RISK WATCH
Costs ramifications in testamentary claims: further erosion of the “Probate Costs Rule” KATE MARCUS, RISK & CLAIMS SOLICITOR, LAW CLAIMS
T
he recent Supreme Court decision of Kocini v Kambanaros (No. 2) [2022] SASC 50 serves as a timely reminder to practitioners practising in testamentary matters to take heed of the potential for costs ramifications. An earlier decision1 had considered whether the applicant, an adult daughter of the deceased, should be entitled to receive further provision from her mother’s estate. The testator had executed two Wills, one dealing with her assets in Greece and the other with her assets in South Australia. The applicant daughter was one of four surviving children of the testator and shared the assets located in Greece equally with her three siblings. The daughter had already received substantial monies from her mother. The provisions of the Australian Will left the deceased’s Australian assets entirely to one son, to the exclusion of the applicant. Judge Dart determined that the applicant had a financial position sufficient to support herself comfortably. It was further noted that the applicant had received a ¼ share of her father’s estate. His Honour indicated that it is not just an economic test which needs to be considered under the Inheritance (Family Provision) Act 1972 (SA). Testamentary freedom is an important consideration and held that ‘it is only appropriate to intervene where there has been a failure in relation to the moral duty and then, only to the extent necessary to rectify that failure.’ [at 32] In this he had regard to the comments of Ormiston J in Collicoat v McMillan (1999) 3 VR 803, “Those who are capable of supporting themselves comfortably, and are likely to be able to do so for the rest of their lives, will find it difficult to show any breach of moral obligation to make adequate provision for proper maintenance and support.” [at 47] On this basis the court was not satisfied
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that the testator failed to provide adequately for the applicant and the claim failed. The subsequent argument as to costs is reported as Kocinci v Kambanaros (No. 2). The starting point for any consideration of costs order is of course that they in the discretion of the Court or Judge (e.g. Section 40(1) of the Supreme Court Act 1935 (SA)). This needs to be read in conjunction with Rule 194.5 of the Uniform Civil Rules 2020 which provides inter alia that, as a general principle, costs follow the event. Rule 194.6 also identifies a number of discretionary factors to which the Court may have regard. There has been, however, a different position regarding costs in testamentary matters, the history of which was summarised by Kourakis CJ in Fielder v Burgess [2014] SASC 98. “There is a long line of authority to the effect that where probate litigation has been caused, or contributed to, by the way in which the testator made his testamentary intentions known it is appropriate that costs be ordered to be paid out of the estate (the probate costs rule)… [at 57]… However, the bottom line is that the disputes are between private parties advancing competing claims to the testator’s bounty for their private financial benefit. Of even greater contemporary significance is the effect of the old probate costs rule on parties to litigation of this kind. The probability of the payment of the costs of all parties out of the estate irrespective of the result gives the parties little incentive to make appropriate decisions as reasonable self-funded litigants about their prospects of success, and the proportionality of the expense incurred in bringing or defending proceedings. [at 62] I cannot see any utility in putting the beneficiaries to the expense of a contested hearing and depleting the estate in cases in
which the ultimate result of litigation is clear notwithstanding the suspicion or ambiguity clouding the Will.” [at 63] Further: “The probate costs rule is arguably anachronistic in modern times in which there is a greater concern with the need for proportionality in litigation. It may soon be necessary to reconsider it.” [at 65] The probate costs rule has also been applied in IFP matters and runs counter to the usual “loser pays” rule we are familiar with from other areas of litigation. In Kocini v Kambanaros (No. 2) Judge Dart addressed the conflict as follows: “The Court should not adopt an approach to costs that creates a barrier to the commencement and prosecution of legitimate claims.” [at 11] and yet “…the Court must also have regard to the fact that a party who brings an unsuccessful claim has put a respondent to significant legal expense. It is generally undesirable in such circumstances that an applicant can walk away without meeting any of the costs of the respondent.” [at 12] Ultimately, his Honour determined that the justice of the case required that the unsuccessful applicant pay $50,000.00 towards the costs of the respondent; the applicant was financially stable and not impoverished. She had pursued the matter for her own private benefit. Judge Dart’s decision is the latest in a series of cases over the last few years (including Fielder v Burgess) where the courts have noted that the probate costs rule is not to be applied in every case and that, in appropriate cases, different orders can be crafted to meet the justice of different cases.
