground of appeal must be upheld. As respondents' counsel conceded, it was for the respondents as propounders of the will to establish on the balance of probabilities that the will was valid and that probate should be granted to them. The propounders had to satisfy the court affirmatively that the testator had testamentary capacity to make the will. The Briginshaw standard did not apply to the propounders. Insofar as any burden fell on the applicant it was a shifting evidential burden to demonstrate that there was undue influence. Under s 140(2), undue influence stood to be proven to a standard akin to the Briginshaw standard.

28 As to the second ground, the applicant submitted that the judge erred when she failed to take into account a material consideration, namely the documents filed in the VCAT proceeding. The documents were before the court as exhibits to an affidavit of the applicant's solicitor sworn 24 February 2015 and included a neuropsychological assessment report, a previous will, and the VCAT application, decision and order. The reasons for decision of the VCAT Senior Member who determined the guardianship application conclude that 'the allegations of manipulation are of such significance that the presence of an independent administrator remains imperative'.[17] They do not contain, however, (and it would not be appropriate for them to contain) any findings as to the three objections to the will of the testator. The VCAT decision was not concerned with the will. It was concerned with the need to reappoint STL as administrator of the estate of the testator.

29 I am not satisfied that the judge failed to take into account a material consideration as alleged in ground 2.

30 The third ground is that the Judge misdescribed the allegation of 'undue influence' as a claim of an 'equitable species of fraud, an essential component of which is an allegation of fraudulent conduct'.[18]

31 Undue influence has long been described as a fraud in equity. In Symons v Williams,[19] Barry J said that it is 'only one of the instances of fraud; and undue influence itself is manifested in a variety of ways [...] but still it is in all cases bottomed in fraud'.[20]

32 In her references to an 'equitable species of fraud' or 'fraudulent conduct', the judge was clearly not referring to fraud as would constitute the tort of deceit as defined by the House of Lords in Derry v Peek.[21] She is referring to undue influence as a recognised category of equitable fraud.

33 The making of an allegation of undue influence is, of course, a serious allegation, and especially so when the second person is said to have exerted it in relation to a testamentary instrument executed by an elderly and infirm person. Such allegations should not be made unless they are based on evidence. Section 18(d) of the Civil Procedure Act 2010 (Vic) provides that it is an overarching obligation binding on parties and practitioners alike not to make a claim that does not have a proper basis on the factual and legal material available to the person at the time of making the claim.

34 I am not satisfied that any error has been shown as to this ground.

35 As to the significance as to costs of a possible Part IV challenge by the applicant, the judge said:

A further factor relevant to the determination of Rosalba's application for costs relates to the first letter sent by Ms Margolit to the estate's solicitors three days after filing the caveat. In that letter, Ms Margolit informed the estate's solicitors that Rosalba:

is currently considering her rights to contesting your clients' application for probate and, furthermore, in relation to a Part IV claim pursuant to the Administration and Probate Act 1958...

These are foreshadowed challenges to the deceased's will in the alternative, viz., Rosalba would contest the application for a grant of probate and, if unsuccessful, would issue a Part IV claim. [...] At the date of the letter, Rosalba had filed the caveat in the Probate Registry. To my mind, such an approach threatens the estate with a potentially costly exercise and is designed to persuade the estate to compromise against the background of the threatened actions. More often than not, these types of claims involve bitter disputes between family members with a claimant seeking to advance claims of sometimes doubtful validity to the deceased's estate for their private benefit, whether financially or emotionally, with scant regard to the costs to be incurred in the challenge or the claim.

36 This Court was informed that a Part IV application has recently been issued by the applicant in the County Court of Victoria.

37 The applicant submitted that the judge erred when she considered the foreshadowed issue of a Part IV claim to be a relevant factor in the determination of the costs application in the caveat proceeding. I agree with this submission. The existence of a possible Part IV claim is irrelevant to the award of costs in the caveat proceeding.

38 While there is much to be said for the concern that the costs of litigation may fritter away the assets of an estate, particularly an estate of moderate or small size, the possibility of a Part IV claim is not a relevant consideration affecting the discretion to order costs upon the withdrawal of a caveat. The Court has no evidentiary basis on which it can conclude whether a Part IV claim would or would not be meritorious. The Court does not know at this stage whether a Part IV claim would succeed or fail. It is premature to draw any conclusion about its merits. The propriety of the caveat must be measured against the conduct of the parties and the evidence and information available to them at the time of lodgement, rather than on a view as to the merits or demerits of a future Part IV claim.

39 I would uphold ground 4 with the result that ground 5 does not arise.

40 As two of the grounds of appeal are upheld, it is necessary for this court to exercise the discretion as to the costs of the contested probate proceeding anew.

41 Helpful principles that guide the exercise of the discretion as to costs in contested probate applications are set out in the joint judgment of Giles JA and Brownie AJA in Perpetual Trustee Company Ltd v Baker.[22] That judgment draws on a variety of authorities[23] to recognise two exceptions to the well-established principle that in disputed proceedings, costs should follow the event.

42 The first is that where the testator has been the cause of the litigation ('though usually with no sense of blameworthy fault', to adopt the words of Santow J in In the Estate of Moyle: Moyle v Moyle[24]) the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate.

43 The second is that where the circumstances led reasonably to an investigation concerning the testator's will the costs may be left to be borne by those who incurred them. There is commonly overlap between these two situations, and often some doubt as to which principle should apply. The principles do however identify a range of possible considerations depending on the individual circumstances and situation.

44 Senior Counsel for the applicant submitted that the appropriate costs order was that the applicant's costs of the probate proceeding should be assessed on the standard basis and paid out of the estate. The submission of counsel for the respondents was that it was open to the Court to allow the applicant proper and reasonable costs up to the date on which the caveat was withdrawn. The submissions are substantially similar.

45 The dispute between the parties relates not to the form of order that should be made, but rather to the quantum that should be allowed. As occurred before the judge, Senior Counsel for the applicant contended that $14,700 was the appropriate amount. She confirmed that the amount of $14,700 did not include any amount of costs relating to a claim under Part IV. Counsel for the respondents submitted that the $14,700 claimed was too much, and that an amount of $7,500 was, in all, appropriate. A dispute as to the quantum of costs is ordinarily resolved by the Costs Court.

46 In my view, the discretion of the Court should be exercised in favour of the applicant so that the applicant's costs of the proceeding are assessed on the standard basis, and paid out of the estate. I would exercise the Court's discretion as to costs in this manner for the following reasons:

(1) such a costs order falls within the parameters of the principles set out in Perpetual Trustee Company Ltd v Baker.[25] A submission to this effect by Senior Counsel for the applicant was not resisted by counsel for the respondents;

(2) the costs orders sought on behalf of the applicant and the respondents are similar;

(3) it is reasonable to allow the applicant costs out of the estate on the standard basis until the applicant was provided with a copy of the affidavit and report of Dr Chau - this was not until after the directions hearing on 14 November 2014;

(4) the evidence in the VCAT proceeding highlights that there may have been an issue concerning the testamentary capacity of the testator when she executed the will;

(5) while it is true, as the judge noted, that the applicant's solicitors were aware of, or should have been aware of, the requisition from the Registrar to the estate's solicitors as to testamentary capacity, and of Mr Aiello's affidavit, they did not receive the medical evidence until more than a fortnight after Dr Chau's affidavit was sworn. On receipt of the affidavit from Dr Chau, the applicant withdrew the caveat. The Court was informed that the applicant would withdraw the caveat on 28 November 2014;

(6) the intentions of the applicant in relation to a claim under Part IV are not relevant or material to the award of costs in the probate proceeding. The Court is in no position to assess the merits of the Part IV claim now before the County Court of Victoria; and

(7) the dispute arises between different members of the same family. It is highly desirable that the dispute be contained and, if possible, compromised entirely.

47 In my view, the applicant's costs of the proceeding to 28 November 2014 should be assessed on the standard basis by the Costs Court, and be paid by the estate.

48 That leaves outstanding the costs of the short directions hearing on 18 December 2014, and the costs hearing on 27 February 2015. It is unfortunate that these additional costs have been incurred. In my view, they must be dealt with in the same way as the costs of the proceeding prior to 28 November 2014. As to the costs of the appeal, it is appropriate to grant an indemnity certificate under s 4(1)(b) of the Appeal Costs Act 1998 (Vic).

49 Subject to any submissions of counsel as to final orders, I would order that:

(3) in lieu of the orders below, the applicant's costs of the proceeding be assessed on the standard basis by the Costs Court, and when assessed be paid by the respondents out of the estate;

(4) the applicant's costs of the appeal be assessed on the standard basis by the Costs Court, and when assessed be paid by the respondents out of the estate;

(5) an indemnity certificate under s 4(1)(b) of the Appeal Costs Act 1998 (Vic) be granted to the respondents in respect of the costs of the appeal ordered to be paid out of the estate.

[2] Re Veca [2015] VSC 74 ('Re Veca').

[3] [1938] HCA 34; (1938) 60 CLR 336 ('Briginshaw').

[4] Re Veca [24]-[25], [28]-[29].

[5] Kennedy v Shire of Campaspe [2015] VSCA 47 ('Kennedy'), [12]; Note Printing Australia Ltd v Leckenby [2015] VSCA 105, [78]-[82].

[6] Kennedy [2015] VSCA 47, [14].

[9] [2004] VSCA 235.

[13] See Brown v Guss [2014] VSC 251 [382]-[393] and the authorities cited therein.

[14] [2015] VSCA 137.

[15] [2015] VSCA 137 [44], [48].

[16] NOM v Director of Public Prosecutions (2012) 38 VR 618 [124].

[17] See VW [2012] VCAT file no G61594 dated 26 June 2012 (Senior Member R Scott).

[18] In the context of probate cases, 'undue influence' has a more specific meaning, also carrying a requirement of coercion or importunity - see Veall v Veall [2015] VSCA 60 n 67.

[19] [1875] VicLawRp 29; (1875) 1 VLR (E) 199.

[20] Ibid 216; see Meagher, Gummow & Lehane, Equity Doctrines & Remedies (LexisNexis Butterworths, 4th ed, 2002) [15-005].

[21] [1889] UKHL 1; (1889) 14 App Cas 337.

[22] [1999] NSWCA 244 [13]-[14].

[23] Shorter v Hodges (1988) 14 NSWLR 698; In the Estate of Moyle: Moyle v Moyle (Unreported, Supreme Court of NSW, Santow J,18 June 1988); Davies v Gregory (1873) 3 P & D 28; Roe v Nix (1893) P 55; In the Will of Millar [1908] VicLawRp 95; (1908) VLR 682; In the Will of Severs [1887] VicLawRp 110; (1887) 13 VLR 572; Phillips v Dundas (Unreported, Supreme Court of Victoria, Smith J, 18 December 1995); In the Will of Ryan; Williams v Ryan [1998] VSC 109 (Byrne J); and Middlebrook v Middlebrook (1962) 36 ALJR 216 (Menzies J).

[24] Unreported, Supreme Court of NSW, Santow J, 18 June 1988.

[25] [1999] NSWCA 244 [13]-[14].