Neil Ronald Telfer as Executor for the Estate of the late Lyall Telfer v Carolyn Telfer

(1) Should Neil be passed over as executor of Lyall's June 2010 will? 6Carolyn contends that although Neil was named as executor of Lyall's will of 21 June 2010, the Court's findings disqualify him from being able to take office as executor of the will. Neil disputes this contention and says that he should office as executor. Although there was contention about the signing of the second codicil, the 17 February 2011 codicil, there is no issue between the parties about the validity of Lyall's 21 June 2010 will. The only question is whether Neil, the named executor under that will, should now take office. 7The principles that govern whether a named executor entitled to apply for a grant should be passed over, may be shortly stated. The proper course in ordinary circumstances is to assume that a person named by a deceased person as his or her executor will act properly and that the testator expects that person will do so: The Uniting Church in Australia Property Trust (NSW) & Anor v John Kerry Millane; Re the Estate of Otterley Lynda May Ritchie [2002] NSWSC 1070 ("Millane") at [9] (Windeyer J). All named executors are entitled to apply for a grant, but only in very special circumstances can a named person be passed over and the Court possesses inherent power to pass over an executor if it decides that that course is appropriate: Boller v Boller, Supreme Court of NSW (7 June 1990) (Young J) ("Boller"). The power to pass over an executor is also conferred under Probate and Administration Act 1898 s 74. 8No general rule can be laid down, but misconduct may render a named executor incompetent and entitle the Court to pass him or her over: Re Hunter [1932] NSWLR 911 ("Hunter"). But although Hunter says that a person who has so misconducted himself may be found not to be a proper person to be entrusted with the estate's administration, it is necessary for the misconduct to be proved, rather than just pleaded; and it would be highly undesirable if the administration of estates were delayed by having to determine in prior proceedings disputed claims of unconscionable conduct against putative executors: Millane at [7]. The mere existence of a conflict of interest does not itself justify passing over a named executor who wishes to take a grant: Monty Financial Services Limited v Delmo (1996) 1 VR 65 ("Monty"). 9It seems to me that the present case is one of proved misconduct, not just of a conflict of interest. The critical relevant finding in the Court's principal judgment is at [119]. The Court there concluded that Neil must have been aware that the signature on the second codicil was not Lyall Telfer's signature. Despite that, Neil propounded it as Lyall's signature throughout the proceedings. A person who is prepared to propound to the Court a document as the testamentary instrument of the deceased, when he knew it was not, is not a proper person to be entrusted with the administration of the estate. These circumstances meet the requirements of Hunter to pass over a named executor. The finding also establishes proven rather than pleaded misconduct to meet the requirements of Millane. The circumstances also satisfy Young J's requirements in Boller of "special circumstances" enabling a named executor to be passed over. The situation is aggravated by the fact that Neil Telfer also had a hand in creating the document which he was propounding. 10The conclusion that Neil should be passed over as executor is strengthened by the particular requirements of the administration of this estate. The appointed executor would have to resolve the remaining issues about the sale of the Northmead property to Mark, decide the genuineness of Carolyn's and Mark's claims upon the estate, determine whether Carolyn's entitlement against the estate is secured by way of the deed and distribute any residue to Carolyn. The second codicil which Neil was propounding is a document that favoured Mark's interests over Carolyn's to a degree, the Court would have even less confidence in his fitness for office because of the special nature of these duties that he would have to fulfil. The document which he has wrongly propounded favours one of the parties whose interests he would have to consider fairly were he to become executor. 11Neil Telfer resists this conclusion. Through his counsel, Mr Rollinson, he emphasises that he has not been found to have forged the codicil, but rather to have propounded a false document. The case is said to be analogous to Burnside v Mulgrew [2007] NSWSC 550 ("Burnside"), see especially [60] and [69] to [75]. 12But I do not think this case is analogous to Burnside. In Burnside the Court did not infer that the proponent of the document knew that it was not signed by the deceased: Burnside at [74]. That cannot be said in this case, even though it is correct that I have not found that Mr Neil Telfer forged the codicil. Neil Telfer will be passed over as executor.

(2) Should Carolyn have a costs order against Neil and if so on what basis? 13Carolyn seeks an order that Neil pay her costs of these proceedings on the indemnity basis. Neil resists this and argues that an appropriate portion of Carolyn's costs should be paid from the estate, but that he should not have to pay her costs on any basis. 14Neil puts a number of arguments to justify his position. Neil argues that a large part of the case before and at trial was occupied by matters on which Carolyn has not succeeded or which have ultimately proved irrelevant. Neil points to a number of such matters. He says that in reality Carolyn was determined upon the course of challenging Neil's appointment well before the issue of the challenge to the codicil emerged and that these proceedings are an abuse of process. He points to the testamentary capacity issue on which the Court has not had to reach any conclusions. Neil also points to other issues pursued by Carolyn that are irrelevant to the pleaded issues. There are issues: relating to the alleged poor character of Mark Telfer and his bad relationship with Lyall; material going to the question of whether Carolyn's debt is secured or unsecured; grievances about the sale of the Northmead property to Mark; issues whether the Northmead property has been sold at an undervalue; issues whether the solicitors acting for Neill should be cross-examined in relation to their attendance upon Lyall. In substance, Neil argues that this litigation was conducted for an ulterior purpose, namely to maintain a "feud" against Mark. 15Neil's submissions are not without some merit. And Mr Rollinson has put them at their best. This case has generated an uncommon degree of passion on both sides. But the accusation that Carolyn has maintained this litigation for an ulterior purpose rings hollow. She succeeded. The litigation she authored had substance. But this should not permit her to recover costs associated with pursuing issues irrelevant to the pleadings. Neil's first argument that the proceedings are abuse of process fails. But it is nevertheless an effective argument in highlighting the need to winnow out any irrelevant costs that Carolyn may have incurred, through the costs assessment process. 16The usual rule is that costs follow the event unless it appears that some other order should be made as to the whole or any part of the costs: Uniform Civil Procedure Rules 2005 r 42.1. This principle reflects the general common law presumption which is based upon the principle that costs are compensatory: Footes v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 and Ohn v Walton (1995) 36 NSWLR 77 at 79. Costs should follow the event here and be awarded in Carolyn's favour unless Neil shows that "some other order" should be made. 17But in probate litigation there are two well-recognised exceptions to the rule the costs follow the event. Where the testator has, or those interested in the residue have, been the cause of the litigation the costs of the unsuccessful party may be ordered to be paid out of the estate; and, if the circumstances lead reasonably to an investigation in regard to the document propounded to probate the costs may be left to be borne by those who respectively incurred them: Perpetual Trustees Company v Baker [1999] NSWCA 244. 18I accept Carolyn's submissions that neither of the two well-recognised exceptions to the ordinary costs rule apply here. It was Neil who propounded the second codicil and Neil was aware that the second codicil did not contain Lyall's signature. Lyall was not the cause of the litigation. It was only Neil's conduct that led to the investigation of the circumstances surrounding the second codicil. 19Another exception to the normal rule that costs follow the event is that an executor or trustee is usually allowed his costs out of the estate if his conduct has been honest, even though it may have been mistaken: Upton v Downie [2007] NSWSC 1281. None of Neil's costs of the litigation should be recoverable against the estate as Neil's pursuit of the litigation was not honestly mistaken. 20But there are limits to the denial of Neil's recovery against the estate. Neil may well have expended funds on behalf of the estate in anticipation of taking up his office as executor, which expenses are not accounted for merely by his pursuit of this litigation. He should still have those costs out of the estate. So the Court's orders will provide that Neil should not have his costs of this litigation out of the estate. But otherwise the ordinary law will apply that Neil as a prospective executor is entitled to be reimbursed for his costs out of the estate: National Trustees Executors and Agency Co v Barnes (1941) 64 CLR 268. 21Neil advanced another argument to the effect that a costs order against him and in favour of Carolyn would be unfair. The argument was based on two observations. The first was that Carolyn had always opposed a grant of probate to Neil. Secondly, Carolyn had only offered to agree to the grant of probate to Neil upon terms that he administer the estate in a particular way that favoured her and included paying out her debt. 22But there is a simple answer to this argument. It can be accepted that Carolyn was making unreasonable demands against Neil. But Neil was not without his own defences. Apart from propounding a codicil that he knew did not contain the signature of the deceased, he could merely have sought probate of Lyall's will of 21 June 2010. Had he not propounded the second codicil, as he did, the argument for passing him over as executor would probably have faced real difficulties. 23Carolyn should have her costs on an indemnity basis. The principle is that the Court should not lightly depart from awarding of costs on the ordinary basis: Hobartville Stud Pty Limited v Union Insurance Co (1991) 25 NSWLR 358 at 370. Caution must be exercised when departing from making costs order on the usual basis: Leichardt Municipal Council v Green [2004] NSWCA 341. But delay occasioned by the making of unjustified allegations or maintaining false defences is a well established category for the awarding of indemnity costs: Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354 at 358 and Commonwealth Bank of Australia v Saleh [2007] NSWSC 990. The Court's findings in paragraph [119] of the principal judgment are clear: Neil should not have maintained the second codicil, as he knew that it did not contain Lyall's signature. That deliberate conduct caused the incurring of costs in the proceedings. He should pay costs on indemnity basis.

(3) Should a Civil Procedure Act s 98(4)(c) costs order be made? 24Carolyn seeks the making of an order for a specified gross sum instead of assessed costs under Civil Procedure Act s 98(4)(c). Neil opposes such an order. On this issue Neil is successful. 25The applicable principles in relation to the making of specified gross sum costs orders under Civil Procedure Act s 98(4)(c) may be shortly stated. Although the Civil Procedure Act s 98(4)(c) power has been described as particularly suited to complex litigation, the rule is expressed in general terms and is not limited to cases of that type: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006 (Burchett J). The power to award a Civil Procedure Act s 98(b)(c) specified gross sum instead of assessed costs is exercised whenever the circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119 (von Doussa J). 26Probable inability to pay a costs order will usually provide a proper basis for the making of a s 98(4)(c) order. If the unsuccessful party ordered to pay costs is unlikely to be able to pay the amount of costs ordered then the successful party is further aggravated by having to fund the additional costs of taxation, those costs also being unrecoverable: Harrison v Schipp [2002] NSWCA 213 ("Schipp") at [21] (Giles JA) and Hadid v Lenfest Communications Inc [2000] FCA 628 ("Hadid") (Lehane J). 27There is no procedural obstacle to the Civil Procedure Act s 98(4) discretion being exercised now. Civil Procedure Act s 98(4) provides as follows: 98. Courts powers as to costs (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount. 28The Court may make such an order "at any time before costs are referred for assessment". The costs order has just been made as has not been referred for assessment as yet. 29An order for a specified gross sum instead of assessed costs should not be made here. A personal costs order has been made against Neil, not the estate. There is no evidence advanced to support the conclusion that Neil will be unable to pay that costs order, or that an assessment would involve further unnecessary aggravation to Carolyn. 30Moreover, there is merit in the point Mr Rollinson makes on behalf of Neil that a costs assessment will be needed to unpick the expenditure of costs on irrelevant non-litigation related matters from costs associated with costs the pleaded issues in the litigation. The need to separate out these irrelevant costs and expenses, and there seem to be some, makes the "broad brush" approach that goes with a Civil Procedure Act s 98(4)(c) order inappropriate. 31The costs of the statement of claim and the cross claim should both be recoverable on an assessment because Carolyn has been successful on those. But she should not recover costs associated matters irrelevant to the pleaded issues in the litigation. She may ultimately have to bear her own costs of those matters. I should add to avoid further dispute on this that I regard Carolyn's costs incurred in relation to the testamentary capacity issue as legitimately incurred in connection with these proceedings.

Conclusions and Orders 32The Court has answered the three questions posed to it for argument on 14 June 2013. Neil Telfer should be passed over as executor of Lyall Telfer's will of June 2010. Neil Telfer should pay Carolyn Telfer's costs of these proceedings on the indemnity basis. And Carolyn Telfer should not have the benefit of a specified gross sum instead of assessed costs. The Court will make directions to achieve this. These can be dealt with by the costs assessor. 33It is appropriate first to record the orders made on 14 June 2013. They were as follows: 1. The Statement of Claim be dismissed. 2. The Plaintiff (Neil Ronald Telfer) not be entitled to proceed to take probate over the Will of Lyall Vincent Telfer dated 21 June 2010. 3. Order in accordance with Prayer 3 of the Amended Cross Claim. 4. The President of the Law Society to nominate a person suitable to act as the administrator of the estate of Lyall Vincent Telfer. 5. Excluding existing costs orders, the plaintiff (Neil Ronald Telfer) pay the defendant's costs of the proceedings as a whole (including her amended cross claim) on an indemnity basis. 6. The costs referred to in Order 5 are to be paid personally by the plaintiff without any indemnity out of the estate of Lyall Vincent Telfer. 7. The Plaintiff is not to have his costs of these proceedings paid out of the estate. 8. In complying with Order 4 the President of the Law Society shall be mindful in making a choice for the administrator that it is a small estate and there have been allegations that the estate is in fact insolvent. 9. Reserve the question of whether a lump sum costs order should be made in respect of Order 5. 10. The nomination under Order 4 to be communicated to the parties' solicitors who shall then file with the Registry consent orders. 11. Grant liberty to restore within 7 days any further submissions about the form of order 7. 34As a result of the making of this decision today 21 June 2013 the reserved question in Order 9 of 14 June 2013 has been decided as contended for by Neil. In the result the Court will give effect to that determination and these reasons with the following further orders: (1)Amend Order 7 of the orders made on 14 June 2013 so that it will now read as follows: "7. The plaintiff is not to be indemnified out of the estate in respect of his costs of these proceedings. But this Order does not prevent the plaintiff seeking indemnity and being indemnified by the administrator of the estate out of the estate's assets when that administrator is appointed, in respect of any funeral, testamentary and administration expenses that the plaintiff establishes he has already paid on behalf of the estate." (2)Dismiss the defendant's application for a specified gross sum cost order instead of assessed costs. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 24 June 2013