McCabe [2012] NZHC 1759 (19 July 2012)

Last Updated: 28 July 2012

IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY

CIV-2011-488-663 [2012] NZHC 1759

BETWEEN IN THE ESTATE OF NANCY MCCABE Deceased

Hearing: On the Papers

Counsel: WD McKean for the Executors

AG Rowe for Caveator

Judgment: 19 July 2012

_{COSTS JUDGMENT OF TOOGOOD J}

This judgment was delivered by me on 19 July 2012 at 2:30 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:

WD McKean, Webb Ross, Whangarei: [e-mail]

AG Rowe, Wells & Co., Auckland: [e-mail]

ESTATE OF N MCCABE HC WHA CIV-2011-488-663 [19 July 2012]

Introduction

[1] Nancy McCabe (“Mrs McCabe” or “the deceased”) died on 22 September

2011, leaving a will dated 5 April 2005 (“the Will”). In terms of the Will, two of Mrs McCabe’s children, Irene Misiepo and Robert McCabe (together “the executors”), were appointed the executors of her estate. On 11 October 2011, Bruce McCabe (“the caveator”), the deceased’s eldest child, lodged a caveat under s 60 of the Administration Act 1969 against a grant of probate of the Will.

[2] By application dated 9 November 2011, the executors sought an order nisi for probate of the Will. An order nisi was granted by Peters J on 11 November 2011, and the caveator was directed to show cause by 9am on 1 December 2011 why probate should not be granted.

[3] The caveator has now withdrawn his opposition to the grant of probate and the grant has been made absolute. The executors and the caveator have filed detailed memoranda and supporting affidavits as to costs.

Background

[4] The effect of Ms McCabe’s dispositions is that three of her children

(including the caveator) will not receive any benefit under the Will. On 29

November 2011, an affidavit by Bruce McCabe in opposition to the grant of probate to the executors was filed. Further affidavits in opposition were filed subsequently by another of the deceased’s sons, Ivan McCabe; Ivan’s wife, Elizabeth; and Bruce’s wife, Kathleen.

[5] Bruce McCabe’s challenge to the validity of the Will was based on an allegation that his mother may have been unduly influenced and coerced as to the terms of the disposition of her estate by her youngest child, Robert McCabe. Counsel for the executors enumerated 35 purported grounds relied upon for Bruce McCabe’s allegations. They include disputes between the siblings and their mother over the estate of Mrs McCabe’s late husband, Bernard, including a matrimonial

property claim against that estate by Mrs McCabe in 2002; allegations that Robert McCabe authored correspondence signed by the deceased in 2005; and allegations of questionable conduct by Robert McCabe in his capacity as the person with effective control of the family farms. Bruce McCabe alleged that a solicitor acting for Mrs McCabe in the matrimonial property case expressed concern about Robert’s influence over her.

[6] Extensive affidavits in response were filed by the executors and others, including Robert McCabe’s son Micheal, and two solicitors who acted for or advised Mrs McCabe in respect of her will and estate matters. The allegations of undue influence or coercion were denied; the solicitors who dealt with Mrs McCabe over relevant matters appear to have been satisfied that the terms of the Will reflected Mrs McCabe's views as to the disposition of her estate free of any improper conduct by any other person. There was also an affidavit from a legal secretary who produced a

2002 will in which Mrs McCabe expressly excluded Bruce from any benefit

"because of his behaviour and actions since the death of [her] late husband."

[7] Bruce McCabe withdrew his opposition to the grant of probate after having had an opportunity to consider the views of the independent witnesses. He has commenced other High Court proceedings in relation to a family trust settled by his late father, which, he says, are more suited to addressing his concerns about the conduct of other family members. In respect of the probate proceeding, he made an open offer to the executors to pay schedule costs of $10,904, calculated on a 2B basis. The offer was rejected.

The executors’ claims to increased or indemnity costs

[8] The executors seek increased costs under r 14.6(1)(a), alleging three alternative grounds; namely:

[a] the nature of the opposition filed by the caveator is such that the time required by the executors to resist it substantially exceeds the time

_{allocated under band C;}1 _or

1 High Court Rules, r 14.6(3)(a).

[b] the caveator contributed unnecessarily to the time or expense of the grant of probate of the estate, by taking or pursuing an unnecessary step or an argument that lacked merit;2 or

[c] some other reason exists which justifies the court making an order for increased costs despite the principle that the determination of costs should be predictable and expeditious.3

[9] In the event that the Court should conclude an award of increased costs is justified, the executors seek indemnity costs under r 14.6(1)(b) of the Rules. The grounds upon which indemnity costs are sought are those set out in r 14.6(4)(a); namely, that in lodging a caveat against the granting of probate and opposing the issue of an order that the Order Nisi should be made absolute, the caveator acted improperly or unnecessarily. Alternatively, they rely of the “other reason” ground in r 14.6(4)(f).

[10] As is so often the case in proceedings of this kind, the dispute between the parties has a lengthy background of apparently bitter family disharmony. The affidavits filed by Bruce McCabe in opposition to the grant of probate, and the exhibits attached to them, are extensive. They cover most of the family history from around 1970 to the present and include matters of detail which might in themselves appear trivial or irrelevant to the events immediately leading up to the execution of the Will in 2005.

[11] The executors criticise the caveator for failing to disclose, in his affidavit, that he had a bitter lengthy dispute with his mother over her matrimonial property claims against his late father's estate, and that he stood to benefit if those claims did not succeed. They are also highly critical of the wide-ranging attack on the involvement and conduct of Robert McCabe in family matters which they say was unfocussed and which, at best, should have been confined to events at or about the time of the execution of the Will. They submit that the executors were put to

_{significant cost in responding to the broad allegations, and they point out that, since}

2 _{Rule 14.6(3)(b)(ii) and (iii).}

3 Rule 14.6(3)(d).

Bruce McCabe is not a beneficiary of the estate, the unnecessary costs of responding to the now-abandoned opposition to the grant of probate will fall on the other children.

The caveator’s position regarding costs

[12] Acknowledging the general rule the that costs should follow the event, the caveator argues that it is appropriate to view this case as falling within the exceptional class of cases where, bearing in mind the knowledge and means of knowledge of the opposing party, there are reasonable grounds to question whether there has been undue influence in the settling of the terms of a Will.4 In the event that the Court should consider a costs order to be appropriate, he disputes the claim for indemnity or increased costs and says that schedule costs only, in terms of his offer, should be awarded, less a discount for the expense of resisting the executors’

costs claims.

Is this a case where no costs order should be made?

[13] I deal first with the caveator’s submission that this case falls within a recognised category of probate cases in which there is an exception to the general rule that “the party who fails with respect to a proceeding or an interlocutory application should pay costs to the party who succeeds”.5

[14] In Re Paterson, Stringer J said the following:6

The Court has a general discretion as to costs in all actions and proceedings before it, but there are certain well-established principles upon which that discretion should be exercised in cases of contested wills. They are as follows: (i.) If the litigation originates in the fault of the testator – eg by the state in which he left his testamentary writings, or by his eccentric or irrational habits and mode of life – or of those interested in the residue the costs may be properly paid out of the estate. (ii.) If there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent. (iii.) Unless the circumstances of the case are such as

4 _{Re Paterson [1924] NZLR 441.}

5 _{Rule 14.2(a).}

6 At 442.

to bring it within one of the foregoing exceptions, the general rule that costs should follow the event ought to prevail ....

[15] In that case, the Judge heard evidence and argument and came to what was a finely balanced view that the will was that of a free and capable testator. The Judge considered, however, that the caveators were amply justified in opposing the will on both grounds put forward by them.

[16] The caveator’s position receives some support from the view taken by Giles J in Fraser v Chalmers,7 which was a case involving a challenge to the testator’s Will on the grounds of testamentary incapacity and undue influence. In that case, the testator had left the bulk of his estate to his caregiver. His brother and his niece lodged a caveat against the granting of probate, but the caveat was overlooked and probate was granted. The caveator successfully issued proceedings for an order

recalling probate. In the subsequent solemn form proceedings, however, the challenge of the former caveators was withdrawn once the medical records of the testator had been examined.

[17] Giles J considered the application of the second of the principles referred to by Stringer J in Paterson. For the caveator, Mr Rowe, submits that the following passage from the judgment in Fraser v Chalmers has resonance in this case:8

It is fair to say that none of the medical records available to the [caveators] focused upon the issue of mental condition. When the doctor’s affidavit was made available the whole file was referred to a psychiatrist for independent review and that consultant concluded that there was no basis upon which to advance a case of lack of testamentary capacity. Immediately that advice was received counsel intimated to the executor’s advisers that opposition to the grant of probate would be withdrawn.

I am satisfied that there was a sufficient and reasonable basis for the [caveators] to maintain the issue of testamentary capacity. In probate proceedings the Court has an obligation to ensure that any legitimate concern about the capacity of deceased is investigated. What the [caveators] were seeking to do was to put that in issue so that the Court could examine the totality of the evidence in determining whether or not this deceased had capacity to dispose of his estate in the way that he did. In my view the actions of the [caveators] come within the ambit of the second principle in Re Paterson.

7 _{Fraser v Chalmers (1997) 11 PRNZ 348.}

8 At 351-352.

[18] In this case, the justification for Bruce McCabe’s decision to raise the issue

of undue influence places some emphasis on a letter from his solicitor dated

24 June 2004, in which the solicitor reported on a telephone discussion he had had with Mrs McCabe’s solicitor, Mr Harte. The letter referred to the caveator’s concerns about the extent of Robert’s influence over his mother; they were said to have been regarded by Mr Harte as “sensibly held”. The solicitor reported to the caveator that Mr Harte had said that he had largely been avoiding the issue of Robert McCabe’s influence over his mother, and that he had some real concerns about the appropriateness of it and where his instructions were coming from.

[19] In his affidavit, which was filed on 13 March 2012, Mr Harte did not accept that what was reported to the caveator in the June 2004 letter was a proper record of his statements but rather an interpretation of matters discussed between the lawyers. While not expressly disavowing any concerns about Robert’s influence over his mother, Mr Harte says at paragraph 19 of his affidavit:

I do not recall the words used in the conversation but I do not think I would have spoken to the Hobec lawyer in the exact terms used by him. I accept that we would have talked about the issue of Robert’s influence on Mrs McCabe as it was an issue I was alive to and I accept it would have been likely to come up given the circumstances.

[20] The caveator submits that he acted responsibly in withdrawing his opposition once he had considered Mr Harte’s affidavit and the other affidavits filed and served on behalf of the executors in reply.

[21] By way of contrast, Mr Rowe also referred me to the judgment of Fisher J in Re Dudley, Hayden v Semeti,9 in which issues related to a will went to trial and the Court rejected the allegation of undue influence. The value of the estate in that case is not disclosed in the judgment, although Fisher J described it as “very small, consisting essentially of a half interest in the house occupied by the widow.” The Judge held that the claim of undue influence had been founded largely upon unsubstantiated suspicion and that the hearing had been needlessly prolonged by

_{character assassination. The proceedings involved, among other things, three}

9 Re Dudley (deceased) HC Auckland P1042/92, 14 May 1993.

judicial conferences and the filing of 27 affidavits of which 20 were filed by the plaintiff executors in responding to the caveator’s allegations.

[22] Fisher J held that the estate should not bear the costs of the proceeding which included a three-and-a-half day hearing. Against a potential liability of scale costs in the vicinity of $20,000, the caveator was directed to pay $15,000.

[23] Mr Rowe observed that the litigation in the present case did not reach trial and that the preparation costs were not as extensive as that in Re Dudley. He also submitted that the severe criticism of the caveator by the Judge in that case would not be appropriate in the present proceeding.

[24] Having regard to the detailed allegations and counter-allegations set out in the memoranda and affidavits filed, the evidence (albeit untested) is sufficient for me to reach the view that the caveator’s actions in recording his opposition to the grant of probate pending an investigation by the Court were justifiable. I do not mean that I regard the allegations as having any substance; I have not considered their merits (except as to matters related to Mr Harte’s views) and am unable to reach any conclusions upon them. Nor do I draw any adverse inference against the caveator because he withdrew his opposition after the affidavits on behalf of the executors had been served.

[25] I consider, however, that the caveator was entitled, against the background of extreme family disharmony and evidence in the June 2004 letter of what appeared to be an influential relationship between Robert McCabe and the deceased, to put his concerns in issue so that the Court could examine the evidence. I also accept that the caveator acted responsibly in withdrawing his opposition once the affidavits on behalf of the executors in reply had been filed and served. It was no doubt of some significance to the caveator that there was nothing in the evidence provided by the solicitors Mr Harte and Mr Wakeman to justify any continued concern about coercion or undue influence.

[26] Nevertheless, legitimate concerns arising from the information received by the caveator in June 2004 that Mr Harte had some reservations about Robert

McCabe’s influence over his mother could have been addressed in a manner which did not require the filing of an affidavit comprising 24 closely-typed pages and

47 exhibits.

[27] It would have been sufficient, in my view, for the caveator, at least initially, to produce the letter purporting to summarise Mr Harte’s concerns and seek a response from the executors. It may have been possible to do so informally, but a succinct affidavit in opposition to the application to make absolute the order nisi could not have been criticised. A few short paragraphs describing in general terms the disharmony between the family factions would have provided support for the concerns arising from the June 2004 letter. Such an approach would have been sufficient, in my view, to require the executors to file the affidavits subsequently filed from Mr Harte and Mr Wakeman (who prepared the will and witnessed its execution). In the event that the caveator’s reasonable concerns were not allayed by affidavits filed by the professional advisers, supplementary evidence of the familial disharmony could have been provided.

[28] In such circumstances, I do not think the second exception described in Re Paterson should be applied to relieve the caveator from the consequences of having framed the Court’s inquiry into the validity of the will in such broad terms. Put another way, the second exception in Re Paterson should not be applied to impose liability upon the estate for the entire costs of establishing the validity of a will where the scope of the challenge to validity has been unnecessarily broad.

[29] In determining how to exercise the costs discretion, I take into account also the modest size of the estate relative to the expense to which the executors have been put in responding to the broad allegations made by the caveator. The estate is valued at only $225,000; the indemnity costs claimed by the executors (including Mr Harte’s fees) total $29,818.61.

[30] In those circumstances, I turn next to the application by the executors for increased costs.

The executors’ claim for increased costs

[31] Mr McKean submits that the Court’s inquiry should properly have been focused on the events leading up to the execution of Mrs McCabe’s will. I agree. That leads me to the conclusion, however, that it was not necessary for executors concerned about the cost of litigation to respond to the caveator’s much broader approach in kind. It would have been possible for the executors to reserve their position on responding to the caveator’s detailed allegations, while denying them in general terms, and to focus on providing evidence from the professional advisers. In the event that the caveator pursued his objection after the filing of affidavits from Mr Harte and Mr Wakeman, the executors could have filed supplementary evidence prior to a defended hearing.

[32] In a case where there has not been a full hearing of the allegations and counter-allegations made in relation to a contested will, a Judge is not well-placed to make an assessment of the kind which is necessarily undertaken in considering an application for increased costs. The correct approach to an application under r 14.6(3) is to consider whether scale costs are sufficient to meet the particular circumstance and then to determine by what extent, if any, there should be an uplift

from scale.10 In the present case, the parties are agreed that the proceeding and all

steps taken in it should be assessed on a Category 2B basis. In those circumstances, the claim for increased costs needs to be justified by evidence as to the extra time required to be taken by reason of any of the matters described in sub-paragraphs

14.6(3)(b)(i) – (v). The information provided by the invoices supplied by the executors is not sufficient to enable me to make that assessment.

[33] Although I have said in a general sense that I consider the caveator's allegations to have been excessively broad in the first instance, I am not in a position to assess by how much. I do not have the advantage that would be enjoyed by a Judge who heard the evidence, including cross-examination on the affidavits filed, and who would be better placed to make determinations as to which parts of the evidence were directly relevant by way of background. This would then lead to an

_{assessment of which of the allegations reasonably required a response from the}

10 Holdfast NZ Ltd v Selleys Pty Ltd [2005] NZCA 302; (2005) 17 PRNZ 897 (CA).

executors. Such an exercise would be necessary, in my view, to determine the extent to which the caveator “contributed unnecessarily to the time or expense of the proceeding ... by ... taking or pursuing an unnecessary step or an argument that lacks merit”.11

The claim for indemnity costs

[34] However, the evidence (albeit untested) is sufficient for me to reach the view that the caveator’s actions in opposing the grant of probate pending an investigation by the Court were not improper or unnecessary. I do not regard the caveator’s initial stance as being so unjustified as to meet the tests in r 14.6(4) and I am satisfied, therefore, that an award of indemnity costs would not be appropriate in this case.

The approach to be taken in this case

[35] Bearing in mind that the usual costs principles do not necessarily apply in relation to probate, I consider it appropriate to take a broad approach to the exercise of the Court’s discretion in this case. This requires me to take into account the executors’ rejection of the caveator’s open offer to pay 2B costs, made at the time the opposition to the grant of probate was withdrawn.

[36] The factors weighing with me are these:

[a] the caveator’s election to put a legitimate concern about undue influence in issue was justifiable;

[b] the caveator unnecessarily broadened the scope of his allegations beyond those legitimately required to warrant a response to the suggestion that Mr Harte was concerned about undue influence;

[c] the executors should have limited their initial response to the

caveator’s allegations to providing affidavits from professional

_{advisers, supported by an affidavit from Robert McCabe denying}

11 Rule 14.6(3)(b)(ii).

undue influence and reserving the right to adduce further evidence if necessary;

[d] the caveator acted responsibly and reasonably by withdrawing his opposition once he had read the affidavits of the professional advisers;

[e] it was reasonable of the caveator, notwithstanding the potential application of the exception described in Re Paterson, to offer to pay

2B costs of $10,904;

[f] it is undesirable to add to the already substantial costs burden on the parties –

[i] by directing the executors to provide further information about the time spent in responding to each of the 35 allegations which the executors identified as having been made by the caveator’s; and

[ii] requiring the parties to provide further submissions on which matters covered by the affidavits filed on both sides went beyond providing legitimate evidence of a background of disharmony, and identifying the time spent on each.

[37] It is time for the parties to move on, at least as far as their late mother’s will

is concerned.

[38] In the application of the Court’s overall discretion as to costs under r 14.1(1), and in recognition of the principles described in r 14.2, I direct that the caveator pay a contribution to the executors’ costs of $10,904.00.

...........................................

Toogood J