SHORTEN v SHORTEN

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40308/01

MASON P MEAGHER JA SHELLER JA

Noel William SHORTEN v Stanley Alexander SHORTEN (No 2) JUDGMENT

1 MASON P: The deceased, Florence Minnie Shorten, died on 6 February 1999 aged eighty-eight. Foster AJ granted probate in solemn form of her will made on 25 January 1996. He rejected the claim that she lacked testamentary capacity raised by the appellant Noel Shorten who propounded a 1979 will that the 1996 will had revoked (see Shorten v Shorten [2001] NSWSC 100). 2 Noel Shorten's cross claim propounding the earlier will was dismissed with costs. The costs of the plaintiff executor (Stanley Shorten) were ordered to be paid out of the estate of the deceased and to be assessed on an indemnity basis. Otherwise there was no order as to costs. Foster AJ gave his reasons for these costs orders in a supplementary judgment (Shorten v Shorten [2001] NSWSC 363). 3 Noel Shorten's appeal against the orders made by Foster AJ was dismissed with costs (Shorten v Shorten [2002] NSWCA 73). That judgment sets out the detail of the issues litigated at first instance and on appeal in relation to the estate. 4 Noel Shorten argued that at first instance his costs should have been ordered to be paid out of the estate. 5 In my reasons (with which Meagher JA and Sheller JA agreed) I said this: The appellant's challenge to the costs order fails, in my opinion, at the level of failing to establish any error in the exercise of the judicial discretion on the facts of the particular case. His Honour expressed his reasons in a supplementary judgment ( Shorten v Shorten [2001] NSWSC 363). However some of the argument raises a question of some importance, since this Court was invited not to follow or alternatively to overrule some of the reasoning in the decision of Perpetual Trustee v Baker [1999] NSWCA 244 in light of a High Court decision in Middlebrook v Middlebrook (1962) 36 ALJR 216. I propose that in that aspect of this Court's decision in the matter, this Court's reasons in the present matter be reserved. 6 This judgment further addresses the reasons supporting the order made by Foster AJ for the costs of the trial. 7 This was a case where the executor/beneficiary under an earlier will unsuccessfully challenged the validity of the later will which revoked it. The challenge was based exclusively on a claim that the deceased lacked testamentary capacity. 8 The deceased suffered a severe stroke in July 1988. Before then she had been a fit, strong-willed woman. Between November 1988 when she was discharged from Tamworth Base Hospital and her death in February 1999 she resided in the Peel Nursing Home in Tamworth. As indicated, the will for which probate was granted in solemn form by Foster AJ was executed on 25 January 1996. At that time the deceased was confined to a wheelchair and difficult to communicate with, particularly because she had difficulties in expressing her wishes. 9 Foster AJ described the evidence of three lay witnesses (whom he accepted) in the following terms: Those three witnesses were clearly of the view that they could make themselves understood to the deceased, in conversation, provided they took their time and were patient. Responses that they received by word or gesture indicated to them sufficiently that the deceased had comprehended what was being said to her.

The deceased's ability to communicate was obviously very limited. I am not satisfied, on the evidence called by the defence, that she was, for practical purposes, limited to the words 'yes' and 'no' which were sometimes used inappropriately. I am satisfied she had an ability to, at least, make small sentences and to convey her meaning by single words and expressive gestures. In my view the following passage from Donna Shorten's affidavit, which I accept, gives a clear picture of the deceased's ability to understand and to communicate. It reads as follows: 11. "Minnie's condition after the stroke was stable for years. She only really deteriorated in the last few months of her life.

One of the after effects of the stroke was to give her significant difficulties of communication in that she had a lot of trouble in expressing herself.

In my experience of her ability to understand conversation was strong. (sic)

She would become very frustrated at her inability to express herself and this frustration would be shown by facial expressions, shaking her head, moving her left hand and arm to make gestures of displeasure.

Accordingly communicating with Minnie became a matter of getting down to what she wanted to convey.

One had to interact with her using step-by-step procedures.

By way of example I recall a matter a few days after the stroke talking to Minnie and finding that she was ill at ease about something she wanted.

On that occasion I proceeded by putting to her alternatives until ultimately I was able to understand that what she wanted was her glasses which were in turn inside her black handbag which was at her home in Nundle in her bedroom in a cupboard.

If you took time with Minnie you could find out what she wanted to say.

There were a number of occasions when she came out to stay with my husband and I and as such I needed to be able to communicate with her to find out what she wanted.

I found that if one was to apply ordinary common sense dealings one could get to what it was that Minnie wanted to say. You had to be patient, you had to give her time, you had to be interactive with her.

I never had any doubts that Minnie's mind was clear.

She was a lady of firm character, she was determined and she knew what she wanted.

32. In communicating with Minnie she could at her very best string together phrases. Her conversation was not limited to mere responses 'yes' and 'no', although mostly that was all she was required to say.

33. The best that Minnie could do was to put together say somewhere of the order of a sentence of about four words.

34. It particularly struck me on a number of occasions that Minnie's recall of other people was unaffected by her stroke.

35. I can recall phrases and sentences of a short nature said by my mother-in-law on different occasions over the years such as: 'want to go home', 'beautiful garden', 'look at that', 'good night'."

10 All concerned knew that testamentary capacity would be in issue when arrangements were made for the deceased to give instructions for her 1996 will. Accordingly, the family solicitor who would normally have done work for Stanley Shorten formed the view that an independent solicitor should be brought in. That new solicitor (Mr O'Halloran) was put on notice that there were questions about the deceased's legal capacity and that the former solicitor was leaving it to Mr O'Halloran to form his own view on the matter. Mr O'Halloran's evidence was closely examined by the primary judge. 11 There was a genuinely triable issue as to lack of testamentary capacity. The evidence of Noel Shorten and his witnesses, including the specialist evidence of Ms Bennett, a clinical neuro-psychologist, raised questions as to the deceased's testamentary capacity. But at the end of the day the court was satisfied on that issue in light of the totality of the lay and medical evidence. 12 There was nothing unusual about this probate litigation. It was a contest between the adult sons of an aged and infirm parent who had revoked a will favouring one son upon making a later will favouring her other sons. There had been a change of circumstances which explained the testatrix's change of heart and there was both lay and medical evidence as to her testamentary capacity at the time. 13 When addressing costs, Foster AJ considered whether there were circumstances which afforded reasonable grounds for doubting testamentary capacity and opposing the will being admitted to probate. He held that such grounds existed, although it was appropriate that the unsuccessful defendant should bear his own costs ([2001] NSWSC 363 at [6]-[8]).

Costs in contested probate trials 14 Costs are in the discretion of the court, but in civil trials the proper exercise of that discretion will normally require that the unsuccessful party be ordered to pay the other party's costs. This reflects the principle that an order for costs seeks to indemnify or compensate and not to punish (Ohn v Walton (1995) 36 NSWLR 77 at 79). The general rule is enshrined in Pt 52A r 11 of the Supreme Court Rules that provides: If the court makes any order as to costs, the court shall, subject to this Part, order that the costs follow the event, except where it appears to the court that some other order should be made as to the whole or any part of the costs.

15 This basic rule applies in contested probate litigation, but there are two well-recognised exceptions in that field. In an often cited passage in Re Estate of Hodges (decd); Shorter v Hodges (1988) 14 NSWLR 698 at 709 Powell J said: Costs are, of course, in the discretion of the court, but that discretion, being a judicial, and not an unfettered, one must be exercised in accordance with established principle. The general principle to be applied in adversary litigation is that costs follow the event, those costs being taxed on a party and party basis. However, over the years, a number of exceptions to this general rule have come to be recognised. In the field of probate litigation, two such exceptions have come to be recognised, they being: 1. where the testator has, or those interested in residue have, been the cause of the litigation, the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate; 2. if the circumstances led reasonably to an investigation in regard to the document propounded, the costs may be left to be borne by those who respectively incurred them: see, eg Mitchell and Mitchell v Gard and Kingwell (1863) 3 Sw & Tr 278; 164 ER 1280; Orton v Smith (1873) LR 3 P & D 23; Wilson v Bassil [1903] P239; Spiers v English [1907] P 122; Kenny v Wilson; In the Estate of Holtam; Gillett v Rogers (1913) 108 LT 732. To these exceptions to the general principle should, perhaps, be added the principle that, although a legal personal representative may be entitled to recover from a party to litigation costs only on a party and party basis, he, as a fiduciary, retains the right to an indemnity from the estate, and, thus, may have recourse to the estate for any difference between his costs on a trustee basis and the costs recovered from a party. 16 In Hodges the deceased suicided within hours of making his last will. He was severely depressed at the time, but not of unsound mind in the sense of having a clinical psychiatric condition. Powell J said (at 710): While, in the present case, I do not think that the Deceased can be regarded as having been "the cause of the litigation", in the sense in which that phrase seems to have been used in the cases (see Orton v Smith ); nonetheless, it seems to me that the facts were such as might be said "to lead reasonably to an investigation". This being so, it seems ot me that the appropriate course to adopt in regard to costs is to make no order, but, instead, to leave them to those by whom they were incurred.

17 Some of the English cases describe the first exception in terms of the "fault" of the testator (see, eg Re Cutcliffe's Estate [1959] P 6). 18 In his appeal against the costs order Noel Shorten submitted that this was a case where the litigation had been caused by the conduct of the testator, with the result that it fell within the first exception in Hodges. He submitted that this was a case where an investigation into the capacity of the deceased was necessary because of the circumstances peculiar to the deceased. He cited the following passage in the joint judgment of Giles JA and Brownie AJA in Perpetual Trustee Company Ltd v Baker [1999] NSWCA 244: [13] Costs are in the discretion of the Court, and the established principle on which the discretion as to costs will normally be exercised is that costs follow the event. In probate litigation, in particular, however, exceptions have been recognised, one being that where the testator has been the cause of the litigation the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate, and another being that if the circumstances led reasonably to an investigation concerning the testator's will the costs may be left to be borne by those who incurred them (see for example in the estate of Hodges: Shorter v Hodges (1988) 14 NSWLR 698 at 709). [14] The two exceptions tend to overlap. As was said by Santow J in In the Estate of Moyle: Moyle v Moyle (18 June 1988, unreported), if a testator is by his mental frailty and other circumstances in a position where the circumstances reasonably call for investigation of the validity of the will "in one sense the testator, though usually with no sense of blameworthy fault, has by his or her conduct caused the litigation to occur". A party reasonably but unsuccessfully propounding or challenging the will, and so bringing about the necessary investigation, should no more have to bear his own costs than pay the costs of the other party. So it has been said that where the conduct and habits and mode of life of a testator have given ground for questioning his testamentary capacity the costs of the unsuccessful party should be paid out of the estate, as distinct from being left to be borne by that party ( Davies v Gregory (1873) 3 P & D 28; Roe v Nix (1893) P 55; In the Will of Millar (1908) VLR 682), and the costs of both sides in testamentary capacity cases have often been allowed out of the estate ( In the Will of Severs (1887) 13 VLR 572; Phillips v Dundas (Smith J, unreported); re Ryan: Williams v Ryan (1998) VSC, 109; In the Will of Ryan: Williams v Ryan (Byrne J, VSC, 23 October 1998, unreported); Cf Middlebrook v Middlebrook (1963) 26 ALJR 216 where Dixon CJ and McTiernan, Taylor and Owen JJ ordered that the parties bear their own costs but Menzies J would have ordered that the costs be paid out of the estate). [15] We consider that the approach in these cases extends to the costs of unsuccessfully seeking to uphold a grant of probate on appeal, at least where the result at first instance was not obviously erroneous. In the present case the respondent was a necessary contradictor, and can hardly be said to have acted unreasonably when possessed of a judicially sanctioned grant. In the circumstances of the present case, we consider that a proper exercise of discretion is that the costs of the appeal should be paid out of the estate of the deceased, in the case of the appellant on a trustee basis.

19 There are many statements to the effect that where the conduct, habits and mode of life of a testator have given ground for questioning testamentary capacity, the costs of the unsuccessful opponents of the will will be ordered to be paid out of the estate (see generally Williams, Mortimer and Sunnucks, Executors Administrators and Probate 18th ed, 2000 p448). Early cases involved testators who left their testamentary papers "in confusion" but the "conduct of the testator" could include irrational actions giving rise to reasonable doubts about testamentary capacity provided they were genuinely held by those opposing the grant (see Davies v Gregory (1873) LR 3 P&D 28 at 31; Clarke v Clarke (1901) 1 SR(NSW) B & P 25; Johnston v Public Trustee (1929) 24 Tas LR 71). 20 These and other cases provide support for the proposition in Moyle and Baker (adopting the remarks of Santow J in Moyle) that the two exceptional categories stated in Hodges tend to overlap. But the categories are not coterminous. They remain conceptually distinct, although the court's ultimate discretion as to costs may result in an opponent's costs being met by the estate in situations such as mentioned in the previous paragraph. 21 Middlebrook v Middlebrook (1962) 36 ALJR 216 involved an appeal to the High Court from an order by Myers J in the Probate Jurisdiction of the Supreme Court admitting a will to probate. The will was a simple one and it had been prepared by a solicitor on the instructions of the testator two days before the testator's death from carcinoma. The solicitor gave evidence that the testator's instructions were clear and that his manner of responding to questions disclosed no doubts as to his mental capacity. The testator's son had opposed the grant of probate and relied upon evidence from a doctor and nurse that raised questions about the deceased's capacity to comprehend what he was doing at the relevant time. However, since the medical evidence primarily addressed the physical state of the deceased it was held insufficient to displace the effect of the solicitor's evidence which touched directly upon the issue of testamentary capacity. 22 The High Court did not disturb the grant of probate, but set aside Myers J's order that the caveator pay the costs of the proceedings. In lieu, the High Court ordered that there be no order as to the costs of the probate suit. This left the caveator liable for his own costs of the trial, as in the present case. 23 Dixon CJ (McTiernan J agreeing) dealt with costs as follows (at 217): I am not content, however, to uphold his Honour's order as to costs. His Honour ordered the caveator to pay the plaintiffs' costs of the suit. No doubt in probate suits the prima facie rule is that, as in other litigation, costs follow the event. But in probate suits there are considerations which more readily affect the application of this rule than in most other forms of litigation. See Re Keane , [1909] VLR 231, at p239. An examination by Hood J of the more important English cases decided up to the date of his judgment will be found in Re Millar [1908] VLR 682. There are in the present case circumstances which would naturally lead the caveator to think that an investigation of the validity of his father's last will was justified. If this case were judged on its general circumstances only, I think that adequate reasons would be seen for entertaining some doubt as to the validity of the will. It is only as a result of investigation that the reasons for finding affirmatively in favour of the testator's testamentary capacity distinctly appear. In these circumstances the proper course is to apply the principle enunciated by Sir Gorrell Barnes P that "if the circumstances lead reasonably to an investigation of the matter then the costs may be left to be borne by those who have incurred them". Spiers v English [1907] P 122 at p123. I think that the order appealed from should be varied accordingly.

24 Owen J explained his disagreement with the costs order at first instance in the following terms (at 223): Finally it was argued that his Honour should not have ordered the defendant to pay the plaintiffs' costs of the proceedings. In exercising the discretion which s153 of the Wills Probate and Administration Act, 1898-1954 (NSW) gave him, his Honour relied upon the decision in Re Cutliffe's Estate , [1959] P 6, as showing that the defendant could not rely upon the evidence of Sister Mills to justify a departure from the general rule that costs follow the event because the sister's evidence had not been accepted. In this respect I think his Honour fell into error. In Cutliffe's Case the evidence which was disbelieved was that of the parties who had opposed the grant of probate on the ground of undue influence. But that is not the present case and, in all the circumstances, I am of opinion that no order as to costs of the proceedings before Myers J should have been made and that his Honour's order should be varied accordingly.

25 Taylor J did not address costs in his reasons. Although he expressed his agreement with the observations of Menzies J and Owen J, I read this as dealing with the substantive issues, because Taylor J expressly agreed with the form of order proposed by Owen J. 26 Menzies J agreed that Myers J had erred in following Cutcliffe, a case in which a plea of undue influence had been rejected as an "invention". He would have ordered the costs of the plaintiffs to be paid out of the estate, having regard to various matters (see at 218). However, this was a dissenting view in the High Court. 27 The appellant's submission that Foster AJ erred in principle in light of Baker's Case cannot therefore be accepted. It was well open to his Honour to conclude that this case fell within the second "exception" stated by Powell J in Hodges. Merely because the deceased's condition following her stroke raised triable issues as to her testamentary capacity did not require the court to conclude that she had been the "cause" of the litigation. 28 In any event, the appeal as to costs was bound to fail because the appellant never suggested to Foster AJ that this was a case where the litigation was caused by the conduct of the testator (see [2001] NSWSC 363 at [4]). 29 MEAGHER JA: I agree with Mason P. 30 SHELLER JA: I agree with Mason P. **********

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