Plaintiffs v Defendant

**1 The defendant applied to have the plaintiffs' claim dismissed on the grounds that the plaintiffs are not eligible persons within the definition of 'eligible person' in s 90(g) of the Administration and Probate Act 1958 ('Act'), and that the plaintiffs' claim has no real prospects of success. The application was made under ss 62 and 63 of the Civil Procedure Act 2010.

2 On 15 December 2016, I delivered judgment determining that the application should be dismissed. I held that the plaintiffs fall within the natural and ordinary meaning of the words of the definition of 'eligible person' in s 90(g) of the Act, and that, accordingly, there is a real as opposed to a fanciful prospect that at trial the plaintiffs will be found to be eligible persons.

3 The parties are at odds as to the appropriate costs order. The plaintiffs submit that their costs (on a standard basis) of the application for summary dismissal should be paid by the defendant personally and that he not be entitled to be indemnified out of the estate of the deceased in respect of those costs or his own costs of his application. The defendant submits the plaintiffs' costs be paid by him on a standard basis and that he be entitled to an indemnity in respect of those costs and his own costs out of the estate.**

**4 Unless otherwise expressly provided by any Act or by the Rules of Court, the costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid.[1]

5 The discretion regarding costs has been described as absolute, unconfined or unfettered, although that discretion must be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation.[2] In the exercise of the discretion, practices or guidelines have been developed,[3] which are not legal rules that confine the exercise of the discretion.[4]

6 Although costs are in the discretion of the Court, there is a settled practice (sometimes called a general rule) that in the absence of good reason to the contrary, a successful litigant should receive his or her costs.[5] It is not, however, a legal rule devised to control the exercise of the discretion.[6]

7 It is not in dispute that the applicable provisions of the Act are those in force after the amendments made by the Justice Legislation Amendment (Succession and Surrogacy) Act 2014 ('the 2014 Act'). These amendments apply to the estates of persons who died on or after the commencement of Part 2 of that Act, being 1 January 2015.[7] The provisions of s 97(6) and (7) of the Act as in force before those amendments, dealt with matters of costs. Sub-sections 97(6) and (7) previously in force provided:**

(6) Subject to subsection (7), the Court may make any order as to the costs of an application under section 91 that is, in the Court's opinion, just.

(7) If the Court is satisfied that an application for an order under section 91 has been made frivolously, vexatiously or with no reasonable prospect of success, the Court may order the costs of the application to be made against the applicant.

8 In Briggs v Mantz (No 2),[8] McMillan J said of these provisions:

These specific provisions were considered by Byrne J in Re Bull (No 2).[9] The Part IV regime in Victoria has contained express legislative provisions in relation to costs since its inception. The usual order as to costs in civil litigation (that costs should follow the event) has been the exception, rather than the norm, in Part IV litigation. Under these provisions, the Court may make any order as to costs that it considers just. The authorities in respect of costs in Part IV litigation are informed, as with other probate litigation, by the fact that it involves litigants who are brought to their respective positions by the conduct of the deceased testator. Ordinarily, a trustee will be entitled to be indemnified from the estate for their costs, and there 'have even been cases where an unsuccessful plaintiff has, nevertheless, obtained his or her costs from the estate'.[10]

As Byrne J made clear in Re Bull (No 2), the fact that the Court may exercise a power to award costs against an applicant by virtue of s 97(7) does not act as a restriction on the Court awarding costs against an applicant by virtue of the general discretion contained in s 97(6). Rather, it contains a reminder and encouragement to the Court 'to operate as a disincentive to would-be applicants whose claim to a moral entitlement are tenuous'.[11] It certainly does not prevent the Court from considering the application of the general principles of costs in civil litigation.

9 Her Honour also referred to other decisions bearing upon what might be called the 'modern approach' to the determination of costs in Part IV applications, including the observations of the Court of Appeal in Forsyth v Sinclair (No 2):[12]

We consider that it is a matter of concern that in many family provision cases, the amount available for distribution amongst the competing beneficiaries is significantly reduced by legal costs. Parties should not assume that litigation can be pursued safe in the belief that costs will always be paid out of the estate. Every effort should be made to resolve the dispute before costs get out of proportion.

**10 Despite these observations, there is still an expectation that plaintiffs will receive their costs out of the estate and that defendants will be indemnified for their costs out of the estate, as those defendants are brought before the Court in their capacity as administrators and are, as a general proposition, duty bound to uphold the will of the deceased, or the application of the intestacy provisions of the Act.[13]

11 The consideration of ss 97(6) and (7) of the Act, and their application to costs in Part IV applications, and the use of the general provision and principles to which I have above referred, were changed by the 2014 Act that removed the sub-sections altogether, and the result is summarised by the Attorney-General in his second reading speech as follows:[14]**

In addition to limiting who can make a claim on a deceased estate, the bill seeks to deter unmeritorious family provision claims by repealing the current family provisions costs provisions. Under the current provisions, the court may order that the applicant pay the defendant executor's costs if an application has been made frivolously, vexatiously or with no reasonable prospect of success. The courts have interpreted the inclusion of these specific costs provisions to mean that the usual rule as to costs does not apply in family provision cases. The result is that parties do not usually bear the risk of paying costs in the event that they are unsuccessful, removing a disincentive to bringing weak or opportunistic claims while forcing some families to settle those claims to avoid having legal costs taken out of the estate. The bill repeals this cost rule as a signal that there is no need for particular leniency towards successful claims in family provision matters, and that the usual cost rules should apply.

12 Although it appears to me that the learned Attorney-General is not strictly correct when he says that '[t]he courts have interpreted the inclusion of these specific costs provisions to mean that the usual rule as to costs does not apply in family provision cases', what the repeal of the sub-sections, and the comments of the Attorney-General, make absolutely clear is that the general discretion as to costs and the guidelines and practices that have developed in the exercise of the discretion are now to be applied. That said, it remains true that:

Family provision cases are different to other civil cases in some respects. By their nature, they can be more difficult to predict. There can be wide divergence between different judges as to the appropriate outcome. Claimants often establish a moral obligation, even if they fail. Quantification is inherently uncertain. A claimant might fail because, although a responsibility was owed to him or her, investigation reveals that a greater responsibility was owed to others or that there simply is 'not enough to go around'.[15]

**13 The move towards the application of general costs principles must therefore take into account the special characteristics of family provision cases, where relevant.[16]

14 How this change affects the usual entitlement of the administrator to indemnity out of the estate is yet to be worked out. Suffice it to say, that conduct that is in breach of the duty of the administrator or which is itself unreasonable or unwarranted in the context of the proceeding may affect the entitlement to indemnity.**

15 The plaintiffs' argument is that, for the reasons that follow, it is appropriate that the defendant personally pay the costs of his application and not be indemnified from the estate:

**(a) the estate is small, at present (and subject to further discovery) the Inventory of Assets and Liabilities reveals a total gross estate of $243,979.07;

(b) after the filing of the defendant's summons for summary judgment, the plaintiffs filed and served very detailed affidavits setting out their relationship with the deceased and the basis of their claim;

(c) the defendant's conduct towards the plaintiffs as detailed in affidavit of Emilia Harding-Colliss sworn 14 July 2016[17] and Kieren Innes-Irons affidavit sworn 18 July 2016[18] show an ill-will by the defendant towards the plaintiffs;

(d) the defendant elected not to file any affidavits responding to the plaintiffs' affidavits; and

(e) the defendant, in pressing his summary judgment application after having read those affidavits, and electing not to respond, has burdened a small estate with considerable costs.**

**16 Although the defendant conceded that the general rule that costs should follow the event applied in this case, so that it was appropriate that the defendant be ordered to pay the plaintiffs' costs on a standard basis, the defendant submitted that as is usual in applications under Part IV of the Act, there should be a right of indemnity out of the estate of the deceased.

17 The defendant contended that in dismissing the application, the Court found that 'only a full hearing is appropriate'[19] to determine the issue and that 'there is a real prospect that the plaintiffs are eligible persons.'[20] The issue in the application is asserted to be a novel one, in that it required the Court to consider the interaction between s 53 of the Adoption Act 1984 ('Adoption Act') and s 90(g) of the Act. These matters have not been considered by the Court before and was a point worthy of testing. The defendant says his conduct in bringing the application is not unreasonable or calculated to vex the plaintiffs.

18 Further, the defendant brought the application in his capacity as the administrator of the deceased's estate, being the capacity in which he is sued. He should not in the circumstances have a personal costs order made against him or be deprived of the indemnity to which he would ordinarily be entitled in his capacity as administrator. The defendant submitted that the application he brought did not involve any conduct or consequence which would warrant such an order.**

**19 Although the debate between the parties was principally as to the defendant's entitlement to indemnity from the estate of the deceased, there are other issues of principle and practice at play, because of the nature of the application and the limitations of the evidence before the Court.

20 In Towercom Pty Ltd v Fahour (No 4) [2013] VSC 585, I examined the cases on the question of costs in a summary judgment application. Reference is made in that decision to the usual order being that the parties' costs of the application for summary judgment should be their costs in the proceeding. The logic of this position is that where the application fails because the successful party shows a genuine possibility of success, the applicable principle is that should the party who is successful in the summary judgment application ultimately fail, he or she will probably be ordered to pay the other party's costs of the proceeding, which will then include the costs of the application; a corresponding result will occur if the result is the other way around. In the exceptional case, however, where the application fails because it should not have been made, the successful party should have their taxed costs of the application.[21]

21 There is, however, no rule that the Court should order that the costs be in the proceeding and some cases suggest that if the application fails, the ordinary costs consequences should follow, namely, that the plaintiff be ordered to pay the costs of the application in any event.[22]

22 Where it appears that the applicant for summary judgment should have known that there was no reasonable chance of success and that the application ought never to have been made, the unsuccessful party will be ordered to pay the successful party's costs.[23] This is similar to the test for the application of indemnity costs.

23 In some cases, it may not be so clear to the applicant for summary judgment that there was no real chance of success (although it might ultimately be clear after argument), in which case, an order that the costs be in the proceeding (and follow the event at trial) may be appropriate. In other cases, there may be circumstances that point against making an order that leaves the costs to follow the event at trial. Whichever is appropriate turns on all the circumstances.

24 In this case, and despite the defendant's concession that the costs should follow the event, I consider that the appropriate order is that:**

**(a) the plaintiffs' costs of the defendant's application should be their costs in the proceeding; and

(b) the question of the entitlement of the defendant to be indemnified out of the estate of the deceased in respect of his own costs of the application, and any costs ultimately payable to the plaintiffs in respect of their costs of the application, should be reserved to the trial judge.**

25 I have come to this view for the following reasons:

**(a) the debate on the application was primarily a question of construction of the Act against the facts as advanced by the plaintiffs in the affidavits in opposition to the application;

(b) the plaintiffs' affidavits in opposition to the application constitute the first evidence adduced by them in the proceeding, notwithstanding the requirement in the Rules[24] and the Practice Note[25] for an affidavit or a position statement in support of the origination motion. It is relevant to observe, however, that in the endorsement on originating motion the plaintiffs set out in summary form the facts advanced in more detail in their affidavits;

(c) this is a case where it may not have been so clear to the defendant that the application for summary judgment had no real chance of success, although I consider it was ultimately clear after argument;

(d) the definitions in s 90 of the Act are new and largely untested. To that extent the eligibility of the plaintiffs is a novel question involving the interpretation of the Act and the Adoption Act, against a blank canvass;

(e) the criticisms which the plaintiff's make of the defendant's conduct towards the plaintiffs (as referred to in their affidavits) may turn out to be warranted, but are presently unanswered and untested and should not be used as a basis for any firm conclusions at this stage;

(f) although there are matters of concern raised by the plaintiffs' allegations as to the evidence of the defendant in his application for a grant of representation[26] and the possibility of deliberate falsehood in the defendant's affidavit material in support of the application for summary judgment, neither of these allegations have been answered or tested and for those reasons should not be used as a basis for any firm conclusions at this stage;

(g) the allegations concerning the defendant's evidence, and the conduct of the defendant towards the plaintiffs, may well be highly relevant to the question whether the defendant should ultimately have an indemnity for his costs, and the costs (if any) he is ordered to pay the plaintiffs, out of the estate of the deceased. Because it is not possible or appropriate to determine matters of that kind at this stage, it is also important that they are not prematurely precluded from being decided in the future. Thus, the question of the defendant's entitlement to indemnity must be deferred and he should be prevented from indemnification out of the estate for his own costs until the trial or earlier determination of the proceeding;

(h) any order as to the costs of the application will not be taxed immediately without an immediate taxation of costs order pursuant to r 63.20.1 of the Rules[27] (which has not been sought) and so cannot be paid (absent agreement) until the completion of the proceeding; and

(i) the size of the estate is particularly relevant to the duties of the administrator and his lawyers to minimise costs, and will be more relevant to any question that the administrator or his lawyers should bear some or all of the costs of the application. The material available is insufficient to enable a reasoned determination of this issue at this time.**

26 For these reasons, the orders in relation to the costs of the defendant's application for summary dismissal of the plaintiffs' proceeding will be:

**(a) the plaintiffs' costs on a standard basis of and incidental to the defendant's summons filed 29 June 2016 shall be their costs in the proceeding; and

(b) the entitlement of the defendant to be indemnified by the estate of the deceased in respect of the plaintiffs' and his costs of his summons filed 29 June 2016 is reserved to the trial judge.**

[1] Supreme Court Act 1986 (Vic), s 24(1).

[2] see for example Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 537; cited with approval in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 86.

[3] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 86.

[4] Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513, 537; Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 86.

[5] Ritter v Godfrey [1920] 2 KB 47, 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732, 809; Milne v Attorney-General for the State of Tasmania [1956] HCA 48; (1956) 95 CLR 460, 477.

[6] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 86 [35].

[8] [2014] VSC 487 [20].

[9] [2006] VSC 226 (30 June 2006); see also Hansen v Hennessy (No 2) [2014] VSC 115 (24 March 2014) (Lansdowne AsJ).

[10] Re Bull (No 2) [2006] VSC 226 [4] (30 June 2006).

[12] [2010] VSCA 195 [17] (per Neave and Redlich JJA, Habersberger AJA).

[13] But the duty to uphold the deceased's will is not an absolute duty and ordinarily, but especially where the estate is a small, it is the duty of the personal representative either to compromise the claim, or to contest it and seek to uphold the provisions of the will: In the Will of Lanfear (1940) 57 WN (NSW) 181, per Williams J, 183; see also Smith v Whittaker & Ors [2016] VSC 287 [37].

[14] Hansard, Legislative Assembly, 18 September 2014, p 3442 at 3443.

[15] Webb v Ryan (No 2) [2012] VSC 431 [37] (per Whelan J (as he then was)).

[19] Innes-Irons & Anor v Forrest [2016] VSC 762 [61].

[21] Harry Smith Car Sales Pty Ltd v Claycom Vegetable Supply Co (1978) 29 ACTR 21, 23.

[22] Cooney v Dopel [1928] VicLawRp 8; [1928] VLR 54; Allen v Birbeck [1930] ArgusLawRp 89; [1931] VLR 140.

[23] International Harvester Co v Mullavey [1906] ArgusLawRp 123; [1906] VLR 659; Dawson v Watson [1929] ArgusLawRp 52; [1929] VLR 263.

[24] Supreme Court (Miscellaneous Civil Proceedings) Rules 2008, r 16.03(3).

[26] Innes-Irons & Anor v Forrest [2016] VSC 762 [11].

[27] Supreme Court (General Civil Procedure) Rules 2015.