The Court’s Power to Make a Statutory Will
Under the Succession Act 2006 (NSW), the Court has the power to authorise a will to be made, altered or revoked for a person without testamentary capacity. The creation of such is termed a ‘court ordered’ or ‘statutory’ will. For a more in-depth analysis of statutory wills, please refer to our information sheet.
Power of the Court to Order Costs in Statutory Will Matters
The Court’s power to make costs orders in statutory will proceedings derives from three pieces of legislation, namely s 18(5) Succession Act 2006 (NSW), s 98(1) Civil Procedure Act 2005 (NSW) and r 42.1 Uniform Civil Procedure Rules 2005 (NSW). Combined, these legislative instruments give the court discretion as to the making of any orders as to costs.
An application for a statutory will is said to be protective in nature, as a successful action protects the wishes of a person who otherwise lacks testamentary capacity. In protective matters, there is no general rule that the protected person’s estate should bear all the costs of the parties involved in the action. Rather, the question is what costs orders would be proper. The Court has been cautious in its approach to determining questions of costs, in an attempt not to discourage meritorious statutory will applications.
Key Considerations for the Court When Awarding Costs
The court recently noted in A Ltd v J (No 2) [2017] NSWSC 896 that there are two matters (in particular) which must be considered when determining a costs order in statutory will proceedings, namely:
- Whether the application was properly brought; and
- Whether an order that costs be paid from the proposed testator’s assets would have any detrimental impact on the proposed testator’s wellbeing.
Therefore, the size of the estate and the future care needs of the incapable person are decisive factors.
What are Common Costs Orders?
There are different types of costs orders available to the Court. Solicitor/client costs are those costs charged by your solicitor. If you are on the receiving end of a favourable solicitor/client costs order, the entirety of your professional fees will be paid (either by the estate or another party to the proceedings). Conversely, party/party costs are those reasonably and proportionality incurred. Where party/party costs are ordered in your favour, this generally equates to recovery of approximately 60-80% of your costs as charged by your solicitor.
The Courts Approach to Costs Orders for Applicants and Defendants
Case law suggests that a successful statutory will applicant ought to have their solicitor/client costs paid out of the estate, as per Fenwick, Re; Application of J R Fenwick & Re Charles [2009] NSWSC 530 and A Ltd v J (No 2) [2017] NSWSC 896.
An unsuccessful defendant will also generally have their costs paid on a solicitor/client basis out of the estate. This is provided they have acted reasonably having regard to the protective character of the proceeding, and it was likewise necessary to hear the defendant’s submissions to enable the Court to reach a proper conclusion. However, as stated above, this will still depend on the size of the estate and the future care needs of the incapable person.
An unsuccessful applicant will also likely have their costs paid out of the estate, either on a party/party or arguably a solicitor/client basis. Although, the Court has ruled that where a plaintiff pursues an application beyond what is reasonable having regard to the protective character of the proceedings (eg pressing the case for their own advantage), they proceed from this point at their own risk as to costs. It could be that the plaintiff in these circumstances is ordered to pay not only their own costs, but also the defendant’s costs, from a certain point onwards, as per Re MP’S Statutory Will (No 2) [2019] NSWSC 491. To avoid costs implications, applicants should assess the likelihood of the application succeeding when they have enough forensic material to make a considered decision as to whether the action should continue, or proceedings should otherwise be dismissed.
Case Study: A Ltd v J (No 2) [2017] NSWSC 896); A Ltd v J (No 3) [2017] NSWSC 931
This matter involved a thirteen (13) year old child who had cerebral palsy resulting from birth and significant other physical problems. The child was found to lack permanent testamentary capacity.
The applicant was the child’s mother; she had been the manager of the child’s estate and the child’s primary carer since birth. The defendant was the child’s father. The parents separated in April 2010 and subsequently divorced.
The child was the youngest of six siblings, aged between 16 and 26. The siblings gave evidence that the father had contributed to their upbringing at the early stages of their lives and for a short time following their parents’ separation. Although, it was evident that the father had only been in sporadic contact with the relevant child in the years leading up to the mother’s application.
The court accepted the mother’s proposed testamentary regime, being that she would be entitled to 42.5% of the child’s estate, with the father and each of the siblings to have an equal share of the balance (ie approximate shares of 8.21%). The judge noted that such an apportionment reflected the reality of the situation, leaving aside who was to blame for the father’s estranged relationship with the child.
In this case, assistance was obtained from both parents in formulating the appropriate will to be made on behalf of the child. The Court accepted that there was a public interest in the claim being brought by the plaintiff and for all interested parties to be heard in order to enable the making of a statutory will.
Neither parent adopted an unreasonable position, nor conducted the proceedings in a manner to warrant criticism. Further, the Court noted an order that the parents’ costs be paid out of the estate would not adversely impact on the child’s financial position or his care and wellbeing. The child had previously received a settlement sum in the amount of $8.5 million against his birth hospital.
Ultimately, the court ruled it was proper for both the mother and father to have their costs paid out of the child’s estate on a solicitor/client basis.
