Supreme Court New South Wales Medium Neutral Citation: Mackinlay v Holliday (No 2) [2023] NSWSC 1024 Hearing dates: On the papers Date of orders: 28 August 2023 Decision date: 28 August 2023 Jurisdiction: Equity Before: Darke J Decision: Orders made for the plaintiff/cross-defendant to pay 50% of the defendant/cross-claimant's costs (other than the cost of the costs application), and for the defendant/cross-claimant to be indemnified out of the assets of the deceased's estate to the extent he does not recover his costs from the plaintiff/cross-defendant. Catchwords: COSTS - contested probate – small estate - defendant/cross-claimant successful in obtaining a grant of probate in respect of a will and a codicil to the will – whether plaintiff/cross-defendant engaged in an abuse of process such as to warrant an order for indemnity costs – no abuse of process established – whether appropriate to depart from the usual position that costs follow the event - where circumstances existed that might reasonably call for an investigation into the validity of the codicil – where dispute was largely a contest over who would have control over the estate - appropriate in all the circumstances to order that the plaintiff/cross-defendant pay 50% of the costs of the defendant/cross-claimant – order made that defendant/cross-claimant is entitled to be indemnified out of the assets of the estate to the extent he does not recover his costs from the plaintiff/cross-defendant Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 98. Cases Cited: Mackinlay v Holliday [2023] NSWSC 949 Shorten v Shorten (No 2) [2003] NSWCA 60 Williams v Spautz (1992) 174 CLR 509 Category: Costs Parties: Derek Mackinlay (Plaintiff/Cross-Defendant) Brian Holliday (Defendant/Cross-Claimant) Representation: Counsel: Mrs K J Young (Plaintiff/Cross-Defendant) Mr D C Price (Defendant/Cross-Claimant) Solicitors: Dormer Stanhope (Plaintiff/Cross-Defendant) Toomey Pegg Lawyers (Defendant/Cross-Claimant) File Number(s): 2022/0032172 Publication restriction: None JUDGMENT 1. These proceedings concern the estate of the late Roderick Mackinlay ("the deceased"), who died on 19 October 2020 at the age of 91. The deceased left a will dated 5 April 2007, and a codicil to the will dated 22 October 2018. The central issue in the proceedings concerned the validity of the codicil. 2. The codicil, if valid, would operate to amend the 2007 will in various respects, including by naming the defendant/cross-claimant, Mr Brian Holliday, as the sole executor of the estate. Shortly after the death of the deceased, Mr Holliday gave notice of an intention to seek a grant of probate in respect of the will and the codicil. The plaintiff/cross-defendant, Mr Derek Mackinlay, resisted the making of such a grant, by the filing of a series of caveats. In February 2022, Mr Mackinlay commenced the proceedings by the filing of a Statement of Claim, by which he sought a grant of probate in respect of the 2007 will. He was named in that will as one of the executors of the estate. Mr Holliday thereafter pursued his application by means of a Cross-Claim. 3. The matter was heard over five days between 24 and 28 July 2023. I delivered judgment on 15 August 2023 (see Mackinlay v Holliday [2023] NSWSC 949 – "the principal judgment"). I concluded that a grant of probate should be made in favour of Mr Holliday, and that Mr Mackinlay's claim should be dismissed. 4. The question of costs remains for determination. Directions were made for the filing of written submissions, with a view to that question being determined on the papers. 5. The Court has received written submissions from the defendant (dated 18 August 2023, and 23 August 2023 in response), and from the plaintiff (dated 21 August 2023, and 23 August 2023 in response). The plaintiff's submissions were supported by an affidavit of Ms Justeen Dormer, solicitor, sworn on 21 August 2023. 6. The defendant objected to the affidavit being admitted into evidence "save to confirm that the plaintiff has engaged in an abuse of process" and complained that the affidavit had been served without the leave of the Court. However, in the context of a costs dispute intended to be determined on the papers (where affidavits as to the conduct of the proceedings, and the making of offers of settlement, are routinely relied upon), I do not think that obtaining the leave of the Court was necessary. Neither would the defendant have required leave in order to adduce evidence in response, were that considered necessary. The imposition of a leave requirement into what is intended to be a simple and expedient process for the determination of the question of costs would in my view be contrary to the overriding purpose referred to in s 56 of the Civil Procedure Act 2005 (NSW). Further, I do not think that the affidavit should only be admitted on the limited basis suggested by the defendant. I will treat the affidavit as read, on the question of costs, for what it is worth. I will add that, for reasons I will come to, I do not accept the defendant's submission that the plaintiff has engaged in an abuse of process, such as might justify an order for indemnity costs. 7. The defendant initially submitted that the plaintiff should pay his costs of the proceedings on the ordinary basis. He subsequently submitted that the costs should be paid on an indemnity basis, on the ground that the plaintiff had engaged in an abuse of process. However, as I have said, that has not been established. The defendant also seeks an order to the effect that he is entitled to an indemnity for his costs out of the assets of the deceased's estate. 8. The plaintiff opposes the making of orders as sought by the defendant. The plaintiff contends that each party should be left to bear his own costs, and that neither party should be entitled to costs out of the estate. 9. The defendant submitted that the usual rule, that the unsuccessful party should be ordered to pay the successful party's costs, should apply in the present case. It was submitted that the plaintiff pursued the proceedings in the knowledge that the estate had a value of only about $44,000 and was responsible for the incurring of costs that are out of all proportion to the size of the estate. It was further submitted by the defendant that neither of two well-recognised exceptions to the usual rule, that operate in the context of contested probate litigation, were applicable. Those exceptions (which were referred to by Mason P, with whom Meagher and Sheller JJA agreed, in Shorten v Shorten (No 2) [2003] NSWCA 60 at [15]) may be stated as: 1. Where the testator has, or those interested in the residue have, been the cause of the litigation, costs of unsuccessfully opposing probate may be ordered to be paid out of the estate; and 2. 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. 1. The plaintiff accepted that, as he was unsuccessful, the prima facie position is that he should be ordered to pay the defendant's costs on the ordinary basis. However, it was submitted that in the circumstances of the case a different costs order was warranted, namely, that each party bear his own costs, without recourse to the assets of the estate (or, alternatively, that only the defendant have recourse to the estate). The plaintiff referred in submissions to a variety of circumstances said to support the making of orders as suggested. 2. The principal matters relied upon by the plaintiff may be summarised as follows: 1. the Probate List Judge (Hallen J) had warned the parties that given the small size of the estate, neither party would necessarily be entitled to recover its costs from the estate; 2. there was evidence to suggest that a recovery action for the benefit of the deceased's estate may be available against the defendant; 3. the defendant's position, until it was reversed on the first day of the hearing, appeared to be that the plaintiff was not a beneficiary of the deceased's estate; and 4. the circumstances in which the codicil was made called for an investigation of its validity, as reflected in findings made by the Court in the principal judgment (see at [90], [100], [104] and [142] - [143]). 1. The plaintiff submitted that it was a clear case where there was a public interest in a close examination of the facts surrounding the codicil. It was further submitted that the deceased, through his conduct and behaviour, was in part a cause of the litigation, as such conduct and behaviour led to a supposition that he may not have been of sound mind. The plaintiff submitted that the conduct of the defendant is also relevant. It was put that had the defendant conceded earlier that the plaintiff was a beneficiary of the deceased's estate "there would have been no probate proceedings". Finally, the plaintiff submitted that, having regard to the small size of the estate and the costs of estate litigation, there was no justification for the defendant (who is not a beneficiary) to persist with the litigation, especially as he now concedes that the plaintiff is a beneficiary. 2. According to the defendant, the deceased's estate has a value of only about $44,000. The plaintiff suggests that the value could be much greater than that, as there is the potential for a recovery action to be brought for the benefit of the estate against the defendant. However, the Court is not in a position to express any view concerning the prospects or magnitude of any potential recovery action. In these circumstances, I think that I should proceed on the basis that the value of the estate, as far as it is currently known, is as suggested by the defendant, and thus not sufficient to cover the costs of either party. 3. Both parties seek to rely upon the small size of the estate in support of their contentions as to costs. The defendant says that the plaintiff "pursued the proceedings" (presumably, by resisting the defendant's application and by bringing his own application) in the knowledge that the estate had a value of only about $44,000 and was responsible for the incurring of costs that are out of all proportion to the size of the estate. The plaintiff says that, having regard to the small size of the estate and the costs of estate litigation, there was no justification for the defendant to persist with the litigation. 4. It is inescapable that each party prosecuted his case to a conclusion, even though the estate seemingly had only a small value, and Hallen J had warned that costs might not be recoverable out of the estate. Further, there is no evidence of any settlement offers having been made. It seems to me that if, as suggested by the plaintiff, persisting with the litigation was not justified, fault lies on both sides. 5. The plaintiff further suggested that the litigation occurred as a result of the defendant's stance that the plaintiff was not a beneficiary of the deceased's estate. I accept the evidence to the effect that the plaintiff believed the defendant held that view until statements to a different effect were made by counsel for the defendant on the first day of the hearing. However, I am unable to accept that the plaintiff would not have commenced the proceedings had the defendant conceded that the plaintiff was a beneficiary of the estate. The proceedings, as framed by the pleadings, were not concerned with any question of whether the plaintiff was a beneficiary. The plaintiff took no steps to raise it as an issue. The proceedings were concerned with whether probate should be granted in respect of the 2007 will only (as contended by the plaintiff), or whether probate should be granted in respect of the 2007 will and the codicil to the will (as contended by the defendant). Moreover, when counsel for the defendant suggested that the plaintiff was a beneficiary, there was no change to the plaintiff's conduct of the proceedings. He continued to resist the defendant's claim and advance his own claim. Again, neither of those claims involved in any issue as to whether the plaintiff was a beneficiary of the estate. For the above reasons, I do not accept that the litigation was caused by the stance of the defendant concerning the plaintiff's status as a beneficiary. 6. I note here that the defendant submitted (in his submissions in response) that, as the plaintiff would not have brought the proceedings had he understood he would be regarded as a beneficiary of the estate, the plaintiff engaged in an abuse of process by pursuing the proceedings for a collateral purpose. However, even if the plaintiff would not have commenced proceedings had the defendant conceded that he was a beneficiary, it does not follow that the plaintiff was pursuing the proceedings for a collateral purpose so as to amount to an abuse of process. 7. It may be accepted, for the sake of the argument, that the question of whether the plaintiff is a beneficiary was not an issue in the proceedings. The question can thus be regarded as a collateral issue. It may be further accepted, for the sake of the argument, that the defendant's failure to concede the issue was a motive for the plaintiff's commencement of the proceedings. Yet it does not follow that his pursuit of the proceedings, seeking a grant of probate in respect of the 2007 will, was for a collateral purpose. Motive is to be distinguished from purpose. On the face of it, the plaintiff was pursuing the proceedings for the purpose of obtaining a grant in respect of the 2007 will. It has not been shown that the plaintiff had some of other, predominant purpose, of obtaining an advantage for which the proceedings are not designed or some collateral advantage beyond what the law offers (see Williams v Spautz (1992) 174 CLR 509 at 526-7 and 529 per Mason CJ, Dawson, Toohey and McHugh JJ). The asserted abuse of process was the basis of the defendant's submission that the plaintiff pay his costs on an indemnity basis. For the above reasons, there is no such basis for an indemnity costs order against the plaintiff. 8. I turn now to the plaintiff's submissions to the effect that the facts surrounding the codicil, and the conduct and behaviour of the deceased, called for an investigation of the validity of the codicil. These submissions may be regarded as being largely directed to the second of the two exceptions referred to at [9] above. The first exception is not directly engaged, as the plaintiff does not seek his costs out of the estate. 9. The plaintiff referred in submissions to various findings made in the principal judgment, including: 1. that evidence adduced by the plaintiff raised a doubt as to the deceased's mental competence sufficient to displace a presumption of mental competence (see at [90]); 2. the deceased was suffering from a degree of cognitive impairment or deficit, likely due to progressive dementia (see at [100]); and 3. that the existence of such impairment or deficit was supported, inter alia, by many of the observations of the deceased made by witnesses called by the plaintiff (see at [104]). 1. The above-mentioned findings are indicative of circumstances that might reasonably call for an investigation of the validity of the codicil. Even when viewed in the context of my overall conclusions, which were adverse to the plaintiff, the findings suggest that it was not unreasonable of the plaintiff to resist the defendant's claim for a grant of probate in respect of the will and the codicil. 2. However, it is necessary to consider the plaintiff's resistance in its overall context. In particular, it should not be overlooked that the codicil propounded by the defendant would only operate to alter the 2007 will in the limited respects summarised in the principal judgment at [94]-[95] – notably, the identity of the executor (and thus the repository of the executor's powers) would change, from the plaintiff and his mother to the defendant; and the gift to the plaintiff's mother would change, from an absolute gift to a gift for life. The codicil would not operate to make any adverse change to any gift to the plaintiff and would not operate to make the defendant the beneficiary of any gift. In my view, the dispute between the parties can fairly be seen as largely a contest over who would have control over the deceased's estate. 3. In that regard, I note that the plaintiff opposed the defendant's position from the outset. The defendant's Notice of Intended Application for Probate filed on 3 December 2020, was met by a series of caveats that were filed and maintained by the plaintiff, prior to his commencement of the proceedings in February 2022. 4. In determining the question of costs, it is of course necessary to consider the conduct of both parties. As I have said, the dispute was largely a contest over who would have control over the estate, and each party prosecuted his case to a conclusion even though the estate had only a small value, and Hallen J had given warnings about the ability to recover costs out of the estate. Further, there is no evidence of any settlement offers being made, such as an offer involving the appointment of an agreed independent person as an administrator of the estate. I note that Hallen J raised the prospect of an independent administrator at a directions hearing on 15 August 2022. In my view, both parties share responsibility for the incurring of the no doubt significant costs of the proceedings, but of course only the defendant was ultimately vindicated. Nevertheless, the presence of circumstances that might reasonably call for an investigation of the validity of the codicil means that there remains something to be said in favour of orders, as between the parties, that each bear his own costs, or at least that the plaintiff not be ordered to pay all the costs of the successful defendant. 5. Ultimately, having taken all of the circumstances into account, and considered them in the light of the submissions of the parties, I have come to the conclusion that, as between the parties, the appropriate exercise of the Court's discretion as to costs under s 98 of the Civil Procedure Act is to order that the plaintiff/cross-defendant pay 50% of the defendant/cross-claimant's costs of the proceedings, other than the costs of this application. Given that each party has had a measure of both success and failure on the question of costs, it is appropriate that each party bear his own costs in that regard. The order for costs will be expressed in relation to the proceedings as a whole, given the overlapping of issues on the Statement of Claim and the Cross-Claim. 6. The Court will further order that, to the extent that the defendant does not recover costs from the plaintiff, the defendant is entitled to an indemnity for his costs out of the assets of the deceased's estate. The defendant, as the executor named in the codicil, has in my view acted reasonably in propounding the will and the codicil. Moreover, I do not think that the defendant (unlike the deceased himself) can be regarded as having contributed in any substantial way to suspicion in relation to the validity of the codicil. I note that at [137] of the principal judgment, I recorded that no attempt was made at the hearing to establish that the defendant had acted in any way improperly in relation to the codicil. The assets of the estate may prove to be insufficient to fully indemnify the defendant, but that was a risk he was evidently prepared to run. 7. The Court will make the following orders: 1. Order that the plaintiff/cross-defendant pay 50% of the defendant/cross-claimant's costs of the proceedings (other than the costs of the application for costs) on the ordinary basis; and 2. Order that to the extent the defendant/cross-claimant does not recover his costs from the plaintiff/cross-defendant, the defendant/cross-claimant is entitled to an indemnity for his costs out of the assets of the estate of the late Roderick Mackinlay. ********** Amendments 28 August 2023 - Typographical error on coversheet - Shorten v Shorten (No 2) [2003] NSWCA 60 changed from Shorten v Shorten (No 2) [2023] NSWCA 60 28 August 2023 - Typographical error in [17] changed "bought" to "brought" in first sentence 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: 28 August 2023