King v Hudson

Supreme Court of NSW|2009-10-08|Before: Ward J, Powell J

JURISDICTION : Equity Division Probate List

Cross-claim dismissed. DECISION : Order that the costs of the plaintiff of the proceedings and the cross-claim be paid out of the estate of the deceased on the indemnity basis. Order the defendant's costs on the s18A application in the proceedings be paid out of the estate on the party/party basis.

CATCHWORDS : COSTS - consideration of exceptions in probate litigation to general principle that costs follow the event - whether the deceased could be said to have been the "cause" of the litigation where testamentary capacity was in issue - whether there was such an overlap between the issue of testamentary intention and the issue as to testamentary nature of the documents to give rise to conclusion that second of exceptions in Shorter v Hodges ought not to apply - costs orders made as noted above

LEGISLATION CITED : Wills Probate & Administration Act 1898

In The Will of Millar [1908] VLR 682 Middlebrook v Middlebrook (1982) 36 ALJR 216 Orton v Smith (1873) LR 3 P & D 23 CASES CITED : Perpetual Trustee Company Limited v Baker [1999] NSWCA 244 Re Estate late Hazel Ruby Grounds, Page v Sudawaie [2005] NSWSC 1311 Re Estate of Hodges (deceased); Shorter v Hodges (1988) 14 NSWLR 698 Shorten v Shorten [2001] NSWSC 263

Peter James King (First Plaintiff) PARTIES : Jennifer Jane King (Second Plaintiff) Judith Hudson (Defendant)

COUNSEL : M Willmott SC (Plaintiffs) P O'Loughlin (Defendant)

SOLICITORS : Owen Hodges Lawyers (Plaintiffs) McLaughlin & Riordan (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION PROBATE LIST

111441/06 PETER JAMES KING & ANOR V JUDITH ELIZABETH HUDSON, THE ESTATE OF GARY CHARLES KING JUDGMENT 1 In this matter I handed down reasons for judgment on 25 September 2009 and indicated that I would hear Counsel's submissions on costs. The matter was listed for submissions on costs on 8 October 2009. Having had the benefit of reading Counsel's written submissions on costs in advance, following argument, I gave my rulings indicating that I would give more complete reasons in due course. These are those reasons. 2 The matter came before me in the Probate List, there being two relevant issues to determine - first, whether either or both of two documents headed "Last Will and Testament" (neither of which was formally valid) satisfied s 18A of the Wills Probate & Administration Act 1898 ("the Act") and, secondly, whether the deceased had testamentary capacity at the time he made those documents. 3 For the reasons outlined in my judgment handed down on 25 September 2009 I found that both documents satisfied s 18A of the Act and that the deceased had testamentary capacity as at the time he made each of those documents. I therefore ordered that the will dated 15 October 2005 should be admitted to probate. It followed from the findings I made that the defendant's cross-claim should be dismissed and I so ordered when the matter came back before me on the hearing of costs on 8 October 2009. 4 As far as the application for costs was concerned, the plaintiffs (being the executors named in the 15 October 2005 will which I have ordered should be admitted to probate) seek an order that their costs, on the indemnity basis, of the proceedings and the cross-claim be paid or retained as the case may be out of the estate of the deceased and that no order otherwise be made as to the costs of either party of the proceedings or of the cross-claim. 5 The defendant seeks an order that her costs of the proceedings and of the cross-claim be paid on a party and party basis out of the estate of the deceased. 6 In the result, I ordered that the plaintiffs' costs on an indemnity basis of the proceedings and the cross-claim be paid or retained, as the case may be, out of the estate of the deceased, as sought by the plaintiffs. I ordered that the defendant's costs of the determination of the s 18A issue be paid on a party and party basis out of the estate. Otherwise I made no order as to the costs of either party of the proceedings or of the cross-claim. I gave leave for a minute of those orders to be entered forthwith and directed that the probate file be returned to the registry for the grant of probate to be completed. Reasons 7 I was referred to the statement by Powell J in Re Estate of Hodges (deceased); Shorter v Hodges (1988) 14 NSWLR 698 at 709 that in probate litigation there are two recognised exceptions to the general principle in adversary litigation that costs follow the event and that those costs be taxed on a party and party basis. Those exceptions are: 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;

If the circumstances led reasonably to investigation of the document propounded, the costs may be left to be borne by those who respectively incurred them. 8 It was submitted by Senior Counsel for the plaintiffs (Mr Willmott) that while the issue as to whether the documents which had been signed by the deceased were testamentary in nature so as to satisfy s 18 of the Act was within the first of the exceptions (the testator having been the cause of the necessity for that litigation by having failed properly to execute his will), the question as to his testamentary capacity (which had occupied the bulk of the hearing) was one which (while a matter reasonably to be investigated in the circumstances) was not caused by the testator for the purposes of the first exception and therefore that at the very least the defendant's costs of the proceedings and cross-claim (other than the costs relating to the s 18A issue) should be borne by the defendant. No order was sought that the defendant pay the plaintiffs' costs of any part of the proceedings. 9 Mr Willmott noted that the facts in the present case bore a marked similarity to the facts in Shorter v Hodges, where the deceased (there suffering from severe depression) had committed suicide shortly after making his last will. Powell J said (at 710): While, in the present case, I do not think that the deceased can be regarded as having been "the cause of the litigation", in the sense in which the phrase seems to have been used in the cases (see, eg, Orton v Smith ); nonetheless, it seems to me that the facts were such as might be said "to lead reasonably to an investigation". This being so, it seems to me that the appropriate course to adopt in regard to costs is to make no order, but, instead, to leave them to those by whom they were incurred. 10 Mr Willmott took me to Orton v Smith (1873) LR 3 P & D 23; Shorten v Shorten [2001] NSWSC 263; on appeal [2002] NSWCA 73 and [2003] NSWCA 60 at [28], and to Middlebrook v Middlebrook (1982) 36 ALJR 216, for the proposition that where testamentary capacity is in issue in a case such as the present, the ensuing litigation is not "caused" in the relevant sense by the testator. 11 Counsel for the defendant, Mr O'Loughlin, noted, however, that in Perpetual Trustee Company Limited v Baker [1999] NSWCA 244, Giles JA and Brownie AJA had made reference to what was said by Santow J in the Estate of Moyle: Moyle v Moyle (18 June 1998, unreported) namely that if a testator is by his mental frailty and other circumstances in a position where the circumstances reasonably call for an investigation of the validity of the will then "in one sense the testator, though usually with no sense of blameworthy fault, has by his or her conduct caused the litigation to occur". 12 It was submitted by Mr O'Loughlin there is in fact a third category of exception to the general rule, for cases in which the two exceptions overlap. I consider this below. However, at the outset, it seems to me that it is difficult to say that the deceased in this case (simply by reference to his state of depression and suicidal ideation) could be said to have been the "cause" of the litigation for the purposes of the first exception, as I understand it to be set out in Shorter v Hodges. If that were to be the case, then it would seem to me that in any case where a severely depressed, possibly delusional, or suicidal testator committed suicide leaving behind him or her a will (whether formally valid or not) that testator could be said to have "caused" ensuing litigation in relation to his or her testamentary capacity. It seems to me that more than the mental frailty or incapacity of the deceased is required in order to bring the case within the first of exceptions referred to by Powell J. 13 As to the question of overlap, in Perpetual Trustee Company Limited v Baker, their Honours did note that the two exceptions tended to overlap. They went on from considering the statement of Santow J above, to say this (at [47]): A party reasonably but unsuccessfully propounding or challenging the will, and so bringing about the necessary investigation, should no more have to bear his own costs than pay the costs of the other party. So it has been said that where the conduct and habits and mode of life of a testator have given ground for questioning his testamentary capacity the costs of the unsuccessful party should be paid out of the estate, as distinct from being left to be borne by that party. 14 Mr Willmott took me to a number of the cases cited by Santow J, to demonstrate that there something more than simply the question of capacity was raised. It was submitted by Mr Willmott that, to the extent that Wood J in In The Will of Millar [1908] VLR 682 had suggested that an unsuccessful party's costs should be allowed out of the estate both where these testator has caused the litigation and where there was ground for reasonable enquiry, this did not represent the position in New South Wales and should not be followed. 15 The principles outlined by Powell J in Shorter v Hodges have been applied in a number of cases and were repeated by Santow J in Redroff v Miegoch (22 April 1996 unreported) and in Perpetual Trustee Co Limited v Baker, with approval. 16 It seems to me that in this case there was not such an overlap as to give rise to a conclusion that the second exception ought not to apply, in the sense that the issue of the testamentary intention of the deceased and the issue as to the testamentary nature of the documents to be determined for the purposes of s 18A were, in my view, discrete from the issue in relation to the deceased's testamentary capacity. The former could have been (as they ultimately were) determined fairly readily on a much narrower evidentiary basis than that which was put before the court on the investigation of the deceased's testamentary capacity. 17 Nevertheless, that does not seem to be determinative of the costs issue because it is clearly recognised that the statement of the two recognised exceptions do not remove the court's discretion. I was taken to Redroff where Santow J said: If there is a distinction to be made between what are in truth frequently overlapping exceptions, I doubt whether that distinction should be carried to the point where there is automatically, under the second exception, never any order that costs be paid out of the estate but only an order that the unsuccessful party should be left to pay his or her own costs. That could be quite unfair in some cases.

Thus there are many cases where circumstances reasonably call for an investigation to be made before the court could properly pronounce in favour of (or against) a will. They would involve serious hardship for the contesting party who thereby performs a public service, if that unsuccessful party were nonetheless required to pay his or her own costs. I do not consider, therefore, that this should be the inevitable consequence of coming within the second exception, though in some cases that may be the proper order. 18 In Re Estate late Hazel Ruby Grounds, Page v Sudawaie [2005] NSWSC 1311, Campbell J, as his Honour then was, noted that an overlap had been recognised by the Court of Appeal between the two exceptions referred to in Shorter and that, if a case for decision fell within that area of overlap this meant that one of the exceptions suggested that the appropriate order concerning costs should be different to the order which is suggested by the other exception. His Honour said (at [30]): In that area of overlap, the principles which are recognised by the two exceptions are insufficient to produce a result. It is a matter for the trial judge, in light of the circumstances of the particular case before him or her, to decide which costs order better achieves justice. 19 There, his Honour noted that the question whether some special costs order ought to be made in favour of an unsuccessful defendant so as to relieve him (or her) of the burden of costs falls for determination on the basis of whether there were circumstances which afforded reasonable grounds for a defendant's opposition of the grant of probate. 20 Here, it is not suggested that the defendant's conduct of the litigation was unreasonable per se. It was noted by Counsel for the defendant that the issue as to the deceased's capacity was, as I perceived it, a more difficult question. Ms Hudson had put forward valuable evidence (particularly from the expert witness called on her behalf, Professor Westmore) in order to assist the court to determine the issue of testamentary capacity. 21 It was submitted that Ms Hudson filled the role of a necessary contradictor to the proceedings and had raised in her affidavit and in the evidence tendered before the court a number of matters which had not been otherwise before the court when the statement of claim seeking s 18A declarations and consequential relief was issued. 22 I accept that that is the case. However, there was an array of evidence arguably relevant to the background circumstances but ultimately not relevant on the determination as to whether the deceased had testamentary capacity (such as evidence of various alleged delusions held by the deceased in relation to his next door neighbour and a developer seeking to obtain an advantage in relation to his property; his concerns in relation to his tenure or employment at the University; and his financial circumstances) which, it seems to me, were never likely to be said to be delusions capable of affecting the dispositions made under the will. The adducing of this evidence meant that costs were inevitably incurred by the plaintiffs in responding thereto. 23 Further, it was submitted by Mr Willmott, and I accept, that Professor Westmore's evidence was not supportive of the proposition that, as at the date on which the documents were signed, the deceased lacked testamentary capacity. Rather, Professor Westmore's evidence, as I understood it, was that by the time the deceased committed suicide he was psychotic and that psychosis would have taken some time to develop. Professor Westmore was unable to say when that psychosis would have developed and could not see anything on the face of the testamentary dispositions to suggest that either of them was affected by any delusion or psychosis at that stage. While on the one hand Ms Hudson, to adopt the terminology referred to in Redroff, may be said to have performed a public service in putting forward the circumstances which reasonably called for an investigation in relation to the deceased's testamentary capacity, it also is the case that Ms Hudson was opposing a grant of probate the effect of which would have been, if she were successful on the whole of her claim, to leave the estate to pass on intestacy to her. She therefore had a clear interest in the outcome of the proceedings. In those circumstances, I think the appropriate orders are as I have indicated above and I so ordered.

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