Re Estate Condon; Battenberg v Phillips [2017] NSWSC 1813 | Case summary

Supreme Court of NSW|2017-11-10|Before: Lindsay J, Powell J

ed, 1948) at pages 33-338 Dal Pont, Law of Costs (3rd ed, 2013), paragraph [3.44]

Solicitors: Plaintiff: Russo & Partners Defendants: Diamond Conway File Number(s): 2017/00033495

INTRODUCTION

In contested probate proceedings, the defendants/cross claimants apply (by a notice of motion filed on 15 September 2017) for an order (under rule 42.21 of the Uniform Civil Procedure Rules 2005 NSW) that the plaintiff/cross defendant give security for the costs of the proceedings.
There are three main ingredients in the case for security. First and foremost, grounding the application for security on UCPR rule 42.21(1)(a), is the fact that the plaintiff (a nephew of the deceased person whose estate is contested in the principal proceedings) is ordinarily resident outside Australia; he is domiciled in Scotland. Secondly, the plaintiff has no assets in Australia. Thirdly, to the extent the plaintiff has assets in the United Kingdom, enforcement of a costs order against him there would be attended by difficulties and delay which should not be imposed on the deceased's estate.

THE FACTUAL MATRIX

Blanche Minnie Condon ("the deceased") died on 13 December 2016, aged 86 years, leaving property (with an estimated value in excess of $7 million) in New South Wales.
Four testamentary instruments are attributed to the deceased; namely: 1. a will dated 22 November 2016 (which made no provision for the plaintiff), propounded by the defendants as executors named in the will, the validity of which is challenged by the plaintiff on the grounds that the deceased lacked testamentary capacity at the time it was executed and she did not know or approve of its contents; 2. a document bearing that dates 14 and 27 September 2006, the authenticity of which is disputed by the defendants, purporting to be an "irrevocable agreement" made between the deceased and her sister-in-law - the adoptive mother of the plaintiff - relied upon by the plaintiff as an informal will of the deceased (capable of admission to probate under section 8 of the Succession Act 2006 NSW), or as a declaration of trust, expressed to be in favour of the plaintiff to the extent of 18.75% of the net estate of the deceased (together with sundry chattels); 3. a will dated 18 July 1997 in which the plaintiff is named as beneficiary of a legacy for $50,000; and 4. a will dated 16 August 1993 in which the plaintiff is named as a beneficiary of a legacy for $20,000.
Each of the 2016, the 1997 and the 1993 wills takes the form of a formal will prepared by a solicitor. Each of the 2016 and 1997 wills nominated one or more persons as executor; made provision, by way of legacies, for several natural persons and charities; and disposed of the residue. The 1993 will followed a similar pattern, save that it contained a specific devise of real property in favour of a friend as a preliminary to what became the usual form of dispositions.
Under each of the three solicitor-drawn wills the defendants each received a legacy of $400,000. In the 2016 will they were also named as residuary beneficiaries, replacing charities to which the deceased's residuary estate had been destined to go under the 1997 and 1993 wills.
The 2006 document embraces legalese in its expression, but it appears not to have been drafted by a lawyer. Its narrative style contains a hint of a possibility that it might be read as intended to confer benefits on the plaintiff's sister, Merryn, as well as him. The plaintiff's case appears to be predicated upon an assumption that he is the sole intended "beneficiary" of the document; but evidence of his principal witness, Rudolf Fabian, attributes to the deceased contemporaneous statements of an intent to favour Merryn, by the 2006 document, as well as the plaintiff.
On one reading of the document, the defendants submit, Merryn might be entitled to 31.25% of the deceased's net distributable estate. They have caused notice of the proceedings to be served on Merryn; she has not, as yet, entered an appearance in the proceedings. The nature of her current social relationship with the plaintiff (if any) is unknown.

THE 2006 DOCUMENT

The 2006 document is in the following terms, with emphasis added: "I Blanche Minnie Condon make this irrevocable agreement with Alisa Margaret Lee my sister inlaw in respect of her adopted son Andrew Battenberg and my godson. I express this agreement by way of example and instead of using the $100.00 as discussed with Alisa on 24 August 2006 I am using a better example of $400 to make the calculation clear. The original of this document will remain in my papers to be executed by the Executors of my Estate upon my death and or a claim being lodged. Should any challenge be made Andrew Battenberg is to be indemnified by my estate to enforce his rights contained herein. I have accepted liability to compensate Andrew Battenberg from my deceased Estate to correct the wrongs done by the family to him and apologise on behalf of the entire Family. While the amount of my liability is to be calculated on the value of my Estate the payment is to be treated as a creditor of my Estate. I believe communication between Andrew and the family will cease at some point after Alisa's death and if so will not affect or negate this agreement I now bind myself to. The payment of compensation is the reason Andrew will not benefit from my final Will and Testament. The simple example, if my Estate were to be theoretically valued at $400.00 after paying for the expenses, taxes and my funeral with three unit beneficiaries, distribution would be as follows: Andrew Battenberg Compensation $ 75.00 Brolin Family $125.00 Phillips Family $100.00 Price Family $100.00 TOTAL $400.00 The reason why Merryn, of the Brolin Family in this example is to receive an additional $25.00 or 25% is because Alisa Lee has already made part payment of the compensation due to Andrew Battenberg from her Estate for which I have accepted liability. The reason I refer to the other 3 units as families is because I may make provision in the future for individual members of those family units within my Will. The compensation 75% calculation must be based on the equal or in the event one unit benefits above the other, the higher of his two cousins including their respective families share of my Estate. I also return to Andrew various items of my household contents that Harold had lent to me out of his share of our father Joseph Lee's Estate and were part of the contents of the Flat at Artarmon our stepmothers final home. These it ems are not to be included in the value of my Estate as while Harold had allowed me to select and to keep the items it was by way of loan on basis that they would be returned to Andrew following my death. These items are as follows: Bureau Cabinet, My Victorian Dressing Table, Victorian Wardrobe, Chest of Draws, Card side Table, China Cabinet, Victorian chairs, Bronze at front Entrance Hall, sterling Silver Tea and Coffee Service, Antique Kutani and oriental China including Chinese Punch Bowl, Early Moorcroft Bowl, Early Moorcroft Vase, china Tea Set, and China Cats given to me by Andrew. This Irrevocable Document now formalises our Agreement of 24 August 2006 signed by me dated as of 14 September 2006, and Alisa Lee on the 27 September 2006."
In the top right hand corner of the document appears the name of the deceased and her address.
The whole document is typed, save that the number "27" in the final paragraph is written in hand, consistent with evidence of Mr Fabian suggesting that the document was signed by the deceased on 14 September 2006 and subsequently by Alisa Lee, on 27 September 2006.
The original of the document has not been produced to the Court. Both sides of the record deny that it is within their possession.
All that is presently available to the Court is a photocopy sourced from Mr Fabian.
At the foot of the document are four signatures, purporting to be those of the deceased; "Alisa M Lee" (now deceased); "RJ Fabian" (friend and witness of the plaintiff); and "Ruth Phillips" (a sister of the deceased's husband Harold, mother of the defendants).
According to Mr Fabian, the deceased sent to him by post the original document, ostensibly bearing the signature of the deceased and that of Mrs Phillips as witness to that signature; he superintended execution of the document by Mrs Lee (then terminally ill) and witnessed her signature. He says that he then posted the original document bearing all four signatures, to the deceased and retained a photocopy for his records; in accordance with oral agreements made between himself, the deceased and Mrs Lee, he did not disclose the existence of the document to the plaintiff until after the death of the deceased.
The evidence presently before the Court does not disclose whether Mrs Phillips is available to give evidence in the principal proceedings. Her name is not one of the six prospective witnesses identified by the solicitor for the defendants as likely to be called by them at a final hearing.

PROCEDURAL ORIGINS OF THE PROCEEDINGS

The principal proceedings have their genesis in a caveat filed by the plaintiff on 3 March 2017 and a summons for probate filed by the defendants on 27 March 2017.
The caveat was expressed in the following terms: "CLAIM I [the Caveator] require that no grant of probate or reseal be made in the estate of Blanche Minnie Condon late of Kensington, who died on 13 December 2016, without notice to me. I require that the Will dated 22 November 2016 of Blanche Minnie Condon late of Kensington, who died on 13 December 2016, be proved in solemn form. I require that no grant be made in the estate of Blanche Minnie Condon late of Kensington, who died on 13 December 2016 unless I am given the opportunity to be heard on the question whether a declaration as to the Court's satisfaction under section 8 of the Succession Act 2006 (or where still relevant section 18A of the Wills, Probate and Administration Act 1898) should be made in respect of a document made by the deceased. My interest is: Beneficiary."
The caveat did not refer, in terms, to the plaintiff's status as a beneficiary under each of the deceased's 1997 and 1993 wills. Those instruments, on their own, conferred on him an "interest" sufficient to ground standing to challenge to the validity of the 2016 will.
Upon an exercise of probate jurisdiction, a caveat is not a form of originating process, but a document filed with the Court requiring, in effect, that the Court take no steps in the administration of a deceased estate without notice to the Caveator: Estate Kouvakis; Lucas v Konakas [2014] NSWSC 786 at [242]. The plaintiff's caveat did not confer on him the status of a "plaintiff" for the purpose of principles governing the making of an order for security for costs: In re Emery, deceased; Emery v Emery [1923] P 184; Rose v Epstein [1974] 1 WLR 1565.
The plaintiff acquired the title of "plaintiff", in these proceedings, by an agreement between the parties that he file a statement of claim in support of his claim based on the 2006 document.
On 8 June 2017 the defendants filed a notice of motion seeking an order that the plaintiff's caveat cease to be in force. When that motion came before Kunc J on 17 July 2017: 1. the parties agreed that the plaintiff would file a statement of claim in support of his claim on the estate of the deceased, in consequence of which directions were given for the filing of pleadings; 2. the Court ordered that the defendants be appointed "administrators pendent lite of the estate of [the deceased] with all powers except that of distribution of the estate"; and 3. costs were reserved.
The plaintiff contends that it is more likely than not that he will be awarded the costs thus reserved. That is unwarranted speculation. It is at least as likely that those costs will be treated as costs in the principal proceedings (in the vernacular, "costs in the cause"), ultimately dependent for their disposition on the outcome of the principal proceedings.

THE PLEADINGS, AND CASES ADVANCED, IN THE PRINCIPAL PROCEEDINGS

The Plaintiff's Claims for Relief

On 26 July 2017 the plaintiff filed a Statement of Claim in which, in substance, he claimed relief to the following effect: 1. orders for the 2006 document to be admitted to probate as an informal will of the deceased; and 2. a declaration that, on the true construction of that document, the net distributable estate of the defendant is held by the legal personal representative(s) of the deceased, as to 18.75%, for the plaintiff; or 3. declarations to the effect that, on the true construction of the document, it operated as an inter vivos declaration of trust in favour of the plaintiff.
On 15 August 2017 the defendants filed a Defence in which, inter alia, they contended that: 1. the signature on the 2006 document which purports to be that of the deceased is not hers; 2. the document was not, in any event, intended by the deceased to have testamentary effect, with the consequence that it cannot be admitted to probate as an informal will; 3. if the 2006 document did have effect as a testamentary instrument, it was revoked by the deceased's 2016 will; and 4. if the 2006 document did have legal effect, and if it was not revoked by the 2016 will, then, on its true construction, the plaintiff is simply a creditor of the estate (as he is apparently described in the document) in an amount calculated as 18.75% of the deceased's net distributable estate.
On the pleadings, the plaintiff's alternative claim of a beneficial entitlement to property of the deceased, based on an allegation that the 2006 document constituted an inter vivos declaration of trust by her, in favour of the plaintiff, must be circumscribed by what is not pleaded as well as defined by what is: 1. There is no suggestion in the pleadings that a precondition of any entitlement the plaintiff might have to enforce the 2006 "irrevocable agreement" is that his mother (or, more accurately, a representative of her deceased estate) needs to be joined in the proceedings as the party who (for the benefit of the plaintiff) allegedly entered into an agreement with the deceased. 2. Nor is there any exploration in the pleadings about whether any promise made by the deceased to confer a benefit on the plaintiff was supported by consideration sufficient to support a cause of action in contract. 3. The plaintiff accepts that he was not a party to any agreement with the deceased, and that no consideration moved from him to the deceased in return for any promise she may be found to have made in his favour. 4. In the absence of an allegation of a legally enforceable contract to make testamentary provision for the plaintiff, reliance upon an "irrevocable agreement" allegedly made by the deceased might be thought to be misplaced, as might an allegation of a "declaration of trust" affecting property of which the deceased might, or might not, be possessed at the time of her death at an indefinite future time. 5. Notice should also be taken of the absence of any pleading, or, apparently, any factual foundation for a pleading, of estoppel based upon an allegation of reliance by the plaintiff upon whatever promise might be found to have been made by the deceased.
The defendants' submissions in support of their motion for security describe the plaintiff's prospects of success in the principal proceedings as "poor", but the motion and submissions in support of it stop short of an application for an order that the Statement of Claim be struck out (UCPR rule 14.28), or that proceedings on it be summarily dismissed (UCPR rule 13.4), as an abuse of the process of the Court.
Nevertheless, in the interests of all parties and an orderly conduct of the principal proceedings, attention needs to be given to clarification of the case the plaintiff seeks to make on his alternative inter vivos "declaration of trust" case.
Attention is drawn to the following extracts from JD Heydon and MJ Leeming (eds), Jacobs' Law of Trusts in Australia (LexisNexis Butterworths, Australia, 8th ed, 2016), paragraphs [6.22]-[6.23] and [6.25]-[6.26], omitting footnotes but with emphasis added: "Declaration of Trust [6.22] The second principal mode by which a trust may be constituted [other than by a transfer of property] is by declaration. What is required is a statement, intended to be final and binding, that property owned by the settlor is thereafter held on trust for another… No consideration is required. Because the trust property is already owned by the trustee, the principles in Milroy v Lord do not apply; indeed, that is the force of Milroy v Lord. [6.23] The declaration must be manifested in writing signed by the person making the declaration if the trust property is land or any interest in land. In the case of legal interests in personalty, the declaration may be oral or even inferred from conduct. The position of declarations of trust of equitable interests in personalty is not entirely free from doubt by reason of conflicting decisions on the construction of s23C(1)(c) of the Conveyancing Act 1919 (NSW) and its equivalents. However, it is submitted that although the provision is apt to apply to equitable interests in personalty, a declaration of trust which carves out a new and subsidiary equitable interest is not caught by the section, there not being a disposition of an interest subsisting at the time of the disposition. … Consideration [6.25] When a trust has been declared but the settlor has not been divested of the trust property, the trust is said to be incompletely constituted and operates merely as an agreement to create a trust. Such an agreement will not be enforceable unless it is based upon valuable consideration and a party to the consideration requires performance of it. It will not be enforceable by volunteers. If the property that is the subject of the declaration is future property, then a completely constituted trust will arise as and when the property comes into the hands of the settlor. [6.26] An agreement to create a trust is not a trust but a contract. It is accordingly subject to the principles applicable generally to all contracts and will be enforceable only if it can be shown to be a valid and enforceable contract. The consideration may move from the trustee or from the intended beneficiary. Where the consideration has moved from a person constituted a trustee of the benefit of the agreement for a beneficiary, the beneficiary may enforce the trust because of the consideration given by the trustees. Likewise where the consideration has moved from a beneficiary, the trustee may enforce the trust on the beneficiary's behalf. Parties to the consideration comprise parties who give valuable consideration, and also parties who are within marriage consideration, namely, the spouses and the issue of the marriage, and trustees for them. Beneficiaries who are not parties to the consideration are volunteers and cannot enforce the agreement. If, however, the court at the suit of a party to the consideration compels the settlor to constitute the trust, it will compel the settlor to constitute the whole trust - that is, even those provisions for the benefit of volunteers."
On the pleadings, the strongest of the plaintiff's claims - still contentious - appears to be his allegation that the 2006 document constituted an informal will. That case depends for its efficacy mainly on a successful challenge to the validity of the 2016 will, although the plaintiff would have the Court construe a standard revocation clause in the 2016 will as not extending to the 2006 document.
The plaintiff's case is that the 2006 document took the form it did because the deceased wanted to provide "compensation" for him as redress for his alleged mistreatment, as a youth, at the hands of her brother (the plaintiff's adoptive father) and her husband.
Because the original of the 2006 document is missing, the defendants contend that (assuming it ever had legally binding force) it should be presumed to have been destroyed and, if destroyed, revoked.
The defendants' case is that the 2016 will was prepared by a solicitor who took instructions from the deceased on 10 November 2016, and witnessed execution of the will on 22 November 2016, in circumstances in which his evidence in support of a finding of testamentary capacity should be accepted.
The plaintiff's response includes reference to documents produced on subpoena by the Prince of Wales Hospital said to evidence a sharp decline in the deceased's mental health between September 2015 and 12 December 2016, only about three weeks after the 2006 will was executed. That evidence does not necessarily displace evidence that the deceased possessed full capacity in November 2016. It does not pinpoint a time of sharp decline, which (on the evidence presently available) could have occurred after the will was executed.

The Defendant's Cross Claim

On 16 August 2017 the defendants filed a Cross Claim in which they seek an order that they be granted probate of the 2016 will in solemn form.
On 30 August 2017 the plaintiff filed a Reply to the defendants' Defence in which, so far as is material, he contends that, on the true construction of the 2016 will, the 2006 document was not revoked.
On 31 August 2017 the plaintiff filed a Defence to Cross Claim in which he contends that: 1. the deceased lacked testamentary capacity at the time she executed the 2016 will; and 2. the 2016 will was executed in "suspicious circumstances" sufficient (because, at the time it was executed, the deceased was in ill health, frail and hospitalised, and the will was inconsistent with the 2006 document and apparently drafted without reference to the 2006 document) to warrant a finding that the deceased did not know or approve of the contents of the will; or 3. on the true construction of the 2016 will, the deceased did not intend to revoke the 2006 document.
The plaintiff propounds the 2006 document; but assumes that the defendants, or some other person, will take a grant of probate or administration. The defendants propound the 2016 will. Nobody propounds the 1997 will or the 1993 will. Nevertheless, implicit in each party's presentation of the case appears to be an acceptance that the 1997 will is valid, subject to whatever (if any) findings are made in favour of the validity of the later instruments.
I do not pause to do more than notice a suggestion by the defendants that the plaintiff is an undischarged bankrupt. Evidence adduced by the plaintiff demonstrates that he was discharged from bankruptcy on 25 May 2013.

THE EVIDENCE ADDUCED ON THE DEFENDANTS' MOTION FOR SECURITY

As the defendants appear to have accepted, the evidence adduced on the hearing of their motion for security is sufficient to establish that the plaintiff has an arguable case (though, perhaps, not a strong one), both as to the validity of the 2016 will and as to the validity of the 2006 document as an informal will.
Although the original of the 2006 document has not been located, the plaintiff has obtained affidavits from Mr Fabian, who claims to have been a witness to its preparation and execution.
There are substantial factual questions in dispute about the provenance of the document. By comparison with the signatures of the deceased on her three solicitor-prepared wills, the defendants question the authenticity of the purported signature of the deceased on the 2006 document.
The legal effect of the document (if any), and its relationship with the 2016 will, are matters for debate not fully argued before me.
Bound, on the hearing of the defendants' motion for security, to form a view about the strength or otherwise of the plaintiff's case, I incline to the view (for reasons already explained) that the plaintiff's alternative case of a "declaration of trust" is not strong, and that his strongest case (dependent upon his challenge to the validity of the 2016 will) is his allegation that the 2006 document constitutes an informal will.
Although by no means conclusive, the medical records subpoenaed from the Prince of Wales Hospital invite a question as to the state of the deceased's mental health during her end days. That said, the evidence thus far adduced by the plaintiff is a substantial distance from establishing a want of testamentary capacity in the deceased, either at the time she executed the 2016 will or at the time she gave instructions for its preparation.
The 2006 document is unusual in content and form, and in the alleged manner of its preparation. Propounded as an informal will, it attracts no "presumptions" associated with due execution of a testamentary instrument, and its extra-ordinary character deprives it of comparable inferences that might be drawn from common experience: Re Estate of Wai Fun Chan, Deceased [2015] NSWSC 1107 at [18]-[24].
By contrast, the 2016 will is regular on its face, accompanied by evidence of preparation by a solicitor, and due execution as a will, conforming to an established pattern of testamentary instruments executed by the deceased. Its form and manner of execution are likely to attract presumptions of due execution, capacity and knowledge and approval: Re Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 704-707.
In the absence of the original of the 2006 document a doubt might be expressed as to the utility of any handwriting expert briefed to express an opinion about the authenticity of the signature on a copy of the document attributed to the deceased. Nevertheless, the parties contemplate retaining handwriting experts.
The defendants' motion for security was heard on affidavit evidence, to which no substantial objection was taken, without cross examination of any deponent.
In these circumstances, the evidence adduced on motion has not been sufficiently exposed to view to enable me (in the absence of full argument) to form a concluded opinion about the parties' respective, ultimate prospects of success in the principal proceedings.
The state of the evidence focuses attention squarely upon the facts that the plaintiff is ordinarily resident outside Australia and, although he has assets overseas, he has no assets in Australia.
The plaintiff deposes to having assets in the United Kingdom but, to the extent that he has assets, they appear to be the subject of trusts (the terms of which are not in evidence) designed to ensure that he can claim an entitlement to means-tested social welfare benefits in the United Kingdom.
In an affidavit sworn by him on 27 October 2017 the plaintiff deposes to his residency in Scotland, his involvement in a motor vehicle accident in 2009 which has left him "almost a paraplegic" and his personal circumstances generally. In paragraphs 5 and 6 of that affidavit he summarises his financial position in the following terms: "[5] … My current assets and liabilities are as follows: A. Assets: a) Damages claim against Mr and Mrs Bardsleys and Stuart Ferguson (currently being litigated in England) - estimated 600,000 pounds. b) Furniture - estimated 8,000 pounds. c) I am the sole beneficiary of two trusts, including a personal injury trust known as the ABPI Trust which holds the damages I received for the motor vehicle accident in 2009 - I am not aware of the exact value of the Trust but I believe it is in excess of 2,000,000 pounds. d) Loan to Estate of Alisa Lee - 45,000 pounds. e) Volvo 90 SUV 2016 - 30,000 pounds. f) Money in Bank 685 pounds. B. Liabilities: a) Legal fees for current Application unpaid - 8,000 pounds b) Credit Cards (Master card) - 50 pounds c) Ebay 45 pounds [6] In respect of my private medical expenses and house hold expenses, these are paid from the ABPI Trust which currently pays approximately 90,000 pounds per year to me. One of the reasons for the creation of a Personal Injury Trust is that it ring-fences the award which means I can obtain means tested benefits and also apply for a means tested Disability Funds Grant from the government health scheme. I am also in receipt of a means tested shared government benefit where I receive approximately 25,000 pounds due to my injuries. I receive these benefits payment on (a monthly basis) annually in 13 payments. I am also in receipt of a non means tested benefit through the DWP at the higher rate for living and mobility. I am paying my current legal fees from these funds. There are no charges or any other security or liabilities attached to any of these funds, nor do I have any other current liabilities".
In the same affidavit, the plaintiff not only discloses his involvement in other litigation, but foreshadows the prospect of yet more litigation, unrelated to these proceedings. His involvement in substantial litigation adds a flavour of contingency to any assessment of his financial circumstances.
An inference available on the whole of the evidence adduced on the hearing of the motion is that, if the plaintiff were ordered to pay the costs of the principal proceedings, the plaintiff's assets are structured in such a way that enforcement of that order (independently of reciprocal arrangements for the enforcement of orders across territorial boundaries) would be attended by difficulty, delay and additional costs.

THE COURT'S INHERENT JURISDICTION TO ORDER THAT SECURITY FOR COSTS BE GIVEN

During the course of the hearing of the motion, I invited counsel for the parties to consider whether there was an occasion for invocation of the Court's inherent jurisdiction to order security. In extending that invitation I had in mind the plaintiff's submission that an order for security could not be accompanied by an order (such as that commonly made by reference to UCPR rule 42.21(1)) for a stay of proceedings, pending the provision of security, without frustrating the administration of the deceased estate the subject of the proceedings.
The existence of the Court's inherent jurisdiction to make orders for the provision of security for costs is not in contest. It is well established: Rajski v Computer Manufacture & Design Pty Ltd [1982) 2 NSWLR 443 at 447-448, affirmed on appeal [1983] 2 NSWLR 122. However, with the benefit of submissions of counsel, I doubt that it adds anything of practical significance to a determination of the present motion.
Accordingly, I confine my determination of the motion to a consideration of UCPR rule 42.21, the current rule of court authorising an order for security for costs.

UCPR RULE 42.21 : A SOURCE OF JURISDICTION TO ORDER THAT SECURITY FOR COSTS BE GIVEN

UCPR rule 42.21 is in the following terms (with emphasis added): "(1) If, in any proceedings, it appears to the court on the application of a defendant: (a) that a plaintiff is ordinarily resident outside Australia, or (b) that the address of a plaintiff is not stated or is mis-stated in his or her originating process, and there is reason to believe that the failure to state an address or the mis-statement of the address was made with intention to deceive, or (c) that, after the commencement of the proceedings, a plaintiff has changed his or her address, and there is reason to believe that the change was made by the plaintiff with a view to avoiding the consequences of the proceedings, or (d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, or (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, or (f) that there is reason to believe that the plaintiff has divested assets with the intention of avoiding the consequences of the proceedings, the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. (1A) In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant: (a) the prospects of success or merits of the proceedings, (b) the genuineness of the proceedings, (c) the impecuniosity of the plaintiff, (d) whether the plaintiff's impecuniosity is attributable to the defendant's conduct, (e) whether the plaintiff is effectively in the position of a defendant, (f) whether an order for security for costs would stifle the proceedings, (g) whether the proceedings involves a matter of public importance, (h) whether there has been an admission or payment in court, (i) whether delay by the plaintiff in commencing the proceedings has prejudiced the defendant, (j) the costs of the proceedings, (k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute, (l) the timing of the application for security for costs, (m) whether an order for costs made against the plaintiff would be enforceable within Australia, (n) the ease and convenience or otherwise of enforcing a New South Wales court judgment or order in the country of a non-resident plaintiff. (1B) If the plaintiff is a natural person, an order for security for costs cannot be made merely on account of his or her impecuniosity. (2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct. (3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed. (4) This rule does not affect the provisions of any Act under which the court may require security for costs to be given."

SECURITY FOR COSTS IN PROBATE PROCEEDINGS: WHAT THE PRACTICE TEXTS SAY

The common experience of probate practitioners is that an application, let alone an order, for security for costs in probate proceedings is uncommon. Authority on the topic is scant.
Practice texts deal with the topic in passing references only.
Mason and Handler's Succession Law And Practice NSW (LexisNexis Butterworths, 1985, Loose Leaf Service) records the following (in paragraph [6089]): "Applications for security for costs are not common in probate proceedings. However, an application arose in Hyland v Burbidge (NSWSC, Powell J, 23 October 1992, unreported), and his Honour's consideration of the principles are [sic] set out in [13,029]."
The service provides an extract from Powell J's judgment as a casenote published at paragraph [13,029]. The whole judgment is available electronically on Butterworths' Casebase website as Hyland v Burbidge; The Estate of Charles Keith Hyland BC 9201526.
Powell J's judgment is a primary reference, not only in the LexisNexis Butterworths Looseleaf Service, but also in RS Geddes, CJ Rowland and P Studdert, Wills, Probate And Administration Law in New South Wales (LBC Information Services, Sydney, 1996).
In Appendix 1 to that text (entitled "Costs in Probate Matters"), at paragraph [Cost.14], on page 669, the following entry appears (with footnotes here incorporated in the text): "Security for Costs from Foreign Party Where a foreign party to judicial proceedings is seeking to invoke or resort 'to the jurisdiction for the purpose of establishing rights or obtaining relief' [Willey v Synan (1935) 54 CLR 175 at 184 per Dixon J], he or she may be ordered to give security. [The principle was discussed and applied in Hyland v Burbidge (unreported, NSWSC PD, Powell J, 23 October 1992) at 29]."
R Hastings and G Weir, Probate Law and Practice (Law Book Co, Australia, 2nd ed, 1948), upon which Geddes, Rowland and Studdert is based, appears not to notice at all the question of security for costs in probate proceedings, save in respect of a formal requirement for security in support of an appeal.
In neither the Butterworths service nor the Law Book Company texts is there a general treatment of the topic, security for costs in probate proceedings. Both modern texts, in substance, go no further than a reference to Powell J's judgment in Hyland v Burbidge which, in turn, refers to the judgment of Dixon J in Willey v Synan. Of the two judgments, only that of Powell J relates to probate proceedings.
The observations of Powell J (and Dixon J) are directed, essentially, to the liability to an order for security of a party who ordinarily resides outside Australia; that is, to a party who attracts the operation of UCPR rule 42.21(1)(a).

HYLAND v BURBIDGE : A RARE EXAMPLE OF AN ORDER FOR SECURITY IN PROBATE PROCEEDINGS

Perhaps what is of particular significance in the judgment of Powell J is that, although his Honour traversed the facts of the case before him in great detail and doubted whether the plaintiffs' claim in the proceedings before him was soundly based, he appears to have proceeded on the basis that the rules of court governing his decision (Supreme Court Rules 1970 NSW, Part 53 rules 1-5, the predecessors of UCPR rule 42.21) did not operate in probate proceedings in a manner explicitly different from their operation in other proceedings in the court.
That is consistent with an observation, about English probate law and practice, in Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (Sweet & Maxwell, London, 20th ed, 2013), at paragraph [39-15] on page 487, that (under the English Civil Procedure Rules) "[security] for costs is given on the same principles as in other actions".
With an express qualification, the same observation can be found in the iconic first edition of HC Mortimer, The Law and Practice of the Probate Division of the High Court of Justice (Sweet and Maxwell, London, 1911), at page 703, citing an earlier edition of Williams on Executors, citing in turn Robson v Robson (1864) 3 Sw & Tr 568; 164 ER 1396.
The qualification relates to attribution of the roles of "plaintiff" and "defendant" to parties in probate proceedings, bearing in mind that an order for security can only be made against a party who, in substance, is a plaintiff.
Having stated that "[the] question of giving security of costs in the Probate Division [of the English High Court of Justice] is governed by the same rules as apply at common law", Mortimer recorded the following: "It should, however, be observed that, on the question of the immunity of a defendant from giving security for costs, the substantial, and not the nominal position of defendant and plaintiff respectively in the suit should be considered; as in certain cases in the Probate Division the nominal position of plaintiff or defendant depends on the mode in which the cause commenced."
Although the same principles may apply to all proceedings, their application depends upon the facts of the particular case, including peculiarities about the nature of the proceedings in which they are to be applied.
With their focus upon due administration of a deceased estate, probate proceedings might require consideration of factors not material to other types of proceeding. At the very least, the comparative absence of orders for the provision of security for costs in probate proceedings invites a critical assessment of the jurisdiction.
At the commencement of a long judgment, Powell J described an application for security for costs as "an unusual form of application to be met in proceedings in this [the Probate] Division of the Court": BC 9201526 at 1. His Honour did not dwell upon why applications for security were uncommon in Probate proceedings.
In the principal proceedings before him, the plaintiffs (resident overseas) sought an order for the revocation of a grant of probate in common form made to the defendant. Those proceedings were associated with various other proceedings in which family provision relief was claimed. There were substantial private international law questions, which his Honour addressed, about the law to be applied in administration of the deceased's estate.
In his exposition of the facts of the case, Powell J not only expressed doubts about the plaintiffs' prospects of success. He also remarked that what was "stultifying the administration of the estate" was not the existence of the grant of probate which the plaintiffs sought to have revoked, but the apparent impenetrability of asset structures put in place by the deceased as a barrier to claims by the plaintiffs: BC 9201526 at 23.
At BC 9201526 at 25, Powell J made the following observations: "Despite the fact that this Court undoubtably has jurisdiction to dismiss a proceeding such as this as an abuse of process (see, for example, Neilsen v Public Trustee, 8 May 1992, Powell J, unreported, and cases their cited) and despite the views which I have earlier… expressed as to the plaintiffs' prospects of success in these proceedings, I do not consider the matter to be so clear that an order for dismissal, at this stage, would be warranted. … This notwithstanding, my views as to the plaintiffs' prospects of ultimate success remain relevant to [the order for security for costs] sought."
Against this background, Powell J dealt with the defendant's application for security for costs (reported at BC 9201526 at 27-30) in the following terms (with emphasis added): "I turn, then, to the defendant's application for security for costs. The bases upon which, as I understand it, the defendant seeks to support his application are as follows: 1. Despite the plaintiffs' claim to dual citizenship; despite the plaintiffs' claim that they wish to come to live in Australia and enter university here next year; the plaintiffs are persons who are ordinarily resident outside this state (Supreme Court Rules 1970 part 53 rule 2(1)( a)), it following that, prima facie, an order should be made; 2. The fact that the plaintiffs have monies - $177,000 - in a joint account with the State Bank at its Martin Place Branch does not justify the failure to make an order; credit balances with banks are the most mobile of assets (although [counsel] did not refer to it, see Baume v Lockyer (1903) 20 WN 195) - and, in any event the plaintiffs already have between them debts totalling at least $114,000. 3. The defendant's prima facie entitlement to an order is strengthened when one observes: a. that the plaintiffs' prospects of ultimate success do not appear strong; b. that, since the issues which will probably need to be determined are complex questions of law and fact, involving, more likely than not, witnesses from interstate and overseas, the hearing is likely to be protracted and the costs involved very high; c. By contrast, the funds available to the defendant in his capacity as executor are, as the evidence now stands, very small, and quite inadequate to fund the litigation. The sole basis, as I understand it, upon which the plaintiffs seek to oppose the making of an order for costs is that, although they are nominally plaintiffs in the proceedings, they are, in reality, defendants seeking to defend their rights, a submission to support which [their counsel] prayed in aid the decisions of the High Court in Willie v Synan (1935) 54 CLR 175) and the recent decision of Wilcox J in Amalgamated Mining Services Pty Ltd v Warman International Limited (1988) 19 FCR 324). With respect, it seems to me that this submission is not made good. I say this for two reasons: 1. The authorities upon which [counsel for the plaintiffs] relies do not, in my view, establish, as a principle of law, the proposition that, in every case in which a foreign plaintiff 'is forced to defend his rights', that foreign plaintiff is, for the purposes of an application for security for costs, to be regarded as a defendant. On the contrary, so it seems to me, those authorities do no more than provide particular examples of the general principle (see, for example, Washoe Mining Co v Ferguson (1866) LR 2 Eq 371; Neck v Taylor [1893] 1 QB 560; New Fenix Compagnie Anonyme D'Assurances de Madrid v General Accident, Fire and Life Assurance Corporation Limited [1911] KB 619; Buckley v Bennell Design and Construction Pty Ltd (1974) 1 ACLR 301) that, when dealing with applications for security for costs, the Court is concerned, not so much with a party's place on the record, as with the true substance of the claim, the subject of the litigation, and the parties' relationship to that claim. That this is so is, in my view, amply demonstrated by the following passage in the judgment of Dixon J (as it then was) in Willie v Synan (supra) at 184-185): 'The principle is that a party to judicial proceedings, who resides beyond the jurisdiction, should not be required to give security for costs unless, however the parties are arranged on the record, he is the person invoking or resorting to the jurisdiction for the purpose of establishing rights or obtaining relief. If he does avail himself of the remedies the jurisdiction provides in order to obtain affirmative relief or redress, he may be ordered to give security, although he becomes a defendant in the action. Thus, on the one hand, a defendant in an action at law who filed a bill in equity to restrain the proceedings at law, was not required by the Court of Chancery to give security for the costs of the suit although he resided out of the jurisdiction (Watteeu v Billam (1849) 3 DeG and SM 516; 64 ER 586). And, on the other hand, a distraining landlord who became a defendant in an action of Replevin in respect of the goods distrained was ordered to give security on the ground that he resided out of the jurisdiction (Selby v Cruchley (1820) 1 Brod and B 505; 129 ER 817). The principle was considered in Maatschappij Voor Fondsenezit v Shell T ransport and Trading Co.[1923] KB 166), where a number of illustrative cases are collected in the judgment of Scrutton LJ. He said: 'The position, I think, extends to every case where the person against whom security is sought is really defending himself against attack, even if he be nominally plaintiff, but really defending himself against defendants' previous action against him' ([1923] 2 KB at 177). 2. In my view, it cannot, in all the circumstances, be said that, in commencing these proceedings, the plaintiffs are doing no more than defending themselves against an attack previously launched against them, in this country, by the defendant; on the contrary, it seems to me that the plaintiffs have invoked, or resorted to, the jurisdiction for the clear purpose of obtaining some tactical, or forensic, or other like, advantage for themselves - and in all probability for their mother - (see, for example, In the will of Krokstedt (1895) 16 NSWLR (B and P) 106). Order In the circumstances, I have concluded that the defendant has made out a case for an order of the type which he now seeks. However, as it was suggested to me that, if I were so to conclude, the parties might be able to work out, between themselves, the detail of an appropriate order, I refrain, for the time being, from doing more than publishing these reasons [and standing the motion for security over, with a direction for short minutes of proposed orders for security to be brought in]".
On a subsequent occasion, Powell J made orders for security for costs in terms to the following effect: 1. ORDER that within 14 days the plaintiffs provide security in the sum of $30,000 in a form acceptable to the Registrar for the costs of the defendant. 2. ORDER that, in default of the plaintiffs providing security for the defendant's costs pursuant to Order 1, the proceedings be stayed. 3. ORDER that the plaintiffs pay the costs of the defendant's motion for security, with liberty to the defendant to have such costs taxed forthwith if not agreed. 4. RESERVE to the defendant liberty to apply for further security by motion on notice.

NATURE OF A SECURITY FOR COSTS ORDER

In his Law of Costs (LexisNexis Butterworths, Australia, 3rd ed, 2013), at pages 931-932, Professor GE Dal Pont makes the following observations (with emphasis added, but footnotes omitted) about the "purpose and rationale" of an order for security to costs: "Purpose and Rationale [28.1] The purpose of an order for security for costs is to protect a defendant (or respondent) in whose favour the court has made a costs order from having that order wholly frustrated by the inability of the plaintiff (or appellant) to satisfy it. It reflects, to this end, a power that is 'essentially … of risk-management between the parties having regard to their legitimate interests both as applicant and respondent'. Were the court to lack power to order security for costs, defendants would, so far as their own legal costs are concerned, be at the mercy of plaintiffs who may lack sufficient financial resources to satisfy an order to pay their costs. That a plaintiff lacks significant financial resources will not necessarily prevent lawyers from acting for the plaintiff, as lawyers may secure their costs entitlement by requiring moneys on account of costs in advance, or through the vehicle of a lien, litigation loan, irrevocable authority or some other security. Or the lawyers may take the matter on a speculative basis. [28.2] A chief concern of the law in this regard is not to deny an impecunious plaintiff access to the courts, while ensuring that, where the plaintiff or another person who may benefit from the proceeding is financially able to lodge security for the defendant's costs, such security is given so that the orders of the court are not frustrated. After all, an unscrupulous plaintiff may, by divesting itself of funds or by being funded by a third party, otherwise seek to order its affairs to secure the benefit of a judgment in its favour without being at risk of paying costs in the event of failure. Thus it has been said that security for costs orders prevent abuse of court process by 'preventing impecunious persons from litigating without responsibility'. [28.3] An order for security for costs is designed to secure the defendant's entitlement to recover its own legal costs from an unsuccessful plaintiff. Such an order accordingly owes its lifeblood and justification to the general rule that 'costs follow the event' (termed the 'indemnity rule'). In cases where the court does not order costs against an unsuccessful plaintiff, whether in the exercise of its curial discretion or pursuant to a statutory direction to this end, the rationale for a security for costs order evaporates because the successful defendant has no entitlement to any indemnity for its own costs from the plaintiff. Hence, there are no costs in respect of which security is required…. [28.4] …[Courts] are reticent to accede to applications for security for costs in classes of case where, aside from any statutory directive, costs are not uncommonly met out of a fund. A typical example is the case law involving justifiable challenges to testamentary dispositions. Unsuccessful applications in family provision cases, for instance, may lead the court to make no order as to costs, particularly if it would have a detrimental effect on the applicant's financial position. As such, a court is unlikely to order security in such cases unless convinced that the claim is frivolous or otherwise unmeritorious."
Professor Dal Pont's reference to "risk management" in the second sentence of paragraph [28.1] is a reference to the following observations of French J in East Grace Corporation v Xing (No. 1) [2005] FCA 219 at [6]-[7], with emphasis added: "[6] The question in determining whether security should be awarded and, if so, what the quantum is, is essentially one of risk management between the parties having regard to their legitimate interests both as applicant [plaintiff] and respondent [defendant]. There is the question of the risk to the respondent of non-recovery. There is the question of prejudice to the applicant….. There is also the established principle that [an] award of security for … costs is generally not granted at the level of full indemnity. This has regard to the uncertainties of litigation including, of course, … the possibility that litigation can be settled. [7] The quantification of an appropriate amount by way of security is certainly not an exact science. I have to assess [in the case before the Court] what additional security should be awarded and in this case I am satisfied that having regard to the evidence additional security should be awarded. The additional security that should be awarded together with the security that has been provided should represent a reasonable proportion of the likely total costs which might be at risk in the event that the respondent were successful…".
Professor Dal Pont's reference to family provision cases in the penultimate sentence of paragraph [28.4] is supported by a reference to the judgment of Gaudron J in Singer v Berghouse [1993] HCA 35; 67 ALJR 708; 114 ALR 521. There her Honour dismissed an application for an order that security for the costs of an appeal to the High Court of Australia be provided. She did so on the basis that, given the special nature of family provision cases, so far as costs are concerned, there was no certainty that, even if unsuccessful in the appeal, the appellant would be ordered to pay the costs of the appeal.
Singer v Berghouse is not directly in point in the current proceedings. Although often closely connected in practice (and similar to the extent that the costs of all parties are commonly ordered to be paid out of a deceased estate, or an unsuccessful party might not uncommonly be relieved of an obligation to pay an opponent's costs), probate and family provision proceedings have their own dynamic. The practice of the Court in dealing with the costs of a family provision claim (governed by legislation unique to it) cannot, in principle, be taken as a guide to the Court's practice in dealing with the costs of probate suit.
For present purposes, the significance of Gaudron J's decision is that: (a) it illustrates the proposition that, if there is a substantial possibility that a party will not be subjected to an adverse costs order in the event of an unsuccessful outcome in the proceedings, that fact weighs heavily against an order for the party to provide security for costs; and (b) it lends support to a need, upon any application for security for costs, to take into account the nature of the proceedings in respect of which an order for security is sought .

GENERAL FACTORS PECULIAR TO PROBATE PROCEEDINGS TO BE TAKEN INTO ACCOUNT ON AN APPLICATION FOR SECURITY FOR COSTS

An order for security for costs is available as a means of minimising a risk of abuse of the processes of the Court attending the conduct of proceedings by a party, in substance a plaintiff, who invokes the jurisdiction of the Court without being able or willing to pay costs of a defendant if ordered to do so. The nature and magnitude of any such risk may depend upon the nature of the jurisdiction of the Court invoked in the principal proceedings.
The purpose of probate proceedings is generally to advance the due and proper administration of a particular deceased estate, having regard to any duly expressed testamentary intentions of the deceased, and the respective interests of parties beneficially entitled to the estate; the task of the Court is generally to carry out a testator's testamentary intentions, and to see that beneficiaries get what is due to them: In the goods of William Loveday [1900] P 154 at 156; Bates v Messner (1967) 67 SR (NSW) 187 at 189 and 191-192; Hookway v Hookway [2017] TASFC 4 at [9] and [69].
In the paradigm case (a model to which the current proceedings conform despite the plaintiff's alternative case based upon an allegation of a declaration of trust), an essential feature of probate proceedings is that they concern the management of property in a court-supervised process designed to effect an orderly transfer of property from a deceased person (whose formally expressed intentions, if any, are paramount) to one or more beneficiaries in circumstances in which: (a) the deceased person is, by definition, absent; and (b) one or more beneficiaries may also be absent or under a legal disability.
Because the subject matter of the proceedings is succession to property from a deceased estate, a special public interest element attends the proceedings. By nature, property rights generally, notionally operate "against the whole world", not merely as between a transferor and transferee. Where, as in a probate case, the transferor is incapacitated by death and interested persons are dependent upon findings of the Court in identification and enforcement of his or her intentions, the public has a particular interest (beyond the interests of parties in ordinary adversarial proceedings) in the integrity of the Court's processes.
In Gray v Hart; Estate of Harris (No. 2) [2012] NSWSC 1462 at [4]-[5] White J drew a number of threads together with the following observations (with emphasis added): "[4] It is well established that the principles applicable to the awarding of costs in probate litigation differ from those applicable to ordinary civil suits where the principle that costs follow the event usually means that the losing party pays the winning party's costs. [5] The reason for the difference is that in a probate suit the Court is concerned to give effect to the last will of a free and capable testator or testatrix. There is a public interest in keeping faith with the wishes of a capable will-maker that requires an investigation into the validity of the propounded wills. A grant of probate in solemn form operates in rem, that is, it binds the world, or at least those affected persons who have notice of the proceedings. Irrespective of what the parties might want, the Court will not pronounce against a will unless there is material to satisfy it that the deceased did not have capacity, or that there is some other reason why the will is invalid. A grant is not made or withheld solely by the consent of the parties. There is, therefore, a public interest in the incurring of some level of costs in cases where there is genuine doubt about the validity of a will."
In an uncertain, imperfect world the law endeavours to accommodate both respect for a deceased person's testamentary intentions (if any) and insistent claims on a deceased's estate by the living. This is done in a variety of ways, chief amongst them being the following: 1. Although probate proceedings are not wholly without an adversarial flavour in practice, they retain, in the public interest, an inquisitorial character that permits the Court to ensure that the public interest, not merely private interests, can be served: Boyce v Bunce [2015] NSWSC 1924 at [60]. An exercise of the Court's jurisdiction might be assisted by the existence of a contradictor, available to test a claim for relief, but it is not dependent upon one. 2. So far as practicable, the Court endeavours to ensure that probate proceedings are conducted in a transparent way. That is seen: 1. in public identification of testamentary instruments admitted to probate and in consideration of whether an instrument constitutes a valid expression of testamentary intentions. 2. in identification of persons who may have an interest in the estate of a deceased person (eg, by insistence upon public advertisement of applications for a grant of probate or administration) . 3. in treating a witness to execution of a will as a witness of the Court for the purpose rendering public evidence which might otherwise be concealed by a claim of legal professional privilege: Re Fuld [1965] P 405 at 409F-411B; Re Estate Pierbon, Deceased [2014] NSWSC 387; Boyce v Bunce [2015] NSWSC 1924 at [145]-[148]. 1. Probate proceedings are characterised by the Court as "interest proceedings" (Gertsch v Roberts; The Estate of Gertsch (1993) 35 NSWLR 631 at 634B-C; Gardiner v Hughes [2017] VSCA 157 at [90]-[98]), with the consequence that: 1. a person can participate in the proceedings only if possessed of an interest in the outcome of the proceedings: Estate Kouvakis; Lucas v Konakas [2014] NSWSC 786 at [230]-[233]. 2. if given notice of the proceedings and allowed an opportunity to intervene in them, an interested person has a choice whether to participate in them or not (and whether to take steps designed to protect his or her interest in some way or not); but he, she or it (by reason of knowledge of the proceedings and an opportunity to intervene) is in any event bound by the Court's determination; Osborne v Smith (1960) 105 CLR 153 at 158-159. 3. an executor is not universally bound to propound a will or other testamentary instrument, but may decline to do so unless indemnified against an adverse costs order by those in whose interest it is to have the instrument admitted to probate: Rennie v Massie (1866) 1 LR P&D 118; In re Egel; Farmers' Co-Operative Executors and Trustees Ltd v Sickert [1939] SASR 477 at 480-481. 1. A system of grants of administration involving a distinction between a grant of probate in common form and a grant of probate in solemn form is designed to facilitate the administration of estates, both: 1. in cases in which there is no dispute and an application for a grant can be dealt with administratively, as a grant in common form; and 2. in cases in which there are substantial disputes, or doubts, which require (by a grant in solemn form) a determination by the Court designed to provide practical certainty in the administration of an estate. 1. The principles governing orders for costs in probate proceedings commence with the usual, general rule (currently expressed in the Uniform Civil Procedure Rules 2005 NSW, rule 42.1) that "costs follow the event"; but, consistently both with that rule and the Court's statutory jurisdiction to award costs (currently found in the Civil Procedure Act 2005 NSW, section 98) special rules of practice (commonly described by reference to Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698, but, historically, grounded upon Mitchell v Gard (1863) 3 Sw & Tr 257; 164 ER 1280, as explained in Gray v Hart; Estate of Harris (No. 2) [2012] NSWSC 1562): 1. not uncommonly allow for costs of all parties to be paid out of a deceased estate; or 2. at least, contemplate that an unsuccessful party might, in some circumstances, be relieved of any obligation to pay the costs of a successful opponent.
In the management of probate proceedings, there may be alternative means available for minimising a risk of an abuse of process associated with a plaintiff who is impecunious or whose assets are beyond reach, and an application or order for security for costs might well occupy a low rank of priority when measured against the Court's preference for cases to be heard and determined on the merits.
If an order for the payment of costs out of an estate can fairly be anticipated (because the cause of litigation is plainly the fault of the deceased), or if the plaintiff has an interest in the estate whatever outcome of the proceedings is reasonably likely, there may be no necessity for, or utility in, an order for security. A plaintiff who claims an interest in an estate might assign or charge his or her interest in the estate in favour of somebody able and willing to prosecute the proceedings with the requisite funding: JG Starke, Assignments of Choses in Action in Australia (Butterworths, Australia, 1972), paragraphs [82]-[83] and [87]-[88]; Dal Pont, Law of Costs (3rd ed, 2013), paragraph [3.44]. Given their central concern with property, probate proceedings lend themselves to a variety of private arrangements (including, at times, an inter partes agreement that reasonable costs are to be, or are likely to be, paid out of an estate) without involvement of the Court in interlocutory procedures.
A plaintiff might, not uncommonly, circumvent the more onerous costs of probate proceedings, and the costs regime applicable in probate proceedings, by pursuing an alternative claim for family provision relief in a hope or expectation (not always realised) of a more liberal access to an order for the payment of all costs out of the estate of the deceased.
If and when, by one means or another, all persons with an interest in an estate are joined in, or otherwise bound by the outcome of, probate proceedings, questions about security for costs may begin to approximate such questions as encountered in ordinary civil proceedings - but for the possibility that, in the ordinary course of probate practice, an order for costs might not be made against an unsuccessful party.
In practice, in most cases, that possibility turns on: 1. whether responsibility for the proceedings can fairly be laid at the feet of the deceased (eg, because of the form of a will) rather than in attribution of fault to one or more parties; 2. whether the circumstances in which a testamentary instrument was created was such as to invite an investigation by the Court; and 3. Whether participants in the proceedings have acted reasonably.
It is not necessary in this judgment to explore in depth the practice of the Court in making orders for costs in probate cases. It is sufficient to observe, first, that there is substantial scope for a departure from the rule that "costs follow the event"; and, secondly, that flexibility in exercise of the Court's costs jurisdiction does not, of itself, preclude an order for the provision of security.
Nevertheless, it should be noticed that an examination of older practice texts, and case law, suggests a greater range of possible orders than is acknowledged by the defendants, and customarily acknowledged, by reference to the "two exceptions" (from the rule that costs follow the event) specifically mentioned by Powell J in Re Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709. See, for example, Hastings Weir, Probate Law and Practice (2nd ed, 1948) at pages 33-338. Dal Pont, Law of Costs (3rd ed, 2013), paragraph [10.17] et seq, also suggests greater flexibility in the costs jurisdiction than is sometimes suggested by reference to Shorter v Hodges.This flexibility is consistent with the management function of an exercise of probate jurisdiction directed towards facilitating an orderly succession to property. Ultimately, the question for the Court is what, in all the circumstances of the case, is the appropriate order for costs: Williamson v Spelleken [1977] Qd R 152.
In Gray v Hart; Estate of Harris (No. 2) [2012] NSWSC 1562 White J returned to the source of much jurisprudence on probate costs (Mitchell v Gard (1863) 3 Sw & Tr 275; 164 ER 1280) for the purpose of drawing attention to enduring principles.
Towards the same end, I set out here the substance of the judgment of Sir James Plaisted (later Lord Penzance) in Mitchell v Gard (with emphasis added): "These questions of costs [in a testamentary suit, following admission of a will to probate] are addressed to the discretion of the Court. It is hardly in the nature of discretion that its exercise should be adjusted by exact rule. No positive regulation could be established that would bear the strain put upon it by the justice or hardship of particular instances. But, where all is not possible, something may yet be done. By acknowledged method and general classification, the suitor may in some measure be enabled to estimate the prospect before him, and foresee the penalties under which he launches into litigation. To this extent it is the duty of the Court, so far as may be, to assist him. The basis of all rule on this subject should rest upon the degree of blame to be imputed to the respective parties; and the question, who shall bear the costs? will be answered with this other question, whose fault was it that they were incurred? If fault lies at the door of the testator, his testamentary papers being surrounded with confusion or uncertainty in law or fact, it is just that the costs of ascertaining his will should be defrayed by his estate. If the party supporting the will has such an interest under it that the costs, if thrown upon the estate, will fall upon him, and he by his improper conduct has induced a litigation which the Court considers reasonable, it is not unjust that the estate should bear the costs of the litigation which his conduct has caused. But if the testator be not in fault, and those benefited by the will not to blame, to whom is the litigation to be attributed? In the litigation ascertained by other Courts, this question is in general easily solved by the presumption that the losing party must needs be in the wrong, and, if in the wrong, the cause of a needless contest. But other considerations arise in this court. It is the function of this court to investigate the execution of a will and the capacity of the maker, and having done so, to ascertain and declare what is the will of the testator. If fair circumstances of doubt or suspicion arise to obscure this question, a judicial inquiry is in manner forced upon it. Those who are instrumental in bringing about and sub serving this inquiry are not wholly in the wrong, even if they do not succeed. And so it comes that this court has been in the practice on such occasions of deviating from the common rule in other courts, and of relieving the losing party from costs, if chargeable with no other blame than that of having failed in a suit which was justified by good and sufficient grounds for doubt. There is still a further class of cases. I speak of those in which, beyond the execution of the will and the capacity of the testator, the opposing party takes upon himself to question the conduct or the good faith of others, and a place on the record pleas of undue influence or fraud. These are affirmative charges; they ought not to be made except upon some apparently very sufficient ground. But though they may and do differ largely in the degree of probability or suspicion to be demanded for their justification, it is not easy to say that they differ in nature from pleas denying execution or capacity. Both classes of defence are addressed to the same question, what was the will of the testator, and both are within the scope of the subject and trusted to the vigilance of the court. Here, also, it seems just and meet, if the circumstances of the case have rendered the inquiry a proper one, that neither party should be condemned in costs. From these considerations, the court deduces the two following rules for its future guidance [the "two exceptions" mentioned in Estate of Hodges; Shorter v Hodges]: first, if the cause of litigation takes its origin in the fault of the testator or those interested in the residue, the costs may properly be paid out of the estate; secondly, if there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator, or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent. I am aware that there are many cases to be found in which costs have been granted out of the estate under circumstances different from those I have predicted. I am aware also that in some cases a less liberal view than I have taken of the conduct of parties pleading undue influence and fraud has prevailed; but there are cases to be found pointing both ways.… But it is hard to extract a general rule. It is of high public importance that doubtful wills should not pass easily into proof by reason of the cost of opposing them. It is of equal importance that parties should not be tempted into a fruitless litigation by the knowledge that their costs will be defrayed by others. These opposite reasons appear to have alternately swayed the decisions to be found in the books. It is the desire of the court to keep both in view, while yielding to neither, and it is in this spirit that the above rules have recommended themselves for adoption. Of the present case, on the facts, little need be said.… The court considers that Mr Gard, to whom the bulk of the property of the testatrix was bequeathed in a will made by himself, a professional man, has been guilty of improper conduct in the transaction, and particularly so in knowingly omitting from the will legacies which he knew (for so jury found) that the testatrix had ordered and still desired, but which escaped her memory at the time the will was executed. This conduct, and the suspicions which flowed from it, gave the next of kin a fair and reasonable ground for litigation. The Court therefore orders that the costs of the plaintiffs be paid out of the estate."
In making (Hyland v Burbidge BC 9201526 at 23) or in declining to make (Sawbridge v Hill (1871) 2 LR P&D 219 at 221) an order for security for costs in probate proceedings, the Court may have regard to the effect of such an order on the administration of the estate the subject of the proceedings.
If an order for security is to be made against a party who is ordinarily resident outside Australia, but who resides in a jurisdiction which has reciprocal enforcement protocols with Australia, what is necessary for the due administration of an estate may be a factor to be taken into account in deciding whether the quantum of security ordered should be limited to the costs of enforcing an order of the Court in the foreign jurisdiction. The presence of that factor might serve to distinguish probate proceedings from other types of case, in which a defendant might be confined to security limited to foreign enforcement costs. Cf, Lo Surdo v Public Trustee [2003] NSWSC 837 at [22]-[31].

SPECIFIC FACTORS RELIED UPON BY THE PLAINTIFF : FRUSTRATION OF ESTATE ADMINISTRATION AND FUTILITY OF AN ORDER FOR SECURITY

The plaintiff contends for a right to be heard on his claims for relief based on the 2006 document, and in opposition to admission of the 2016 will to probate, unqualified by any obligation to provide security for costs against the possibility that: (a) he might fail to establish his claims for relief based on the 2006 document; (b) he might fail in his challenge to the 2016 will, the defendants proving the validity of the 2016 will; and (c) he might be ordered to pay the costs of the defendants.
Viewed in terms of risk management, there is, my opinion, an appreciable risk that the case sought to be made by the plaintiff (with respect to both the 2006 document and the 2016 will) will fail, and that (in part, because he is apparently seeking to vindicate a personal right, representing no interest save his own) that risk is accompanied by a risk of an adverse costs order.
This assessment highlights the plaintiff's contentions that: (a) an order that he provide security for the costs of the defendants would stultify the proceedings generally, both on his claims for relief based on the 2006 document and in respect of the 2016 will; (b) an order that the proceedings be stayed until security is given would impede administration of the deceased's estate; (c) unless the case he seeks to make is determined on the merits after a full hearing, any grant of probate made in favour of the defendants would be liable to be revoked; and (d) because the defendants are on notice of his claim to a beneficial entitlement to a substantial portion of the deceased's estate, they cannot administer the estate in disregard of that claim without themselves being liable to account to him for his entitlement.
The plaintiff relies upon observations of the Privy Council in Guardian Trust and Executors Company of New Zealand Ltd v Public Trustee of New Zealand [1942] AC 115 at 128, where, upon revocation of a grant of probate in common form, the displaced executors of a will found to have been invalid were held liable to her next of kin for legacies paid out to third parties in reliance upon the grant of probate subsequently revoked: "A trustee who has received information of a charge on the interest of his cestuiq que trust in favour of a third party is not entitled to disregard it merely because he believes the charge to be invalid. Nor can an executor who has information of the existence of a later will act in disregard of such information merely because he honestly believes that his testator was not at the time of making it of testamentary capacity. In all such cases…, the question is whether the person acting in a fiduciary capacity has had notice of the claim, and not whether he formed a favourable or unfavourable view as to the prospect of the claim succeeding."
Debate on this aspect of the plaintiff's case did not extend to a consideration of the statutory protection available to the defendants, and those dealing with them, in the event of revocation of a grant made in their favour: see Probate and Administration Act 1898 NSW, sections 40D and 90(2).
A principal point of difference between the present proceedings and those dealt with by the Privy Council (which may not affect the plaintiff's alternative "declaration of trust" claim) is that, in the present proceedings, the defendants seek a grant of probate of the 2016 will in solemn form.
As explained in Estate Kouvakis; Lucas v Konakas [2014] NSWSC 786 at [249], a grant of probate "in solemn form" is a judicial statement that, on the Court's then assessment: 1. all persons interested in the making of a grant (and, particularly, those with an interest adverse to the making of a grant) have been allowed a fair opportunity to be heard, with a consequence that principles about the desirability of finality in the conduct of litigation should weigh heavily on any application for revocation of the grant; 2. on the evidence then formally noticed, the Court is satisfied that the particular grant represents, consistently with the law's requirement that testamentary intentions be expressed formally, an expression of the deceased's last testamentary intentions, if any; and 3. an order for a grant in solemn form appropriately serves the due administration of justice.
Whereas a grant of probate in common form may be described as "inherently revocable" (Tobin v Ezekiel (2012) 83 NSWLR 757 at [8]; Dickman v Holley [2013] NSWSC 18 at [235]), the same cannot be said of a grant in solemn form which, by its nature, demands deference to principles governing the finality of judgments.
If the plaintiff's claims for relief in due course were to be dismissed (UCPR rule 42.21(3)), or if the Court were to decline to hear the plaintiff in opposition to the defendants' claim for a grant of probate (Young v Jackman (1986) 7 NSWLR 97; Chamberlain Group Pty Ltd v Kids for Life Academy Pty Ltd [2015] NSWCA 241; 18 BPR 35,591 at [17]), for want of compliance with an order for security, the plaintiff would arguably be in no better position than a person who: (a) had notice of the claim for probate; (b) was given a reasonable opportunity to intervene in proceedings on the claim; and (c) did not intervene.
It is not necessary, at this stage of these proceedings, to form a concluded view about what, if any, factors should be taken into account on an application under UCPR rule 42.21(3) for an order that the plaintiff's claims for relief be dismissed, or about the effect of such a dismissal having regard to the Civil Procedure Act 2005 NSW, section 91. Nor is it necessary to form a concluded view about whether the plaintiff should be heard no further in the proceedings in the event that he fails to comply with an order for the provision of security.
It is sufficient for the day to determine, as I do, that the nature of the case sought to be advanced by the plaintiff in the principal proceedings does not render him immune from an order that he provide security for the costs of the defendants if a case for security is otherwise made out.
The plaintiff's contention that a stay of proceedings in aid of an order for security would impede administration of the deceased's estate can be met in at least two ways.
First, nothing in UCPR rule 42.21 mandates that an order for security must be accompanied by an order that proceedings be stayed. Both orders are within the discretion of the Court. While in most cases proceedings might be stayed until security is given (or, perhaps more often, relying upon the general power to stay proceedings found in section 67 of the Civil Procedure Act 2005 NSW, if security is not given), there may be cases (and the present is one) in which this is not appropriate: NSW Law reform Commission, report No. 137: Security for Costs and Associated Orders (December 2012), paragraphs [5.26]-[5.33].
Secondly, if an order for a stay were to be made under UCPR rule 42.21(1) it could (and should) be made on terms (authorised by the Civil Procedure Act 2005 NSW, section 86) that it not operate so as to affect administration of the estate of the deceased pursuant to the interim administration order made by Kunc J on 17 July 2017.

APPLICATION OF PRINCIPLES TO FACTS

Upon an application of UCPR rule 42.21, the plaintiff is "a plaintiff" not only in name but in substance. He seeks to invoke the jurisdiction of the Court for the purpose of establishing, in his own interest, rights said to attend the 2006 document. A primary focus of the principal proceedings (and the one likely to occupy most time and costs) is the provenance, validity and effect of that document. The status of that document, irregular in form and content, is at the core of the proceedings.
But for the Statement of Claim, in which the nature of the document is laid out, and the plaintiff's related challenge to the validity of the 2016 will, the principal proceedings would be a routine application for probate of a regular form of will conforming to an established pattern of the deceased. In a practical sense, the plaintiff is, in forensic terms, the moving party in the proceedings, it being incumbent on him to prove the 2006 document.
A determination of the plaintiff's status having been made, there is no dispute that he is ordinarily resident outside Australia within the meaning of UCPR rule 42.21(1)(a). That fact enlivens the discretions (to make an order for security and to order that the proceedings be stayed) for which UCPR rule 42.21(1) provides.
Non-residence is a pre-condition to an exercise of the discretion to order security, but there must be something more to justify an order: Lo Surdo v Public Trustee [2003] NSWSC 837 at [26]. That "something more" is an unacceptable risk that, unless an order for security is made, a costs order made later in the proceedings will be frustrated by an unwillingness or inability of the plaintiff to satisfy it.
If and to the extent that the plaintiff is impecunious, that fact cannot, of itself, justify the making of an order for security: UCPR rule 42.21(1B).
Turning to the criteria for the making of an order for security to which UCPR rule 42.21(1A) invites attention, the following attract comment: 1. Although the plaintiff is a cross defendant to the defendants' claim for a grant of probate in respect of the 2016 will, in the context of the proceedings as a whole he is effectively the plaintiff, not simply in the position of a defendant: UCPR rule 42.21(1A)(e). 2. The plaintiff has no assets in Australia and, on that basis, any order for costs made against him will not be enforceable within Australia: UCPR rule 42.21(1A)(m). 3. Although there are reciprocal arrangements for the enforcement of an order of the Court in the United Kingdom, enforcement of a costs order against the plaintiff in the UK would be likely to be attended by substantial inconvenience, and costs, having regard to the nature and structure of assets the plaintiff claims to hold there: UCPR rule 42.21(1A)(n). 4. The case the plaintiff seeks to make in the principal proceedings is arguable (but perhaps not strong), at least so far as concerns: (i) his application for an order that the 2006 document be admitted to probate as an informal will; and (ii) his objection to the 2016 will as invalid: UCPR rule 42.21(1A)(a). 5. I am not satisfied that the plaintiff is impecunious (UCPR rule 42.21(1A)(c)) but, if he is, no impecuniosity can be attributed to the defendants or the deceased (UCPR rule 42.21(1A)(d)). 6. I am not satisfied that an order for security for costs (more particularly, an order for the provision of a modest amount of security) would stifle the proceedings: UCPR rule 42.21(1A)(f). I do not exclude the possibility that the plaintiff might be able to obtain financial assistance (eg, from his sister Merryn, if not a litigation funder) in support of his conduct of the proceedings, if he is unable to fund the proceedings from his own resources. On one (debatable) view of the case, Merryn is beneficially entitled to a proportion of the deceased's estate and might be expected to support it, if not her sibling. 7. On the evidence presently available, there is no basis upon which the plaintiff's claims for relief can properly be regarded as otherwise than genuine: UCPR rule 42.21(1A)(b). 8. There is no basis upon which to find that delay on the part of the plaintiff in commencing proceedings has prejudiced the defendants: UCPR rule 42.21(1A)(i). 9. Nor can it reasonably be said that delay on the part of the defendants in applying for security militates against an order for security: UCPR rule 42.21(1A)(l). In my opinion, it is no impediment to an order for security that the defendants evidently waited until the pleadings were closed before (promptly thereafter) filing their motion for security. There was utility in the questions in dispute being clarified by pleadings, particularly in circumstances in which the strength of the plaintiff's informal will case is largely dependent upon the strength of his challenge to the validity of the 2016 will, a challenge not articulated until the close of pleadings. 10. The principal proceedings involve no particular matter of public importance, beyond the public interest element inherent in probate proceedings: UCPR rule 42.21(1A)(g).
Specific consideration needs to be given to the quantum of costs likely to be incurred in the principal proceedings (UCPR rule 42.21(1A)(j)) and the question whether the security sought by the defendants is proportionate to the importance and complexity of the subject matter in dispute in the proceedings (UCPR rule 42.21(1A)(k)).
Nevertheless, in my assessment, there is a risk (against which the defendants should be protected by an order for security) that the plaintiff's case in the principal proceedings will fail at a final hearing, he will be ordered to pay costs of the defendants and he will be either unwilling or unable to do so.
The defendants seek security in the sum of $175,000, against their "existing and expected" costs of $238,383. They support that level of claim with a detailed affidavit by an experienced solicitor, based upon assumptions about the future course of the proceedings. They point to cost estimates on the plaintiff's side of the record which suggest that the plaintiff's "existing and expected" costs could total $175,000.
Even if costs of that order were ultimately to be incurred, and reasonably incurred, on the defendants' side of the record, I am not presently satisfied that the proceedings are so complex as to render a forward estimate of that level of costs reasonable. The defendants' claim is for an order for security in a single lump sum directed towards providing for conduct of the whole proceedings, until the conclusion of a four day hearing, preceded by substantial interlocutory preparation, including medical evidence and the report of a handwriting expert.
The jurisdiction of the court to order that security be given extends to making an order that includes an element of security for costs already incurred; but the fact that a defendant has incurred those costs without first making an application for security is a factor to be taken into account upon an assessment of the quantum of security to be ordered: Dal Pont, Law of Costs (3rd ed, 2013), paragraphs [28.37]-[28.38].
The size of the plaintiff's claim in the principal proceedings (ostensibly not less than about $1.3 million) justifies serious preparation of the case in opposition to that of the plaintiff; but, at this stage of the proceedings, I doubt the necessity for, or utility of, an order for security having the reach for which the defendants contend. Too onerous an order for security might stultify the proceedings even if (as I apprehend) a more modest one would not. A balance must be struck.
In my opinion, having regard to all the circumstances of the case (including the possibility that the proceedings might settle), the appropriate order for security is one that requires the plaintiff to give security in the sum of $75,000, in the form of a bank bond or such other form as might be agreed between the parties or approved by the Registrar.
In circumstances in which the defendants have been appointed interim administrators of the deceased's estate, and having regard to the time of the year at which an order for security is made, I propose, subject to any submissions that might be made to the contrary, to allow the plaintiff until 28 February 2018 to give the security ordered.
I do not propose to order that the proceedings be stayed in aid of the order for security, in circumstances in which the deceased's estate is the subject (only) of an interim form of administration. These proceedings differ from those in which Powell J made an order for security (Hyland v Burbidge) because there a grant of probate had been made, but was the subject of an application for revocation, whereas here no grant has yet been made, although interim administrators have been appointed.
It is generally not in the public interest for an application for probate to be left, unnecessarily, in abeyance. In the present case, the parties should be left to prepare for a final determination of the principal proceedings as they deem appropriate. The plaintiff does not himself seek a grant of administration. It is in the interests of all concerned that there be a grant of probate or administration as soon as may be practicable.
Although I am not minded to stay the proceedings: unless the parties press the Court for directions for the preparation of evidence in the meantime, I propose to adjourn the proceedings until a date shortly after 28 February 2018, reserving liberty to apply for an earlier directions hearing in the event that the plaintiff gives the requisite security earlier than that date.
Prima facie, the plaintiff should pay the defendants' costs of the motion for security, costs following the event.

CONCLUSION

Subject to allowing the parties an opportunity to be heard as to the form of the orders to be made and costs, I propose to make orders to the following effect: 1. ORDER that, no later than 28 February 2018, the plaintiff give security in the sum of $75,000 for the defendants' costs of the proceedings. 2. ORDER that such security be given in the form of a bank bond or in such other form as may be acceptable to the Registrar. 3. RESERVE to the defendants liberty, if the plaintiff fails to comply with Order 1: 1. to apply, by motion on notice, for an order that the Statement of Claim be dismissed; or 2. to object to the plaintiff being heard further in the proceedings unless and until he provides security for the defendants' costs as ordered. 1. RESERVE to the defendants liberty to apply, by motion on notice, for further security; 2. ORDER that the plaintiff pay the costs of the defendants' motion for security. 3. ORDER that the defendants be at liberty to have those costs assessed, and enforced, forthwith. 4. ORDER that the proceedings be listed before the Registrar on 5 March 2018 for directions. 5. RESERVE to the parties liberty to apply for an earlier directions hearing in the event that the plaintiff provides security for the defendants' costs earlier than the time limited by Order 1.

Amendments 21 December 2017 - Addendum (21 December 2017) added. 29 January 2018 - Deletion of "both" in last line of 92 (b). Insertion of "(from the rule that costs follow the event)" in the fourth line of 99. 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: 29 January 2018

Re Estate Condon; Battenberg v Phillips

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (21 paragraphs)

Parties

Legislation Cited (1)

Cases Cited (21)

Cited By (4)