Wehbe v Giotopoulos

Supreme Court of NSW|2023-08-10|Before: Darke J, Mr J

Introduction

On 14 July 2023, I delivered judgment in this matter, dismissing the plaintiffs' application for a grant of probate in solemn form of the will signed by the late Wadad Wehbe ("the deceased") on 8 July 2020: see Wehbe v Giotopoulos [2023] NSWSC 827 ("the principal judgment"). Consequently, I made orders declaring that the deceased died intestate. I also made orders for the making of a grant of administration, in respect of the intestate estate of the deceased, in favour of Andrew John Fleming, solicitor.
The issue which remains for determination in this matter is the question of costs as between the plaintiffs and the defendant.
At [84] of the principal judgment, I indicated my preliminary view that there seemed no reason why costs as between the parties should not follow the event. However, I noted that a forgery allegation, which was made in the Defence filed on 7 September 2021, but removed from the Amended Defence filed on 22 June 2022 and not pressed, constituted a discrete issue which was separable from the other issues raised by the defendant in the proceedings. Accordingly, I formed the view that the costs of that issue should be borne by the defendant, or at least not by the plaintiffs.
At [85] of the principal judgment, I indicated that the question of costs would be dealt with on the papers. To that end, orders were made directing the parties to serve and provide to my Associate brief written submissions.

Plaintiffs

The plaintiffs submit that the defendant is disqualified from any entitlement to costs. A number of submissions were made by the plaintiffs to this effect. Those submissions may be distilled as follows.
First, the plaintiffs observe that the defendant's claim that the deceased's execution of the will was procured by the undue influence of the plaintiffs was not established in the substantive proceedings. It is submitted that the failure to establish this claim amounted to a failure of the defendant on "issues of substance" which "occupied a substantial part of the proceedings".
Second, the plaintiffs referred to the circumstances identified by McHugh J in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [69] (as cited by Campbell JA in Tomanovic v Global Mortgage Equity Corporation Pty Ltd (No 2) (2011) 288 ALR 385; [2011] NSWCA 256 at [97]) in which the Court may depart from the usual order as to costs. The plaintiffs submit that a departure from the usual order as to costs is justified because the defendant "invited the proceedings", "unnecessarily protracted the proceedings" and prosecuted the matter "solely for the purpose of increasing the costs recoverable".

Defendant

The defendant accepts that she should bear the costs relating to the allegation of fraud which was abandoned upon her filing of the Amended Defence on 22 June 2022. However, the defendant refers to an order made in these proceedings by Hallen J on 20 June 2022, upon the granting of leave to file the Amended Defence, that the defendant is to pay the plaintiffs' costs thrown away, if any, by virtue of the grant of leave to amend.
The defendant submits that no further order for the payment of the costs of the fraud allegation is necessary because she accepts that the relevant order made on 20 June 2022 by Hallen J would include the plaintiffs' costs in respect of the fraud allegation.
As to the balance of costs, the defendant submits that she is entitled to her costs, and an indemnity from the estate of the deceased, as she successfully opposed the will propounded by the plaintiffs and the Court found that the deceased had died intestate.
The defendant submits that the substantive proceedings fall squarely within the principle identified by Isaacs J in Nock v Austin (1918) 25 CLR 519 at 529, whereby a party who creates a suspicion in relation to a will under which that party benefits is under a burden of clearing away that suspicion and ordinarily must, regardless of whether that party is successful, pay the costs of the opposing party. The defendant makes particular reference to the suspicious circumstances considered in the principal judgment, such as the close involvement of the beneficiaries in the preparation of the will, the limited ability of the testator to read and comprehend written English, and the significant burden the plaintiff's had to dispel the suspicious circumstances.
In addition, the defendant seeks costs on an indemnity basis. The defendant relies on the affidavit of her solicitor, David Shad, affirmed on 17 July 2023. Annexed to this affidavit is a Calderbank offer dated 30 May 2022 ("the Calderbank offer") and an offer of compromise dated 7 June 2023 and made under the Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR offer"). It is submitted that the settlement offers made were reasonable and, if accepted, would have avoided further costs being incurred. The defendant submits that the plaintiffs acted unreasonably by failing to accept either of the offers.
The terms of the Calderbank offer provided for the payment of a settlement sum of $220,000 (inclusive of costs) to the defendant by the plaintiffs, consent to the grant of probate of the 8 July 2020 will propounded by the plaintiffs, and an entitlement on the part of the plaintiffs to recover their costs from the estate of the deceased on an indemnity basis. The defendant says that she had incurred costs of about $85,000 by that time.
The Calderbank offer further provided, inter alia, that there otherwise be no order as to costs and that the defendant would bear her own costs of the proceedings. It is submitted that because Mary Naim (a daughter of the deceased and a sibling of the parties) was not a party to the Calderbank offer, the plaintiffs would have received a substantially greater return from the estate had the offer been accepted. As the plaintiffs and their brother (Bashir Wehbe) were the sole beneficiaries under the 8 July 2020 will, they would have been entitled to the whole of the estate equally.
In reliance on the Calderbank offer, the defendant seeks an order that the plaintiffs pay the defendant's costs on an ordinary basis up to the date of expiry of the Calderbank offer (25 June 2022), and on an indemnity basis thereafter (from 26 June 2022). To the extent that the defendant's costs are not wholly reimbursed by this order, the defendant seeks orders entitling her to costs on an indemnity basis from the estate.
The terms of the UCPR offer provided for letters of administration of the intestate estate of the deceased to be granted to Andrew John Fleming, and for the costs of all the parties to be paid from the estate of the deceased on an indemnity basis.
In reliance on the UCPR offer, the defendant seeks alternative orders that the plaintiffs pay the defendant's costs on an ordinary basis up to the date of the UCPR offer (7 June 2023), and on an indemnity basis thereafter (from 8 June 2023). To the extent that the defendant's costs are not wholly reimbursed by this order, the defendant seeks orders entitling her to costs on an indemnity basis from the estate.
The defendant also seeks various orders in relation to the administration of the estate. Orders are sought for the granting of the usual powers of an administrator to Andrew John Fleming. Orders are also sought entitling Mr Fleming to make a claim for and be paid from the estate in relation to all usual and proper charges arising from his work as an administrator, and the cost of engaging other professional advisers in relation to the administration of the estate. Additionally, the defendant seeks an order that Mr Fleming is entitled to deduct from the plaintiffs' shares of the estate any amount agreed or ultimately assessed in respect of the costs order in favour of the defendant, and pay such amount to the defendant.

Determination

The applicable legal principles relating to costs in the probate context were recently summarised by Henry J in Alexakis v Masters (No 3) [2023] NSWSC 694 at [7]-[14]. I respectfully adopt those principles here.
Turning first to the submissions of the plaintiffs, the logical starting point is to consider whether there is any basis for making an order departing from the general rule that costs follow the event.
The plaintiffs correctly observe that the defendant failed to establish that the execution of the will was procured by undue influence. This raises the question of whether the Court should exercise the discretion to apportion costs in accordance with the discrete issues raised in the substantive proceedings.
Having regard to the principles governing the assessment of costs where the successful party in the proceedings did not succeed on a particular issue, I do not accept that an apportionment of costs is appropriate in the circumstances of this case (see Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] per Beazley, Ipp and Basten JJA).
As observed at [81] of the principal judgment, it was ultimately unnecessary to decide the issue of undue influence, and the undue influence case, as particularised, was largely based upon the particulars of the suspicious circumstances case. While the undue influence case did include additional allegations (that were not made out) that the plaintiffs were violent and domineering towards the deceased, it did not take up a significant part of the trial, either by way of evidence or argument.
In Bostik Australia Pty Ltd v Liddiard (No 2) (supra), the Court of Appeal observed at [38] that "it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed". As a matter of impression and in light of the success of the defendant on the dominant issues arising in these proceedings, I am satisfied that such an approach is appropriate here.
Accordingly, I do not accept that the defendant's failure on a single issue (undue influence) disqualifies the defendant from any entitlement to costs.
I also reject the plaintiffs' submissions that the defendant "invited the proceedings", "unnecessarily protracted the proceedings" and prosecuted the matter "solely for the purpose of increasing the costs recoverable". Such allegations were not substantiated.
Turning then to the submissions of the defendant, I accept that the order made in these proceedings by Hallen J on 20 June 2022 is sufficiently wide to encompass the plaintiffs' costs relating to the defendant's allegation of fraud, which was abandoned by the filing of the Amended Defence on 22 June 2022. Those costs were thrown away by reason of the amendment that entailed the abandonment of the allegation. Accordingly, I accept the defendant's submission that a separate order in respect of the costs of the fraud allegation is unnecessary.
With respect to the balance of costs, it follows from the above that I see no reason to depart from the view I expressed at [84] of the principal judgment that costs as between the parties should follow the event. Furthermore, I accept the defendant's submission that the principle identified by Isaacs J in Nock v Austin (supra) at 529 is applicable given the suspicious circumstances identified in the principal judgment.
The next issue to consider is whether costs should be awarded against the plaintiffs on the ordinary basis or on an indemnity basis.
The defendant's proposed costs orders are based on the principles in Calderbank v Calderbank [1976] Fam 93 and the operation of Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") r 42.15A(2). As observed by Macfarlan JA in Walker v Harwood [2017] NSWCA 228 at [58], the principles concerning attempts to compromise proceedings by Calderbank offers or offers of compromise are applicable in probate actions. Therefore, the effect of the plaintiffs' rejection of the settlement offers made by the defendant must be considered.
In Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344, Basten JA (with whom McColl and Campbell JJA agreed), observed at [8] that, in determining the cost consequences of the non-acceptance of a Calderbank offer, the Court considers whether there was a genuine offer of compromise and whether it was unreasonable for the offeree not to accept it. In determining whether an offer constitutes a genuine offer of compromise, the Court does not inquire into the subjective intentions of the offeror. Instead, the Court inquires into whether the offeror (here, the defendant) offered to "give something away" in a real sense (see Mautray Pty Ltd v Pillemer Pty Ltd [2022] NSWSC 1315 at [13] per Williams J; see also Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) (supra) at [9] per Basten JA).
In determining whether the refusal by the plaintiffs was unreasonable, the Court may have regard to various factors including: 1. the stage of the proceeding at which the offer was received; 2. the time allowed to the offeree to consider the offer; 3. the extent of the compromise offered; 4. the offeree's prospects of success, assessed as at the date of the offer; 5. the clarity with which the terms of the offer were expressed; and 6. whether the offer foreshadowed an application for indemnity costs in the event of the offeree's rejecting it. (See Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 at [25] per Warren CJ, Maxwell P and Harper AJA; see also Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) (supra) at [12] per Basten JA (with whom McColl and Campbell JJA agreed)).
Upon intestacy, the estate is to be distributed equally amongst the five children of the deceased. The only evidence before the Court regarding the value of the estate is an "Inventory of Property" form (UCPR Form 117) annexed to an affidavit filed by George Wehbe in support of the Summons for Probate filed on 2 July 2021. According to the inventory, the net value of the estate was approximately $600,000. The estimate is not supported by any expert valuation evidence of the principal asset of the estate, namely a property in Punchbowl.
It appears that statements were made to the Court in May 2022 to the effect that the estate may have a value in the order of about $900,000. However, in the absence of any independent evidence of the value of the estate as at the time of the making of the Calderbank offer, it is not possible for the Court to conclude that the proposed settlement sum of $220,000 (inclusive of costs) was a genuine offer of compromise in the circumstances, whereby the defendant offered to "give something away" in a real sense. The value of the defendant's share in the estate as at the date of the Calderbank offer remains obscure.
In addition, I do not accept the defendant's submission that the plaintiffs would have received a higher return from the estate, had they accepted the Calderbank offer, because the proposed settlement did not provide for any payment to Mary Naim (who was not a party to the proceedings). This submission assumes that orders would have been made to effect the compromise and overlooks the public interest that must be considered by the Court in probate litigation, particularly in relation to the rights (whether actual, potential or merely arguable) of absent parties and beneficiaries who may or may not be aware of their interest in an estate (see Estate Cockell; Cole v Paisley [2016] NSWSC 349 at [54] per Lindsay J). Such is the basis for the notice requirements prescribed by Pt 78 r 57 of the Supreme Court Rules 1970 (NSW) (see Bear v Bear; Jordan v Bear [2022] NSWSC 1687 at [292] per Meek J). As such, the Court is not compelled to give its imprimatur to a compromise reached by the parties. A compromise does not deprive the Court of its "independent role in finally determining what orders might be properly made" (see Bear v Bear; Jordan v Bear (supra) at [303] per Meek J).
Turning next to the UCPR offer, it is clear that the defendant obtained a judgment no less favourable than the terms of the offer (see UCPR r 42.15A(1)). Furthermore, I am satisfied that the UCPR offer complies with the formal requirements outlined in UCPR r 20.26; the offer expressly refers to the compromise of the whole of the proceedings and bears a statement to the effect that the offer is made in accordance with UCPR r 20.26. However, as the offer was made less than two months prior to the commencement of the final hearing on 3 July 2023, the closing date for the acceptance of the offer must be reasonable in the circumstances for the offer to comply with UCPR r 20.26(5)(b).
I am satisfied that the 14 days provided for the acceptance of the offer is reasonable in all the circumstances, particularly where all the evidence in the proceedings had been served. I also note that the UCPR offer was rejected by the plaintiffs within about 30 minutes of its receipt, and no suggestion was made by the plaintiffs that the proposed time for acceptance was unreasonable. I am otherwise satisfied that the balance of the requirements specified in UCPR r 20.26 were met.
As the UCPR offer was rejected by the plaintiffs and the defendant obtained a judgment on terms no less favourable to her than the terms of the offer, the cost consequences specified in UCPR r 42.15A(2) are triggered, unless the Court exercises the discretion to order otherwise. Pursuant to UCPR r 42.15A(2), the defendant is prima facie entitled to an order against the plaintiffs for her costs in respect of the claim assessed on an ordinary basis up to 7 June 2023 and on an indemnity basis thereafter (from 8 June 2023). There do not appear to be any grounds for the Court to exercise the discretion to order otherwise.
Accordingly, I consider it appropriate to make the alternative costs orders proposed by the defendant in reliance on the UCPR offer. Additionally, to the extent that the defendant's entitlement to costs is not satisfied directly from the plaintiffs, she ought to be entitled to be indemnified to that extent out of the net assets of the estate of the deceased.
I am also minded the make the orders proposed by the defendant in respect of the administrator, Mr Fleming. I am satisfied that these orders are appropriate in all the circumstances for the due administration of the estate.
Accordingly, the Court orders that: 1. Andrew John Fleming, as the administrator of the estate of the late Wadad Wehbe ("the deceased"), has the usual powers of an administrator; 2. Andrew John Fleming shall be entitled: 1. to make a claim for and be paid from the estate of the deceased, all usual and proper charges at the usual hourly rates as are charged by the legal practice in which he is engaged and on the usual terms of that practice as to payment - 1. for his work as administrator of the estate; 2. for the professional and non-professional services rendered by him or that legal practice in the administration of the estate of the deceased; and 3. to engage the services of any other legal practitioner, accountant, or other professional adviser in relation to the administration of the estate where he considers it necessary to do so and to pay from the estate the costs incurred in having those services provided; 1. the plaintiffs pay the defendant's costs of the proceedings on the ordinary basis up to 7 June 2023; 2. the plaintiffs pay the defendant's costs of the proceedings on an indemnity basis from 8 June 2023; 3. to the extent the defendant's entitlement to costs, in accordance with (3) and (4) above, is not satisfied directly from the plaintiffs, the defendant is entitled to be indemnified to that extent out of the net assets of the estate of the late Wadad Wehbe; and 4. Andrew John Fleming is entitled to deduct from the plaintiffs' shares of the estate and pay to the defendant any amount to which she is entitled pursuant to the indemnity in (5) above.

Amendments 14 August 2023 - Typographical error amended at [28]. 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: 14 August 2023

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