William Reginald d'Apice v Galina Gutkovich; Estate of the late Irene Rachel... [2010] NSWSC 1458 | Case summary

2009/300599 William Reginald d'Apice v Galina Gutkovich Estate of the late Irene Rachel Abraham (No. 3) JUDGMENT 1 HIS HONOUR: On 22 November 2010 I ordered that probate of the will in solemn form of Irene Abraham made on 3 December 2004 be granted to the plaintiff. I ordered that the costs for the plaintiff on the indemnity basis be paid out of the assets of the estate and said that I would hear the parties in relation to the further costs orders to be made. 2 Subject to the argument as to the effect of what is described as an offer of compromise, the position as to costs would be that although costs, prima facie, follow the event (see Pt 42, r 42.1 of the Uniform Civil Procedure Rules 2005) there are special principles applicable to probate actions such that if the circumstances reasonably call for an investigation to be made before the court can properly pronounce in favour of a will, then a contesting party who fails ought not to be required to pay costs and may be left merely to bear his or her own costs. There is also a possible alternative that costs of the contesting party who has failed may also be allowed out of the estate. The reason for such special principles is that there is public interest in having a contradictor where the court has to determine the capacity of the deceased given that a grant or refusal of probate affects not only the interests of the contending parties but results in a judgment in rem so that binds the world. (See generally Re Bardon v Florence; Shekelton v Bardon (Supreme Court of New South Wales, Holland J, 15 December 1983, unreported) cited at L G Handler & R Neal, Succession Law and Practice, New South Wales (looseleaf) LexisNexis Butterworths at [13,005]; and Giunti v Cavallaro [2004] NSWCA 62.) 3 In the present case there were undoubtedly reasons to doubt whether the deceased had testamentary capacity and it was proper for the defendant to contest the grant of probate at all times, notwithstanding the affidavits and report of Dr Wallace and the affidavit of Mr d'Apice. Subject to the question of the document described as an offer of compromise, the appropriate order would be that there be no orders in respect to the defendant's costs, so that she bear her own costs. 4 On or about 15 July 2010 the plaintiff served the document described as an offer of compromise said to have been made in accordance with r 20.26 of the Uniform Civil Procedure Rules. The terms of the offer were as follows: " The plaintiff offers to compromise the proceedings on the following terms: 1. Plaintiff to pay to the defendant a legacy out of the Estate in the sum of $20,000.00 free of any interest. 2. Plaintiff to pay the defendant's costs as agreed or assessed out of the Estate. 3. The Deceased's final Will dated 3 December 2004 be admitted to probate. 4. The plaintiff will consent to the following being made:- (a) The judgment for $18,500.00 dated 9 May 2006 awarded against the defendant in Local Court proceedings 2668 of 2005 referred to [in] annexure 'T' to the Affidavit of Richard John William d'Apice sworn 10 November 2009, being set aside; and (b) The costs orders dated 4 July 2006 awarded against the defendant in Local Court proceedings 2668 of 2005 referred to in annexure 'U' to the Affidavit of Richard John William d'Apice sworn 10 November 2009, being vacated; (c) The Local Court proceedings 2668 of 2005 being dismissed with no order as to costs of the defendant; (d) The costs orders dated 17 August 2006 awarded against the defendant in Supreme Court proceedings 12723 of 2006 referred to in annexure 'V' to the Affidavit of Richard John William d'Apice sworn 10 November 2009, being vacated. 5. This Offer of Compromise is open for acceptance for a period of 28 days after the date upon which the Offer is made. 6. This Offer of Compromise is made in accordance with rule 20.26 of the Uniform Civil Procedure Rules 2005. " 5 The offer has four elements of compromise. First, upon the grant of probate being made to the plaintiff, orders would be made, the effect of which would be to release the defendant of the debt she has under the Local Court judgment for $18,500. Secondly, she would be released from existing costs orders in the Local Court and in the Supreme Court proceedings arising out of the Local Court proceedings. Thirdly, the plaintiff purported to offer payment to the defendant of a legacy out of the estate. Fourthly, the defendant's costs of the proceedings up to the date of the offer date of the offer would be paid out of the estate. 6 It is clear and would have been clear to the defendant that on obtaining probate the plaintiff could have performed the offer, insofar as it related to the vacation of the orders made in the Local Court and the costs orders made in that Court and in this Court in 2006. 7 It is much less clear that the plaintiff could have performed the offer in paragraph 1 to pay a legacy out of the estate. Counsel for the defendant submits that at the time of the offer, the plaintiff did not have the power to carry out its terms. There is evidence before me today that at that time, the residuary beneficiaries had authorised the plaintiff to settle the proceedings in terms of the offer of compromise subject to a grant of probate. In effect, the offer of the legacy out of the estate of $20,000 was an offer to make a gift of that sum to the defendant out of the residuary estate. 8 There is no evidence that the plaintiff advised the defendant at the time that he held those instructions from the residuary beneficiaries, although, as counsel submitted, it would be reasonable to infer that he did. 9 A matter of immediate concern as to whether or not the document constitutes an offer of compromise is order 2 which provides for the plaintiff to pay the defendant's costs as agreed or assessed out of the estate. Under r 20.26(2), an offer of compromise must be exclusive of costs unless it states that it is a verdict for the defendant and that the parties are to bear their own costs. 10 Counsel for the plaintiff submits that the offer is exclusive of costs within the meaning of that rule, notwithstanding the term that the plaintiff is to pay the defendant's costs as agreed or assessed out of the estate. Counsel points out that if the offer had been silent as to costs, the effect of r 42.13A would be that the plaintiff would be entitled to his costs up to the date of the offer. 11 By offering to pay the defendant's costs, the plaintiff was offering a further element of compromise and one which, it is said, does not infringe the principles behind r 20.26 and r 42.13A which are that if an offer of compromise is made inclusive of costs, but is not accepted, it is often impossible to say after judgment whether the judgment obtained is more favourable or less favourable than an offer made inclusive of costs. 12 Counsel also correctly submit that it has been held that r 20.26 applies to probate proceedings. (See Trustee for the Salvation Army (NSW) Property Trust t/as Salvation Army v Becker (No 2) [2007] NSWCA 194.) 13 There is force in these submissions, however, as I held in relation to a similarly worded offer, (similarly worded, that is to say, in relation to costs), in Vaughan v Hoskovich (No 2) [2010] NSWSC 1459, this point of distinction is not open consistently with the reasoning of the Court of Appeal in Trustee for the Salvation Army (NSW) Property Trust t/as Salvation Army v Becker (No 2). It appears from paragraph [24] in that case that the offer of compromise was made after the decision at first instance granting probate. The offer included a term that the costs of the defendants be paid out of the estate in a particular sum. The Court of Appeal held that that was not an offer of compromise within r 20.26 because it was not exclusive of costs. 14 I see no basis for distinguishing the terms of the offer between that case and this because in this case there are additional elements of compromise contained in paragraphs 1 and 4 of the offer. 15 In any event, I think that there would be good reason for making a contrary order based on the same principles that are referred to by Holland J in Re Bardon v Florence; Shekelton v Bardon. There was a public interest in this case of having the defendant contest the deceased's testamentary capacity. Had the offer of compromise been accepted, it would still have been necessary for the court to have been satisfied that the deceased had testamentary capacity. That was a question which was not free from doubt. The defendant's contesting that issue was necessary in order for the question to be properly dealt with. 16 If the offer of compromise is considered as a Calderbank offer, I do not think that the defendant was acting unreasonably in not accepting the offer having regard to the issues in the litigation. 17 In the circumstances I do not think that I ought to make the order sought by the plaintiff that the defendant pay the plaintiff's costs on the indemnity basis from 16 July 2010. 18 I order that there be no order as to the defendant's costs to the intent that the defendant bear her own costs.

William Reginald d'Apice v Galina Gutkovich; Estate of the late Irene Rachel Abraham

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