Re Dillon [No 2][2023] QSC 50

SUPREME COURT OF QUEENSLAND

1. [1]
   By reasons published 3 March 2023^[1],  I determined that the respondent, Ms Grimley was not the de facto spouse of the deceased Mr Dillon at the time of his death.
2. [2]
   The respondent, Ms Grimley’s case that she was the de facto spouse did not succeed and as the parties acknowledge, it is appropriate for the applicant, Ms Maiden, to be granted letters of administration. The parties agree upon the form of the orders with the exception of costs.
3. [3]
   On behalf of the applicant, Ms Maiden, orders are sought that the unsuccessful respondent, Ms Grimley, pay her costs to be assessed on an indemnity basis and to the extent that the applicant’s costs are not met by the respondent, they are paid out of the estate and further the respondent, Ms Grimley, bear her own costs of the proceedings.
4. [4]
   The unsuccessful respondent submits that both the applicant’s and the respondent’s costs be paid from the estate on an indemnity basis.
5. [5]
   As I will endeavour to explain, I accept neither submission.

Relevant Principles

6. [6]
   Applegarth J helpfully summarised the relevant principles in Frizzo v Frizzo (No 2) [2011] QSC 177:

“[26] The usual rule that costs follow the event is applicable to probate proceedings. “The notion, sometimes entertained, that the costs of unsuccessful parties will generally be ordered out of the estate in a probate action, is wrong.” However, due to the general nature of the court’s probate jurisdiction, a number of exceptions to the usual rule have been developed. As Sir J. P Wilde (as Lord Penzance then was) said in Mitchell v Gard:

 The basis of all rule on this subject should rest upon the degree of blame to be imputed to the respective parties, and the question, who shall bear the costs? will be answered with this other question, whose fault was it that they were incurred?

Costs ultimately remain in the discretion of the court.

[27] Two established exceptions to the usual rule are as follows:

1. (a)
   Where the testatrix has been the effective cause of the litigation, such as where the state of her testamentary papers, or her habits and mode of life, or where her own statements have brought about the litigation, the costs of unsuccessful parties may be ordered to be paid out of the estate.

2. (b)
   Where the circumstances are such as to afford reasonable grounds for opposing the will, the unsuccessful party, though not usually granted his costs out of the estate, will not be condemned in costs. The reason for this exception was explained by Sir J P Wilde in Mitchell v Gard:

It is the function of this court to investigate the execution of a will and the capacity of the maker, and having done so, to ascertain and declare what is the will of the testator. If fair circumstances of doubt or suspicion arise to obscure this question, a judicial inquiry is in a manner forced upon it. Those who are instrumental in bringing about and subserving this inquiry are not wholly in the wrong, even if they do not succeed. And so it comes that this court has been in the practice on such occasions of deviating from the common rule in other Courts, and of relieving the losing party from costs, if chargeable with no other blame than that of having failed in a suit which was justified by good and sufficient grounds for doubt.

Conversely, where a will is opposed without proper inquiry into the facts or without reasonable grounds so as to make the opposition unjustifiable, there is no reason to depart from the usual rule that costs ought to follow the event.

[28] In the exercise of its costs discretion, the court ought to keep in mind that:

It is of high public importance that doubtful wills should not pass easily into proof by reason of the cost of opposing them. It is of equal importance that parties should not be tempted into a fruitless litigation by the knowledge that their costs will be defrayed by others. These opposite reasons appear to have alternately swayed the decisions to be found in the books. It is the desire of the Court to keep both in view, while yielding to neither, and it is in this spirit that the above rules have recommended themselves for adoption.

[…]

[36] As Powell J (as his Honour then was) said in Re Hodges; Shorter v Hodges:

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 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.

[37] One should not start with the general proposition that the costs of probate litigation should be borne by the estate. I respectfully adopt the statement of Connolly J in Re Fogarty; Kovacs v Fogarty (No 2):

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.

[38] The approach of Connolly J does not represent a modern trend. In 1926 Scrutton LJ said:

I should be reluctant to do anything to create the idea that unsuccessful litigants might get their costs out of the estate, without making a very strong case on facts. The lure of “costs out of the estate” is responsible for much unnecessary litigation.

[39] It would be wrong to start with the proposition that all parties’ costs should be paid out of the estate, or that they should be paid out of the estate unless it is demonstrated that an unsuccessful party’s conduct was shown to be unreasonable. The general rule remains that costs should follow the event. However, the exercise of discretion in relation to costs should recognise the importance of scrutinising doubtful wills before they are admitted to probate, and not condemning, by way of an order for costs, an unsuccessful party who has acted reasonably in opposing the admission of a will to probate.”

[footnotes omitted]

Application of these Principles

7. [7]
   The starting point is to apply the general rule that costs follow the event. Although the successful applicant seeks costs on an indemnity basis against the respondent, the basis upon  which indemnity costs are sought is not the subject of any submission. In this case, there are no offers which meet the definition of an offer to settle under Ch 9 Pt 5 of UCPR.
8. [8]
   The applicant has, however, bettered three offers to settle made “without prejudice save as to costs” but not expressly said to be made under the Calderbank principle. As Mr Dillon passed away unexpectedly and as a young man he did not have a will and nor did he have any significant assets. The estate is presently of nominal value, with the few assets owned by Mr Dillon being approximately equivalent to the liabilities of Mr Dillon.
9. [9]
   Prior to the suffering of shoulder injuries, Mr Dillon had a good work history and accordingly accumulated superannuation proceeds together with a death benefit totalling almost $172,000 which is not part of the estate.
10. [10]
    The solicitors for the applicant and the respondent have sworn affidavits enclosing correspondence between the parties, however, there is no suggestion that all correspondence has been annexed. The relevant correspondence commences with the letter of Purcell & Associates, the solicitors for the respondent Ms Grimley, dated 15 July 2021 to Crossan Legal, the previous solicitors of the applicant, Ms Maiden. The letter asserts that Ms Grimley was, at the time of death, the de facto partner of Mr Dillon and had lived in a dependent relationship for approximately 10 years with Mr Dillon. The letter asserted that Ms Grimley, as spouse of the deceased ranked in priority to administer the estate and sought the provision of all relevant documents including Mr Dillon’s superannuation entitlements with SunSuper.
11. [11]
    The response of Crossan Legal was drafted in a conciliatory tone with expressions of loss and affection for Ms Grimley, but with the firm allegation that

“Our client has instructed us that your client and the deceased were no longer in a de facto relationship at the time of his death and that the parties had separated approximately two months prior. We are instructed that your client was enquiring about rental properties to move out, and Mr Dillon had become active on a dating website…”

12. [12]
    The letter then set out the known liabilities of the estate at approximately $11,600 together with an unknown liability amount to a finance company. The assets of the estate were calculated at about $12,000. The letter then records the details of a SunSuper superannuation account of an unknown amount which was not part of the estate.
13. [13]
    Importantly the letter records:

“Finally, our client instructs us that she and her daughter, Shannon Dillon, have made efforts to try and liaise with your client in relation to the estate and previously asked for your client’s address and contact details to pass on to SunSuper. Our client instructs that she and her daughter, Shannon, have received no responses from your client since February this year, despite attempts by them to contact her. […] We are instructed that both our client and Shannon acknowledge that your client and Mr Dillon had a relationship which lasted several years and intended to ensure that your client was not left out of receiving monies either from the estate or from the superannuation trustee.”

14. [14]
    That conciliatory approach was not met with approval. In the reply of Purcell & Associates of 10 September 2021, the author recorded

“The comments in your paragraph to [sic] of your correspondence with regard to our client’s relationship with the deceased are rejected and there is no evidence to support that contention. Our client was residing in the property at Blue Gum Drive, where she and the deceased had been in an interdependent relationship for some considerable period of time. Accordingly, as set out in our initial correspondence to your firm, our client as the spouse of the deceased ranks in priority to the administration of the estate. Our client has instructed that we are to immediately give notice of our client’s intention to take up the administration of the estate as the spouse of the abovenamed deceased. Our client requires an immediate account of any assets of the deceased removed form the residence of the deceased immediately after the passing of the deceased.

[…] Please immediately advise your client to cease and desist from any action with regard to any further disposal of estate assets. We reserve our client’s rights and require this information be delivered as a priority.”

15. [15]
    There then appears to be a five month period where either there was not any correspondence entered into, or if there was, it has not been provided in the solicitors’ affidavits. Chronologically the next letter is the letter of Purcell & Associates dated 10 February 2022. It advises that on 13 January 2022, Ms Grimley had received correspondence from SunSuper advising that the trustees had determined to pay the member proceeds 100% to the personal representative of the estate upon the presentation of a grant of administration. The letter records Purcell & Associates advising Ms Grimley of her rights to object to that decision and that:

“Upon receipt of our client’s instructions, we intend to proceed with an objection to the decision of the trustees seeking in lieu a payment to our client of 100% as the spouse of the deceased. This will further delay the resolution of the parties’ competing claims.”

16. [16]
    The letter then records Purcell & Associates advising their client that if Ms Maiden filed an application for a grant of letters of administration of the estate, then Ms Grimley would lodge  a caveat and that any application by Ms Maiden for letters of administration would “Add significant further cost and delay the resolution of this matter... Our client has incurred considerable expense and loss as a result of the refusal of your client to support her application as the spouse of the deceased…”
17. [17]
    The letter then notes the huge emotional cost to all parties to the dispute and respectfully submits it was in the interests of all parties to resolve the matter. The letter then records Ms Grimley making a “without prejudice” offer to settle the entire proceeding on the basis that under the intestacy rules, Ms Grimley as spouse is entitled to 100% of the estate assets and that after Ms Grimley had received 100% of the estate assets, she would agree on an ex gratia basis, following the deduction of her own expenses, and all estate expenses, agree to share the balance left over on an equal basis with Ms Maiden.
18. [18]
    That offer was repeated in Purcell & Associates’ letter of 28 March 2022. That correspondence was replied to in an offer by Ms Maiden by her solicitors, Rees R & Sydney Jones’ letter of 20 April 2022. The offer is said to be without prejudice save as to costs and open for 14 days (but not made pursuant to the principles in Calderbank, nor the UCPR Ch 9 Pt 5). The letter offered Ms Grimley 25% of the net value of the estate after payment of all estate liabilities and estate administration costs.
19. [19]
    After the offer had lapsed on 13 May 2022, Purcell & Appleton sought further information to enable their client to consider the offer in terms of estate assets and liabilities including superannuation interests and administration costs. That request for information was replied to in full by the letter of Rees R & Sydney Jones of 28 June 2022. The statement of assets and liabilities of the estate did acknowledge a number of items for which the value had not been obtained. The response of Purcell & Appleton of 7 July 2022 was to seek copies of all documents relating to the outstanding matters and to allege that legal costs that had been incurred of approximately $1,760 ought not to have been deducted from the estate proceeds.
20. [20]
    On 12 October 2022, Rees R & Sydney Jones as solicitors for Ms Maiden, sent a further offer without prejudice save as to costs to Ms Grimley’s solicitor. The offer essentially was a 60/40 split in favour of Ms Maiden with both parties to bear their own costs. That offer was said to be open for a period of acceptance of 7 days. On 31 October 2022, Purcell & Associates rejected the offer on behalf of their client advising it was not acceptable. The letter put a  without prejudice offer, of a 75/25 split in Ms Grimley’s favour. By letter of 30 November 2022, Purcell & Associates again made an offer of 75/25 in Ms Grimley’s favour.
21. [21]
    On 25 January 2023, Ms Maiden made a further offer to settle on the basis that the superannuation and death benefits be shared equally between the parties, and each party bear their own costs. That offer was also made without prejudice. That offer was rejected. On 30 January 2023, Purcell & Associates on behalf of Ms Grimley made a counter offer that Ms Grimley would receive all of the superannuation benefits and each party would bear their own costs.
22. [22]
    A number of matters may be concluded from the above correspondence. The first is although the applicant has succeeded in litigation and bettered three offers she has made, none of her offers were said to be made pursuant to the Calderbank principle, nor pursuant to Ch 9 Pt 5 so as to enliven a discretion to award indemnity costs. In those circumstances, I do not accept that it is appropriate for an order for indemnity costs be made against the respondent.
23. [23]
    The second is that neither of the two exceptions described by Applegarth J in Frizzo v Frizzo are engaged.  I cannot accept the argument of the respondent that Mr Dillon was the effective cause of litigation. Mr Dillon was a young man with essentially no assets, who was ill and , who took his own life. The case differs significantly factually from cases where the principle of testator being the effective cause of litigation has been deployed, e.g. Estate of HRA (deceased) [2021] QSC 49. In this case, there is no will and accordingly the second exception is not engaged.
24. [24]
    The third feature is that from the outset, as is shown in the letter of Crossan Legal of 26 July 2021, there was an intention on behalf of the applicant to share monies from either the estate or the superannuation trustee with Ms Grimley and the applicant made good on that intention by making three offers which were not accepted.
25. [25]
    The essential factual issue between the parties was whether the de facto relationship between Ms Grimley and Mr Dillon had broken down in the period of two months prior to Mr Dillon taking his life on 19 September 2020, with Ms Grimley’s case being that their de facto relationship had not ceased whereas Ms Maiden’s case that is had ceased.  Ms Maiden succeeded on this factual issue.
26. [26]
    Furthermore, the factual issue was decided in circumstances where the law, as set out by Dutney J in S v B [2004] QCA 449 was clear. That is, de facto relationships are, by their nature, fragile and it is the party asserting their continued relationship is required to prove the existence of the relationship.
27. [27]
    This case, therefore, does not materially differ from other cases where there is a factual issue in dispute between parties, which  is resolved in favour of one party against the other and engages the general rule that costs follow the event.
28. [28]
    On behalf of the respondent, it is argued that an order for costs would be punitive and that the respondent ought not to be condemned in costs. That submission is not based upon principle.  Costs are an indemnity, not a punishment^[2].
29. [29]
    In my view, there is nothing in the present case which would take it away from the general proposition that costs follow the event on a standard basis. It seems to be reasonable to order that the applicant’s costs of the proceedings be paid out of the estate to the extent that they are not met by the respondent as Ms Grimley is a young person of limited means.
30. [30]
    It is therefore ordered:

1. The respondent Jane Mary Grimley pay the applicant Virginia Coral Maiden costs of and incidental to the application of the applicant filed 7 September 2022 on a standard basis.
2. That the applicant’s costs of both proceedings be paid out of the estate on an indemnity basis to the extent they are not met by the respondent.