Citation: Pozniak Estate: Morgan v Reuben [No 2] [2005] NSWSC 813
Court: Supreme Court of New South Wales, Equity Division (Probate List)
Date: 10 August 2005
Judge(s): Palmer J
Background
The underlying dispute concerned the estate of the deceased, Mrs Pozniak. The plaintiff sought a grant of Letters of Administration under a 1996 will, the validity of which was not in question. The defendant resisted that grant, propounding a 1995 will and a 1997 codicil on the basis that these later documents had revoked the 1996 will.
In his earlier judgment delivered on 1 August 2005, Palmer J found that the signatures of the deceased on both the 1995 will and the 1997 codicil were forgeries, and that the attestations by two witnesses (Mr and Mrs Ryner) were fraudulent. Importantly, the trial did not require a finding as to who had procured the forgeries. The question of whether the defendant himself was complicit in the fraud was never put to him in cross-examination and was not decided.
This second judgment dealt solely with the question of costs following that outcome.
Legal Issues
- Whether the plaintiff was entitled to costs on an indemnity basis rather than the ordinary basis
- Whether the defendant acted in good faith in propounding the forged documents, given he claimed reliance on the attesting witnesses' assurances that the signatures were genuine
- Whether the court should admit a late affidavit from the defendant directed to the costs question
- Whether enforcement of any costs order should be stayed for six months pending possible recovery proceedings against Mr Ryner
Decision
Palmer J first ruled on the admissibility of a late affidavit filed by the defendant on the morning of the costs hearing. The affidavit sought to establish that the defendant had acted in good faith, relying on Mr Ryner's assurances that the signatures were genuine. The plaintiff argued the affidavit should be excluded under section 135 of the Evidence Act 1995 (NSW) as its probative value was outweighed by the risk of prejudice. Palmer J admitted the affidavit in full, reasoning that good faith was directly at the heart of the indemnity costs application and that the defendant was entitled to directly address allegations being drawn by inference from the earlier judgment.
On the substantive costs question, Palmer J confirmed the general principle in probate litigation that costs follow the event, with an exception where the litigation was caused by the testator's own conduct, in which case both parties' costs may be paid from the estate. That exception did not apply here: the litigation was caused by the Ryners' fraud, not by anything the deceased did.
The critical finding was that, whatever the defendant's actual involvement in the fraud, he had received a preliminary expert report in September 2003, before proceedings commenced, establishing that the disputed signatures were forgeries. Despite this, he chose to defend the proceedings and adduced no expert evidence to rebut the forgery evidence. Palmer J held that this conduct, taken alone and without any finding of complicity, was sufficient to justify indemnity costs. It was the defendant's decision to press the forged documents in the face of clear notice that expert forgery evidence existed.
Palmer J declined to stay enforcement of the costs order for six months. He did, however, grant the defendant liberty to apply on seven days' notice for a costs order against Mr Ryner under Part 52A rule 4 of the Supreme Court Rules, noting that any such recovery claim was a matter between the defendant and Mr Ryner and should not delay the plaintiff's entitlement to his costs.
Orders Made
- The defendant is to pay the plaintiff's costs on an indemnity basis.
- Liberty is granted to any party to apply on seven days' notice in respect of any application against Mr or Mrs Ryner (or both) under Part 52A rule 4, or under any other applicable provision of the Supreme Court Act 1970 (NSW) or Rules.
- All exhibits are to be retained by the Court until further order, except the original 1996 will, which is released to the Probate Office for the grant of Letters of Administration.
Key Takeaways
- Receiving clear pre-litigation notice of expert evidence establishing forgery, and then pressing ahead with proceedings relying on the forged documents without adducing any rebuttal evidence, was sufficient on its own to justify an indemnity costs order, regardless of whether the defendant was personally found to have participated in the fraud.
- In probate litigation, the established exception to the costs-follow-the-event rule (where both sides' costs are paid from the estate) applies only where the testator's own conduct caused the litigation. Fraud by third parties does not enliven that exception.
- A late affidavit directed solely to costs may be admitted when good faith is genuinely in issue and the evidence directly addresses inferences being drawn against the deponent from the substantive judgment.
- No stay of a costs order will automatically follow merely because a costs-bearing party may have a separate claim against a third party for contribution or indemnity. The plaintiff's entitlement to the fruits of the costs order is not to be deferred while that potential dispute is resolved.
- Where a non-party's improper conduct contributed to the litigation, Part 52A rule 4 of the Supreme Court Rules provides a mechanism by which a costs-bearing party may seek to have costs assessed against that non-party.
Legislation and Cases Referenced
Legislation:
- Evidence Act 1995 (NSW), s 135
- Supreme Court Act 1970 (NSW)
- Supreme Court Rules, Part 52A rule 4
Cases:
- Spiers v English [1907] P 122
- Brown v M'Encroe (1890) 11 LR(NSW) Eq 134
- Re Estate of Hodges (1988) 14 NSWLR 698
- Colgate-Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248
- Oshlack v Richmond River Council (1998) 193 CLR 72