Smith v Magi

Supreme Court of NSW|2011-04-06|Before: Davies J, Santow J, White J

Judgment 1On 25 March 2011 I gave judgment on an application by the Defendant to be allowed to adduce expert evidence and a further application by the Defendant to rule on the admissibility of the expert evidence adduced by the Plaintiff - see Smith v Magi [2011] NSWSC 198. I refused leave to the Defendant to adduce expert evidence. I determined that the second report of Dr Guthridge of 8 April 2009 should not be admitted into evidence because it did not contain an acknowledgement that it was prepared in accordance with the Expert Witness Code, nor did it comply with the principles in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705. I gave leave to the Plaintiff to obtain and rely on a further report from Dr Guthridge which complied with the principles in Makita and the Expert Witness Code. 2Within hours of delivering that judgment the Defendant advised that she no longer contended that the 2007 Will should be admitted to probate and she did not intend to contest the application for probate of the 1999 Will. 3Two sets of proceedings had been commenced. The Plaintiff had commenced proceedings on 11 January 2010 seeking probate of the 1999 Will in solemn form. On 29 January 2010 the Defendant commenced proceedings naming Marilyn Dowd as the Defendant. In these proceedings she sought probate of the 2007 Will and sought an order that a caveat lodged by the Defendant cease to be in force. Those proceedings were not properly constituted because the Plaintiff ought to have been named as an additional Defendant. It appears that those proceedings were not advanced. Rather, the contest took place on the basis of the proceedings commenced by the Plaintiff. 4In those circumstances, it is necessary to deal with the application for probate of the 1999 Will and the costs of the proceedings. Final orders need to be made in that regard.

The grant of probate 5In Phillpot v Olney [2004] NSWSC 592 White J said: [7] Because the grant of probate or letters of administration is a public act, the Court will not make orders for the grant of probate or of letters of administration merely because the parties have agreed to them. ( Re Podger [1957] VR 275 at 278; Re Grey deceased [1978] VR 596 at 601; Re Irving deceased [2003] VSC 351 at [23]). In this case the order affects a person other than the parties to the proceeding. On the other hand, the fact that the parties have agreed upon orders for the resolution of the issues in the case is a relevant circumstance, particularly where, as in this case, the plaintiff and the defendant have retained counsel of known competence and experience in the area. 6In the present case the other persons particularly affected by probate being granted of the 1999 Will are the deceased's great grandsons Brendan Kajic and Justin Kajic. They are the sons and grandsons of the Plaintiff and the Defendant respectively. Under the 1999 Will they each receive $10,000 and a specified chattel whereas under the 2007 Will they share equally in one half of the estate of the deceased. 7Citations were issued to each of these beneficiaries but neither has appeared. Subsequent to the decision of the Defendant not to contest probate being granted of the 1999 Will letters were sent to each of these beneficiaries informing them of the Defendant's decision. The letters suggested they may wish to seek independent legal advice, asked if they had any objection to what was proposed, and noted that the matter was further listed before the Court on 6 April 2011. Follow up letters were sent 4 days later which expressly pointed out to them that they would receive greater benefits under the 2007 Will than under the 1999 Will. They were again informed that the matter was before the Court on 6 April 2011, that if they did not appear it was expected that the 1999 Will would be admitted to probate and that they would be bound by that decision. 8There was no appearance for either of these beneficiaries when the matter was heard on 6 April 2011, and I was informed by Senior Counsel for the Plaintiff that there had been no contact from those beneficiaries with his instructing solicitors. 9In my opinion, it is appropriate that the 1999 Will be admitted to probate for the following reasons. There is no question of the deceased's competence or capacity in relation to the 1999 Will. The matters of significance concern the 2007 Will. 10First, Dr Guthridge examined the deceased on 30 October 2006 for the purposes of providing a report to the Guardianship Tribunal. She diagnosed dementia probably of the Alzheimer's Type. She found he had a poor short-term memory and was vulnerable to financial misappropriation. He had no insight into his cognitive impairment, believing himself quite capable of managing his own affairs and caring for himself. She noted that a neighbour who had known him for 19 years and had assisted him on a regular basis had noticed a 2 year history of gradual cognitive decline. 11Secondly, his general practitioner who had looked after him from 1997 until his death in 2008 thought that he suffered from dementia most probably of the Alzheimer's type which severely affected his mind, memory and understanding. He agreed with Dr Guthridge that he was not competent to manage his own financial needs. 12Thirdly, I have evidence of documents which went to the Guardianship Tribunal from the Hunter New England Aged Care Assessment Team which carried out an assessment of the deceased on 7 April 2008. It is accepted that this post dates the November 2007 Will but it must be seen in the light of the earlier assessments by both Dr Guthridge and Dr Clemensen. The Aged Care Assessment noted that he always had short term memory problems, occasionally had long term memory problems, he occasionally wandered, and he was always confused and disoriented in time and place. 13Fourthly, attacks are made on the later Will arising out of the very recent rapprochement between the deceased and the Defendant, and the way the Will instructions were obtained, including the fact that the solicitor retained was not previously known to the Defendant and that solicitor did not seem to be aware of the 1999 Will. 14As Rein J said in Grant v Binetter [2010] NSWSC 278 at [34], it is not necessary for me to form any view about whether these matters would be made out. Rather, I only need to be satisfied that there is a bona fide case put forward to attack the 2007 Will. I also have regard to the undoubted competency of counsel advising the parties, and to the fact that ample notification has been given to those most affected by the 1999 Will being admitted to probate.

Costs 15The Plaintiff seeks her costs of the proceedings out of the estate on an indemnity basis. That order is not opposed by the Defendant. The Defendant seeks her costs out of the estate on a party party basis with the proviso that those costs do not exceed the Plaintiff's costs. The Defendant says that an order that she receive her costs out of the estate will result in finality to the disputes between the parties because she will thereafter consent to the dismissal of her proceedings under the Family Provision Act 1982. The Plaintiff opposes the Defendant receiving her costs from the estate. 16Although the usual order in civil matters is that an unsuccessful party (which includes one who consents to the orders sought by the other side) should pay the successful party's costs, there are 2 well recognised exceptions in contested probate litigation. The often cited passage in this regard is to be found in Re Estate of Hodges (Deceased); Shorter v Hodges (1988) 14 NSWLR 698 at 709: 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:

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;
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] P 239; 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. 17In the present case, the Defendant argues that she falls within the first exception, that is, that the testator has been the cause of the litigation. The Plaintiff argues that the proceedings do not fall within either exception and submits that because the proceedings were ultimately not contested and because the Defendant has in effect discontinued her own proceedings claiming probate of the 2007 Will, there needs to be a reason to depart from the ordinary position that the Defendant should pay the costs of the proceedings. 18It is clear that the 2 exceptions tend to overlap: In the Estate of Moyle; Moyle v Moyle (unreported - Santow J - 18 June 1988). This led Giles JA and Brownie AJA to say in Perpetual Trustee Co Ltd v Baker [1999] NSWCA 244 at [14] in a passage quoted with approval by Mason P (with whom Meagher and Sheller JJA agreed) in Shorten v Shorten (No 2) [2003] NSWCA 60 at [18]: 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). 19Similarly, Campbell J (as his Honour then was) said in Re Estate Late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311 at [30] that in the area of overlap it is a matter for the trial judge in the light of the circumstances of the particular case to decide which costs order better achieves justice. That is consistent with what Bryson AJ said in Dawson v Peters (No. 2) [2007] NSWSC 1421 at [7]. 20The evidence tends to suggest that the desire to make a new will in 2007 emanated from the deceased because his brother Frank had died that year, and Frank was the executor of the 1999 Will. Whilst it is certainly true that the Defendant facilitated the deceased achieving his desire to make a new will, including taking him to solicitors, that was done in the light of the fact that the Guardianship Tribunal had refused earlier that year to make any order in respect of the deceased's affairs and had adjourned that application for a 12 month period. 21Those matters cause me to reject the submission of the Plaintiff that the making of the will was caused by the Defendant rather than the deceased. Further, it seems clear that in all of the circumstances there was a need for investigation in relation to the 2007 Will. This case appears to me to be one where it could be said the 2 exceptions overlap. 22To determine which costs order best achieves justice the circumstances that need to be considered are whether the solicitor retained to prepare the will for the deceased was alive to his responsibilities in terms of satisfying himself of what may be described as the Banks v Goodfellow requirements. Mr Meek of Senior Counsel for the Plaintiff disputes that the solicitor's investigation in that regard was adequate, particularly because the solicitor did not apparently enquire about the existence of any earlier will and was not aware of such will. Nevertheless, the evidence of the solicitor who subsequently took over the preparation of the new will in the first solicitor's office was that she was provided with a copy of the earlier will some months before the 2007 Will was signed. 23Mr Meek says further that the solicitor made no assessment of the deceased's capacity to reason. However, what is recorded on the solicitor's note about the deceased's reason for excluding Marilyn Dowd blunts that submission to some extent. The reason the deceased gave for excluding his other daughter Marilyn was not challenged as being other than an appropriate reason. 24I also have regard to the fact that the first draft of the 2007 Will provided for the whole estate to go to the Defendant. The deceased subsequently gave further instructions, albeit through the Defendant it is accepted, the result being that the 2007 Will provided for a quarter share to go to each of the Plaintiff, the Defendant and the 2 great-grandsons. That was against the Defendant's interest and might be thought to have resulted from a decision of the deceased himself. 25All of these matters seem to me to justify the approach taken by the Defendant to oppose probate of the 1999 Will and propound the 2007 Will. In the first place, therefore, the Defendant is entitled to some costs out of the estate. The matter to be determined is what is the appropriate cap to be put on the Defendant's legal costs. 26When the matter came before Palmer J on 6 December 2010 Palmer J was informed that the Defendant's costs to that point were $142,000. His Honour refused leave to the Defendant at that point to adduce expert evidence as to the deceased's capacity. 27As I noted in my earlier judgment when the further application was made to adduce the evidence of Dr Obeid the Defendant offered to cap her costs at $50,000.00 up to 6 December 2010 or such other sum as the Court considered appropriate from 7 December 2010. 28At the costs hearing Mr Loofs of counsel said that the reason the Defendant had decided, after my earlier judgment, not to contest probate of the 1999 Will was because of the leave that I gave for Dr Guthridge to prepare a further report that complied with the Expert Witness Code and the principles in Makita . But, of course, the decision must necessarily have been related also to my refusal to permit the report of Dr Obeid to be relied upon. Whether or not another report was obtained from Dr Guthridge was only particularly significant if the Defendant was not permitted to have her own expert give evidence. That raises the question, therefore, whether it was reasonable for the Defendant to have continued her opposition to the 1999 Will up to the time she withdrew that opposition and, if it was not reasonable, at what point it ceased to be reasonable. 29In my opinion, the Defendant's opposition to the 1999 Will ceased to be reasonable after Palmer J's decision in December 2010. Although it was always possible for the Defendant to make further application to rely on an expert witness, as she did before me, the chances that she would be permitted to do so, even with an offer to cap her costs, were very slim in the light of Palmer J's decision and his reasons. The probabilities after 6 December 2010 were that the Defendant would have no medical evidence to offer in answer to that of Dr Guthridge and Dr Clemensen and, although she had the evidence of the solicitors who prepared the 2007 Will, their evidence concerning assessments of the deceased would have to be seen in the light of the medical evidence not only of Dr Guthridge and Dr Clemensen but of the assessments made by the Aged Care Team in the periods surrounding the making of the 2007 Will. 30At the time of the application before Palmer J the Plaintiff's legal costs were said to be $50,000. That was no doubt the reason for the offer of a cap at that figure by the Defendant if she was permitted to adduce the evidence of Dr Obeid. 31Bearing in the mind the evidence that had been obtained by the Defendant at that time including affidavits from the 2 solicitors, the 2 witnesses to the will and the Defendant herself (and there were also other affidavits of less significance) it would be reasonable to conclude on the basis of the Plaintiff's costs to that point that a reasonable range of costs for the Defendant to that point would be $40,000 to $50,000. The Defendant should not be entitled to obtain any costs out of the estate beyond 6 December 2010. 32I reserved the question of costs from the hearing of the Defendant's Motions. The Defendant was largely unsuccessful. Had the Defendant been successful in being allowed to adduce the evidence of Dr Obeid I would not have given her the costs of that Motion because she was seeking an indulgence of the Court, that is, seeking to re-ventilate the matter argued before Palmer J by offering a cap on her costs. 33Although the Defendant was successful in having one of Dr Guthridge's reports excluded 2 things cause me to conclude that there should be no adjustment of the costs on the Motion for that. The first thing is that it was a matter of form and not substance, and in that regard I gave leave to the Plaintiff to serve and rely on a further report of Dr Guthridge that complied with the Witness Code. Secondly, the bulk of the hearing of the Motion was taken up with the question of Dr Obeid's report, and the assertion of a right to rely on it was linked to the inadequacy of the report of Dr Guthridge that was disallowed. 34The result is that the Defendant should pay the costs of the Motions. 35Rather than make 2 costs orders which would need to be offset after any agreement or assessment, the better course is to reduce the cap on the Defendant's costs recoverable in respect of the whole of the proceedings. 36I accept that the exercise involved in determining the appropriate cap on the Defendant's costs is to some extent arbitrary. However, I do not think I should place any weight on the Defendant's statement that she will discontinue her Family Provision Act claim if she obtains her costs out of the estate. There is no evidence to indicate the likelihood of her obtaining an order under that Act. In any event, it does not seem to be an appropriate consideration in determining what if any order should be made in other, albeit related, proceedings. 37Although the Defendant has sought her costs capped in a particular figure, and the Plaintiff accepts as its position of last resort that the Defendant should receive costs capped to no more than $40,000, an order in those terms is calculated only to result in the expenditure of more costs either to obtain an agreement on the final sum or to go to assessment. I have regard both to ss 56 and 60 Civil Procedure Act 2005, and consider that it is appropriate in this case to make an order pursuant to s 98(4) of that Act to specify a gross sum which will be recoverable by the Defendant from the estate. Having regard to the matters in paras [29], [30] and [32] - [34] above I consider that the gross sum the Defendant should recover from the estate should be $35,000.

Conclusion 38The orders that I make, therefore, are these: (1) Order that probate in solemn form of the will of the Late Arthur Ernest Rice dated 7 September 1999 be granted to the Plaintiff. (2) I refer the proceedings to the Registrar to complete the grant. (3) I order the Plaintiff's costs to be paid out of the estate on an indemnity basis. (4) I order that the Defendant's costs fixed in the sum of $35,000 be paid out of the estate of the deceased.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 20 April 2011

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