In the matter of the estate of Ian Fogarty, Emma Kovacs v Gregory Fogarty and Lorraine Fogarty (No. 2) [2007] ACTSC 40 (22 June 2007)

Last Updated: 8 May 2008

In the matter of the Estate of IAN PATRICK FOGARTY

EMMA ROSE KOVACS v GREGORY PATRICK FOGARTY

and LORRAINE HELEN FOGARTY (No. 2)

[2007] ACTSC 40 (22 June 2007)

PRACTICE & PROCEDURE - Costs - probate jurisdiction and costs to follow event.

Family Law Act 1975

Re Estate of Hodges, Shorter v Hodges (1988) 14 NSWLR 698

Re The Black Stump Enterprises Pty Ltd and Associated Companies (No 2) [2006] NSWCA 60

No. P 374 and 410 of 2006

Judge Connolly J

Supreme Court of the ACT

Date 22 June 2007

IN THE SUPREME COURT OF THE )

) No. P 374 and 410 of 2006

AUSTRALIAN CAPITAL TERRITORY )

In the matter of the Estate of IAN PATRICK FOGARTY deceased late of 30/47 Blackall Street, Barton in the Australian Capital Territory

BETWEEN: EMMA ROSE KOVACS

Plaintiff

AND: GREGORY PATRICK FOGARTY and LORRAINE HELEN FOGARTY

Defendants

ORDER

Judge: Connolly J

Date: 22 June 2007

Place: Canberra

THE COURT ORDERS THAT:

1. In matter No. P 374 of 2006, the plaintiffs pay the defendant's costs on the ordinary basis; and

2. In matter P 410 of 2006, the defendants pay the plaintiff's costs on the ordinary basis.

1. This is an application for costs following the determination of conflicting claims concerning the estate of the late Ian Patrick Fogarty, who passed away on 6 June 2006 (In the matter of the Estate of Ian Patrick Fogarty: Emma Rose Kovacs v Gregory Patrick Fogarty and Lorraine Helen Fogarty [2007] ACTSC 24 (20 April 2007)). He was a young man, who died suddenly. He was married at the time of his death, but he and his wife had separated, and had engaged solicitors to discuss a property settlement agreement preparatory to a divorce. Mr Fogarty had made arrangements to nominate his parents as the beneficiary on a superannuation policy, but no will was ever identified. Following his death, competing applications were brought in relation to his estate, by his lawful widow, and by his parents. His parents claimed that Mr Fogarty had told them that he had made a will in which all property would go to them. No person was able to say that they had sighted such a document.

2. The competing applications were heard on 26 and 27 February 2007, and I delivered a judgment on 20 April 2007 in which I held that the parents had not established the existence of a lost will to the requisite standard, and accordingly their claim would be dismissed, and the widow would be entitled to the estate.

3. The parents' application was supported by material which, as I stated in my original judgment, "involved voluminous irrelevant affidavits pouring bile on his wife, which have added considerably to the costs of proceedings". Accordingly, I did not make the form of costs order which, if not the norm, then is certainly not uncommon in these types of applications, that is that the estate bear all of the costs of the proceedings. Rather, I gave the parties leave to bring an application in relation to costs.

4. On the costs application, counsel for the widow sought orders that the defendant parents pay the plaintiff widow's costs on the letters of administration application (P 410/06). On the lost will claim (P 374/06), counsel also sought orders that the plaintiff parents pay the defendant widow's costs and, further, that there be a special order against the legal practitioners in relation to the additional costs occasioned by the inappropriate affidavits filed by the parents, which prompted Ms Kovacs to respond with affidavits in reply. Counsel for the parents argued that the estate should bear the costs of the claim, subject to orders that the costs be reduced to exclude the irrelevant affidavit material.

The law in relation to costs in estate claims

5. It seems to me that the law in relation to costs in estate claims is well set out by the remarks of Powell J in Re Estate of Hodges, Shorter v Hodges (1988) 14 NSWLR 698 at 709 where his Honour said:

Costs are, of course, in the discretion of the court, but that discretion, being a judicial and not an unfettered one, must be exercised in accordance with established principle.

The general principle to be applied in adversary litigation is that costs follow the event, those costs being taxed on a party and party basis. However, over the years, a number of exceptions to this general rule have come to be recognised. In the field of probate litigation, two such exceptions have come to be recognised, they being:

1. where the testator has, or those interested in the residue have, been the cause of the litigation, the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate;

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.

6. It seems to me that it is wrong to take from these statements of the law the proposition that the general outcome in probate litigation is that costs are borne by the estate. Such an outcome would potentially encourage ill conceived litigation by parties with ill will towards another interested in the estate, who could litigate sure in the knowledge that, even if they were unsuccessful, the other party would have a smaller estate once costs were paid. There is, it seems to me, an element of that in this matter.

7. The affidavits filed in support of the parents' application went into entirely inappropriate detail with allegations of sexual infidelity in relation to the widow. Such scandalous material has, at least since the enactment of the Family Law Act 1975, had no place in divorce proceedings, and it should have no place in probate proceedings. All that the court needed to know was that the parties' marriage had broken down and that property settlement negotiations were in place. There was also an affidavit from a so called disinterested neighbour, which made allegations of visits by the widow to the deceased's premises shortly after his death. On cross-examination, this person claimed to have no ill will towards the widow. She was then shown a most disgraceful letter, which she acknowledged that she had written, boasting of her own sexual exploits with the deceased under the nose of the wife. I am certainly satisfied that this took counsel unawares - had counsel known of this, he would certainly not have put this person forward as a witness.

8. These affidavits were subject to objection, and I disallowed all of the objectionable material on the first day of the hearing. Affidavits in reply from the widow were also subject to objection, and material of a similar ilk was removed. What I obviously did not know at the hearing, but was put before me on the costs application, was that the solicitors for the widow had, in serving the solicitors for the parents with these affidavits, written in the following terms (see affidavit of 22 May 2007), advising that all the deponents would be required for cross-examination:

Advice from counsel on behalf of Ms Kovacs suggests that your application is ill conceived, and the evidence in support that you have filed is spurious. The reason all your deponents are required for cross examination is as a result of your putting our client's credibility in issue in most disgraceful ways.

We invite you at this time to withdraw your application. We undertake that if you withdraw your application by close of business on Wednesday 4 October 2006 then we will not seek costs against your clients personally for your ill founded application. If we are successful, we will seek to tender this letter and request that costs be borne personally by your clients and not by the estate due to the nature of your application.

9. In her affidavit in support of her claim for letters of administration, Ms Kovacs said "Based upon their conduct towards me since his death, I believe that the defendants' opposition to my application is motivated by hostility towards me". Such a view is strongly supported by the nature of the material sought to be put before the court in relation to the lost will claim.

10. It seems to me that in this case, the appropriate form of costs order should be the ordinary form of order in adversary litigation, that is, that the unsuccessful party should bear the costs of the action. The successful party, the widow in this case, put the unsuccessful party clearly on notice in September 2006 that this would be the form of order sought, both on the basis of the strength of the case, and their objection to the scandalous form of the affidavits filed.

11. I accept that the parents' lost will claim was not unarguable and indeed, in my reasons, I accepted that the deceased had said that he had made a will. As I noted in my reasons, the authorities on lost wills cases require proof of the existence of the lost will to a high standard and there was no case to which I was referred where the only evidence of a will was a recollection of a statement of the deceased. In all of the successful cases, there is a witness who says they saw or read the actual will, or witnesses or documents showing drafts of a will, or evidence that a particular solicitor was involved in the preparation of such a will. Despite the deceased being a man well versed in commercial matters, no one was able to give such evidence. The parents' claim was thus inevitably weak and the nature of the allegations made against the widow in the supporting material does give rise to real concerns.

12. It was this material that was the basis for the claim by Ms Kovacs that I should frame the costs order in such a way that the legal advisers to the parents were themselves partly responsible for the costs. Counsel for the parents advised me, in open court and in the presence of his clients, that the affidavits were prepared on express instructions, and indeed that some material had been removed from earlier drafts. I was advised that otherwise legal professional privilege was claimed in relation to pre-trial advice. I advised the clients that, on this submission, any costs order would be likely to be borne by them rather than their legal advisers. They did not wish to give any different instructions.

13. A form of costs order that imposes costs on legal advisers is an exceptional form of order. The New South Wales Court of Appeal recently considered this matter in Re The Black Stump Enterprises Pty Ltd and Associated Companies (No 2) [2006] NSWCA 60, where Young CJ in Eq, whose reasons were supported by Santow and Bryson JA, said :

... on the principal point, that is, when should the Court make an order that solicitors pay the costs of the proceedings, [counsel] reminded us of the decisions in Ridehalgh v Horsefield [1994] Ch 205 and Lemoto v Able Technical Pty Ltd [2005] NSWCA 153.

In Ridehalgh at p 229 and Lemoto at [92] the English Court of Appeal and this Court respectively said, quoting the words of McColl JA in the latter case:

The jurisdiction to order a legal practitioner to pay the costs of legal proceedings in respect of which he or she provided legal services must be exercised `with care and discretion and only in clear cases'.

There is abundant other authority for similar propositions; see eg White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169, 239; Steindl Nominees Pty Ltd v Laghaifar [2003] QCA 157; [2003] 2 Qd R 683, 689.

One of the difficulties for a court when applying the test set out in those authorities is in making an assessment as to whether it is the solicitor or the client that is the real cause of the problem. This is exacerbated in that legal professional privilege may prevent the lawyer from informing the Court of what truly happened. Without the client's release, the lawyer may well be unable to give the Court full information; see eg Kumar v MIMIA [2004] FCA 18; (2004) 133 FCR 582.

14. It seems to me that there is insufficient basis in this case for any adverse order against legal advisers. While the nature of the inflammatory and scandalous affidavit material inevitably added to the costs of the proceedings, the only information I have is that these were filed on express instructions.

15. I should make the observation that, although the widow filed affidavits containing responses that were themselves objectionable and subject to the same vice, they were clearly filed in response and in an effort to, in effect, clear her name. In filing this material, Ms Kovacs' legal advisers clearly put the parents on notice that they would be objecting to the nature of the allegations, and pursuing the issue of costs. I make it clear that in ordering costs in this matter I am of the view that, even though some of the affidavit material filed by Ms Kovacs was ruled inadmissible, she should not be penalised in relation to costs for this material, which was clearly in response.

16. Persons wishing to contest probate type matters should be on notice that it does not inevitably follow that this will be a cost free exercise. I make the observation that it seems to be the case that in New South Wales, where legislation now prohibits law firms from advertising their services in personal injuries matters, there is a growing trend to advertise the merits of contesting wills. Persons advising potential probate litigants should advise them that costs orders may follow. In this case, had the matter simply proceeded on the basis of bare affidavits asserting that the deceased had spoken of a will, I may have been inclined to the view that the deceased's conduct had lead to the uncertainty that had to be resolved by litigation, thus falling within the first exception to the normal costs rule set out in Shorter v Hodges (supra). However, in this case, scandalous affidavit material was filed indicating a degree of animosity to the widow and, in the face of a clear letter advising that costs would be sought, the matter proceeded to litigation. One witness in the parents' case was shown to be personally motivated by malice towards the widow in a most disgraceful manner. The estate in question was not extensive, and the costs of the voluminous material would have the potential to significantly eat into the estate. Such a result would, it seems to me, be unjust.

17. It seems to me that in this case, costs should follow the event. I therefore order that:

1. In matter P 374 of 2006 the plaintiffs pay the defendant's costs on the ordinary basis; and

2. In matter P 410 of 2006 the defendants pay the plaintiff's costs on the ordinary basis.

I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of his Honour, Justice Connolly.

Associate:

Date: 22 June 2007

Counsel for the plaintiffs: Mr D Hassall

Solicitor for the plaintiffs: Ray Swift Moutrage & Associates

Counsel for the defendant: Ms L Donoghue

Solicitor for the defendant: Rachel Bird & Co

Dates of hearing: 30 May 2007

Date of judgment: 22 June 2007