New South Wales Supreme Court CITATION : Revie v Druitt; Revie v Druitt in the Estate of Revelle [2005] NSWSC 965 HEARING DATE(S) : 16 September 2005 JUDGMENT DATE : 26 September 2005 Equity Division JURISDICTION : Equity Division Probate List JUDGMENT OF : Windeyer J at 1 DECISION : Particular costs orders made CATCHWORDS : PROBATE action - costs LEGISLATION CITED : Family Provision Act 1982 Buckley v Millar (1869) 8 SCR (Eq) 74, Callaghan v Myers (1880) 1 NSWR 351 Graham v Kahler, Estate of Delfendahl (17 July 1991, unreported) In the Goods of Chamberlain [1867] LR 1 P&D 316 Middlebrook v Middlebrook (1962) 36 ALJR 216 Moyle v Moyle; In the Estate of Moyle (18 June 1998, unreported) CASES CITED : Perpetual Trustee Company Limited v Baker [1999] NSWCA 244 Re Levy (dec'd [1953] VLR 652 Ryman v The Public Trustee; Estate of Carroll (Holland J, 12 November 1979, unreported) Shorten v Hodges; Estate of Hodges (dec'd) (1988) 14 NSWLR 698 Shorten v Shorten (No. 2) [2003] NSWCA 60 F R Burns, "Elders and testamentary undue influence in Australia" (2005 28 UNSWLJ 145 Geddes, Rowland and Studdert (1996) Wills Probate and Administration Law in New South Wales page 665, note 27 Sandra Joan Revie (Plaintiff) PARTIES : Roy Henry Macquarie Druitt (Defendant) FILE NUMBER(S) : SC 2236 of 2002; 104156 of 2004 Ms J Needham SC (Plaintiff) COUNSEL : Mr D M Flaherty (Defendant) Levitt Robinson (Plaintiff) SOLICITORS : Duncan & Mackenzie (Defendant) LOWER COURT JURISDICTION : - 9 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J MONDAY 26 SEPTEMBER 2005 2236/02 SANDRA JOAN REVIE & ANOR V ROY HENRY MACQUARIE DRUITT 104156/04 SANDRA JOAN REVIE V ROY HENRY MACQUARIE DRUITT IN THE ESTATE OF LEONARD WILLIAM LESLIE REVELLE DECEASED JUDGMENT on costs and final orders 1 Judgment on the main issue was delivered on 8 September 2005. In the Probate action I found against the will of the deceased dated 4 October 2001 and for the will dated 30 August 1999. In the Equity action I found that the plaintiff's claims for damages for breach of contract to leave the property by will and in the alternative for a charge over that property or its proceeds, failed. I determined that part of the Equity action involving a claim under the Family Provision Act 1982 should be stayed rather than dismissed so as to preserve the claim in the event of a successful appeal in the Probate action. 2 It follows that the plaintiff succeeded in the Probate suit for revocation and new grant and that the defendant as executor of the 2001 will lost. However, the plaintiff's claim based on undue influence failed. Success followed the finding on testamentary capacity. In the Equity action on the issues determined the plaintiff failed. 3 The other fact to be taken into account is a Calderbank letter dated 13 July 2005 whereby the plaintiff offered to settle both actions for $200,000 plus costs. The plaintiff's costs for both actions were estimated to be somewhere in the vicinity of $160,000, although that does not mean that they would be assessed for that amount. Had the offer been accepted the defendant or more correctly the beneficiaries under the 2001 will would probably have got something as the assets remaining are in excess of $550,000. That amount represents the balance remaining of the proceeds of sale of the Short Street property. 4 If costs followed the event then the appropriate orders would be: (a) that Mr Druitt as unsuccessful defendant pay the plaintiff's costs of the Probate action other than on the issue of undue influence; (b) the plaintiff pay the defendant's costs on the issue of undue influence; (c) that the plaintiff pay the defendant's costs of the Equity proceedings other than the issue on the undetermined Family Provision Act claim; (d) that in the event of there being no appeal or no successful appeal on the Probate action then there be no costs of the Family Provision Act proceedings. 5 In Probate actions however costs do not always follow the event. In argument as to costs the court is invariably taken to the decision of Powell J in Shorten v Hodges; Estate of Hodges (dec'd) (1988) 14 NSWLR 698. In that case His Honour identified two exceptions to the general rule of costs following the event which are applicable to Probate actions. The first exception is where the testator has been the cause of the litigation in which case costs of unsuccessfully opposing probate may be ordered to be paid out of the estate. The second exception is that where the circumstances lead reasonably to an investigation in regard to the document propounded, then the costs may be left to be born by those incurring them. While these principles have generally been applied the court is now regularly taken to the decision of the Court of Appeal in Shorten v Shorten (No. 2) [2003] NSWCA 60, to support an argument that the exceptions can overlap and that where the conduct, habits and mode of life of a testator have given grounds for questioning his testamentary capacity it may be appropriate to order costs to be paid out of the estate. In Shorten the earlier decision of the Court of Appeal in Perpetual Trustee Company Limited v Baker [1999] NSWCA 244, which approved a statement to that effect by Santow J in Moyle v Moyle; In the Estate of Moyle (18 June 1998, unreported) was reconsidered. 6 It seems the decision in Shorten v Shorten was reserved to give careful consideration to Perpetual Trustee Company Ltd v Baker in light of the decision of the High Court of Australia in Middlebrook v Middlebrook (1962) 36 ALJR 216. That was a case where the court considered an investigation of the will was justified. A costs order of the trial judge that the opponent caveator pay the propounder's costs was set aside and the parties left to bear their own costs. The propounding executor would, of course, have been entitled to indemnity costs from the estate, as he was successful in his application for probate. Shorten v Shorten determined that while the two exceptions can, in certain circumstances, overlap, that does not mean that they are not separate concepts. 7 It is not necessary to go into any further discussion and deal with the facts of the many cases where the principles applicable to costs in Probate actions have been discussed. I accept the argument of Ms Needham, SC that in this case it could not be said that the deceased was the cause of the litigation. To a considerable extent Mr Druitt was the cause of the litigation. After all he knew that the deceased signed documents which embodied incorrect statements, and it was he who prepared the 2001 will without the assistance of any solicitor. The exceptions given in Hodges do not really cover the position of an unsuccessful propounder of a later will, but I see no reason why the reasoning should not apply. The circumstances led reasonably to an investigation which resulted in a finding against the 2001 will. This is within the second exception. I consider that Mr Druitt should bear his own costs except on the issue of undue influence. On that issue subject to the Calderbank consideration I consider that the plaintiff must pay the costs. Different considerations apply to litigating that issue because the claim is based on the conduct of someone not the testator. While in particular circumstances it might be a proper exercise of discretion to order that the costs on that issue be paid out of the estate, this was not one of those cases. 8 Before leaving this question I should perhaps refer to a passage in a decision of Young J in Graham v Kahler, Estate of Delfendahl (17 July 1991, unreported) where His Honour said: I would also mention in case the point has been overlooked that Carroll's case is also authority for the proposition that unless there are some special circumstances, if a person has obtained probate in common form and the grant is revoked and probate in solemn form is granted in an earlier will, that person usually pays the whole costs of the proceedings personally and is not entitled to any costs out of the estate and that is the reason why cases such as Le w [sic] and Carroll suggest that defendants in the present situation should always obtain an indemnity from the beneficiaries. 9 The decision in Ryman v The Public Trustee; Estate of Carroll (Holland J, 12 November 1979, unreported) referred to did not go so far as to say that and in fact in that case the Public Trustee obtained an order for payment of his costs out of the estate, although the grant of probate of the will of which the Public Trustee was executor was revoked. There were special provisions as to costs in s43A of the Public Trustee Act 1913 which bore upon that decision as did His Honour's conclusion that the position as to capacity was not so clear as not to require the Public Trustee to seek to uphold his will. Re Levy (dec'd [1953] VLR 652 (Le W is a printing error) which is the other case referred to, on the other hand does deal with this question in discussion of the decision of In the Goods of Chamberlain [1867] LR 1 P&D 316. That was a case which decided that an executor who had obtained a grant of probate of a will in common form, but who later had doubts about its validity could not seek to revoke that grant but on the other hand could propound the will in solemn form and invite those interested in obtaining its revocation to oppose it and inform the beneficiaries under it that revocation would not be opposed and that the executor would take no steps to support a grant in solemn form unless the beneficiaries under the will were prepared to guarantee his costs. In other words the passage from the decision of Young J which I have set out is relevant to particular circumstances where the executor himself has no faith in the validity of the will in respect of which a grant in common form has been obtained. This is accepted to be the position in Geddes, Rowland and Studdert (1996) Wills Probate and Administration Law in New South Wales page 665, note 27. 10 I turn now to the question of the Calderbank letter. It was put that it was sent one week before the trial began and at a time when the defendant was, or should have been, well aware of the risks involved in the actions. Thus it is said that the defendant should have accepted the offer thereby avoiding the costs of three days' hearing, particularly as the defendant had really put on no evidence of any value in the Probate action as to capacity. In hindsight it is easy to say the defendant should have accepted the offer. In fact, however, the result was uncertain and unless it was the fact that the defendant at that stage should have obtained an indemnity from the beneficiaries as a condition of defending the action he had a proper basis for seeking to uphold his grant. Although the beneficiaries were his children I should not find without evidence that he should have insisted on obtaining an indemnity or that he could have obtained an indemnity within that time. In any event, while the two sets of proceedings were connected the claims were entirely separate and I do not consider the Calderbank letter gives grounds for an order different from the one which would have been made in its absence. I do not consider it unreasonable not to accept the offer. I consider therefore that the orders that I originally proposed for the Equity action should be made. 11 So far as the Probate action is concerned, if I had decided to order that the defendant pay the plaintiff's costs other than on the issue of undue influence I could have accomplished this by an order that the defendant pay only a proportionate part of the plaintiff's costs, that way providing for the plaintiff's costs relative to the issue of undue influence to be excluded and for the defendant's costs relative to that issue to be deducted from the plaintiff's costs. As I understood it this was a course which the parties would have preferred, but one which I do not think is possible under the circumstances where no orders as to costs on the other issues will be made. In those circumstances I will order that the plaintiff pay the defendant's costs on the issue of undue influence. In case it is of assistance I consider that this issue took up no more than fifteen percent of the hearing time. 12 There are two other matters which, although not directly before me, bear upon the distribution of the estate. Prior to his death, the deceased took ejectment proceedings against the plaintiff for possession of the Short Street property. Mr Druitt continued these as executor. After the death of her mother the plaintiff stated that she would not maintain the claim for possession. She vacated the property and the proceedings were discontinued by consent. The Probate proceedings had not been commenced at that time and insofar as the defendant incurred costs in litigating that action on behalf of the estate, he would be entitled to be indemnified out of the estate. A separate action under the Family Provision Act was commenced by Adrian Stott on 5 September 2002, proceedings 4425 of 2002. That action was dismissed on 9 May 2003 by the court as a result of failure of the plaintiff to prosecute it. Once again this happened before the Probate action was commenced and Mr Druitt, as executor, was bound to contest it on behalf of the estate. His costs in so doing should come out of the estate. If the plaintiff wishes to recover those costs from her son that is a matter for her. 13 On 6 July 2004 orders were made by Young CJ in Eq in the Equity action which bore also upon the Probate action which was commenced on 15 March 2004. Brownie AJ had granted an injunction on 28 March 2004, restraining the sale of Short Street by Mr Druitt. Under the orders made on 6 July that injunction was dissolved and trustees for sale of the Short Street property were appointed under particular conditions. That order was made by consent. Another order was made, not by consent, as to the application of the proceeds of sale. So far as is relevant here $100,000 of the proceeds was to be paid "to the defendant's solicitors to be applied to the payment of legal costs and disbursements in any proceedings involving the estate of Leonard William Leslie Revelle deceased". The property was sold and the sum of $100,000 was paid. It has been applied in payment of those costs. An affidavit of Mr Druitt sworn 15 July 2005 in the Equity proceedings states that the $100,000 has been exhausted in payment of the costs of those proceedings and the costs of the Family Provision Act proceedings begun by Mr Adrian Stott. Whether part of that sum has been applied towards the costs of the Probate action is not clear. The costs of the proceedings before the Chief Judge were reserved. I consider that the costs of the defendant of those proceedings before the Chief Judge should be paid out of the estate and I will make that order. It does not seem to me that the order for payment of the $100,000 was a final order which would prevail over any costs order ultimately made in the proceedings. It was a method of funding the proceedings and subject to being brought into account with the final costs orders made. In bringing it to account as I have said, the costs of the possession proceedings, the costs of the proceedings against the estate by Mr Adrian Stott and the reserved costs ought to be paid out of the estate and be set against the sum of $100,000. So of course can the costs of the Equity proceedings and the costs of the issue on undue influence. 14 Finally, although in no way bearing upon the decision I came to in my earlier judgment I refer to paragraph 54 there where I said I knew of no case in New South Wales where a defence of undue influence had been successful. As a result of an article by F R Burns, in Vol 28 University of New South Wales Law Journal 2005, page 145 by F R Burns, "Elders and testamentary undue influence in Australia" (2005 28 UNSWLJ 145 I now know there are two such cases, namely Buckley v Millar (1869) 8 SCR (Eq) 74, and Callaghan v Myers (1880) 1 NSWR 351. By the 1890's, as that article states, it is likely those cases would have been decided differently. 15 The orders are as follows: In the Probate action: 1. The grant of probate of the will dated 4 October 2001 of the late Leonard William Leslie Revelle be revoked. 2. Letters of administration with the will dated 30 August 1999 annexed of the estate of Leonard William Leslie Revelle, deceased, be granted to Sandra Joan Revie, the administrator with the will annexed of Jean Mary Revie, a beneficiary under the said will dated 30 August 1999. 3. The cross-claim be dismissed. 4. The plaintiff pay the defendant's costs on the issue of undue influence. 5. Otherwise no order as to costs. In the Equity action: 1. The claim under the Family Provision Act be stayed until the later of: (a) 28 days after the date of the order made in proceedings no 104146 of 2004; (b) in the event of an appeal, until 28 days after the determination of an appeal; (c) in the event of there being no appeal or the appeal being dismissed, the Family Provision Act claim be dismissed with no order as to costs; (d) liberty to apply on 7 days' notice for variation of this order. 2. Summons otherwise dismissed. 3. Plaintiff pay defendant's costs of the proceedings other than the claim referred to in order 1. 4. The reserved costs of the defendant of the proceedings before the Chief Judge in Equity on 6 July 2004 be paid out of the estate of the deceased. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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