Court orders specific devisee to personally indemnify estate for debts and pay all litigation costs personally.

Neutral Citation Number [2006] IEHC 219

THE HIGH COURT

PROBATE

[2003 No 500 S.P.]

IN THE MATTER OF THE ESTATE OF PHILIP MARKEY, BUSINESSMAN, LATE OF CURRAGH LAWNS NURSING HOME, KINNEAGH,

CURRAGH, CO. KILDARE, AND FORMERLY OF “THE STRAY INN” MILE MILL, KILCULLEN, CO. KILDARE, DECEASED.

BETWEEN

JOHN O’CONNOR

APPLICANT

AND

GERARD MARKEY AND MARY MARKEY

DEFENDANTS

Judgment of Mr. Justice Herbert delivered on the 14th day of July, 2006

1. This was an application made by way of Special Summons to the Court, by the special administrator appointed by the court, for

the purpose of resolving a dispute which had arisen in the course of the administration of the Estate of Philip Markey, between Gerard

Markey and Mary Markey, both children of the deceased and beneficiaries under his will. The first named Defendant claimed that

payment of the several debts the subject matter of the application, were the sole liability of the estate and should be paid, in effect,

out the residuary gift bequeathed to the second named Defendant. The second named Defendant claimed that the first named

Defendant was obliged to personally indemnify the estate against the total amount of these debts, which in default of payment should

be paid by the special administrator out of the property specifically devised to the first named Defendant. In my judgment given on

24th January, 2006, I found that the first named Defendant was obliged to indemnify the estate in respect of the whole amount of

these debts.

2. The first named Defendant now claims that the entire costs of all the parties to the application, together with certain linked costs,

should be paid out of the assets of the estate. The second named Defendant claims that her costs and those of the special

administrator should be paid out of the estate with an order over against the first named Defendant, or in the alternative, claims an

order for costs against the first named Defendant personally. The special administrator claims that he is entitled to his costs of the

application out of the estate. Counsel for the first named Defendant relied upon the decision in the case of In The Goods of Morelli,

deceased: Vella v. Morelli [1968] I.R. 11. Counsel for the second named Defendant relied upon the decisions in In Re Buckton: (1906

B. 1879), Buckton v. Buckton [1907] 2 Ch. 406 and In Re Knapman: (1879 K. 14) Knapman v. Wreford, 18 Ch.D. 300.

3. Order 99, rule 1(1) of the Rules of the Superior Courts, 1986, provides that the costs of and incidental to every proceeding in the

Superior Courts shall be in the discretion of those Courts. Order 99, rule 1(4) of those Rules provides that the costs of every issue of

fact or law raised upon a claim or a counterclaim shall, unless otherwise ordered, follow the event.

4. In the case of In The Goods of Morelli, deceased, (above cited) Budd, J.

5. (Ó Dalaigh C.J., Haugh and Walsh J.J., concurring, FitzGerald J., dissentiente), adopting the decision in O’Reilly v. Forde 5 I.L.T.R.

54, and referring to Fairtlough v. Fairtlough 1 Milw. 36 at 39 per Dr. Radcliffe, (a decision of the Prerogative Court), O’Kelly v. Browne

Ir. 9 Eq 353, Young v. Dendy Lr., P. and D. 344, Burke v. Moore Ir. 9 EQ 609, Gillic v. Smyth 49 I.L.T.R. 36, Regan, deceased: Murphy

v. Finlen [1939] L.J.Ir. 50 and Kavanagh v. Fegan and Others [1932] I.R. 566, held, that it was the general practice in Ireland that if:

(a) The case was a proper one to have been litigated and

(b) The litigation was properly conducted, the general costs should be paid out of the personal estate of the deceased as

the Court had no jurisdiction to order them to be paid out of real estate.

6. The learned judge declined to accept the argument of Counsel for the Defendant in that case, that a more recent practice had

developed in Ireland of only exonerating the unsuccessful party from paying the costs of the successful party. It was held as follows

by Budd, J.:-

“A question, however, arises about the proper order to make and, if there is a doubt about the matter, it is obviously

desirable that there should be some general principles laid down as a guide to a trial judge so as to secure some

uniformity of practice and, in particular, so that litigants can be advised and may know how they stand when they wish to

contest or support a will in an action. Speaking for myself, I am by no means satisfied that some new practice has found

general acceptance in recent times; nor do I think that any good reason has been shown for departing from the old Irish

practice. In our country the results arising from the testamentary disposition of property are of fundamental importance

to most members of the community and it is vital that the circumstances surrounding the execution of testamentary

documents should be open to scrutiny and be above suspicion. Accordingly, it would seem right and proper to me that

person, having real and genuine grounds for believing, or even having genuine suspicions, that a purported will is not valid,

should be able to have the circumstances surrounding the execution of that will investigated by the court without being

completely deterred from taking that course by reason of a fear that, however genuine their case may be, they will have

to bear the burden of what may be heavy costs. It would seem to me that the old Irish practice was a very fair and

reasonable one and was such that, if adhered to, would allay the reasonable fears of persons faced with making a

decision upon whether a will should be litigated or not. If there be any doubt about its application in modern times, these

doubts should be dispelled and the practice should now be reiterated and laid down as a general guiding principle bearing

in mind that, as a general rule, before the practice can be operated in any particular case the two questions posed must

be answered in the affirmative. I now turn to the facts.”

7. In my judgment, In The Goods of Morelli, deceased, is distinguishable on its facts from the instant application and, the principles of

law restated and followed by the then Supreme Court in that case have no application to the circumstances which fall to be

addressed in the present application. In The Goods of Morelli, deceased, was a case which turned on a question of due execution, as

did Kavanagh v. Fegan and Others, Gillic v. Smyth and, Burke v. Moore. Keogh v. Wall was a revocation suit. In Regan, Deceased:

Murphy v. Finlen, the three statutory pleas were raised and, O’Kelly v. Browne was a probate suit. All these cases were concerned

either with, “The state in which the deceased himself or herself has left his or her testamentary papers”, or with the testamentary

capacity of the deceased. This explains what Budd J., meant in the passage which I have cited and, why he considered, “The old

Irish practice was a very fair and reasonable one.”

8. By contrast, the instant application bore all the hallmarks of contentious litigation between beneficiaries which did not in any way

touch upon the capacity of the testator or the state in which he had left his testamentary papers. The present application arose in

the course of administration of the estate, was not a probate action, but neither was it an ordinary administration suit. To all intents

and purposes it was a hostile lis inter partes between two beneficiaries under the will. It related to the conduct of the testator’s

business by the first named Defendant while the testator was still alive and to the issue of whether the first named Defendant was or

was not obliged to pay the particular debts as they arose, so that they would not become a burden upon and payable out of the

estate on the death of the testator. The special administrator was in reality only a nominal Plaintiff to enable the opinion of the Court

to be obtained by way of a Special Summons for directions in the course of the administration. The many issues of fact and of law

were litigated as a proceeding inter partes between the first named Defendant and the second named Defendant on their own

evidence, and the evidence of witnesses called by each of them.

9. In my judgment the instant case falls within the “Third class of cases”, identified by Kekewich, J. in the case of In Re Buckton

(above cited) where the learned judge held as follows at pages 414 and 415:-

“In a large proportion of the summonses adjourned in the Court for argument the applicants are trustees of a will or

settlement who asked the Court to construe the instrument of trust for their guidance, and in order to ascertain the

interests of the beneficiaries, or else ask to have some question determined which has arisen in the administration of the

trusts. In cases of this character I regard the costs of all parties as necessarily incurred for the benefit of the estate,

and direct them to be taxed as between solicitor and client and paid out of the estate. It is, of course, possible that

trustees may come to the Court without due cause. The question of construction or of administration may be too clear

for argument or it may be the duty of trustees to inform a claimant that they must administer their trust on the footing

that his claim is unfounded, and leave him to take whatever course he thinks fit. But, although I have thought it

necessary sometimes to caution timid trustees against making applications which might with propriety be avoided, I act

on the principle that trustees are entitled to the fullest possible protection which the Court can give them, and that I

must give them credit for not applying to the Court except under advice which, though it may appear to me unsound,

must not be readily treated as unwise. I cannot remember any case in which I have refused to deal with the costs of an

application by trustees in the manner above mentioned.

There is a second class of case differing in form, but not in substance, from the first. In these case it is admitted on all

hands, or it is apparent from the proceedings, that although the application is made not by trustees (who are

Respondents), but by some of the beneficiaries, yet it is made by reason of some difficulty of construction, or

administration, which would have justified an application by the trustees, and it is not made by them only because, for

some reason or other, a different course has been deemed more convenient. To cases of this class I extend the operation

of the same rule as is observed in cases of the first class. The application is necessary for the administration of the trust,

and the costs of all parties are necessarily incurred for the benefit of the estate regarded as a whole.

There is yet a third class of cases differing in form and substance from the first, and in substance though not in form,

from the second. In this class the application is made by a beneficiary who makes a claim adverse to other beneficiaries,

and usually takes advantage of the convenient procedure by originating summons to get a question determined which, but

for this procedure, would be the subject of an action commenced by writ and would strictly fall within the description of

litigation. It is often difficult to discriminate between cases of the second and third classes, but when once convinced

that I am determining rights between adverse litigants I apply the rule which ought, I think, to be rigidly enforced in

adverse litigation, and order the unsuccessful party to pay the costs. Whether he ought to be ordered to pay the cost of

the trustees, who are, of course, Respondents, or not, is sometimes open to question, but with this possible exception

the unsuccessful party bears the costs of all whom he has brought before the court.”

10. In the instant case the special administrator made the application, but, I am satisfied that this was essentially in a nominal

capacity only and does not in any material way alter the situation. The claim made by the first named Defendant, who is the principal

beneficiary under the will, that he was not obliged to discharge the debts in issue in the application, was totally adverse to the

second named Defendant who is also, but to a much lesser extent, a beneficiary under the will and, whose residuary bequest would

be substantially or entirely consumed by the payment of these debts should they fall to be paid out of the testamentary estate. If

there was any issue of community importance in this case, it was, that persons in the position of the first named Defendant should

not be permitted to resile from their contractual and fiduciary obligations, particularly when this inures to their own betterment and to

the detriment of others, including other beneficiaries under the same will. In my judgment, it would be neither fair nor reasonable that

the first named Defendant, having failed in his claim in this application, should be awarded costs out of the estate or exempted from

paying the costs of the special administrator and of the successful second named Defendant, both of whom he caused to be involved

in this litigation.

11. In my judgment, the costs of the special administrator, including the costs of Stephenson, Solicitors, who were appointed by the

Order of this Court (Carroll J.), made 2nd February, 2004, to advise and to act on behalf of the special administrator in the

administration of the estate of Philip Markey, deceased, must be paid out of the estate, even though this was not an ordinary

administration suit. I direct that the provisions of Order 99, rule 1(5) of the Rules of Superior Courts, 1986, shall apply, so that in

addition to party and party costs, all and any other costs, charges and expenses, reasonably incurred for the purpose of the

application, shall be allowed.

12. In the case of In Re Knapman (above cited) legatees who are also next of kin to the testator brought an action against the sole

executrix to whom the residuary estate, both real and personal had been devised and bequeathed, seeking a revocation of the

probate. They were unsuccessful in the action and were ordered to pay the costs of the executrix. The Court of Appeal held that the

executrix was entitled to

13. set- off these costs against the legacies. The Court held that the executrix was entitled to her expenses out of every part of the

assets but as between the different persons, residuary legatee and the unsuccessful plaintiff legatees, the latter should not receive

their legacies until the assets of the testator were put in the position of not being diminished by the expenses incurred by the

executrix as a consequence of their proceedings.

14. In my judgment, though the special administrator should have his costs out of the estate, this could well result in the sort of

unjust and anomalous situation which the Court of Appeal had sought to avoid in the case of In Re Knapman (above cited). If these

costs fell to be paid out of the real and personal assets of the testator in the order provided by s. 46(3) and the first schedule part II

of the Succession Act, 1965, the burden would fall on the residuary bequest to the successful second named Defendant thereby

depriving her of all or a material part of the benefit preserved to her by the judgment of this court in exoneration of the devise to the

unsuccessful first named Defendant. In the case of In Re Knapman, justice was achieved by allowing a set-off of the costs of the

executrix against the legacies bequeathed to the unsuccessful plaintiffs. It was a rule of the Courts of Equity that where assets were

otherwise insufficient, costs in an administration action, could be charged on specifically devised real estate, (see Jackson v. Pease

L.R. 19 Eq. 96). In my judgment following the approach adopted by the Court of Appeal in the case of In Re Knapman (above cited),

the costs of the special administrator in the instant case should be a charge on the real estate specifically devised to the first named

Defendant. This property was valued by Neylon and Company Limited, Property Consultants and Valuation Surveyors, on 10th July,

2002, at approximately €685,000 to €700,000. The first named Defendant should not be entitled to require that the property be

vested in him by the assent of the special administrator otherwise than subject to this charge for the purpose of making good this

loss to the assets of the testator.

15. In my judgment, as no appeal was taken against the order of Kearns, J. (then of the High Court), made 10th March, 2003, the

costs awarded by that order fall to be paid out of the assets of the testator in accordance with the order of application of assets in a

solvent estate provided by s. 46(3) and first schedule part II of the Succession Act, 1965.

16. I find, adopting the principles formulated by Kekewich, J. in the case of In Re Buckton, (above cited), that the second named

Defendant is entitled to an order for costs against the first named Defendant personally, such costs to include, all costs arising on

foot the Special Summons No. 500 of 2003, to encompass the Application for Directions of 2nd February, 2004, (on which costs were

reserved by Carroll, J.); the second named Defendant’s costs of complying with the Order for Discovery made by Carroll, J., on 2nd

February, 2004; the costs of the application to the Master of the High Court on 13th July, 2004; the costs of the Appeal by the first

named Defendant from the decision of the Master to this Court (O’Donovan, J.), on 1st November, 2004 and, the costs of the hearing

before me, to include all proper and reasonable fees due to Mr. John Eddison of Buckton Ryan, Chartered Accountants and, any

stenographer’s expenses. It will be apparent from a consideration of my judgment of 24th January, 2006, that full discovery by the

first named Defendant was essential to the proper conduct of this application. I will not allow the costs of the legal submissions filed

on behalf of the second named Defendant as a separate item of costs.

17. The costs awarded to the special administrator and to the second named Defendant will include the costs of this application for

costs.