Supreme Court New South Wales Medium Neutral Citation: Lewis v Lewis (No 2) [2020] NSWSC 1519 Hearing dates: 29 October 2020 Date of orders: 29 October 2020 Decision date: 29 October 2020 Jurisdiction: Equity - Probate List Before: Parker J Decision: See [43] Catchwords: COSTS – party/party – general rule that costs follow the event – application of rule and discretion – plaintiff's propounded will and codicils admitted to probate but disputed clauses omitted – defendant substantially successful – interest COSTS – payment out of estate – partially successful defendant acting in interests of residuary beneficiaries – form of order – estate subrogated to defendant's party/party costs order against plaintiff Legislation Cited: Civil Procedure Act 2005 (NSW), ss 101(4), 101(5) Cases Cited: National Trustees Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 Re Estate of Paul Francis Hodges (1988) 14 NSWLR 698 Tjiong v Tjiong (No 2) [2018] NSWSC 1981 Category: Costs Parties: David Grant Lewis (Plaintiff/Cross Defendant) Peter Howarth Lewis (Defendant/Cross Claimant) Representation: Counsel: C Vindin (Plaintiff/Cross Defendant) LJ Ellison SC (Defendant/Cross Claimant) Solicitors: Walker and White (Plaintiff/Cross Defendant) L Rundle & Co Solicitors (Defendant/Cross Claimant) File Number(s): 2017/130576 Publication restriction: Nil Judgment – EX TEMPORE Revised from transcript; issued 3 November 2020 1. I gave my judgment in this contested probate litigation on 25 September: Lewis v Lewis [2020] NSWSC 1306. I must now make orders to give effect to my conclusions and to deal with costs. This judgment assumes familiarity with, and uses the same naming conventions, as the principal judgment. 2. The plaintiff, David, propounded the testator's will dated 19 December 2014 together with a codicil dated 6 August 2015. The defendant, Peter, resisted the grant of probate for those instruments and propounded (by cross-claim) the testator's will dated 22 June 2011 or alternatively her will dated July 2010. 3. As an alternative to the December 2014 will and the August 2015 codicil, David propounded various other testamentary instruments which are described in the judgment. The description need not be repeated here. 4. I found that the December 2014 will and the August 2015 codicil should be admitted to probate but in each case only as to part. Following some debate between counsel the form of the orders required to give effect to this has been settled. 5. The December 2014 will revoked the testator's previous testamentary dispositions. My conclusion that it should be admitted to probate (even if only in part) necessarily meant that the cross-claim failed. It must be dismissed. 6. I will also order that David's claim be otherwise dismissed. Although I expressed a different view in argument, I think I should make such an order to reflect my conclusion that the other instruments propounded by David (and the clauses of the December 2014 will and the August 2015 codicil that I excluded from probate) should not be admitted to probate. 7. The major issue debated between counsel was costs. I will deal with this in two stages: First, orders for costs between the parties; and second, orders for costs out of the estate. 8. Counsel for David sought an order that Peter pay seventy-five per cent of David's costs. Counsel pointed out that David had succeeded in having the December 2014 will and the August 2015 codicil admitted to probate, albeit in part. Counsel characterised the result as an overall success, albeit not a total one, for David. 9. In this regard, counsel noted that Peter resisted the admission of the December 2014 will and the August 2015 codicil to probate on two grounds. One was lack of testamentary capacity and the other was lack of knowledge and approval. The testamentary capacity defence, which was pressed right up to the delivery of the judgment, failed. Peter's success was limited to the knowledge and approval defence and then only as to some of the clauses in the will and the codicil. 10. Counsel for Peter presented a diametrically opposed point of view. Counsel characterised the result as one in which Peter succeeded on all of the issues which were of practical significance. 11. All of the testamentary instruments which were the subject of the case (starting with the deceased's May 2010 will) had the same basic structure. After deduction of relatively minor legacies the residue of the deceased's estate was to be divided into five shares. Each of her four sons was to receive one of those shares and the fifth share was to be divided among her seven grandchildren. 12. The major alterations made by the December 2014 will and the August 2015 codicil were threefold. They involved the addition of: 1. provisions giving the Trustee (who was to be David unless he had died or was unwilling to act) apparently broad powers to "deal with" the testator's assets in the Trustee's uncontrolled discretion; 2. provisions giving the Trustee wide discretionary powers to claw back from beneficiaries (apart from David) broadly drawn categories of expense incurred by the deceased, or by the family companies or trusts; and 3. a large pecuniary legacy in favour of the deceased's grandchildren, consisting of the value of the Turramurra property as at the date of the deceased's death. 1. David failed to obtain a grant of probate which extended to any of these alterations. The only substantial difference between the portions of the December 2014 will and the August 2015 codicil admitted to probate and the June 2011 will was a list of legacies totalling $80,000. Of those legacies, $50,000 represented a legacy to the deceased's granddaughter Kate which had earlier been recorded in a testamentary letter dated April 2013. Peter did not oppose the admission of that letter to probate as, in effect, a codicil to the 2011 will, if probate of the December 2014 will and the August 2015 codicil was refused. 2. It is true that the testamentary capacity defence failed. I found that while the deceased had some short-term memory loss, this was quite insufficient to deprive her of capacity and overall that her cognitive function was very good. 3. This issue was, however, a minor one in the case. No experts were qualified on either side for the purpose of the proceedings. The only medical evidence came from contemporaneous reports from Dr Wong and he was not cross-examined. Many of the lay witnesses gave evidence touching on the testamentary capacity issue but most, if not all, of their evidence would have been required even if the defence had not been run. The only possible exception to this is the evidence of Peter's sister-in-law Rhonda Lewis, and even in her case the evidence she gave of memory loss was arguably relevant to the knowledge and approval defence. 4. In my view counsel for Peter is closer to the mark in his characterisation of the outcome of the proceedings. Overall David failed in the litigation and Peter succeeded. The proper order as between the parties is that on David's claim, David should pay Peter's costs, with a discount to reflect Peter's lack of success on the testamentary capacity defence. In the exercise of my judgment I fix the discount of twenty per cent. 5. In passing I note that counsel for Peter relied on a Calderbank letter. That letter proposed a regime under which the 2011 will would be admitted to probate subject to some further adjustments, and in particular adjustments giving effect to the legacies in the December 2014 will to which I have referred. 6. But the letter was sent on 10 June, only a few days before the hearing was due to commence. It also contained provision for releases to be given. Those releases included releases as between the estates of the testator and her late husband Geoffrey. They also included releases between all of the sons of the deceased (including Roger and Hugh who were not parties to the proceedings). In my view this offer could not realistically have been accepted in the time available and I do not think that it justifies any alteration to the costs order which I have foreshadowed. 7. My foreshadowed order concerns the costs, as between the parties, on David's claim. The cross-claim gives rise to different considerations. 8. The cross-claim was required because Peter resisted the admission of the December 2014 will and the August 2015 codicil to probate in whole, even to the extent of uncontentious clauses which I eventually admitted. This reflected Peter's testamentary capacity defence and not his knowledge and approval defence. The cross-claim has failed and as between Peter and David as cross-claimant and cross-defendant costs should follow the event. 9. Furthermore I would not in any event have given Peter any costs of the cross-claim. His conduct with respect to the attestation of the June will made it necessary for there to be detailed evidence of the circumstances in which the will was prepared in order to satisfy the Court that it properly reflected the deceased's wishes. 10. Making an award of costs in Peter's favour on the claim against him but against him on his cross-claim raises the question of how to deal with costs which straddle both claims. In my view such costs (for example, costs of directions hearings or the general costs of the trial) should follow the claim not the cross-claim. This is because I think that in substance the cross-claim was responsive to the claim made by David. 11. The costs order on the cross-claim will, therefore, be confined to costs solely referable to that cross-claim. Examples are cross-claim filing fees and the costs of preparation of affidavits required by the rules for propounding the June 2011 and July 2010 wills. 12. Counsel for Peter sought an order for interest on costs. As a result of amendments to the Civil Procedure Act 2005 (NSW) in 2015, by s 101(4) an award of costs now carries interest unless the Court in the exercise of its discretion orders otherwise. By s 101(5) interest at post judgment rates runs from the date of judgment unless the Court fixes another date. Both of the award of costs which I have foreshadowed will thus carry interest without the need for the Court to make any order (there is obviously no reason to order otherwise in the circumstances of this case). 13. But in his submission counsel for Peter asked that interest on the costs should run from the date that the costs in question were paid by Peter to his solicitors. This would require an order under s 101(5). 14. I considered the award of interest on costs at some length in my judgment in Tjiong v Tjiong (No 2) [2018] NSWSC 1981. In that case, I discussed the rationales which apply to fixing the date from which interest would run and the rate at which interest should be awarded. The statutory provisions which were applicable in that case were those predating the 2015 amendments to which I have referred, but in my view the underlying rationales I discussed still have some application. 15. Based on the views I expressed in Tjiong I would be inclined to think that the appropriate order to do complete justice would be for interest to run at pre-judgment rates from the date incurred to the date fixed by assessment and thereafter at post-judgment rates. But I was not addressed on this question in any detail by either counsel (and in fact there was no reference to interest rates at all). In the circumstances I think it would be too complicated to adjust matters in this way (assuming that to be permissible under the revised language of s 101). I will therefore make no order under s 101(5) to the intent that both costs awards will carry interest in accordance with s 101. 16. Counsel for Peter also sought an order that, to the extent not recoverable from David, his costs should be paid out of the estate. David's primary position was that he was only asking for an order for costs as between the parties; but if the Court considered that an order for costs in Peter's favour out of the estate was appropriate a like order should be made in favour of David. 17. For the purposes of the argument I was referred by both counsel to authority and in particular the oft-cited judgment of Powell J in the Re Estate of Paul Francis Hodges (1988) 14 NSWLR 698. His Honour stated two principles. The first concerned the circumstances in which the costs of an unsuccessful opposition to probate may be ordered out of the estate. The second concerned circumstances in which the costs of unsuccessfully propounding a document may be left to lie where they fall, rather than being ordered against the unsuccessful propounder. 18. But neither of these principles fits the facts of Peter's application. Peter is here seeking an order for costs out of the estate for his substantially successful defence of proceedings. 19. As a defendant in the proceedings Peter was not officially representing the interests of the estate. David was propounding a document which would have made him executor and Peter was resisting that claim. In fact David succeeded in obtaining probate of the provisions in the December 2014 will and the August 2015 codicil appointing him as Trustee; but, obviously as a result of Peter's objections, he agreed that even if successful he would not take up that appointment and the grant would be made in favour of Mr Glass as an independent third party. I think that counsel for Peter was correct in characterising his role as a defendant to David's claim as being in effect that of a contradictor. 20. It is true that Peter was the principal target of the claw-back provisions. In resisting the grant for probate for those provisions he was no doubt expecting that if probate were obtained they would be used primarily against himself. But Peter was not the only target. Some of the provisions expressly applied to his brother Roger. Moreover, as I have already indicated, the terms of the provisions allowed for claw-back from any beneficiary apart from David himself. 21. Furthermore, both of the other significant alterations made by the December 2014 will and the August 2015 codicil (namely conferral of power on the Trustee to "deal with" assets of the estate and the large legacy in favour of the grandchildren) affected all of the residual beneficiaries equally. In resisting those claims Peter was acting in the interests of all of the residuary beneficiaries and he was successful in doing so. 22. In these circumstances I see Peter's role in the litigation as analogous to that of a trustee defending a trust against a claim by a third party. It is well established that in such circumstances a trustee who successfully defends the claim will usually be entitled to an order that his or her costs be paid on a solicitor-client basis out of the assets of the trust. That is so even if in defending the interests of the trust the trustee is also defending his own personal interests: National Trustees Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 279. 23. In my view this principle fits the present circumstances. In resisting David's claim, Peter has acted to the advantage of the residuary beneficiaries. He was only partially successful but to the extent of that success I think he should have an order for his costs out of the estate. 24. I have already decided that Peter should have the benefit of a costs order against David for 80% of his costs, which will be assessed on the ordinary basis. But as I have found that Peter's actions have been for the benefit of the estate, I see no reason why he should have to wait for assessment and enforcement to recover the moneys which he has outlaid. 25. I therefore propose to make an order that Peter's costs be paid out of the estate now. Upon payment the estate will be subrogated to his rights under his costs order against David. This will leave any gap between solicitor-client costs and recoverable party-party costs, and any delay resulting from the assessment and enforcement of the costs order against David, on the residuary beneficiaries. That is as it should be. 26. This order will, of course, be confined to the 80% of Peter's defence costs which are the subject of the order against David. And for the reasons I have already given, there would be no justification for awarding Peter any of the costs of his cross-claim out of the estate. 27. While I have not so far had to apply the principles stated by Powell J in Hodges, those principles have some relevance to the possibility of ordering David's costs, or some part of them, out of the estate. The principles require attention to whether it can be said that, in substance, the testator has been the cause of the litigation. While in the present case the testator did sign the instruments which have given rise to all of the trouble, on my findings the whole impetus for execution of those instruments came from David. In a real sense he has been the cause of this litigation. It would be quite wrong for any order for costs to be made out of the estate in his favour. 28. Finally, I must consider whether to refer Peter to the Law Society of New South Wales for possible disciplinary action over his conduct concerning the attestation of the 2011 will. Counsel for Peter asked me not to make such a reference. Counsel pointed out that Peter did not, in these proceedings, seek to conceal his conduct. But to my mind the critical factor is the impropriety of Peter's conduct as a solicitor in procuring false attestations for the will in the first place. 29. Counsel submitted that I had gone too far in my judgment in saying that Peter had sought to blame the attesting witnesses for what had happened. Counsel referred in that regard to what Peter said in his affidavit. I was, however, referring to the evidence Peter gave in cross-examination. Be that as it may, the important criticism relates to Peter's conduct at the time. 30. Nothing said by counsel for Peter has dispelled the views I expressed in my judgment. Accordingly, I do propose to refer the papers to the Law Society. It will be for that body to decide whether Peter's conduct was sufficiently egregious for it to take action and, if so, what action. 31. For these reasons I make the following orders: 1. Order that administration of the estate of Pamela Lewis with the will of Pamela Lewis dated 19 December 2014 (limited to clauses 1 – 11) and the codicil dated 6 August 2015 (limited to clauses 3, 10 and 11) annexed be granted to Jeremy Neil Glass. 2. Refer the proceedings to the Senior Deputy Registrar in Probate to complete the grant in accordance with the Rules. 3. Dispense with the requirement for the Administrator to provide an administration bond. 4. Order that the plaintiff's claim be otherwise dismissed. 5. Order that the defendant's cross-claim be dismissed. 6. Order that: 1. the defendant (cross-claimant) pay the costs of the plaintiff (cross-defendant) solely referable to the cross-claim; 2. the plaintiff otherwise pay 80% of the defendant's costs of the proceedings (apart from costs already the subject of an interlocutory costs order). 1. Order that: 1. 80% of the defendant's solicitor-client costs of the proceedings (apart from those costs solely referable to the cross-claim and costs the subject of any interlocutory costs order); and 2. the defendant's solicitor-client costs the subject of any interlocutory costs order in the defendant's favour, be paid out of the estate of the late Pamela Lewis, on terms that upon payment the Administrator of the estate shall be subrogated to the defendant's entitlement under order 6(b) and under any interlocutory costs orders in the defendant's favour. 1. Order that the papers be referred to the Law Society of New South Wales for consideration of possible disciplinary action against the defendant. ************ Amendments 20 July 2021 - insert the word "out" at [29] to read "out of the estate" 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 July 2021