Supreme Court New South Wales Medium Neutral Citation: Pirovic v Barbieri [2021] NSWSC 335 Hearing dates: 26 March 2021 Decision date: 08 April 2021 Jurisdiction: Equity - Expedition List Before: Sackar J Decision: See paras [9], [14], [20], [25] Catchwords: COSTS — Party/Party — Court's discretion — whether there should be an order that each party pay their own costs or some apportionment SUCCESSION — Contested probate — Testamentary capacity — whether costs should be paid out of the estate or costs paid personally — if costs paid personally whether they should be on an ordinary or indemnity basis Legislation Cited: Trustee Act 1925 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Clocchiatti v Pierobon; Estate of John Pierobon [2014] NSWSC 488 Re Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 Texts Cited: n/a Category: Costs Parties: Anton Pirovic (first plaintiff) Zorina Pirovic (second plaintiff) Anne Victoria Barbieri (first defendant) Representation: Counsel: J Drummond (plaintiffs) A Cheshire SC (defendant) Solicitors: Delaney Lawyers (plaintiffs) William Roberts Lawyers (defendant) File Number(s): 2019/199597 Publication restriction: n/a Judgment 1. I gave judgment in this matter on 21 December 2020. 2. The principal issue in the case was the enforceability of a mortgage which had been entered into between the Plaintiffs and a company controlled at the time by the Second Plaintiff's father and more to the point how much money was due under it. There was never in dispute that a mortgage was signed by the relevant parties. The real dispute between the parties was whether the Plaintiffs owed $161,500, alternatively $185,262 (the Plaintiffs' case) or $1,918,196.95 (the Defendant's case). 3. Several issues remain unresolved concerning costs and consequential orders. 4. I found the Plaintiffs owed an amount under the mortgage of $185,262. There were other questions including the construction of the mortgage and other issues which theoretically would, if made out, have rendered the mortgage unenforceable. The Plaintiffs were unsuccessful on those issues. 5. The Defendant's whole case (on her cross-claim) depended on a series of oral representations allegedly made by and to the deceased, the Defendant and, to some extent, in the alleged presence of others to the effect that demands for repayment of the mortgage had been made, in which case the Plaintiffs would have been liable not only for the repayment of principal but a substantial amount of interest leading to the huge disparity between what the respective parties asserted was due under the mortgage. 6. I rejected the Defendant's case on this point which involved the making of credit findings as to the Defendant's reliability accurately to recount relevant events. Instead I preferred the contemporaneous records such as they existed which did not support the Defendant's version of events. 7. Although she brought the case in her capacity as Executor and Trustee, the Defendant's case only got off the ground if she was believed in her narrative. There was no simple question of construction which could have resolved issues quickly and cheaply. Her case would always have involved giving in effect largely uncorroborated testimony with all the risks that involved. 8. The first question to be addressed is where the $23,762 (being the difference between $161,500 and $185,262), should be paid from. That is in my view simply resolved. It should be paid to the defendant as Executor and Trustee out of the Controlled Monies Account. 9. The balance of the monies $1,571,434.95 should be paid from the Controlled Monies Account to the Plaintiffs. 10. The next question is what the appropriate orders for costs are. 11. The Plaintiffs submit the Defendant / Cross-Claimant should personally pay the Plaintiffs' costs of the proceedings. 12. The Defendant submits on the other hand that she was successful on some of the issues and therefore the order should be an order that each party pay their own costs or there should be some apportionment fairly to reflect her partial success on some items. 13. Although it is correct that the Plaintiffs failed on some issues, the great preponderance of time and effort was clearly spent on whether there had ever been a demand for repayment of the mortgage. All other matters in my view played little if any tangible part in the trial. 14. In my view the Defendant was wholly unsuccessful on that substantial issue. On that issue and on her case she lost entirely. In my view she should pay the Plaintiffs' costs of the trial. Any apportionment in my view would be an entirely artificial exercise and not in any event a true reflection of the central factual issue, contested at trial. 15. The next question is whether the Defendant should be indemnified out of the estate or pay the costs personally and if so on an ordinary or indemnity basis. 16. I formed a most unfavourable view of the Defendant generally and in particular rejected her basic narrative. She made a number of untruthful statements in support of her claim against the Plaintiffs as I saw it. 17. However the Defendant was in effect criticised for not having approached the Court to obtain judicial advice which if given might have led to her being indemnified for the costs out of the estate. The mere fact that a Trustee can approach the Court for judicial advice and the Defendant did not, is not here in my view a determining factor. She would have been obliged to inform the Court that there was a robust dispute based upon a clash of recollections about whether a demand(s) had been made for repayment of the mortgage debt. I consider it would likely have been the view of the Court that an application under s.63 of the Trustee Act 1925 (NSW) would not have been an appropriate vehicle by which properly to assess that issue and that it was more properly the subject of conventional adversarial litigation. As such her failure in the circumstances to seek judicial advice is in my view of no moment. 18. Rule 42.25(1) of the Uniform Civil Procedure Rules 2005 (NSW) states that a person who has been a party to proceedings in the capacity of trustee "is entitled to be paid his or her costs in the proceedings, in so far as they are not paid by any other person, out of the fund held by the trustee…" This is subject to r.42.25(2) which adds that the Court may order the person's costs not be so paid if the trustee acted unreasonably or has in substance acted for their own benefit rather than for the benefit of the fund. 19. Powell J discussed in Re Estate of Hodges; Shorter v Hodges (1988) 14 NSWLR 698 at 709 that although costs should normally follow the event there were exceptions in probate litigation. White J more recently in Clocchiatti v Pierobon; Estate of John Pierobon [2014] NSWSC 488 said at [78] that doubtful wills should not pass too easily into proof. On the other hand, fruitless litigation should not be paid out of the estate. However if the testator was the cause of the litigation the costs of ascertaining the will should come out of the estate. There are sometimes circumstances that merely require an enquiry to ascertain whether the will is that of a free and capable testator. In that case, an unsuccessful party should pay the costs personally. 20. This was not a case about the terms of the will which were left unclear and it was not a problem in my view caused by the testator. I found he never made the various promises attributed to him by the Defendant and that assertion was, for example, contrary to his own hand written statement made at about the same time as his will in 2011. In the contemporaneous written materials there was no support for the Defendant's case as I saw it. The case concerned a mortgage and its terms. True the question was whether the amount owed was an estate asset but that litigation was collateral to the will as such. It should be observed that in order to bolster her case the Defendant asserted that some of her funds were used to lend to the Plaintiffs. I consider it is fair to submit as the Plaintiffs do that the Defendant was advancing her own interests in the litigation in substance. For these reasons I am of the view the Defendant should not be indemnified out of the estate. 21. The last matter raises the question of whether there should be an order for indemnity costs. The Court has an undoubted discretion about the matter. It is submitted that the proceedings were brought for an ulterior purpose or in wilful disregard of the facts. In effect the Plaintiffs submit that the Defendant persisted with a hopeless case which in material respects was false to her knowledge. 22. Whether, and if so when, indemnity costs should be ordered turns upon matters of degree. A level of significant unreasonableness or delinquency is required. 23. Merely to resist what turns out to be the ultimate outcome or result in the litigation is not enough. That does not in and of itself amount to sufficient unreasonableness. Commencing or continuing with a hopeless case may however suffice. Here, I am not prepared to find for example that the Defendant came to Court intent on perjuring herself. On the face of the affidavit evidence it might have been said she faced risks she and others would not be believed but experience suggests much will depend on demeanour and how well or badly a witness performs under cross examination, and the cogency of contemporaneous documents. Such an exercise is always a balance. 24. There was a paucity of contemporaneous documentary materials to support the position contended for and added to a significant amount of apparent exaggeration on her part as I found was not a happy mix but there is no case that cannot be lost. On balance I am not prepared here to find the Defendant acted so unreasonably so as to order she pay the costs on an indemnity basis. 25. In my view the Plaintiffs should get their costs of the proceedings paid for by the Defendant personally on an ordinary basis. ********** Amendments 09 April 2021 - Decision dated amended - 8 April 2021 (not 31 March 2021) 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: 09 April 2021