Shorter v Hodges (1988) 14 NSWLR 698
Re Estate of the Late Hazel Ruby Grounds
Source
Original judgment source is linked above.
Catchwords
Teasel v Hooke [2014] NSWSC 1839
Estate MoranShorter v Hodges (1988) 14 NSWLR 698
Re Estate of the Late Hazel Ruby Grounds
Judgment (6 paragraphs)
[1]
JUDGMENT
HER HONOUR: On 26 July 2024, I gave judgment in this matter and ordered the plaintiff, Elizabeth Kemp, to pay the defendant's costs of the proceedings: Kemp v Findlay [2024] NSWSC 902. Ms Kemp seeks to vacate the costs order. Instead, Ms Kemp asks that her costs of the proceedings be paid out of the Estate or, alternatively, that she not be ordered to pay the defendant's costs.
[2]
Facts
In 2015, Andrew Findlay made a will leaving his $13.5 million Estate to his de facto partner, Ms Kemp (2015 Will). The couple separated on 27 May 2019. On 4 June 2019, Mr Findlay amended the Will on his computer, leaving his Estate to the couple's three children instead (2019 Document). On 5 June 2019, Mr Findlay told Ms Kemp that he had changed his will, leaving his Estate to their children. (Ms Kemp did the same.) Mr Findlay also informed his cousin, the defendant, by three emails sent the same day, attaching the 2019 Document. Mr Findlay also told his family law solicitor, Nabil Wahhab, on 11 June 2019, who made a file note to that effect.
In May 2021, the couple reached a family law settlement. Mr Findlay paid Ms Kemp some $4.6 million. The couple executed a Deed of Release, discharging each other's Estates from any potential claim under the Succession Act 2006 (NSW). Mr Findlay formed a new relationship, which he regarded as committed and long term.
Mr Findlay died in a boating accident in July 2023. The defendant promptly provided Ms Kemp with the three emails, by which Mr Findlay had sent the 2019 Document to him. Mr Findlay had explained in his emails, "This is my new will" and "If I went under a bus between now and then my wishes will at least be clear".
On 19 March 2024, the defendant's solicitor wrote to Ms Kemp's solicitor, advising the import of the evidence which Mr Wahhab was expected to give in support of a grant of probate of the 2019 Document: on 11 June 2019, Mr Findlay gave instructions that he had changed his Will recently. Mr Wahhab made a contemporaneous file note recording Mr Findlay's statement. On 20 March 2024, the defendant's solicitor provided a copy of Mr Wahhab's file note, which recorded, "He ∆d will recently." Fairly obviously, the file note recorded that Mr Findlay gave his family law solicitor instructions that he had changed his Will.
The next day, 21 March 2024, Ms Kemp commenced these proceedings, seeking to prove the 2015 Will. The defendant filed a cross-claim seeking to have the 2019 Document admitted to probate as an informal will under s 8(2)(a) of the Succession Act.
In support of her application, Ms Kemp filed numerous, extensive affidavits. Much of this material may have been more relevant in family law proceedings or a family provision claim.
In addition, Ms Kemp caused a number of very broad subpoenas and Notices to Produce to be issued. One could be forgiven for thinking that Ms Kemp was concerned to ensure that Mr Findlay had made full disclosure in the family law proceedings, or to ensure that the Findlay family did not secret any assets of his Estate through family company and trust structures. Efforts by the defendant's solicitors to reduce the scope of the subpoenas and Notices to Produce went in vain. On 29 May 2024, the defendant filed a motion to set aside the subpoenas. Orders were largely made as sought by the defendant. I ordered Ms Kemp to pay the costs of the motion, where there was a real and substantial problem with the subpoenas, which were far too broad.
The matter was heard in July 2024. The defendant relied on a short compass of facts: the fact that the 2019 Document was created shortly after Mr Findlay's separation from Ms Kemp; that it was promptly emailed to the defendant with the explanation "This is my new will" and "If I went under a bus between now and then my wishes will at least be clear"; and that Mr Findlay told his family law solicitor a week later that he had changed his Will.
Ms Kemp contested this proposition having regard to a wider factual compass, ranging from the onset of relationship problems until Mr Findlay's death. Ms Kemp contended that the 2019 Document was drafted "at the peak of an emotionally turbulent period" but Mr Findlay, an experienced businessman, did not proceed to execute the 2019 Document as he continued to love her and they continued to conduct their personal, financial and business affairs together in a cohesive post-separation relationship. Mr Findlay wanted to give her more money and regarded Ms Kemp "as putting the children ahead of all else."
Largely as a consequence of Ms Kemp's wider case, a considerable body of evidentiary material was relied upon by the parties. Some 25 affidavits were read plus two expert reports (and two joint expert reports). Some 1,500 pages of documents were tendered.
The case theory promulgated by Ms Kemp took time to advance and unravel, occupying the bulk of the hearing and my judgment. Ultimately, the contemporaneous documents simply did not support Ms Kemp's case. In fact, their post-separation relationship was fractious.
Nor was Ms Kemp candid about what had occurred. Ms Kemp initially failed to disclose the Deed of Release executed on settlement of the family law proceedings. Ms Kemp sought to shift the date of their separation to some months after the 2019 Document was prepared, presumably to undermine the link between their separation and the resulting need to change their wills. Ms Kemp also failed to produce a damaging email in answer to a Notice to Produce, which revealed that Mr Findlay had told her that he had made a new will. Ms Kemp also failed to produce her new will in answer to a Notice to Produce, making the same changes as Mr Findlay. I inferred that Ms Kemp did not produce this other will as she thought it may undermine her challenge to the 2019 Document as reflecting Mr Findlay's testamentary intentions, where she had done the same thing.
In the result, the 2019 Document was admitted to probate.
[3]
Submissions
The plaintiff submitted that Mr Findlay's failure to attend to the formalities of will-making, despite knowing that it was necessary to sign the document, was the genesis of this litigation. His failure to execute the 2019 Document was a result of his carelessness, not helped by his personal difficulties. As such, the dispute was "caused" by the testator: Etherton v Mitchelmore [2024] NSWSC 170 at [73]. In Public Trustee v New South Wales Cancer Council [2002] NSWSC 220, Einstein J accepted that the making of an informal document founded the conclusion that the deceased's conduct had necessitated the dispute, with a result that the costs of all parties should come out of the Estate: at [55]. This matter is to be assessed as at the date of institution of the proceedings, although regard can properly be had to any knowledge or reasonable belief subsequently gained: Petrovski v Nasev; The Estate of Janakievska (No 2) [2011] NSWSC 1474 at [16].
The plaintiff submitted that it was significant that she was propounding a duly executed will which, but for the informal Will, would have been admitted to probate. It was reasonable for the plaintiff to uphold the deceased's last duly executed will, particularly where some of the matters which ultimately attained significance in the proceedings only came to light shortly before the hearing when affidavits were served by Mr Wahhab on 24 May 2024 and Ms Roth on 27 June 2024. While Ms Grimes' affidavit of 24 May 2024 was silent about what she did and did not tell Mr Findlay about the execution of wills, her oral evidence informed the Court's finding that there was no evidence that Mr Findlay knew that a will had to be executed to be valid.
Further, the plaintiff was not involved in the drafting of the informal Will, where the level of knowledge available to her in relation to the informal Will is relevant to the Court's discretion: Re Estate of the Late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311 at [32]. The plaintiff submitted that the fact that Mr Findlay told her about the informal Will did not preclude a finding that Mr Findlay failed to take prudent steps to put his affairs in order or that the plaintiff did not act reasonably in bringing the claim. Nor did the fact that the plaintiff's proffered construction of Mr Findlay's third email was not accepted; her construction was not unreasonable. In short, the plaintiff could have won on this, and a range of other issues, on which she did not.
The plaintiff submitted that confusion and uncertainty arose because Mr Findlay did not take the simple steps required to formalise what the Court found to be his testamentary intentions. He did not sign the document, despite having the means and opportunity to do so. He did not tell Ms Grimes about it nor formally revoke the previous will and associated power of attorney and appointment of enduring guardian. He left the previous will with Ms Grimes, this being relevant conduct by a testator affecting the state in which he left his testamentary papers: Kostic v Chaplin [2007] EWHC 2909 Ch at [9]; Hall v Carney (No 2) [2012] SASCFC 105 at [9]. (A recurring problem with Ms Kemp's submissions is that propositions were advanced which were not accepted in my primary judgment and thus cannot be accepted in support of the costs outcome for which she now contends.) In these circumstances, it would be appropriate for the Court to order that the plaintiff's costs be paid out of the Estate. The prejudice to the Estate of such an order was ameliorated by the fact that it had substantial assets.
[4]
Principles
In Mitchell v Gard (1863) 3 SW & TR 275, Sir JP Wilde deduced two rules: "first, if the cause of litigation takes its origin in the fault of the testator … the costs may properly be paid out of the estate; secondly, if there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question … the execution of the will … the losing party may properly be relieved from the costs of his successful opponent": at 1282. The competing considerations on an application such as this were also aptly put at 1281-1282:
"It is of high public importance that doubtful wills should not pass easily into proof by reason of the cost of opposing them. It is of equal importance that parties should not be tempted into a fruitless litigation by the knowledge that their costs will be defrayed by others. … It is the desire of the Court to keep both in view, while yielding to neither..."
Reference to the "fault" of the testator does not necessarily mean moral fault or culpability, but whether the testator's own conduct led to their will being "surrounded with confusion or uncertainty in law or fact", for example, the state in which the deceased left their testamentary papers, where a will could not be found or where there was a question as to whether a will had been revoked: Kostic v Chaplin at [9] (Henderson J).
Concerns have been expressed as to how well these 'rules' accord with the case management principles of today. In Fielder v Burgess [2014] SASC 98, Kourakis CJ considered the 'rules' to be "something of an anachronism" in modern times, in which there is a greater concern for the need for proportionality in litigation: at [58], [65]. At [62]:
"… the bottom line is that the disputes are between private parties advancing competing claims to the testator's bounty for their private financial benefit. … the probability of the payment of the costs of all parties out of the estate irrespective of the result gives the parties little incentive to make appropriate decisions as reasonable self-funded litigants about their prospects of success, and the proportionality of the expense incurred in bringing or defending proceedings."
The 'modern' way to approach the matter is summarised by Basten AJ in Etherton v Mitchelmore [2024] NSWSC 170 at [69]-[75]. In short, costs are generally in the discretion of the Court, where the usual order is that costs follow the event: s 98, Civil Procedure Act 2005 (NSW); r 42.1, Uniform Civil Procedure Rules 2005 (NSW). This rule does apply to contested probate litigation. Whilst it has been said that there are "exceptions" to the rule in such litigation, Basten JA observed in Etherton at [69]:
"…That would clearly be wrong: it is not for the courts to craft exceptions to a statutory rule. The matter was more accurately expressed by Dixon CJ (McTiernan J agreeing) in Middlebrook v Middlebrook:
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."
The usual order as to costs may not apply where the testator has been the cause of the litigation, in which case the costs of unsuccessfully opposing probate may be ordered to be paid out of the Estate: Etherton at [71], citing Re Estate of Paul Francis Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709, followed in Shorten v Shorten (No 2) [2003] NSWCA 60 at [15] (Mason P). As Basten AJ observed in Etherton at [73]-[74]: (emphasis added)
"… Indeed, if the source of the litigation is an informal document prepared by the testator, it may readily be expressed as a dispute 'caused' by conduct of the testator. It does not follow, however, that in all cases involving informal wills, the unsuccessful party's costs will be paid out of the estate.
… It should not be inferred that to state that the testator caused the litigation will necessarily justify an order for costs of the unsuccessful party out of the estate without consideration as to whether the pursuit of the litigation by that party was, in all the circumstances, reasonable. In either case, reasonableness is not to be assessed by reference to the outcome, but by reference to what may objectively have been reasonable in the circumstances which preceded the hearing in Court."
An example of "unreasonable" conduct is Estate Moran; Teasel v Hooke [2014] NSWSC 1839, where the defendant challenged an application under s 8 of the Succession Act "in a strident, adversarial manner, for personal advantage": at [80]. When asked to vary the costs order, Lindsay J had regard to the relatively small size of the Estate, the clarity of intention on the part of the deceased in the informal will, "the motivation of the defendant (not improper but, nevertheless, not to be ignored) to advance his personal interests … in substantial litigation" and where the proceedings were litigated in an adversarial manner: Estate Moran; Teasel v Hooke (No 2) [2015] NSWSC 88 at [10].
Finally, it ought to be borne in mind that probate cases which pre-date the Civil Procedure Act do not attend to the overriding purpose of the rules, requiring litigants to facilitate the just, quick and cheap resolution of the real issues in the proceedings; such considerations now inform the assessment of the reasonableness of the losing party: Etherton at [75]. As Basten AJ concluded in Etherton at [75]:
"A significant practical effect of the [usual costs] rule is to impose a discipline on both lawyers and clients in circumstances where litigation is pursued primarily for financial advantage: there will be costs resulting from failure, beyond the party's own costs of the litigation. In circumstances where the parties are litigating over a fund, the Court should not too readily adopt practices which subvert the valuable discipline of the general rule."
I agree.
[5]
Consideration
Was Mr Findlay at "fault" in the relevant sense? He certainly would have quelled any controversy in respect of the 2019 Document if he had taken the time to print and sign the document in front of two witnesses. Save for the absence of execution, the 2019 Document looked for all intents and purposes to be a will, being an amendment of a will prepared by a solicitor. Merely because Mr Findlay's failure to sign the 2019 Document raised a triable issue does not require the Court to conclude that he was the "cause" of the litigation: Shorten v Shorten (No 2) at [27].
Did Ms Kemp have reasonable grounds, based on what she knew at the time, to question whether the 2019 Document should be admitted to probate? Before commencing these proceedings, Ms Kemp had to hand all of the relevant material on which the defendant intended to rely in proving the 2019 Document. Her concerns about whether Mr Findlay intended the 2019 Document to form his will would presumably have receded on reading his emails to the defendant, Mr Wahhab's file note and considering the import of the evidence that Mr Wahhab was expected to give.
In addition, Ms Kemp would have been able to reflect on what Mr Findlay had told her, that is, that he had changed his will and left everything to their children. In light of this, the only surprise for Ms Kemp would not have been that Mr Findlay had made a new will, but that he had neglected to execute it.
Ms Kemp would also have been able to reflect on the fact that Mr Findlay had already paid her $4.6 million in their family law settlement and that she had released him from any claim on his Estate.
Ms Kemp would also have been able to reflect on the fractious relationship she had with Mr Findlay after their separation. Having reviewed the post-separation communications between the couple in detail, Ms Kemp could not seriously have thought that Mr Findlay wanted to leave his Estate to her. I hesitate to view the pursuit of the litigation by Ms Kemp as reasonable, in all the circumstances, by reference to the information to hand before commencing the proceedings.
Regard may also be had to how Ms Kemp embarked upon this case. Ms Kemp sought to establish her case in the manner I have already described, which had the consequence that the costs of the litigation were far greater than need be. Ms Kemp can fairly be said to have undertaken the proceedings in an adversarial manner for personal advantage: Estate Moran at [80]. As a consequence, overall, I do not consider that Mr Findlay was the cause of this litigation. As Lindsay J observed in Estate Moran (No 2) at [12]:
"… the defendant had a fair opportunity to consider whether to contest the plaintiff's application, and made an informed choice to contest it. I see no reason why the costs of the contest should be notionally attributed to fault on the part of the testatrix, or a perceived need in the defendant to undertake a forensic investigation of the informal Will to the point of a hotly contested application."
Unlike some of the cases I have referred to, this is not a small estate. But I do not think it follows that Ms Kemp's costs should be paid out of the Estate as it does not matter, or does not matter as much. I think it matters. As Mr Findlay emailed Ms Kemp after one of their harsh exchanges, "I have worked hard for what I have." Mr Findlay's failure to execute the 2019 Document certainly presented a valuable commercial opportunity to prove the 2015 Will and 'get the lot'. By this application, Ms Kemp wants the Estate - which her young children are entitled to inherit - to 'pick up the tab' for her endeavour to, effectively, disinherit them. I consider that such a result would be unjust: Fielder v Burgess at [63].
The defendant acknowledged Ms Kemp was entitled to put the defendant to proof in respect of the informal Will, but no more. In fairness to her, I consider that I should not require Ms Kemp to pay the defendant's costs of proving his case. Where that case was of limited scope, I consider that an appropriate proportion of the defendant's costs which should not be paid by Ms Kemp is 25%.
For these reasons, I make the following orders:
1. Vary Order 5 made on 26 July 2024 as follows:
Order the plaintiff to pay 75% of the defendant's costs of the proceedings, either directly or by replenishing the Estate in respect of the defendant's costs.
1. Otherwise dismiss the plaintiff's motion filed on 9 August 2024 with no order as to costs.
[6]
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Decision last updated: 13 September 2024