- Unreported Judgment
SUPREME COURT OF QUEENSLAND
SC No 2650 of 2003
Court of Appeal
General Civil Appeal
31 August 2007
8 August 2007
Jerrard and Keane JJA and Atkinson J
Separate reasons for judgment of each member of the Court, each concurring as to the orders made
2.Set aside order number 5 made on 1 March 2007
3.The appellants’ costs of and incidental to the action assessed on the standard basis be paid out of the deceased’s estate in respect of costs incurred before 30 June 2004, but not thereafter
4.The appellant Graham Leslie Edwards pay the respondents’ costs of and incidental to the 1 March 2007 proceedings on an indemnity basis in respect of costs incurred on and from 1 July 2004
5.The respondents pay the appellants’ costs of the appeal, assessed on the standard basis which costs the respondents can recoup from the estate
SUCCESSION – WILLS, PROBATE AND ADMINISTRATION – EXECUTORS AND ADMINISTRATORS – EXECUTORS AND ADMINISTRATORS – PROCEEDINGS AGAINST EXECUTORS AND ADMINISTRATORS – where the appellants are the executors of a Will – where the appellants attempted to prove the Will – where the leaned trial judge concluded that the appellants should have known the action was bound to fail – where the learned trial judge drew inferences against the appellants in coming to the conclusion – where the learned trial judge ordered that the appellants pay the respondents’ costs of the action on an indemnity basis, and not to be paid out of the estate – whether the learned trial judge erred in making the costs order
In the Estate of Barlow  P 131, considered
H B Fraser QC, with M D Ambrose, for the appellants
D O J North SC, with S Lee, for the respondents
Edgar & Wood for the appellants
Fox & Thomas Pty Ltd for the respondents
 JERRARD JA: This appeal is, by leave granted on 21 March 2007 by the trial judge, against an order for costs made by a learned judge of this Court on 1 March 2007. The costs orders against the appellant plaintiffs were made against them as the purported executors of a Will executed on 23 August 1999 (“the 1999 Will”) by the deceased Clifford Andrew McLelland, which Will the plaintiffs had attempted unsuccessfully to prove. The orders made on 1 March 2007 included orders on the respondent defendant’s counter claim, in which the learned judge pronounced for the full force and validity of a Will of the deceased dated 26 May 1994, (“the 1994 Will”) in solemn form of law, and granted probate of that Will to the respondents. The learned judge also ordered that the appellants pay the respondents’ costs of the action, to be assessed on the indemnity basis, and not to be paid out of the estate of the deceased. Those costs orders are the only orders appealed.
 The appellants do not attack the legal principles on which the learned judge acted, when determining to award costs against the plaintiffs. The learned judge held that the resolution of the costs issue would turn principally on whether the judge accepted that the appellants had tried to prove the 1999 Will in circumstances where they knew or should have known that the prospects of it being declared valid were hopeless, or that the action instituted by them was brought for a collateral purpose or had no chance of success. Describing the matter in those terms accords with long standing authority, such as Boughton v Knight (1873) 3 L.R.P. & D. 64 at 77, and Rennie v Massie (1866) 1 L.R.P. & D. 118 at 119. The cases and applicable principles are helpfully described by Santow J (as His Honour then was) in Pates v Craig and Anor Estate of the late Joyce Jean Cole (BC 9505348, NSW Equity Division, judgment delivered 5 September 1995). Instead, the appellants argued they had been denied procedural fairness in the proceedings under appeal, because the learned trial judge had drawn inferences against them when the appellants had not been given notice by pleadings or particulars that the respondents would urge that those inferences be drawn, and when the appellants were not cross-examined at all. The appellants therefore complained on this appeal of being ambushed by those inferences being urged upon the trial judge; not that the inferences were unavailable.
The events and evidence
 It is necessary to describe the background to, and history of, the litigation to determine the validity of the appellants’ complaints. Clifford Andrew McLelland, who died on 8 August 2002, had made a Will in 1994, when he had undoubted testamentary capacity, and the two respondents, two of his nephews, were the named executors. The respondent Graham Caldwell significantly benefited under that Will. Clifford McLelland made a second Will, the 1999 Will, in which the appellant Graham Edwards, together with a woman named Joan Binney, replaced Graham Caldwell as a significant beneficiary. Mr Edwards was a neighbour of the deceased, and the other appellant, the co-executor under the 1999 Will, Mr Naumann, was a neighbour of the deceased who knew him quite well. Mr Naumann lived in the area near the deceased’s major asset, a rural property known as “The Nobby”. In the 1994 Will that property was left to Mr Caldwell; in the 1999 Will Mrs Binney, a minor beneficiary under the 1994 Will, was entitled to the residue of the estate equally with Mr Edwards. The residue was to include the proceeds of the sale of “The Nobby”.
Powers of Attorney
 The deceased had executed an enduring power of attorney in favour of the respondents on 28 July 1994. They did not exercise its powers until 10 February 1998, by which date the deceased had begun to experience episodes of confusion, at least since April 1997. The evidence included a report dated 27 October 1997 from a psychiatrist, Dr Venugopalan, provided in response to a request from a Dr Donaldson, who had asked for an assessment of the deceased’s mental state. Dr Venugopalan reported that he examined the deceased on 24 October 1997, and that Mr McLelland had difficulty in recognising Dr Venugopalan, although he had attended that doctor’s clinic 12 or 13 times in the past. Mrs Binney joined in the interview sometime after it began. Dr Venugopalan described Mr McLelland as disorientated in day, date, and year, and unable to tell the doctor much about his finances. Dr Venugopalan concluded that McLelland’s testamentary capacity was significantly impaired at that date, and his ability to manage his financial affairs was also significantly affected. The learned trial judge recorded that a general practitioner, Dr Gibson, and a surgeon who had treated the deceased, also expressed the view about that time that the deceased had significantly mentally deteriorated, or was suffering from a worsening condition.
 The deceased and his wife were then living in Toowoomba with Mrs Binney, who had moved in with them to care for the deceased’s wife, in a house owned by the deceased and his wife. In early 1994 his wife was admitted to a nursing home, but Mrs Binney continued to live with the deceased in Toowoomba and look after him. In February 1998 she and the deceased moved to Dalby, to a rented property, while the deceased’s wife remained living at the nursing home at Toowoomba. She in fact died after the deceased did.
 A Dr Keys, a general practitioner in Dalby, noticed cognitive impairment in the deceased on 11 March 1998, and Dr Venugopalan reported again on 19 March 1998, advising Dr Gibson, and the family’s then solicitors (Clewett Corser and Drummond) that the deceased was far less confused (as at 19 March 1998) than he was in October 1997, and that his mental state had improved significantly since the last examination. However, Dr Venugopalan considered there was still some evidence of impairment of the deceased’s testamentary capacity, but that he was capable of managing his every day financial affairs.
 The deceased was re-admitted to Dalby Hospital in both October and November 1998 and recorded at those times as having medical problems including dementia, poor short term memory, lack of awareness of time and place, and occasionally disruptive behaviour. At about that same time new solicitors, Justin F. O’Sullivan & Edgar, began acting for the deceased, acting on instructions that his nephews had forced him out of his Toowoomba house and tried to stop him going to his farm; those allegations were denied by the respondent Mr Caldwell. In January 1999 Mrs Binney took the deceased to Dr Venugopalan again, inquiring about the deceased’s capacity to make a new Will, and Dr Venugopalan told the deceased and Mrs Binney that the deceased could not change his Will (in the doctor’s opinion), and could not identify his relatives or the extent of his property. After that examination Dr Venugopalan completed a functional competence report for the Intellectually Disabled Citizens Council of Queensland, stating the opinion that the deceased had senile dementia since mid-1997, significant impairment to his testamentary capacity with fluctuating cognitive impairment, and the expectation of a progressive and slow deterioration. Dr Venugopalan also opined that the deceased did not then have the capacity to execute an enduring power of attorney.
 In that same month, on 28 January 1999, the deceased went to a meeting with a Mr Teevan, a solicitor at Wonderley & Hall, whom he consulted then for the first time; the appellant Mr Edwards attended that meeting. Mr Edwards consented to acting as an attorney for the deceased, but no power of attorney was executed on that date. The learned trial judge inferred that the delay was because Mr Teevan had sought a medical opinion about the capacity of the deceased to execute a power of attorney. That was because a brief report was obtained from Dr Keys dated 29 January 1999, confirming that he examined Mr McLelland that day, and that:
“To my questioning he fully understands the meaning of Power of Attorney and its full implications. He says that he wishes to change his current Power of Attorney and in my opinion he is fully capable of understanding the ramifications of this and is capable of changing it should he so desire.”
 The learned trial judge remarked that there was no suggestion in that report from Dr Keys that the latter had been made aware, at the time, of the previously expressed views of Dr Venugopalan. The judge also inferred that if Dr Keys had been told of Dr Venugopalan’s opinion, Dr Keys would have probably mentioned it, to explain why Dr Keys disagreed with the other doctor’s view.
 On 12 February 1999 the deceased did execute an enduring power of attorney in favour of the appellant Mr Edwards for financial and personal/health matters, witnessed by Mr Teevan, and also signed by Mr Edwards on that date. Wonderley & Hall then wrote to the respondents on 15 February 1999 advising them that the deceased had executed a fresh enduring power of attorney, terminating the previous one. Clewett Corser & Drummond responded, disputing the deceased’s capacity to revoke his existing power of attorney, or make a fresh one, in the absence of an independent assessment by a specialist geriatrician. On 24 February 1999 the respondents conducted a conversation with the deceased which they tape recorded, and in which the deceased demonstrated confusion, and appeared not to realise that he had revoked the earlier power of attorney and appointed a new one.
 However, on that same date – 24 February 1999 – Dr Keys signed a further certificate (again containing no indication that he had been given Dr Venugopalan’s reports) certifying that he had examined Mr McLelland that same day (it appears there was considerable attention focused that day upon the deceased by the current parties), and that the deceased had attended the practice for the prior 11 months, and Dr Keys had consulted with him on 13 occasions. Dr Keys wrote:
“In my opinion he is capable of fully understanding the implications of creating a new will in spite of some short term memory loss – that is he would understand fully what he was doing at the time but not necessarily recall subsequently when exactly he did change it.”
 The learned trial judge observed that Dr Keys did not address in that report the normal legal tests appropriate to deciding whether someone had testamentary capacity. The next day Mr Teevan took instructions for a new Will, never executed, in which “The Nobby” would be left to Mr Caldwell’s son. Mr Edwards would have been the executor.
 On 22 June 1999 a Dr Oliver, a geriatrician, reported to Dr Keys that he had examined the deceased on 22 June 1999, in the company of Mrs Binney and Mr Edwards, and had questioned the deceased about his reasons for changing his power of attorney. Dr Oliver concluded that the deceased:
“… is aware of his actions and is reasonably informed for a man of 84 without a great deal of formal education. My recommendation would be that he is competent to make a decision as to whom should arrange is affairs.”
The learned trial judge observed that that report contained no evidence of Dr Oliver having been made aware of the earlier reports by Dr Venugopalan, and that Dr Oliver was not asked to express opinions about the deceased’s testamentary capacity.
 On 28 June 1999 the respondents filed a summons in the Toowoomba registry of this Court, seeking to set aside the enduring power of attorney given in the appellant Mr Edwards’ favour and executed on 12 February 1999. The application was served on Mr Edwards on or about 28 June 1999, and what was served included the reports by Dr Venugopalan, describing that doctor’s opinions formed after his examinations of the deceased on 24 October 1997 and 17 March 1998. Mr Edwards’ responses included a letter from his solicitors Justin F. O’Sullivan & Edgar, whom he had instructed, which complained of frustration for Mr Edwards:
“In his management of Mr McLelland’s affairs as a result of the dispute relating to his capacity.”
 The respondents’ application for a declaration, that the power of attorney executed on 12 February 1999 was void, came on for hearing on 2 July 1999, and the learned judge who heard that application delivered judgment on 6 August 1999, declining to make the declaration sought on a summary basis. The reasons for judgment referred to the opinions and reports obtained from Dr Keys, Dr Oliver, and Dr Venugopalan, and remarked that the onus lay on the then applicants – the present respondents – to prove positively that the deceased did not understand the nature and effect of the enduring power of attorney at the time it was executed, and that in view of the evidence positively supporting a conclusion that he had capacity (especially that of Dr Keys and “the solicitor”) the onerous nature of the task of the (now respondents) should not be underestimated. The judge remarked that Dr Venugopalan’s opinions were at least supportive of the case then made by the now respondents, but that there were aspects which needed greater elaboration or clarification before its cogency could be decided. As the learned trial judge in this matter recorded, that application, which was adjourned, remains undecided even now, and the learned trial judge in this matter regarded the significance of that hearing in July 1999 as being that it provided the opportunity for Mr Edwards, and the solicitors who still act for him (and for Mr Naumann), to become fully aware at that time of the reports obtained from Dr Venugopalan.
The 1999 Will
 On a date not established by the evidence, the deceased gave instructions to Mr Teevan of Wonderley & Hall for the execution of a new Will, but on 19 August 1999 Mr Teevan postponed that execution, because he was not satisfied “beyond reasonable doubt as to (the deceased’s) mental capacity to understand the contents of what he was to sign.” The learned trial judge inferred that during the conference in which those instructions were given, Mr Edwards and Mrs Binney were both present, and that there was no evidence that Mr Teevan was given any of the information available to either of them as to challenges to the deceased’s testamentary capacity. In Mr Edwards’ case, that would have included his knowledge of what Dr Venugopalan had said.
 The 1999 Will was executed four days later, and the learned trial judge inferred that Mr Teevan relied, as to the testamentary capacity of the deceased, upon the certificates of Dr Keys, the report of Dr Oliver, and Mr Teevan’s reading of the judgment of 6 August 1999. That conclusion accords with the contents of a letter from Mr Teevan to the appellants’ solicitors, dated 22 January 2003. The appellants did not read any affidavit or lead any evidence from Mr Teevan in the instant proceedings, not even as to due execution of the 1999 Will; it is only fair to Mr Teevan to record that he clearly took steps to inquire into testamentary capacity, and it appears that he was satisfied it existed.
 On 29 October 1999 the respondent Mr Caldwell videotaped a conversation between himself, the deceased, and Mr Caldwell’s wife and son. The learned trial judge concluded from viewing it that it revealed the deceased as very vague, with a poor short term memory, lacking awareness of his nephew Mr Caldwell’s position, and of the alleged attempts to keep the deceased away from “The Nobby”. The deceased himself said on the video that his memory was gone, and he did not remember the power of attorney. The judge concluded that the video did not portray a person who then met the test for testamentary capacity described in Banks v Goodfellow (1870) LR 5 QB 549 at 565.
 The next relevant matter was that Mr Edwards, using the power of attorney, later executed a lease of “The Nobby” in favour of himself and his wife for five years from 1 July 2001 to 30 June 2006, which lease the respondents alleged was on uncommercial terms. That matter was not litigated in the instant case, but counsel for the respondent submitted to the learned trial judge that its significance lay in there being no evidence of the deceased having obtained any independent advice at that time, when entering into a lease with the holder of the power of attorney.
The proceedings under appeal
 The appeal record does not describe the further history of the proceedings to set aside Mr Edwards’ power of attorney before the deceased died on 8 August 2002. The next significant step disclosed was the appellants’ application for probate in common form of the 1999 Will, filed on 18 December 2002. By that date the respondents had already caveated, requiring proof in solemn form of any Will, and the plaintiffs filed a reply and answer on 9 September 2003, asserting that the deceased had testamentary capacity at the time of execution of the 1999 Will. In late November 2003 the defendants provided the appellants with copies of a report by a Dr Mulholland, and copies of the audiotape of 24 February 1999 and of the videotape of 27 October 1999. Dr Mulholland’s opinion, dated 3 February 2003 although disclosed some nine months later, included that as at the date of the taped conversation on 24 February 1999 the deceased would probably not have had testamentary capacity, and he obviously did not have it as at the date of the video taped conversation date of 28 October 1999. Dr Mulholland also concluded that while the deceased’s mental condition would have been fluctuating, it was steadily progressive, and it was unlikely he had testamentary capacity as at 23 August 1999.
 Dr Mulholland’s opinion was very clear, and based on, inter alia, the video and audio tape now supplied to the appellants. Ultimately, the appellants obtained a report themselves, dated 7 January 2005, from a Dr Powell, who also opined that the deceased did not have testamentary capacity on 23 August 1999. That opinion was served on the respondent on 11 April 2005, but despite that the appellants still filed an amended reply and answer dated 12 August 2005, contending that the deceased had full testamentary capacity at the time of execution of the 1999 Will, was capable of knowing and approving its contents, and knew and approved them at the time of execution of the 1999 Will. Finally, in mid-2006, the appellants indicated a willingness to enter into a draft settlement deed, subject to certain conditions.
 The respondents filed an application dated 1 December 2006, seeking summary judgment in their favour under Uniform Civil Procedure Rules 1999 (Qld) r 293 on the appellants’ application for probate of the 1999 Will, and for judgment in the respondents’ favour for the full force and validity of the 1994 Will. They also sought orders appointing them executors of that Will, and orders that the appellants pay their costs of the application and all other costs of the proceedings on an indemnity basis.
 The appellants requested particulars of the conduct relied on to support the application for indemnity costs against them, and the respondents advised by a letter dated 9 January 2007 that they considered that they were not under any obligation to provide the information sought, but that:
“The contents of our filed Affidavits will set out the material and inferences to be drawn therefrom.”
The appellants rely on that statement for much of their argument in this Court; the letter went on:
“However, without limitation the allegations we will be making are:-
A. That the Plaintiffs knew or ought to have known that Mr McClelland lacked testamentary capacity and was incapable of knowing or approving the contents of the second will prior to bringing the action and/or during progress of the action;
B. The Plaintiffs wilfully shut their eyes to facts which indicated those conclusions prior to bringing the action and/or during progress of the action;
C. The Plaintiffs’ actions in bringing and/or continuing proceedings were for some collateral purpose; and
D. The Plaintiffs’ action was continued when there was and there was known to be no reasonable prospects of success.”
 On 24 January 2007 the respondents provided the appellants with an extensive chronology, largely reproduced to this Court at the hearing of the appeal. It set out when relevant events occurred; where those events were referred to or described in the pleadings, notices to admit, or the discovered documents; and specified whether the plaintiffs knew of the matter before the action commenced, and the latest date at which the plaintiffs first knew of the opinion, event, or matter. A letter from the respondents’ solicitors on 24 January 2007 also advised the appellants’ solicitors that:
“It should come as no surprise to your clients that our clients contend that the propounding of the 23/8/99 Will occurred for the collateral purpose of benefiting Mr Edwards and/or Mrs Binney under the terms of the 23/8/99 Will, and brought and delayed for the purpose of allowing Mr Edwards to benefit from the terms of Lease which were favourable to him. Our client’s say this state of mind was entertained at least by Mr Edwards if not both plaintiffs, and if only by Mr Edwards that does not excuse Mr Naumann. At any rate, the decision to propound the Will was unreasonable given the knowledge of your clients, and the benefit which Mr Edwards personally stood to gain from the estate if the 23/8/99 Will were established, and from the delay in having the affairs of the estate administered according to law which the propounding of the Will afforded.
That conduct and delay has been compounded by the conduct of the litigation by your clients clearly set out in the material and now also in the chronology.
If you clients cannot understand our case, it is because of a wilful shutting of one’s eyes to the obvious, a phenomenon which accompanied the decision to propound the will in the first place, and a refusal to acknowledge the inevitable despite overwhelming evidence that the Deceased lacked testamentary capacity as at 23/8/99, which was only added to by facts and documents served on your clients (through your firm) during the progress of the litigation.”
 The appellants had each filed affidavits, dated 17 January 2007 after receipt of the letter of 9 January, and before the one of 24 January. Mr Edwards’ affidavit described him as a rural neighbour of the deceased who later became a close friend, and who had asked him to consent to being given a power of attorney in early 1999. The affidavit described Mr Edwards accepting the invitation, but said nothing about Mr Edwards’ understanding of why he was asked to do that, and gave no description of any other relevant circumstances. It revealed that he became aware of a dispute by the respondent Graham Caldwell as to the execution of the power of attorney, and acknowledged that medical reports were filed in proceedings in the Toowoomba court. The outcome of those proceedings was described, and that Mr Edwards took the deceased to Dr Oliver on 22 July 1999 for an examination as to his capacity. It also described how shortly after that Mr Edwards was asked by the deceased to be an executor of his Will, and he denied any knowledge of its contents at the time. It described the Will being executed, but said nothing about Mr Edwards’ opinion of the testator’s capacity, or knowledge of the opinion of Dr Venugopalan, and admitted only such knowledge of the deceased’s mental state as was referred to in the affidavit material filed in 1999 in the court in Toowoomba. It also acknowledged that at the time the proceedings were commenced (that is, for probate of the 1999 Will) “I was aware that there may be an allegation, with respect to the deceased’s capacity to execute the Will.” It asserted an opinion that the issue could only be properly answered by reference to appropriate expert medical opinions, and that advice had been obtained from a Dr Powell on or about 7 January 2005.
 There was much that was not in that affidavit, including the opinion Mr Edwards had as to the validity of 1999 Will when the proceedings were commenced, and the basis for that opinion. Mr Naumann filed an even shorter affidavit, describing the deceased as a good friend, and describing in identical terms to Mr Edwards an understanding that there may be an allegation with respect to the deceased’s capacity to execute the Will as at the time the proceedings were commenced. Neither affidavit referred to any reliance on the opinions obtained from Dr Keys or Dr Oliver for any purpose. Mr Naumann’s affidavit simply said he was asked to be an executor in the late 1990’s, by the deceased, and agreed.
 Those affidavits made an extremely limited response to the allegations spelled out in the letter of 9 January 2007, and no further affidavit material was filed by the appellants after the letter of 24 January 2007, and the chronology, were received. The affidavit from Mr Edwards said nothing about his knowledge of Dr Venugopalan’s opinions, or whether he had inquired or ascertained or knew if either of Dr Keys or Dr Oliver knew of those opinions when those doctors provided theirs, or whether he had relied at all on any opinions expressed by the solicitor who drew the 1999 Will, or why he had not obtained an expert’s opinion before 2005, or why the appellants had taken so long to concede the 1999 Will could not be upheld, or why they did concede it. Instead, on 7 February 2007 when the matter came on for hearing, the appellants’ counsel informed the learned trial judge that the plaintiffs would not be propounding the 1999 Will and would abide the order of the court, and that the only live issue was costs. Their counsel suggested it might not be appropriate for that to proceed that day, but did not request any adjournment at any stage, or apply at any time to lead evidence from either appellant or read further affidavit evidence.
 Counsel for the respondents made submissions at length, essentially based on the chronology, and informed the court that he did not wish to cross-examine either appellant on his affidavit because:
“In my submission there is ample evidence on the documents, including their own documents.”
That submission apparently referred to evidence in support of the allegations advanced by the respondents. Those submissions included the information that Mr Edwards finally had quit possession of “The Nobby” on 30 June 2006, but only at the expiration of the lease.
 The appellants’ counsel contended that because neither appellant had been required for cross-examination various of the allegations – in particular the contention that Mr Edwards had conspired with Mrs Binney to overbear the Will of the deceased – could not properly be drawn. Their counsel submitted to the trial judge that the allegations advanced by the respondents in oral argument should have been pleaded or particularised, and had not been, and that inferences had been advanced in argument that had not been previously asserted, and to which the plaintiffs accordingly had no opportunity to respond by affidavit. Other than that, the appellants’ counsel opposed the conclusion that they had begun or continued the proceedings propounding the 1999 Will knowing they were bound to fail.
Inferences complained about
 The learned trial judge did not in fact find in the respondents’ favour on the majority of the matters alleged in their correspondence, or in their counsel’s submissions. The appellants’ senior counsel on the appeal, Mr H Fraser QC, identified in oral argument various findings of the learned judge, submitting in respect of all of them that those should not have been made, because the appellants had not been told the court would be asked to draw those conclusions. That submission was, with respect, far too broad, because many of the conclusions were unavoidable, whether the subject of previous notice or not.
 The first such inference, in paragraph  of the reasons for judgment, was the inference that Mr Teevan had sought a medical opinion on 29 January 1999, as to the deceased’s capacity to execute a power of attorney. The finding itself was not challenged, only that it was made without prior notice. There is no obvious merit in even that complaint.
 Likewise, the complaint about a finding in paragraph  of the reasons, that if Dr Keys had been told in January 1999 of Dr Venugopalan’s opinions, Dr Keys would probably have mentioned that fact and the opinions, to explain why he disagreed with them. That conclusion was open to the learned judge, and the appellants had had an ample opportunity to say what they wanted by affidavit from Dr Keys, as to the latter’s opinions and knowledge of Dr Venugopalan’s reports.
 The next finding complained of is in paragraph  of the reasons, namely that the mid-1999 proceedings challenging the power of attorney given to Mr Edwards had provided Mr Edwards and his solicitors with the opportunity to learn fully the reports of Dr Venugopalan and the other concerns about the deceased’s mental state. The evidence before the learned judge showed that conclusion was almost inescapable, because those reports were provided to Mr Edwards in that litigation at that time. There is no denial of procedural fairness or natural justice in drawing an obvious conclusion. It would be a denial of actual justice to fail to do that.
 The same complaint as before is made about a finding in paragraph  of the reasons, that there was no evidence that Mr Teevan had been given, on 19 August 1999, the information available to Mr Edwards and Mrs Binney as to previously expressed opinions about the deceased’s mental state. The fact is simply that there was no evidence before the judge that Mr Teevan was given such information, and therefore no injustice or unfairness in the judge saying that. Likewise there is no injustice or unfairness in the conclusion drawn in , namely that Mr Teevan had satisfied himself as to the deceased’s testamentary capacity relying on the certificate of Dr Keys, the report of Dr Oliver, and the judgment of August 1999. That was, as the learned trial judge in this matter held, a reasonable inference from Mr Teevan’s letter of 22 January 2003, saying just that, and there was no injustice in reaching that conclusion, irrespective of absence of prior notice about it.
 The learned trial judge considered it was inappropriate to make any finding based on the imputation that Mr Edwards and Mrs Binney had manipulated the deceased into executing the 1999 Will, because Mrs Binney had not sworn any affidavit. A muted complaint is made about the finding in paragraph  of the reasons, that Mr Edwards himself had concerns on 3 November 1999 about attending a conference between himself, Mr Caldwell and the deceased, because of the deceased’s apparent readiness to provide answers to questions as to his wishes depended upon the person he was talking to at the time. It was admitted in argument on the appeal that notice had been given of that inference, so there can be no complaint about that conclusion, which was in fact asserted by Mr Edwards’ solicitors in a letter of 3 November 1999. There is a further complaint about the finding in that paragraph , that Mr Edwards’ own adoption of the powers given to him under the enduring power of attorney had been because of a view as to the deceased’s inability, at that time, to look after his own affairs. The complaint again was not that the inference was drawn, but that the appellants were not told it might be. With respect to that complaint, it seems a reasonable inference that Mr Edwards acted on the deceased’s behalf with his power of attorney, because Mr Edwards was satisfied at the time it was appropriate someone else manage the deceased’s affairs. That is all that the judge actually concluded.
 Paragraph  of the reasons contains the critical conclusion by the learned judge which supported the costs orders made, and about which conclusion complaint is made; it reads as follows:
“He [Mr Edwards] also should have known by 28 June 1999 that the reports of Dr Keys and Dr Oliver about the deceased’s capacity were, most probably, provided in ignorance of the information then provided to him in the proceedings challenging the power of attorney, notably the reports of Dr Venugopalan. Dr Oliver’s report was dated 22 June 1999 and did not refer to Dr Venugopalan reports.”
The submission on appeal was that that conclusion was not asserted in the chronology supplied, nor in any affidavits, and not in any letters from the respondents. The learned judge had added as well, in paragraph  of the reasons for judgment, that:
“It should have been apparent to Mr Edwards from 28 June 1999, well before these proceedings were instituted, when the proceedings challenging the power of attorney were served, that those doctors were not provided with all the relevant information as to that issue.”
 Those conclusions were important in the judgment, because the learned judge held that the fact of Mr Edwards taking on the power of attorney, and what he should have known by mid-1999 about the reports of Dr Keys and Dr Oliver, coupled with the provision of the information learnt in November 2003, and the failure of the appellants to indicate that they might withdraw their proceedings until about the time of the expiration of the lease of “The Nobby”, some 18 months after the appellants obtained the negative advice of their own expert, all suggested to the learned judge that the action was not one brought out of a disinterested wish to ascertain whether the 1999 Will was able to be supported. That conclusion appeared in paragraph  of the reasons, although the learned judge did not actually make a positive finding in those terms.
 The judge also found that the contemporary evidence all suggested that anyone in regular contact with the deceased at “this time” (presumably August 1999) should have known that the action had no chance of success, based on their own observations of the deceased. The judge considered that that would have included Mrs Binney, and Mr Naumann, with whom the deceased had lived after the 1999 Will was executed. The judge also thought it probable that Mr Naumann knew of the earlier proceedings in 1999.
 The learned judge concluded, after noting that Mr Edwards was a principal beneficiary under the 1999 Will and had delayed in getting an expert’s report and then in disclosing it, that:
“In my view the proper inference is that, as was submitted by the defendants, they deliberately courted a substantial risk in instituting proceedings that they knew or, properly advised, should have known were bound to fail. They also continued the proceedings for a considerable period after their own expert confirmed that they could not succeed.”
 The appellants complain that they were not advised the respondents would urge that anyone regularly in contact with the deceased would have known of his lack of testamentary capacity. Irrespective of the asserted lack of notice that that conclusion would be urged, the reports obtained from Dr Keys and Dr Oliver did not imply that same conclusion, nor did the conduct of the solicitor, Mr Teevan, who drew the Will and saw to its execution. The conclusion by the learned judge that the appellants knew or should have known that the proceedings instituted were bound to fail appears to depend for much of its force on the earlier conclusion that Mr Edwards at least knew or should have know, before bringing the proceeding, that the opinions of Dr Keys and Dr Oliver were given in ignorance of the reports of Dr Venugopalan. That earlier conclusion must have founded the critical finding, because the learned judge did not find against the appellants on the other allegations, of which notice was by the respondents. But the evidence showed only that Mr Edwards received Dr Venugopalan’s report and opinions after the date on which Dr Keys and Dr Oliver had expressed theirs, and that theirs said nothing about his. Mr Edwards must have known before the Will was executed that Dr Venugopalan had a different opinion from Dr Keys and Dr Oliver, but that does not establish or make likely or probable that Mr Edwards knew or should have realised that the others had not been told of Dr Venugopalan’s opinions. Mr Edwards’s lawyers may have understood that fact, assuming it is the fact – and that Dr Keys and Dr Oliver did not simply disagree with Dr Venugopalan – but that does establish Mr Edwards also understood that point. The appellants complain that the learned judge ought not to have drawn the opposite conclusion because they were not warned in any way about it being advanced, but the more substantial point is that the limited evidence did not go far enough to support the findings Mr Edwards should have know of the non provision of those reports, and for that reason should have known of the deficiencies in the evidence in support of capacity, as at the start of the proceedings.
 Irrespective of notice to the appellants, the evidence did not support a finding that the appellants had begun their proceedings when they knew or should have known that those were bound to fail. They had medical opinion in their support, and also the solicitor’s conduct. They had not been given the audio or video tapes of the deceased. The evidence does support the alternative finding by the judge, that the appellants continued the proceedings for a considerable period after their own expert had confirmed that they could not succeed. There is really no dispute as to that.
 Mr Naumann’s position is not the same as Mr Edwards’. The learned trial judge concluded it was appropriate to impute to Mr Naumann his solicitor’s knowledge – at that date of execution of the Will and the start of the proceedings – of the materials dealing with the deceased’s capacity disclosed in the proceedings in mid-1999. But in Farrah Constructions Pty Ltd & Ors v Say-Dee Pty Ltd  HCA 22 (judgment delivered 24 May 2007, two months after judgment below in this appeal) the joint judgment in that appeal in the High Court was against the proposition that information obtained by an agent outside the scope of his agency and before it arose, could be imputed to the principal. Other than by that imputation, there was no evidence suggesting that Mr Naumann knew of Dr Venugopalan’s opinions until November 2003, when those and the tapes were disclosed in the litigation.
 Mr Naumann took no benefit under the Will, but that fact alone is no protection for him against an order for costs. In Rennie v Massie (supra), an executor who had propounded a codicil which a jury found to have been made when the deceased was not of sound mind, and of which the deceased did not know and approve its contents, was “condemned in costs”. Sir J.P. Wilde held that there was no reasonable ground for the litigation in the case, and that an executor was not bound to propound a testamentary paper if the executor did not like to do so; and in a case of doubt it would not be unreasonable for an executor to take the precaution of obtaining security for costs from the people interested in upholding the testamentary paper. If the executor had not taken that precaution, it was his own fault. Similar observations were made in In the Estate of Barlow  P 131 at 132-133 by Swinfen Eady M R, to the effect that an executor (with no interest in the estate) was under no obligation to propound a Will; “He could have stood aside and left the [co-executor] to establish it, and, if necessary, he could have been made a defendant to the [co-executors] action.”
 Once the appellants received Dr Mulholland’s opinion and the tape in November 2003 they were obliged as the executors of the 1999 Will to obtain promptly their own specialist’s opinion. That could have been obtained and communicated by, at the latest, mid-2004. There is no excuse for these proceedings having dragged on after that date, and the greater part of the blame for that should be given to the appellant Graham Edwards. He had much more in the way of dealings with the deceased, with Mrs Binney, and with the respondents, than did Mr Naumann, and he was the only person to benefit from any delay. For that reason he – while his costs should be paid by the estate until mid-2004 – should indemnify the respondents for their wasted costs after that date, and he should not be indemnified by the estate for the respondents’ costs he has to pay.
 There is authority supporting costs orders against an executor like Mr Naumann, who takes no benefit from a Will, but who is at fault in putting forward a Will which the executor should have known was bound to fail, or in continuing to propound it after acquiring that knowledge. But costs orders are discretionary, and his situation should be distinguished from that of Mr Edwards. Because the appellants succeed in challenging the finding that they instituted proceedings they knew or should have known were bound to fail, the costs order made must be set aside. The appellants’ senior counsel displayed a clear preference for this Court substituting its own order, rather than the matter being sent back for further trial, and it is appropriate to protect all parties from any avoidable litigation costs. Accordingly, order number 5 made on 1 March 2007 should be set aside, and it should be ordered instead that the appellants’ costs of and incidental to the action assessed on the standard basis be paid out of the deceased’s estate in respect of costs incurred before 30 June 2004, but not thereafter; and that the appellant Graham Leslie Edwards pay the respondents’ costs of and incidental to the proceedings on an indemnity basis in respect of costs incurred on and from 1 July 2004; and that the respondents pay the appellants’ costs of the appeal, assessed on the standard basis, which costs the respondents can recoup from the estate.
 KEANE JA: I agree with the reasons of Jerrard JA. Because my conclusion that the appeal should be allowed differs from my initial impression that the decision of the learned primary judge was amply justified by findings which were properly open to his Honour, I should explain the considerations which were critical to my conclusion. In this regard, I gratefully adopt the summary of the evidence and the course of proceedings provided by Jerrard JA.
 As the reasons of Jerrard JA make clear, the finding that Mr Edwards knew or should have known that the opinions of Dr Keys and Dr Oliver were given in ignorance of the reports of Dr Venugopalan, although important to the reasoning of the learned primary judge, was not a finding which the respondents had notified the appellants would be sought against them. It was a proposition which the appellants should have been given the opportunity to address. In any event, the inference that the appellants allowed their action to be commenced in circumstances where they knew, or should have known, that the expert medical evidence available to them to support their attempt to propound the later will was fundamentally flawed was not justified by the evidence.
 Accordingly, in my respectful opinion, it was not open to the learned primary judge to conclude that, at the time the appellants' action was commenced, the appellants knew or should have known that their action was bound to fail because the opinions of Dr Keys and Dr Oliver could not reasonably be thought to afford an arguable basis for their action.
 Mr North SC, who appeared with Mr Lee of Counsel for the respondents, made the point that the appellants filed an amended reply and answer in the action on 12 August 2005 in which it was asserted that the deceased had testamentary capacity when the 1999 will was executed. As at August 2005, the appellants must be taken to have known of the reports of Dr Mulholland and Dr Powell, and that their action was bound to fail. That the appellants persisted in their action after receiving the reports of Dr Mulholland and Dr Powell affords an ample basis upon which to conclude that, thereafter, the further prosecution by the appellants of their action was so unreasonable that the respondents should be entitled to an order for costs, the practical burden of which should not fall on those entitled to the benefit of the estate of the deceased.
 It is a different question, however, whether one can infer that the bloody-mindedness exhibited by the appellants' persistence with their action after August 2005 characterised their commencement of proceedings. Importantly in this regard, it was not contended at first instance that this question should be resolved against the appellants. It was not a finding made by, or even sought from, the learned primary judge. It was a view of the facts to which the appellants were never afforded the opportunity to respond. Accordingly, it is not a view of the facts upon which this Court may act.
 Once it is accepted that it falls to this Court to exercise afresh the discretion in relation to costs, the orders proposed by Jerrard JA are clearly appropriate. It was not urged by the respondents that this Court should not exercise the discretion itself, rather than remit the matter to the Trial Division for a further hearing.
 I agree with the reasons of Jerrard JA for distinguishing between the situation of Mr Edwards and that of Mr Naumann.
 I agree with the orders proposed by Jerrard JA.
 ATKINSON J: I agree with the reasons of Jerrard JA and with the orders proposed.
 At  of the Reasons for Judgment, at AR 948.
 That judgment is at AR 1062.
 This appears in a file note of Mr Teevan dated 19 August 1999, at AR 447.
 The letter is at AR 435 – 436.
 The opinion is at AR 360.
 At Transcript page 14.
 At AR 954 in .
 In .
 At paragraphs - of that decision.
- Published Case Name:
Edwards & Anor v Caldwell & Anor
- Shortened Case Name:
Edwards v Caldwell
 QCA 285
Jerrard JA, Keane JA, Atkinson J
31 Aug 2007
No Litigation History