Risk Watch: Costs ramifi cations in

Costs ramifications in testamentary claims: further erosion of the “Probate Costs Rule”

KATE MARCUS, RISK & CLAIMS SOLICITOR, LAW CLAIMS

The 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] 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.

These cases include the following: • In Hall v Carney & Ors (No 2) [2012]

SASCFC 105 by a majority of 2-1

Vanstone J and Stanley J held that notwithstanding the appellant’s success concerning rebutting the presumption of due execution, the appeal was destined to fail. The appellant had no realistic prospect of overturning the trial Judge’s findings. As the evidence clearly established knowledge, approval and testamentary capacity – costs should not be awarded in favour of the unsuccessful party: the estate should not be further eroded by the appellant’s costs. • Frances Ponikvar (Deceased) (No. 2) [2016]

SASC 166 (Stanley J) concerned costs in relation to an unsuccessful claim which had been brought by a niece against her late uncle’s estate. The deceased uncle had made two Wills, one in 1993 and a second in 2007.

Despite searches of the deceased’s home the original Will from 2007 could not be located and a copy was admitted to probate. The 2007 Will prejudiced the interests of the niece and she opposed the grant of probate that was sought of the 2007 copy of the Will.

The niece was unsuccessful at trial.

Stanley J held that the niece should bear her own costs. He further found that the trial was longer than it would have been but for the niece’s opposition of the application.

Consequently, Stanley J held it was just and reasonable that she be ordered to pay the additional costs that were incurred as a result of her opposition of the orders sought. The niece was ordered to pay 25% of the applicant’s costs of the trial on a party/party basis. • Stanley J’s decision in Public Trustee v Taylor & Ors (No 2) [2020] SASC 213 also saw costs being paid by the unsuccessful litigants. Mr and Mrs

Todt died commorientes- evidence could not establish whether either of Mr or

Mrs Todt had pre-deceased the other.

As a result, there was no proof of survivorship. The first respondent was the sole beneficiary under Mr Todt’s last Will and the second respondent was the sole beneficiary under Mrs

Todt’s last Will as well as being her next of kin. The third and fourth respondents were the next of kin of

Mr Todt. They took a 50% share of the joint estate of Mr and Mrs Todt on the intestacy arising from the commorientes.

The second respondent took the other 50% of the joint estate on the intestacy as the next of kin of Mrs Todt. Of the first respondent, Stanley J noted the self-interested nature of the part he played in the proceedings. The first respondent was acting in an adversarial manner and Stanley J found he was not entitled to have his costs met from the joint assets. It was held that the first and second respondents were jointly liable for the costs of the third and fourth respondents. • In the Estate of Amuso (No 2) [2021]

SASC 61 is another decision of

Stanley J which involved an applicant who was held to have acted in wilful disregard of the facts. He had sought to pursue his own financial benefit at the expense of the other beneficiaries.

The document upon which he sought to rely was not the deceased’s last Will and Testament. The conduct of the testator had not resulted in the trial rather it was caused by the applicant.

Stanley J ordered the unsuccessful applicant to pay the costs of the other parties on an indemnity basis. • The decision of Stanley J In the Estate of Colin William Brown (Deceased) (No 2) [2021] SASC 129 is a further example of costs following the event. The applicant nephew of the deceased brought proceedings seeking the admission to probate of a “lost” Will made by the deceased or alternatively an informal Will. The nephew was unsuccessful and the court dismissed his application. The nephew contended that the need for the proceedings was caused by the deceased due to misrepresentations that the deceased had made during his lifetime. The nephew sought his costs of the proceedings to be paid from the estate on a solicitor/client basis. Stanley J held that costs should follow the event and the unsuccessful applicant was ordered to pay the respondent’s costs.

Kocini v Kambanaros (No. 2) [2022] SASC 50 is therefore a reminder that it must not be automatically assumed that the probate costs rule will come to the rescue of an unsuccessful litigant in a testamentary cause. It may do if the cause and conduct of the litigant was reasonable (albeit ultimately unsuccessful), however, it might not, especially in unmeritorious IFP claims where the applicant is unable to establish “need”. All practitioners need to be aware of this and to be robust in their advice to potential claimants in testamentary matters about the potential for costs to follow the event. Practitioners should give careful consideration of the merits of claims when bringing IFP claims. Unmeritorious claims potentially resulting in unnecessary diminution of an estate may not succeed in having costs paid for by the estate. In fact, practitioners should reflect carefully on costs consequences before embarking on IFP claims, as they would in any litigious matter.