Nicol v Nicole; The Estate of Peter Nicole

The Proceedings

1. On 16 July 2019, the Plaintiff published an online Notice of Intention to Apply for Probate of the deceased's Will. The online Notice did not reveal that the instituted executor named in the Will had predeceased the deceased, or that the Plaintiff was applying for Probate without the named substituted co-executor having been joined in the application.
2. Thereafter, proceedings were commenced by Statement of Claim filed on 26 July 2019, in which the Plaintiff sought a declaration that the Defendant be passed over upon the basis that he had a disqualifying conflict of interest, and that he was not a fit and proper person to act as executor; and an order that Probate in solemn form of the deceased's Will be granted to the Plaintiff alone.
3. The Defendant filed a Defence on 6 September 2019. A Statement of Cross-Claim was signed on the same date, but was not filed until 18 September 2019, pending an assessment, by the Registry, of an application for deferral of the filing fee. In the Cross-Claim, as subsequently filed, the Defendant sought a grant of Probate of the deceased's Will, with leave reserved to the Plaintiff to come in and join the application or, in the alternative, a grant of Letters of Administration with the Will annexed to a suitably-qualified solicitor.
4. Prior to the filing of the Cross-Claim, the Defendant, on 10 September 2019, provided the Plaintiff's solicitors with an unsealed copy of the Cross-Claim and proposed, by letter, that the proceedings be resolved on the basis that an accredited specialist in wills and estates law be appointed as an independent administrator to administer the estate of the deceased.
5. On 19 December 2019, the Plaintiff amended the Statement of Claim to seek, in the alternative, Letters of Administration with the deceased's Will annexed to Christopher John Palmer or another suitably-qualified solicitor.
6. From that point in time until February 2020, correspondence passed between the legal representatives of the parties in relation to the settlement of the proceedings. On 24 February 2020, in accordance with an agreement reached between the parties, Lindsay J made an order granting Letters of Administration with the Will annexed to Michael O'Neill (an accredited specialist solicitor in wills and estates law). His Honour also made consequential orders remitting the matter to the Probate Registrar "to complete the grant and to make such orders relating to the costs of the proceedings as may be necessary".
7. His Honour also noted that the parties "are unable to agree to the appropriate costs order and seek that the question of the costs of the parties be determined by the Court". Directions were then made for the filing and service of affidavit evidence (if any) and written submissions. His Honour ordered that "all questions of costs relating to these proceedings be referred to the Probate Registrar for determination".
8. On 3 April 2020, the Senior Deputy Registrar in Probate noted that in light of the costs estimate provided in the affidavit of the Defendant's solicitor, the Registrar's delegation was exceeded, that upon receipt of the Defendant's submissions, the matter would be referred to the Succession List Judge, and that the parties would be notified accordingly.
9. In this regard, it is necessary to note that in an affidavit of Mr D Shad (sworn 3 March 2020), the solicitor with the carriage of the matter on behalf of the Plaintiff, the estimate of the Plaintiff's costs, calculated on the indemnity basis of the proceedings, were $31,357.36. In an affidavit of Mr B J Dornan (sworn 30 March 2020), the partner on the record in the firm acting for the Defendant, the estimate of the Defendant's costs, calculated on the indemnity basis, were $30,661.74.
10. The matter had been listed for hearing on 14 April 2020 before the Senior Deputy Registrar. However, following receipt of the Court file, and because it seemed that further costs should be avoided, the Court suggested to the legal representatives that the issue of costs should be determined on the papers, in Chambers, and that they would be informed of the orders as soon as that had been done.

The Submissions

1. The Court received comprehensive written submissions by counsel for each of the parties on the issue. I am most grateful to counsel for his, and her, written submissions respectively.
2. In broad terms, the Plaintiff submitted that the proceedings were brought because, first, the Defendant, shortly after the death of the deceased, had accessed the deceased's Commonwealth Bank Account and had withdrawn, for his own benefit, amounts totalling $51,120.90; and secondly, because in early 2019, the Defendant had been charged by NSW Police with possessing two prohibited weapons, possessing a prohibited substance (the drug known as 'Ice') and cultivating a prohibited substance (marijuana).
3. The Plaintiff then submitted that the Defendant provided, in his Defence, particulars of his plea of guilty to the charges and the sentence that had been imposed and had admitted that he had withdrawn the amounts, in the period 17 August 2018 to 10 October 2018, but denied that they were applied for his benefit, and instead had pleaded that the majority of the amounts withdrawn were used to effect repairs and renovations to the deceased's house. However, the Plaintiff submitted that the Defendant had not provided any documents, receipts or invoices in support of that claim and had not given any evidence of the repairs or renovations allegedly undertaken. What had been annexed to his Affidavit sworn 12 December 2019 were "estimates" that had been provided more than 12 months after he had withdrawn the amounts in order to quantify the work he asserted he had done. The Defendant had also denied having a conflict of interest, and had requested the Court to not pass him over as executor.
4. Thus, the Plaintiff submitted that the Defendant's conduct had been the cause the proceedings, in that, before Probate had been granted, he had intermeddled in the estate by withdrawing funds from the deceased's bank account; that the Defendant had been unreasonable in his defence of the proceedings, in that his explanation for the withdrawals was uncorroborated and unsupported by documentary evidence.
5. Finally, the Plaintiff submitted that the Defendant should be ordered to pay his costs, calculated on the ordinary basis, of the proceedings. He submitted that the Defendant had acted unreasonably in defending the proceedings and that, by consenting to the orders made on 24 February 2020, he had effectively surrendered to the Plaintiff's claim.
6. The Defendant submitted: 1. Because the parties, ultimately, had agreed on the appointment of an independent administrator, there were no ultimate findings that the Court could make, or be invited to make, about the conduct of the Defendant. 2. It should be inferred that the proceedings, rather than being caused by the conduct of one, or other, of the parties (in respect of which there is evidence pertaining to each), were, in fact caused, by an irreconcilable conflict - and a deadlock - arising between them. 3. The primary concern of the Court in the proceedings, as ought to have been appreciated by the Plaintiff at the outset, was to ensure that the estate could be administered in an efficient, orderly, and proper, manner, which was highly unlikely without the appointment of an independent administrator. 4. Even though, implicit in the Statement of Claim, was an acceptance that the co-executors could not perform their duties as joint executors, it was not suggested, until some time after correspondence from the Defendant proposing the appointment of an independent administrator and the filing of the Cross-Claim, that an independent person should be appointed to administer the estate. 5. The Court could not conclude that the Defendant had surrendered to the position in the amended Statement of Claim, given the very position referred to, initially, had, in fact, been proposed by the Defendant. 6. It was reasonable for the Defendant to participate in the proceedings in the way that he did. The Defendant: 1. had grappled with the key issue, being the need for an orderly administration of the estate; and 2. had proposed the very basis on which the proceedings, ultimately, were settled, being the appointment of a suitably-qualified solicitor as an independent administrator.
7. Counsel did not disagree on the legal principles which would guide the exercise of the Court's costs discretion where there had been no hearing on the merits, which principles included that where a proceeding was concluded before there had been a hearing, the Court should not resolve the issue of costs by engaging in a hypothetical trial; and that notwithstanding that general principle, a costs order may be justified where one party had acted unreasonably in bringing, or defending, the proceedings, and/or had effectively surrendered to the other.

Determination

1. It is necessary to remember the comments of Allsop P (as his Honour then was), with whom Beazley and Campbell JJA agreed, in Baulderstone Hornibrook Engineering Pty Limited v Gordian Runoff Limited (No 2) [2009] NSWCA 12 at [5]: "Three things need be borne in mind in a judgment such as this on costs: the desirability of avoiding unnecessary recitation of cases (abounding as they are in this area); the desirability of not restating, in different terms, approaches to the broad discretion that have been well settled; and the desirability of dealing with the arguments without over-elaboration, if this is possible."
2. In determining the question, it is, however, necessary for the Court to take into account the parties' conduct throughout the whole course of the proceedings: Fordyce v Fordham (2006) 67 NSWLR 497 at 509 [67]; [2006] NSWCA 274 at [67] (McColl JA, Beazley and Santow JJA agreeing).
3. There are a number of matters which appear to me to be relevant to the determination of the costs issue. These are: 1. The Plaintiff's proceedings were not commenced until about 11 months after the death of the deceased. The Statement of Claim had been served upon the Defendant on 30 July 2019. It was returnable on 26 August 2019, on which date it was adjourned until 21 October 2019. There was a return of subpoena date of 24 September 2019. On 21 October 2019, the Senior Deputy Registrar in Probate made certain directions for the filing with the Court of the original Will of the deceased, for each party to file and serve evidence in chief, including the executors' affidavit, and to file and serve any evidence in reply, following which the matter was listed for directions on 16 December 2019. On that date, the matter had been stood over, by consent, until 24 February 2020, on which date, Lindsay J made the orders to which reference has been made. 2. There was no evidence of a written pre-litigation demand setting out the claim to be made by the Plaintiff or allowing the Defendant a reasonable opportunity to respond to the assertions of the Plaintiff. 3. The only evidence of any discussion regarding the administration of the estate before the commencement of proceedings between the Plaintiff and the Defendant was a conversation, averred to in the Defendant's affidavit (sworn 12 December 2019), in which they were said to have discussed obtaining Probate of the deceased's Will, and in which conversation the Plaintiff was alleged to have said "I will get a solicitor who will do it for free". 4. The Plaintiff's two affidavits were affirmed on 28 November 2019 whilst the Defendant's affidavit was sworn on 12 December 2019. 5. In the Defendant's affidavit, he had admitted that he "had a long standing drug habit as a late teenager and as an adult". He also asserted that the Plaintiff had a criminal history and annexed a copy of the Plaintiff's Police Force Criminal History - Bail Report and Traffic Infringement Report. 6. There is no evidence of any correspondence passing between the legal representatives of the parties until after the commencement of the proceedings. 7. In a letter dated 10 September 2019, the Defendant's solicitors enclosed a copy of the proposed Cross-Claim and suggested that a recommendation had been made, by them, to the Defendant, for "the appointment of an independent Accredited Wills & Estates solicitor to act as administrator" and suggested three solicitors who could be appointed. 8. It was not until a letter dated 19 December 2019 that the Plaintiff's solicitors had written that the matter could be resolved upon the basis of the appointment of an independent solicitor (Mr M O'Neill) to obtain administration with the deceased's Will annexed. However, it was term of the offer made that the Plaintiff's costs, calculated on the indemnity basis, of the proceedings, be paid out of the estate with the Defendant bearing his own costs. 9. On 13 January 2020 (incorrectly dated 13 January 2019), the Defendant's solicitors accepted that Mr O'Neill could be appointed but rejected the costs orders that had been proposed. The Defendant's solicitors also proposed that there be no order as to costs to the intent that each would bear his own costs, respectively of the proceedings. Other terms as to the powers of the independent administrator were proposed. 10. By letter dated 13 January 2020, the Plaintiff's solicitors did not agree upon costs and also with one of the proposed powers that had been suggested. By letter dated 22 January 2020, it was noted that there was an agreement as to the appointment of Mr O'Neill and to at least one order governing his appointment; the proposed power that the Plaintiff had objected to was said to be "not pressed by the Defendant". The position that each party should pay his own costs, respectively, was reiterated. In the alternative, it was proposed that each party's costs be paid out of the estate. However, it seemed to be accepted that "at the next Directions Hearing the parties [would] seek that the Court determined the question of costs of the proceedings".
4. It should have been obvious to both parties, from the outset, that the administration of the estate would be best served by the appointment of an independent person to administer the estate. This was, at least in part, due to the lack of trust, and the fact of some hostility, between them. It should have been equally obvious that the grant could not be made to both of them and that the appointment of only one of them would be likely to produce continued disagreement and substantially increased costs to the estate throughout its administration.
5. Furthermore, each, with the assistance of his legal representatives, ought to have been aware that the Court's overriding concern in this type of case is promoting the orderly administration of the estate and the welfare and best interests of all of the beneficiaries: Miller v Cameron (1936) 54 CLR 572 at 575 (Latham CJ), 579 (Starke J), 580 (Dixon J, Evatt and McTiernan JJ agreeing); [1936] HCA 13; Fysh v Coote [2000] VSCA 150 at [20] (Ormiston JA, Batt and Chernov JJA agreeing); Callaway v Callaway; The Estate of Aileen Margaret Callaway [2019] NSWSC 1275 at [10] (Slattery J), and that the Court's principal concern would be to ensure that the estate was efficiently, and properly, administered according to the terms of the deceased's Will: Mavrideros v Mack (1998) 45 NSWLR 80 at 101-2, 107-8 (Sheller JA, Priestley and Beazley JJA agreeing).
6. However, each of the parties, for some time after the commencement of the proceedings, maintained in the proceedings (although not necessarily in the correspondence between solicitors) that probate should be granted to only one of them. In the affidavit of each of the parties, the deponent based his opposition to, amongst other things, the bad character of the other. In the case of the Plaintiff, he also advanced the potential conflict of interest in relation to the amounts that had been withdrawn from the deceased's bank account and the use to which it had been put.
7. At the end, it was not necessary for the Court to make any finding that either the Plaintiff, or the Defendant, was individually unfit to be the sole executor. No doubt, with the assistance of their legal representatives, each came to the view, albeit late, that it would not be necessary to make any criticism of one or the other of the parties in determining what was in the best interest of the due administration of the estate.
8. Regrettably, despite the fact that each party incurred a similar amount of costs, and that, in any event, the estate was divided equally between the two of them, the parties, still, could not agree that an appropriate order was that each party should bear his own costs of the proceedings and it was left to the Court to determine this issue.
9. Section 98 of the Civil Procedure Act 2005 (NSW) provides the Court with a wide discretion in relation to costs. While the Court's discretion is broad, it must be exercised judicially and consistently with the overriding mandate provided for in Part 6 Division 1 (ss 56 - 60) of the Civil Procedure Act.
10. The general rule is that costs follow the event, unless it appears that some other order should be made as to part or all of the costs, as provided in the Uniform Civil Procedure Rules 2005 (NSW), r 42.1. "The event" is to be taken as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA).
11. Often the Court must take a broad-brush approach to costs and that approach usually is based upon impression and evaluation.
12. In the submissions, neither party referred to the observations made by the Court of Appeal in Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681 at 688 [30]; [2018] NSWCA 84. In that case, Payne JA (Meagher JA agreeing) wrote, at [30]: "If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings."
13. At [2], Basten JA stated the relevant principle in similar terms, noting that "[w]here the parties resolve their differences, except as to the costs already incurred in litigation, they should usually expect that the court will not award costs". His Honour also noted that where there has been a settlement without a trial, it is not usually possible to say that one party has been successful and the other unsuccessful. There is no "event" for costs to follow, applying the usual rule in r 42.1 of the Uniform Civil Procedure Rules. The orders made by consent may, or may not, demonstrate capitulation by the "unsuccessful" party. Where it is submitted that one party has been unreasonable in commencing or defending the litigation, the judgment as to unreasonableness should only be made where the conclusion "is manifest by reference to known circumstances, not in dispute between the parties": see [8]. The Court should not embark upon reviewing large swathes of evidence to resolve, on a tentative basis, disputed questions of fact.
14. It seems to me that in this case, the Plaintiff had acted reasonably in commencing the proceedings, although the relief sought in the proceedings should have been somewhat different. The Defendant, for his part, at a relatively early stage of the proceedings, suggested an outcome that, ultimately, found favour with the Plaintiff and with the Court. Both had, at least in his respective affidavit, escalated the likely dispute by asserting matters to do with the character and the conduct of the other. Yet, both parties, by his legal representative, had acted reasonably in continuing to negotiate in respect of bringing about the resolution of the matter, which resolution, once reached, meant that neither party was successful on the principal relief that he sought.
15. Bearing in mind the issues that were raised, this is not a case where the Court is confident that, although both parties may have acted reasonably to begin with, one party was almost certain to have succeeded on his principal claim for relief if the matter had been fully tried. Nor can the Court be satisfied that one party has had a substantial victory and the other a substantial loss, or that there has been a marked difference in the reasonableness of the actions taken by the parties, so that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in costs: Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5] (Davies AJA, Mason P and Meagher JA agreeing).
16. The only reasonably confident prediction may be that the orders to which the parties agreed upon, ultimately, were orders that were likely to have been made at the conclusion of a contested hearing bearing in mind the principles to which reference has been made.
17. Nor is this a case where an apportionment of costs is appropriate. Neither party has demonstrated, to my satisfaction, that there had been a marked difference in the reasonableness of the actions taken by him, so that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in the form of a costs order against him.
18. Furthermore, I am not satisfied that this is a case where I should separate the costs that were incurred after 13 January 2020, the date at which the Defendant made the offer that each party pay his own costs of the proceedings. By that date, the bulk of the costs had been incurred, and to make a special order for costs in favour of one side or the other would involve further costs being incurred.
19. There is significant flexibility in determining questions of costs. The Court is entitled to examine the realities of the case and will attempt to do substantial justice as between the parties. Given all the circumstances, exercising the discretion under s 98 of the Civil Procedure Act, this case is one where the proper approach is for the Court to make no order as to costs, with the intent that each party will bear his own costs, respectively, of the proceedings, including the costs of the argument as to costs. That is the order that the Court now makes.
20. The Court file has been returned to the Senior Deputy Registrar in Probate to continue to deal with the grant of administration.

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: 20 April 2020