Plaintiffs v Defendant

2 I subsequently heard argument about costs. The plaintiffs sought orders that their costs of and incidental to this proceeding be indemnified out of the deceased's estate and that the defendant's costs be taxed in default of an agreement on a standard basis and be paid out of the deceased's estate.

3 The defendant sought orders that there be no order as to the plaintiffs' costs and that they not be indemnified for any of their costs out of the estate of the deceased. The defendant sought an order that her costs of and incidental to the proceeding, including all reserved costs, be taxed in default of agreement on a solicitor and client basis up to 31 March 2013 and on a standard basis thereafter and be paid out of the deceased's estate.

4 The parties agreed on the relevant principles for determining costs in probate cases. Prima facie costs follow the event.[2] However, there are three exceptions to the general rule in a contested probate case. They are:

(a) first, where the testator has been the cause of the litigation, the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate;

(b) second, where the circumstances lead reasonably to an investigation concerning the testator's will, costs may be left to be borne by those who have incurred them, even if they fail to sustain the issue which they raise;

(c) third, where a putative beneficiary, by improper conduct, is responsible for suspicious circumstances necessitating litigation, the costs of the litigation may be ordered to be paid out of that part of the estate in which the party is interested, even if he or she is successful in the litigation.

5 The plaintiffs relied on their success on the first ground of objection to the grant of probate, which challenged the testamentary capacity of Keith Veall. They established that Keith Veall had testamentary capacity at the time that he executed his last will. They had also proved the related issue of fact, that there was a rational reason for Keith Veall to alter his will in December 2010.

6 The plaintiffs argued that it was appropriate for them to seek probate of the will. The Court accepted the evidence of professional independent people that Keith Veall had testamentary capacity. The plaintiffs were not present when the will was executed and the witnesses to its execution swore that Keith Veall appeared to have testamentary capacity. They submitted that Keith Veall was the cause of the litigation in the sense that he signed the will because of his declining mental state, which included the fact, as accepted by the Court, that he would sign anything put in front of him. They relied on the principles discussed in the New South Wales Court of Appeal decision in Perpetual Trustee Company Ltd v Baker, in which Giles JA and Brownie AJA stated:

Costs are in the discretion of the Court, and the established principle on which the discretion as to costs will normally be exercised is that costs follow the event. In probate litigation, in particular, however, exceptions have been recognised, one being that where the testator has been the cause of the litigation the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate, and another being that if the circumstances led reasonably to an investigation concerning the testator's will the costs may be left to be borne by those who incurred them (see for example [I]n the estate of Hodges: Shorter v Hodges (1988) 14 NSWLR 698 at 709).

The two exceptions tend to overlap. As was said by Santow J in In the estate of Moyle: Moyle v Moyle (18 June 1988, unreported), if a testator is by his mental frailty and other circumstances in a position where the circumstances reasonably call for investigation of the validity of the will "in one sense the testator, though usually with no sense of blameworthy fault, has by his or her conduct caused the litigation to occur". 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 (Davies v Gregory (1873) 3 P & D 28; Roe v Nix (1893) P 55; In the will of Millar [1908] Vic Law Rp 95; (1908) VLR 682, and the costs of both sides in testamentary capacity cases have often been allowed out of the estate (In the will of Severs [1887] VicLawRp 110; (1887) 13 VLR 572; Phillips v Dundas (Smith J, VSC 4 December 1995, unreported); Redroff v Miegoch (Santow J, NSWSC, 22 April 1996, unreported); re Ryan: Williams v Ryan (1998) VSC 109; In the will of Ryan: Williams v Ryan (Byrne J, VSC, 23 October 1998, unreported); cf Middlebrook v Middlebrook (1963) 26 ALJR 216 where Dixon CJ and McTiernan, Taylor and Owen JJ ordered that the parties bear their own costs but Menzies J would have ordered that the costs be paid out of the estate).[3]

7 The defendant submitted that the inquiry into the manner in which the 10 December 2010 will was made was necessary, particularly given the evasive and uncooperative manner adopted by the first plaintiff, Mr Rowland Veall, and his solicitors in response to the reasonable requests of the defendant's solicitors. He created the environment for litigation by overseeing the solicitors who had drawn Keith Veall's last will. He was aware that there was considerable doubt about his father's legal capacity and should have communicated that fact to the lawyers, but elected not to. He did not take any steps to obtain clear medical and other evidence of his father's testamentary capacity in December 2010, and failed to ensure that proper notes concerning his father's instructions and the execution of the will were kept. He had control of and involvement in his father's business and affairs from mid-2008.

8 The defendant also submitted that the manner in which the plaintiffs conducted the litigation was relevant to the question of costs. She argued that Rowland Veall had used the proceeding to try to unravel financial transactions that Keith Veall engaged in. For that purpose, he had issued many subpoenas, but they had produced no relevant documents. His solicitor had failed to provide critical evidence and documents at appropriate times, after she had been requested to do so by the defendant's solicitors. The plaintiffs had served, late, material of relevance, which described the execution of the will, including the second affidavits of Mr Nelson and Mr Sholl. That evidence should have been provided prior to the mediation in the proceeding. The plaintiffs had adopted a policy of not making disclosure and had not complied with orders of the Court.

9 The defendant also submitted that a considerable part of the trial had been wasted by the plaintiffs' unsuccessful argument that various communications between Rowland Veall and Keith Veall and Rowland Veall's solicitors were privileged, when those documents had already been discovered without a claim for privilege being made.

10 It is important to keep in mind that the defendant did not seek to establish that Rowland Veall had exercised undue influence over his father, or attempted to do so, in respect of the execution of the will. While I do consider that Rowland Veall was attempting to persuade his father to make a new will, and thereby to provide him with a greater share of his wealth, I do not consider that the evidence established that Rowland Veall created the environment for the litigation.

11 There were other significant features of the proceeding. The plaintiffs, as executors, sought probate of the will and established that Keith Veall had testamentary capacity when he executed it. As part of that proof, they established that he had a rational reason for making the will, which was that he wished to redress a perceived imbalance in the share of his wealth that his three children had received. The defendant contested, at least, the detail of that evidence.

12 There was very little separate evidence called or submissions made about the second ground of objection to probate, namely that Keith Veall did know and approve of the contents of the will, which was the ground on which the plaintiffs succeeded. The parties regarded that ground as being governed by the evidence and submissions that were directed to the first ground of objection.

13 I consider that the plaintiffs were entitled to seek probate of the will and acted reasonably in so doing. They established that Keith Veall had testamentary capacity as at 10 December 2010. They proved that he had a motive to make a new will. Proof of those facts occupied much of the trial but the plaintiffs succeeded in establishing the point they sought to make by producing that evidence.

14 The solicitors who prepared the will were not acting for Rowland Veall. He was not present when the will was executed and, therefore, could not have assessed the matters giving rise to the second ground of objection on which the defendant succeeded.

15 I consider that Keith Veall's tendency to sign any documents that were put in front of him contributed to the litigation. I have found that he did not understand or approve the contents of the will.

16 I consider that this case is an example of the first and second exceptions to the application in probate matters of the rule that costs follow the event. In the sense that I have identified, the testator was a cause of the litigation and the circumstances did lead reasonably to an investigation concerning the testator's will.

17 In all the circumstances, I consider that this is a case where, subject to a number of exceptions, the plaintiffs are entitled to have their costs paid out of the estate.

18 I will exclude from that order the costs of and incidental to the argument in July 2013 about legal professional privilege, as I do not consider those costs should be part of that order. I consider that the plaintiffs should pay the defendant's costs of that argument.

19 I have previously ordered that the plaintiffs pay the defendant's costs thrown away as a result of the adjournment caused by the plaintiffs filing the further affidavits by Mr Nelson and Mr Sholl. That order stands and those costs and the plaintiffs' costs of that adjournment are excluded from the order. The plaintiffs are not entitled to be indemnified for those costs.

20 Nor do I consider that the plaintiffs are entitled to indemnity out of the estate for their costs of hearings in respect of which the Court has ordered that they pay the costs of other parties of those hearings, whether the defendant or other persons.

21 Other orders concerning costs that have been previously made will stand.

22 I do not consider that the evidence enables a conclusion that either the plaintiffs' or the defendant's conduct, in other respects, disentitles them to the orders that they seek.

23 I consider that the defendant is entitled to the costs order that she seeks, with the exception of costs that she may recover from the plaintiffs. She succeeded in establishing that the will dated 10 December 2011 was not a valid will. In the usual course, a litigant, having successfully opposed the admission to probate of a will, is entitled to receive their costs out of the estate.[4]

24 I have taken into account that this outcome results in the plaintiffs, who were ultimately unsuccessful in the proceeding, receiving an award of costs based on a higher basis than the defendant. However, that result is due to the plaintiffs having acted reasonably in seeking probate of the will and because of the application of the principles for the award of costs in probate matters, to which I have referred.

25 I have also given consideration to the position of Denise Lodder, who is a daughter of Keith Veall, and who was not a party to the proceedings, but a beneficiary under the will dated 10 December 2011 and earlier wills, and the possible effect of the costs orders on her potential entitlements to share in Keith Veall's estate. The parties differed in their estimates of the quantum of the estate and that creates uncertainty as to any amount that will be available for distribution to beneficiaries. I consider that in those circumstances the Court should make an orders for costs in the terms that I have stated, despite the effect that the order may have on other potential beneficiaries.

26 I will discuss with counsel for the parties whether the ascertainment of the costs that I have ordered the parties are to receive out of the estate of Arthur Keith Veall, and the provisions for their payment, should be deferred until a representative of that estate is appointed.[5]

[1] The will was executed on 10 December 2010 but incorrectly dated 10 December 2011.

[2] The authorities are summarised in Nicholson v Knaggs (No 3) [2009] VSC 328 [38]-[48].

[3] [1999] NSWCA 244 [13]-[14].

[4] Gray v Hart; Estate of Harris (No.2) [2012] NSWSC 1562[19], In the will of Severs [1887] VicLawRp 110; (1887) 13 VLR 572 and Williams, Mortimer and Sunnucks, Executors, Administrators and Probate, 20th ed, 556- 557.

[5] See eg Re Ryan; Williams v Ryan [1998] VSC 109 [3].