Wild v Meduri & Ors; Meduri & Anor v Neal & Anor; Meduri v Meduri & Ors No 2

HIS HONOUR: This judgment deals with the particularly thorny question of the costs of a Probate proceeding, as well as with the costs of what was described as “the trust proceeding”, part of which included a claim for a family provision order by the two Plaintiffs, Dominic and John, in those proceedings. In a third proceeding, for a family provision order, by a person under a legal incapacity, the order for the costs of the Plaintiff, Joseph, was essentially agreed.

The judgment relating to the different proceedings was delivered on 23 February 2023, following a hearing of 11 days, in November and early December 2022. It bears the medium neutral citation Wild v Meduri & Ors; Meduri & Anor v Neal & Anor; Meduri v Meduri & Ors [2023] NSWSC 113 (the principal judgment).

These reasons should be read with the principal judgment as events, matters and persons are referred to in both judgments in the same way. I shall, where necessary, refer to paragraphs of the principal judgment by simply stating the paragraph number, although, at times, the principal judgment may have to be referred to in more detail.

At the commencement of the hearing of the proceedings, counsel for the main protagonists had agreed, and submitted, that the Court should not determine, in the principal judgment, how the costs of the proceedings should be borne: [154]. Counsel for both parties submitted that there were documents that might be relevant to how the burden of the costs of the proceedings should be calculated and how they should be borne.

Later in these reasons, I shall refer to one affidavit, sworn on 20 March 2023, by Mr Matthew Puleo, solicitor, in which a copy of correspondence dated 17 November 2022, containing what is said to be a Calderbank offer, sent in the proceedings, on behalf of Dominic and John, to Rose, was annexed. The affidavit was filed, in Court, at the hearing of the costs application, and was read, without objection.

In summary, in the principal judgment, the Court held that:

The parties were given an opportunity to resolve the form of orders and, if possible, agree on the costs orders to be made. As will surprise no-one familiar with the proceedings, they were unable to do so, and on 4 April 2023, the Court ordered that, within ten days, the legal representatives of the parties were to provide Short Minutes of Order in each of the three matters, that reflected the reasons. On the same day, the Court also ordered each party to provide any submissions on costs, in hard and soft copy, by 1 May 2023.

Each party, other than Joseph, who did not need to serve submissions, as his costs were not the subject of dispute, complied with the Court’s order. Again, unsurprisingly, there was a wide difference between the positions of the principal protagonists on the form of orders, and how the costs, estimates of which had previously been provided, and which were eye-watering, should be borne.

Whilst the outcome of the proceedings, respectively, on its face, might appear to be straightforward, it was complicated by the nature of the different proceedings, brought in the alternative, and because the costs of the litigation are so substantial. Consequently, it became necessary to give the parties an opportunity to address the Court by way of written submissions, with any affidavit in support, and then orally, because of the complexity of the issues, and the quantum of costs. Whilst, naturally, this added to the overall costs of the litigation, it was not suggested that the determination of how costs should be borne should be determined, in Chambers, on the papers.

The costs hearing was listed before me, for one day on 10 May 2023 and it was concluded within that time.

At the commencement of the costs hearing, the form of orders, in each proceeding was discussed, and agreement was, broadly, reached upon the orders, other than for costs, that ought to be made. The form orders, in each matter, including in respect of costs, can now be made, and will be included at the conclusion of these reasons.

(I should mention that the Probate proceeding will not be referred to a Senior Deputy Registrar in Probate to complete the grant as Rose has filed a Notice of Appeal on 23 May 2023. This should not cause unnecessary inconvenience to the parties as Mr Neal was appointed as the interim administrator pendente lite and receiver of the estate of the deceased, with identified powers: see [16].)

At [151] – [152] of the principal judgment, I referred to Ex. JS2, in which the estimated costs and disbursements of each party, calculated on the ordinary, and on the indemnity, basis (inclusive of GST), in relation to each of the proceedings, was set out as follows:

I noted, also, that Ex. JS2 revealed that, as at the date of the Schedule, Rose had paid $258,378 on account of her costs; Dominic and John had paid $2,333 on account of their costs; none of Joseph’s costs had been paid; and all the costs of Mr Neal, the interim administrator, had been paid out of the deceased’s estate. (There seems to be no dispute that Mr Neal’s costs, which have been paid out of the estate, were properly paid.)

In Ex. JS2, Rose estimated that the division of her costs was 55% incurred in relation to the Probate Proceedings; and 45% incurred in relation to the Trust Proceedings. Dominic and John estimated the division of their costs as 75% incurred in relation to the Probate Proceedings; 15% incurred in relation to the Trust Proceedings; and 10% incurred in relation to Joseph’s proceedings.

I was not sure that the division of the costs, as asserted by the parties, was correct. It seems to me that, apart from some of the evidence going to the financial and material circumstances of each of Dominic and John, and in his case, going to that of Joseph, upon which circumstances little time was spent, the evidence in the Probate proceeding and part of the trust proceeding needed to be considered in both of those proceedings.

This was discussed at the costs hearing and the parties agreed that the Probate proceeding, and part of the trust proceeding required about 85 per cent of the time and costs, Dominic’s and John’s family provision proceeding, required about 10 per cent of the time and costs, and Joseph’s family provision proceeding required about 5 per cent of the time and costs.

To determine the costs issue, it is next convenient to state the position adopted by each of the parties.

Rose’s principal submission was that whilst she was unsuccessful in the Probate proceedings, as the 2009 Will was found to be a valid Will of the deceased, she had been partly successful in the trust proceeding relating to the family provision claim because Dominic’s and John’s claim was each dismissed. She also submitted that she had been the proper contradictor representing the estate of the deceased in relation to all claims.

Rose also submitted, in relation to the Probate proceedings, that there was a reasonable case for investigation in relation to the validity of the 2009 Will. She pointed to the age of the deceased; that the deceased was frail; that she was uneducated and was illiterate in all languages; that she only spoke Calabrese and understood very limited English; and that Giuseppe, her husband of many decades, had passed away shortly before she had made the 2009 Will, at a time when she had been agitated and distressed.

Rose pointed to the terms of the 2009 Will, submitting that the Will was not simple (especially for someone who had never previously made a Will, who was uneducated, and who could not speak or read any English), in that it contained specific gifts of property of unequal and fluctuating value, as well as a right of residence and trust for the benefit of Joseph; that Dominic and John, together with Connie, had taken the deceased to see Mr Puleo to prepare a Will; that Connie had been the deceased’s full-time live-in carer since 2007 and had accompanied the deceased to all medical appointments; that the deceased had told Rose that “Everything is equal”; and that by 2009, the deceased had experienced mental and physical decline, which was supported by the two experts who had provided expert reports.

Counsel for Rose pointed out that Dr Joseph’s evidence, being the evidence of the only medical practitioner who conducted a capacity assessment on the deceased during her lifetime, was not available to the parties until she gave evidence orally on the 8th day of the hearing.

It was also submitted that Mr Puleo, the solicitor who had prepared and witnessed the 2009 Will had not conducted a capacity assessment at the time of obtaining the deceased’s instructions for the preparation of the 2009 Will, was not aware of the medical conditions from which the deceased was suffering and was not aware that Connie was the deceased's full-time carer. Furthermore, he was unable to produce any file notes or other contemporaneous records of his meetings with the deceased in 2009 and until a subpoena was issued by Rose to his firm in early 2022 and was unable to recall whether he had one, or two, meetings with the deceased in relation to the preparation and execution of the 2009 Will.

Counsel also pointed to the evidence of the other five lay witnesses upon whose evidence she had relied. It was submitted that it would be unjust for Rose to bear, not only her own costs of the Probate proceedings, but also the costs of Dominic and John.

With respect to the trust proceedings, counsel for Rose submitted that, as Rose was the only person who had defended the proceedings on behalf of the estate, it would be appropriate that she receive her costs of the trust proceedings out of the deceased’s estate on the indemnity basis or, alternatively, on the ordinary basis.

Counsel also submitted that as Dominic and John had failed in relation to their family provision claims, they should, accordingly, pay Rose’s costs, whilst bearing their own costs in relation to those claims.

It was submitted that any costs which were ordered to be paid out of the deceased’s estate should be borne proportionally by the assets specifically disposed of by Clauses 3, 5 and 6 of the 2009 Will (the gifts of real property to Dominic and John, to Rose and Connie, and to Tony). She accepted that the provision made for Joseph should not bear any part of the burden of her, or Dominic’s and John’s, costs of the proceedings.

Counsel for Rose relied on Re Estate late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311 (Campbell J) at [30] in which it was written that the costs discretion ought to be exercised in a way which best achieves justice. This meant that Rose ought to be entitled to receive part of her costs of the Probate proceedings out of the deceased’s estate.

Another matter raised was that Rose had incurred significant costs in the Probate proceedings in relation to the administration of the estate for the benefit of all the beneficiaries entitled under the operation of the rules of intestacy. If the 2009 Will were found to be invalid, each of Connie, Tony, Joseph, and Rose, would have received a greater share of the deceased’s estate under the operation of the rules of intestacy.

In relation to the Calderbank offer, Rose submitted that the Calderbank offer did not represent a sufficiently genuine compromise of the dispute, containing no more than a modest compromise as to costs, such that it was not unreasonable for her not to have accepted the offer: Brady v Mikan (No 2) [2022] NSWSC 1320 at [42]. She also relied, in submitting that it was not unreasonable to not accept it, upon the same matters that had been relied upon to support her claim for costs.

Counsel for Rose sought the following orders as to costs:

Senior counsel for Dominic and John submitted that they had been successful in relation to all three claims that had required determination, and that Rose had been entirely unsuccessful. She submitted that Rose’s costs should not be defrayed by either the estate, or by Dominic or John personally (including by their share of the estate) given Rose’s complete lack of success. It was put that costs should follow the event as between Dominic and John, on one side, and Rose on the other. Therefore, Rose should be ordered to pay their costs of both the Probate proceeding and of the trust proceeding and that no order be made in relation to Rose’s costs of the proceedings with the intention that she bear her own costs.

In the alternative, Dominic and John submitted that should any part of their, or Rose’s, costs, be ordered to be paid out of the estate, then those costs should not be borne by the Kemps Creek property.

Dominic and John also sought a costs order calculated on the indemnity basis, for their costs from 17 November 2022 onwards until the end of the hearing, based upon the service of a Calderbank offer during the course of the hearing.

Senior counsel pointed to Rose’s “trenchant opposition” (at [36]), and the finding that the 2009 Will was duly executed by the deceased (at [132]); that contrary to Rose’s assertions, the deceased had been aware of the substance of Giuseppe’s Will when she made the 2009 Will (at [161]-[168]); that despite her criticisms of Mr Puleo, in relation to the preparation of the 2009 Will, the Court had found him to be a credible and satisfactory witness and to have taken appropriate steps to ensure the deceased was properly assisted in the will making process (at [459]); that the suggestion by Rose that the photograph of the deceased with Graham Ball taken in about March 2010 had been somehow ‘mocked up’ was rejected (at [497]); that each of Dominic and John was a more credible witness than Rose (at [626] and [685]); that Rose had been found to be an unreliable, and at times, an untruthful, witness (at [746]-[750]); that Rose was found to have been motivated by what she regarded as the “unfairness” of the 2009 Will (at [1], [746]); that Alan had given evidence as an “interested party” who wished to support Rose’s case (at [770]); that Tony was an unimpressive witness (at [786]); that the more florid evidence of the deceased’s behaviour in or about 2009 was not supported by the medical evidence (at [786]), with no evidence that the behaviour in September 2009 was as it was in 2014 and thereafter (at [853]).

Senior counsel also referred to the finding that the 2009 Will was not irrational (at [929]), that it reflected the deceased’s intentions as instructed to Mr Puleo (at [933]); that it had been duly executed despite Rose’s evidence about the alleged differences in the mark which the deceased had made on the 2009 will on different pages (at [131]); and that the deceased had signed the Will without any assistance.

Senior counsel submitted that neither of the exceptions, as referred to in Re Hodges: Shorter v Hodges (1988) 14 NSWLR 698 at 709 (Powell J) was applicable in the Probate proceedings.

She also submitted that, in relation to the trust proceedings, Rose was not defending the proceedings as a representative of the deceased’s estate, but rather as a person promoting her own financial and personal interests.

Reference was made to the Court of Appeal (Bell P, Leeming, and Payne JJA)’s observations in Bassett v Bassett [2021] NSWCA 320 at [34]:

Therefore, it was submitted that merely because Rose had been substituted as an active Defendant in place of Mr Neal, this did not mean that she was automatically entitled to an indemnity from the estate.

In the alternative, counsel for Dominic and John submitted that if the Court did not make an order that Rose pay Dominic’s and John’s costs personally, then she ought to be indemnified out of the parts of the property other than the Kemps Creek property.

Counsel for Dominic and John sought the following orders as to costs:

On 17 November 2022, Mr Matthew Puleo, Dominic and John’s solicitor, sent a letter to Ms McIntyre, Rose’s solicitor, containing an offer, said to be made in accordance with the principles espoused in Calderbank v Calderbank [1975] 3 All ER 333 (the Calderbank offer) to settle both the Probate proceedings and the trust proceedings.

The Offer was in the following terms:

The letter provided that the Offer would remain open for acceptance until 10:00 a.m. on 28 November 2022, and also stated:

The Offer was rejected by Rose.

It was submitted that there were contextual reasons why Rose did not accept the Offer, namely, that at the time the Offer was made, the expert medical evidence of the two joint medical experts who attended the expert conclave had not yet been tendered in the proceedings. Counsel for Rose maintained that this expert medical evidence was an important aspect of the evidence in both the Probate, and the trust, proceedings.

Counsel pointed to Ying v Song [2011] NSWSC 618 at [26] (Ward J) as authority for the proposition that:

It was further submitted that Dominic and John had failed to discharge their onus to satisfy the Court that it should exercise the costs discretion in their favour: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [20], [26]; Commonwealth of Australia v Gretton [2008] NSWCA 117 at [9], [46]; Starr v Miller; Starr v Miller (No 2) [2021] NSWSC 685 at [29].

Counsel for Rose also submitted that the Offer did not represent a sufficiently genuine compromise of the dispute: Brady v Mikan (No 2) at [42].

Counsel for Dominic and John submitted that Rose’s rejection was unreasonable, for the following reasons:

As earlier stated, one of the submissions pressed upon the Court, on behalf of Rose, was that, unlike Dominic and John, she was not bringing the Probate proceedings asserting an intestacy only on her own behalf, but as well, on behalf of all the deceased’s children who would benefit if the Court found that the 2009 Will was not valid (other than Dominic and John).

Bearing in mind that Tony gave evidence in support of Rose’s case, it seems likely that he supported her claim in the Probate proceedings that there was an intestacy and her defence of the trust proceeding. Connie was not available for cross-examination and her evidence was not read. However, she, with Joseph, would have benefitted if the Court had found that the 2009 Will was not a valid Will.

Neither counsel made any submissions on the principle that Rose could have taken the precaution of obtaining security, by way of an indemnity, for a proportion of the costs from the other persons interested in upholding the claim that the deceased had died intestate.

I dealt with the question of costs in Probate proceedings in Starr v Miller; Starr v Miller (No 2) [2021] NSWSC 685, at [51] – [75]. An appeal from the decision was dismissed, with costs, by the Court of Appeal: Starr v Miller [2022] NSWCA 46. There was no discussion, in the Court of Appeal, about what had been written about costs.

Whilst what was written in that case is lengthy, it should be repeated for the benefit of the parties:

What is commonly referred to as a “Calderbank offer” (a written offer made without prejudice except as to costs that does not comply with the relevant rules of court relating to the making of offers of compromise) is a well-recognised means of making an offer of settlement in circumstances where the party making the offer ultimately seeks a costs advantage if the offer is not accepted: Jones v Bradley (No. 2) [2003] NSWCA 258 at [5]; Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [27]. The offer is not admissible until the substantive issues have been determined. The result of the Court’s adjudication must be as, or more, favourable to the offeror than the offer made.

In Evans v Braddock (No 2) [2015] NSWSC 518, I wrote, at [50]:

In Hunter v Roberts (No 2) [2019] NSWCA 235, the Court of Appeal (comprised of Meagher and Brereton JJA, and Simpson AJA) noted, at [6], that:

I cannot do better than repeat what was written, as a short summary of the principles, by Ward CJ in Eq in Girardi as trustee for The Superannuation Fund – Greengate Investments v Duncum [2021] NSWSC 1138 at [88] – [91]:

If a party wishes to rely upon a Calderbank offer, the terms of the offer should be clear and unambiguous: Coregas Pty Limited v Penford Australia Pty Limited (No 2) [2013] NSWCA 11 at [12]. The offer should embody ‘a real and genuine element of compromise’. The meaning of that phrase is set out in cases such as Leichhardt Municipal Council v Green [2004] NSWCA 341, per Santow JA at [23]; Herning v GWS Machinery Pty Ltd (No 2) [2005] NSWCA 375, per Handley JA at [5]; The Anderson Group Pty Ltd v Tynan Motors Pty Ltd (No 2) [2006] NSWCA 120; (2006) 67 NSWLR 706, per Basten JA at [8].

The onus is on the party making the Calderbank offer to satisfy the court that it should exercise the costs discretion in its favour: Evans Shire Council v Richardson (No 2) [2006] NSWCA 61 at [26]; Commonwealth of Australia v Gretton [2008] NSWCA 117 at [46]; County Securities Pty Ltd v Challenger Group Holdings Pty Ltd (No 2) [2008] NSWCA 273 at [31]; Smith v Jones (No 4) [2022] NSWSC 1715 at [35].

I remain of the view that these principles apply in relation to the proceedings with which I am dealing.

As I have written in other cases, I do not intend what I have described as “principles” or “general principles” to be elevated into rules of law, propositions of universal application, or rigid formulae. The formulation of principles to guide the exercise of discretion, hopefully, avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power.

The probate exceptions to which reference have been made are neither “exhaustive nor rigidly prescriptive. They, too, are guidelines and not straightjackets, and their application will depend on the facts of the particular case. They do not fetter the discretion of the court and in its discretion the court can take into account other circumstances”: McGarry v Murphy [2021] NICh 21 at [3(d)] (McBride J). They must be applied to a wide range of different factual situations.

As Sir J. P. Wilde (later Lord Penzance) stated in Mitchell and Mitchell v Gard and Kingwell (1863) 3 Sw & Tr 275 at 277; (1863) 164 ER 1280 at 1281-1282:

The guidelines upon which the Court’s discretion is exercised are also there for the assistance of those who are required to advise litigants before they embark on what will, undoubtedly, be expensive litigation, and to continue to advise during the course of the litigation, so that the litigants are provided with some idea of the risks being run as to costs: Re Cutcliffe's Estate [1959] P 6 at 21.

There are some matters which are particularly relevant to the issue of costs. These are:

I reject the principal submission made on behalf of Rose, as she was unsuccessful in the Probate proceedings and that, but for the result of those proceedings, Dominic and John would have obtained a declaration that the Kemps Creek property was held on trust for them: [1034].

Similarly, but for the result of the Probate proceeding, each would have received a family provision order: [1033] – [1035], albeit in a lump sum less than each had sought. It follows that in each of the proceedings, Dominic and John were, effectively, successful on each portion of the claims made, even though, ultimately, as submitted by Rose, the orders to be made will provide for each of the trust proceeding, including the family provision proceeding, brought by Dominic and John, to be dismissed.

The trust proceeding was brought in the alternative to the Probate proceeding. However, the family provision claim by each of Dominic and John was made even if they were successful in the trust proceeding because of costs: Tcpt, 7 December 2022, p 815(29-35); 8 December 2022, p 872(35-50), 873(24-30).

The orders to be made dismissing the trust proceeding, which included the claim for family provision orders, flow from Dominic’s and John’s success in the Probate proceeding. It follows that it is unnecessary to consider, as decisive, principles which apply in cases in which there are several claims, some of which are not successful.

In summary, as a result of Rose’s allegations concerning the validity of the 2009 Will, Dominic and John, who, it is to be remembered were the executors named in that Will, had no choice but to be involved in contested Probate proceedings. Had she not made the allegations in relation to the Probate proceedings, it would have been unnecessary for the Trust proceeding to be brought, leaving potentially, only the family provision claim brought by Dominic and John, if each persisted with it, and the family provision proceedings brought by Joseph. Each might have been resolved, or if continuing to a contested hearing , would have resulted in far less costs being incurred.

In all the circumstances, in the exercise of the Court’s discretion, in relation to costs, I am of the view that:

I turn next to the form of orders, including the orders for costs, which the Court makes.