(5) The Calderbank offers. Failure to accept the offers made by the second defendant was unreasonable and should preclude an order for costs out of the estate: submission (3).
Conclusion: Setting Aside the Costs Order of 9 November 1998
40 If the principle in Permanent Trustee Co (Canberra) Ltd v Stocks & Holdings (Canberra) Pty Ltd supra applies before judgment is entered, then the only question is whether there is such affectation of a third party interest as will invoke the application of that rule. If there is, the judgment ought not be set aside. Whilst I have commented in [30] above about the lack of authority on the ambit of the concept of third party interest for the purposes of this rule, I am of the view that such an interest does exist in this case. The second defendant is not precluded from being a relevant third party because it was not yet a party to the suit at that stage; it is not only parties to the proceedings who are encompassed by the rule: see Permanent Trustee itself. The matter was settled in November 1998 with the second defendant, which, although not a party, was taking a close interest in the proceedings, excluded against its wishes from the settlement negotiations. It was settled in a way which did not impinge on the second defendant. If specified wills were admitted to probate, then the additional payment to the first defendant would come out of Professor Popovtzer's share under the will proved and the parties to the settlement would bear their own costs. Now it is asked that the orders for costs be set aside and be set aside specifically to the intent that both the plaintiffs' and the first defendant's costs be ordered out of the estate. In the events which have happened this would mean that it would be the second defendant's share in the estate under the 1985 will which would bear the burden of those orders. The second defendant has an interest in receiving that gift undiminished by the costs of the first aspect of the case. That interest would be impinged on by the setting aside of the judgment, especially since the judgment would be set aside only for the purpose of making an order that so impinged. If the rule in Permanent Trustee does apply although the orders were not entered, then it will preclude the setting aside of the order, which I have held is the better view.
41 However, even if I am wrong, and the Permanent Trustee rule does not apply where the order has not been entered, in my view the result will be the same. Even if the existence of the third party interest does not absolutely preclude the setting aside of the judgment by consent, the setting aside can occur only by the exercise of a judicial discretion. In my view, the interference or potential interference with a third party interest by the setting aside of the judgment, even if not an absolute bar, will remain a factor to be taken into account on the exercise of that discretion. In my view, the way I should exercise that discretion is as follows. The second defendant was not yet a party to the proceedings. However, it had clearly indicated its interest in the matter to both the plaintiffs and the first defendant and had asked for relevant material to be supplied to it, although that had been furnished in a laggardly and not very thorough way. Equally, it may be said that the second defendant had not been vigorous in its pursuit of the material, at least until it was suddenly apparent on the eve of the trial before Hodgson CJ in Eq that settlement negotiations were taking place. There is no doubt that it did ask to participate in those negotiations. That request was refused and, at least until the orders were made in Court, it was excluded from knowledge of what the proposed settlement was. No doubt, at least in part to justify that stance, the settlement was effected in terms which did not on their face affect the second defendant, as I have noted in [40]. Both parties were aware that the second defendant had reserved its position. Both parties were aware that it was not certain that the 1987 will would be admitted to probate, and the terms of settlement and orders based on them were conditioned accordingly. To the plaintiffs and Professor Popovtzer it was made quite plain before the settlement was effected that the second defendant continued to object to its exclusion from the negotiations and made plain that it may well propound an earlier will. It is the clear recollection of both Mr Gavshon and Mr Berger that this was said at the meeting on 5 November 1998 at which the Popovtzers were present and led to unpleasantness when they became angry at this suggestion. There is no evidence that the first defendant was aware up to the time of the settlement of this further announcement on behalf of the second defendant, but there is equally no doubt that the matters earlier stated in this paragraph were known to the first defendant when it entered into the settlement agreement.
42 In the light of those circumstances, I do not see that the dictates of justice require the judgment to be set aside and the question of the costs of the suit up to that point re-agitated. The eventuality which has occurred is no doubt unwelcome to the parties to the settlement, but existed as a known possibility at the time the settlement was entered into. Those parties do not like the eventualities which have occurred, but they took their chances in coming to the settlement as they did and the outcome contrary to their hopes is not sufficient to justify the judgment being set aside when a party whose interests would be affected by the setting aside objects to that course. It should be noted that the application to set aside is not made on the basis that the agreement is vitiated under the principle in the Huddersfield Banking case supra or Harvey v Phillips supra. The entitlement to set it aside is said to arise from the fact that the parties to the agreement are now agreed to abandon it. In my view the dictates of justice do not require the judgment to be set aside; indeed, the dictates of justice require that the judgment not be set aside and that, in the circumstances, the parties be left subject to the orders entered as a result of the agreement, albeit the parties to it now regret it. I should add that I am not persuaded that there is any substance in the arguments that the second defendant gained some advantage by lying by up to the time of the settlement, nor that it caused the other parties to incur unnecessary costs, nor that it gained some advantage out of the work they had done, so as to render it unfair that it should have the advantage of its ultimate share of the estate without that share bearing the costs of the first aspect.
43 There is yet another reason why the judgment ought not be set aside. If the orders are set aside, I am invited to make orders replacing them, namely, orders that the plaintiffs and the first defendant have their costs of the first aspect out of the estate. Unless such an order were to be made, it would be pointless to set the judgment aside. On the material before me I should not be prepared to make the order for costs sought; the order that I should make if the judgment were set aside would be identical with the order which the then Chief Judge made by consent. The situation in relation to this aspect of the suit was significantly different from the situation in relation to the costs of the second aspect of the suit, with which I shall deal below.
44 So far as the second aspect of the suit is concerned, the plaintiffs' case for the costs out of the estate is that the testator was in the requisite sense the cause of the litigation; albeit the conduct was occasioned at least in large part by her illness, it was her irregular and inconsistent conduct which raised the very grave doubts that existed as to her capacity to make the 1986 and 1987 wills. In the first aspect of the case there was, of course, a like issue in relation to her capacity to make the 1988 will. However, the parties had chosen to and were proceeding to contest in addition an issue of a totally different nature, namely, whether the testator had signed the will at all. The contesting cases on this aspect were that Professor Popovtzer, a person who was in a position to be familiar with her handwriting in her later years, denied that the signature which appeared on the 1988 will was hers. Furthermore, there was the evidence of handwriting experts to the effect that it was not. On the other side, the first defendant proposed to lead the evidence of the nurses who swore that they had seen her sign. They were people with no interest in the estate under any of the wills. The first defendant denied forging the will or having any complicity in the forging of the will. There were also handwriting experts who pronounced the signature genuine. Perhaps it could be alleged that it was her deteriorating condition which led to infirmity of handwriting and that this in some way played some part in the execution issue. However, I do not think it could be said in any realistic way that the testator was the cause of this issue. Although, as I have said, there was as well a capacity issue in relation to the 1988 will, faced with the settlement of a suit which centred on the forgery issue the Court will not try proceedings at any stage for the purpose of simply determining costs. The first aspect of the case was never tried. The usual rule was stated by McHugh J in Re The Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624 - 625. It is that in relation to settled or abandoned proceedings the usual order is that there be no order as to costs. The decision I should make, if called upon to decide what should be done concerning the costs of the settled first aspect of the proceedings, is that, in accordance with that principle, I should order that there be no order as to those costs, to the intent that the plaintiffs and the first defendant should bear those costs themselves. For all the foregoing reasons I dismiss the application to set aside any of the orders made by Hodgson CJ in Eq on 9 November 1998.
Conclusions: Plaintiffs' Application for Costs of the Second Aspect out of the Estate
45 The decision of this application involves two questions. The first is whether the circumstances of this case are such as to justify an award of costs out of the estate in favour of the unsuccessful plaintiffs: see second defendant's submissions 39 to (5). The second is whether those plaintiffs are entitled to an order in their favour or whether an order in their favour is precluded on the basis that they did not incur and never were liable for those costs and are therefore not entitled to be indemnified against them: see submission 39. It should be borne in mind that the second defendant does not ask for the application of the usual costs rule in its full rigour, ie, it does not ask that the unsuccessful plaintiffs be ordered to pay its costs, but says that the application for costs out of the estate should be refused and the plaintiffs (and Professor Popovtzer) ought be left to bear their own costs.
46 As to submissions 39 to (4), the second defendant in essence says that the litigation cannot in any way be regarded as having been caused by the testator. They say that it was caused by conduct of the plaintiffs and the Popovtzers. Furthermore, they say that not only did the litigation fail but that it was always hopeless and always hopeless to the knowledge of the plaintiffs and of the Popovtzers. They further say that there was conduct of the Popovtzers that should lead to the conclusion that there should be no costs order which would be ultimately to the benefit of Professor Popovtzer, who actually paid the plaintiffs' costs of the proceedings.
47 The disentitling conduct principally relied on is that it is said that both Professor Popovtzer and Mrs Popovtzer lied in the course of the proceedings. In this regard the second defendant points to [40] of my judgment, where I indicated that they were not impressive witnesses and that there was certain of their evidence which I did not accept. About that, two things should be said. The first is that the evidence which I did not accept was the degree of their recollection of the conferences in July 1987 before the making of the 1987 will and their statements as to the testator's declarations of intention at that time to leave the bulk of the estate to them. On the other hand, as I made plain at the time, there were large parts of their evidence that I did accept, including their evidence of the history of their relationship with the testator and even many or most of the events of their visit to Australia in 1987. I accepted their evidence of a paranoid outburst by the testator against the first defendant. What I said was carefully cast not to encompass a finding that any lack of accuracy or candour concerning the matters as to which I did not accept them was the result of deliberate falsehood. The second defendant accepts that I did not make that finding in my judgment, but presses me to make it now. I very deliberately did not make it at that time and I do not make it now. The human mind, as Judges know, has an enormous power to convince itself of the existence of facts in which a witness or party wishes to believe or has an interest in believing, so that he or she does believe it when giving evidence that is found to be contrary to the real state of affairs. One possibility as to why the Popovtzers gave evidence I did not accept is rationalisation. There may be others. In any event, I decline to find on the balance of probabilities that there was deliberate falsehood. I add that the conduct in including clause 9 in the settlement agreement was not very worthy, but should not affect the conclusion as to costs that I otherwise come to.
48 Arguments were put to me in detail as to why the plaintiffs and the Popovtzers must have known that the proceedings would fail, or must have known facts which, properly assessed, made it inevitable that the proceedings would fail. These submissions focus the bright light of hindsight. Hindsight sings a siren song of which Judges must be cautious. There have been many judicial warnings as to its dangers in different contexts. The Court of Appeal has recently drawn attention to the dangers of hindsight in determining foreseeability in cases of personal injury caused by negligence: see White v Nitis (nee Williams) NSWCA 17 July 1998 unreported per Powell JA; Carlisle v Mullrai Pty Ltd (2000) 31 MVR 312 at [28] per Foster AJA. In Rosenberg v Percival (2001) 75 ALJR 735 at [16] Gleeson CJ analysed the dangers of hindsight as follows:
"In the way in which litigation proceeds, the conduct of the parties is seen through the prism of hindsight. A foreseeable risk has eventuated, and harm has resulted. The particular risk becomes the focus of attention. But at the time of the allegedly tortious conduct, there may have been no reason to single it out from a number of adverse contingencies, or to attach to it the significance it later assumed. Recent judgments in this Court have drawn attention to the danger of a failure, after the event, to take account of the context, before or at the time of the event, in which a contingency was to be evaluated: see, eg, James v Bartlett (2000) 75 ALJR 1 at 5 - 6 [19]; Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 75 ALJR 164 at 167 [17], 183 - 184 [109]."