Affidavit under Part IV of the Trustee Act by Tenterfield Shire Council (No 3)

[2021] NSWSC 1556

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Affidavit under Part IV of the Trustee Act by Tenterfield Shire Council (No 3) [2021] NSWSC 1556

Hearing dates:

On the papers (26 October 2021)

Date of orders:

6 December 2021

Decision date:

06 December 2021

Jurisdiction:

Equity

Before:

Emmett AJA

Decision:

See paragraph [17]

Catchwords:

NOTICE OF MOTION – Uniform Civil Procedure Rules (2005) r 36.17 – slip rule – costs order against litigant “in his capacity as administrator” of estate – adversarial litigation – costs order not limited to assets of estate – litigant personally liable – costs order amended

Legislation Cited:

Bankruptcy Act 1966 (Cth)

Civil Procedure Act 2005 (NSW)

Trustee Act 1925 (NSW)

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Affidavit under Part IV of the Trustee Act by Tenterfield Shire Council [2019] NSWSC 894

Affidavit under Part IV of the Trustee Act by Tenterfield Shire Council (No 2) [2019] NSWSC 1119

Bailey v Marinoff (1971) 125 CLR 529; [1971] HCA 49

Hanave Pty Ltd v LFOT Pty Ltd 136 FCR 566; [2004] FCAFC 180

Hatton v Harris [1892] AC 547

Newmont Yandal Operations Pty Ltd v The J Aron Corp 70 NSWLR 411; [2007] NSWCA 195

Texts Cited:

Nil

Category:

Consequential orders

Parties:

Jack Edward Walsh, Administrator under Letters of Administration 23 July 2004 of the Estate of Jeanette Irene Walsh
Russell Eric Templeton, Administrator under Letters of Administration 31 March 2014 of the Estate of Lucille Mary Kathleen Marshall (nee Walsh)

Representation:

Counsel:
John Baird (Applicant)
Mirren Waters (Respondent)

Solicitors:
Keypoint Law (Applicant on NOM - Russell Eric Templeton)
Simmons and McCartney Solicitors (Respondent on NOM - Jack Edward Walsh)

File Number(s):

2005/00262592

Publication restriction:

Nil

Judgment

1. These proceedings were concerned with entitlement to the proceeds of the sale by Tenterfield Shire Council (the Council) of a parcel of land situated in Tenterfield (the Property) for non-payment of rates. The Council has paid the proceeds into Court. On 16 July 2019, for reasons published on that day,[1] I concluded that the monies in Court (the Fund) should be paid out to Mr Russell Templeton in his capacity as administrator of the estate of the late Lucille Walsh. I reserved the question of costs.

   1. See Affidavit under Part IV of the Trustee Act by Tenterfield Shire Council [2019] NSWSC 894.

2. On 30 August 2019, for reasons published on that day (the Costs Reasons),[2] , I ordered that Mr Jack Walsh, “in his capacity as administrator of the estate of Jeanette Irene Walsh”, pay the costs of Mr Templeton, in his capacity as the administrator of the estate of Lucille Mary Kathleen Marshall (nee Walsh) (the Costs Order). The questions of costs were dealt with on the papers following written submissions by the parties.

   2. See Affidavit under Part IV of the Trustee Act by Tenterfield Shire Council (No 2) [2019] NSWSC 1119.

3. Following the making of the Costs Order, Mr Templeton had his costs assessed and judgment for the amount of the assessment was registered in the District Court of New South Wales against Mr Walsh. Subsequently, Mr Templeman caused a bankruptcy notice under the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) to be served on Mr Walsh requiring payment of the sum of $111,336.16. Mr Walsh did not comply with the bankruptcy notice and Mr Templeman filed a creditor’s petition in the Federal Circuit Court of Australia. On 7 June 2021, Mr Walsh filed an amended notice of grounds of opposition to the petition in which he asserted that:

• he did not owe money to Mr Templeton as claimed in the petition and, consequently, no act of bankruptcy had been committed; and

• a creditor’s application in respect of money owed by a person acting in the capacity as legal personal representative of a deceased person is properly brought under Part XII of the Bankruptcy Act.

He asserted that Mr Templeman’s remedy was limited to having the estate of the late Jeanette Irene Walsh administered under Part XII of the Bankruptcy Act as an insolvent estate. Section 244 of the Bankruptcy Act relevantly provides that, where a debt incurred by the legal personal representative of a deceased person is owing to a creditor, the creditor to whom the debt is owing may present a petition to the Bankruptcy Court for an order for the administration of the estate of the deceased person under Part XII of the Bankruptcy Act.

4. On 10 September 2021, a judge of the Federal Circuit Court (the Bankruptcy Judge) upheld the grounds of opposition and concluded that Mr Walsh had no personal liability to Mr Templeton beyond the assets of the estate of Jeanette Irene Walsh. His Honour found that the Costs Order did not impose a personal liability on Mr Walsh because the words “in his capacity as administrator of the estate of Jeanette Irene Walsh” constituted words of limitation and not of personal liability. His Honour ordered that Mr Templeman’s creditor’s petition be dismissed with costs. His Honour’s reasons for those conclusions are not available.

5. A question has now arisen as to the effect and intent of the Costs Order. By notice of motion filed on 28 September 2021 (the Amendment Motion), Mr Templeman now seeks an order that the Costs Order be varied to provide that Mr Templeman’s costs of the proceedings be paid by Mr Walsh both in his personal capacity and in his capacity as administrator of the estate of the late Jeanette Irene Walsh. He relies on r 36.17 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). Rule 36.17 relevantly provides that, if there is a clerical mistake, or an error arising from an accidental slip or omission, in a judgment or order, the Court, on the application of any party or of its own motion, may, at any time, correct the mistake or error. Mr Templeman contends that my intention in making the Costs Order was to impose a liability for costs on Mr Walsh personally, irrespective of whether he was entitled to be indemnified out of the estate of the late Jeanette Irene Walsh.

6. In his written submissions on the question of costs, Mr Walsh sought an order under s 93 of the Trustee Act 1925 (NSW) that his costs be paid out of the Fund. Section 93(3) relevantly provides that, in any proceedings with respect to the management or administration of any property subject to a trust, the Court may, if it thinks fit, order any costs to be paid out of such part of the property as, in the opinion of the Court, is the real subject matter of the proceedings. Mr Walsh relied on the principle that where, in the proper performance of the duty of a trustee, the trustee seeks the assistance of the Court to decide a question, the costs occasioned by proceedings instituted by the trustee for that purpose will normally be paid out of the fund to which the question relates. Thus, where a trustee applies to the Court for the resolution of an uncertainty as to the terms of the trust and joins competing beneficiaries, it is not uncommon for the Court to order that the costs of the beneficiaries, including an unsuccessful one, be paid from the trust property.

7. However, in the Costs Reasons, I concluded that the issue in the proceedings did not arise from any uncertainty as to the terms of a trust and that the proceedings were not fairly characterised as being an application to the Court for the resolution of uncertainty. Rather, the question in the proceedings was which of the estate of Lucille Marshall (nee Walsh) and the estate of Jeanette Walsh held an interest in the Property at the time of the sale of the Property by the Council. I considered that the proceedings were essentially adversarial litigation in that, had the Council not sold the Property, there could have been adversarial litigation between the legal personal representatives of the respective estates to determine which of the estates was entitled to the Property. I therefore concluded that it was not appropriate for Mr Walsh’s costs to be paid out of the Fund.

8. In the alternative, Mr Walsh contended that there ought to be no order for him to pay Mr Templeton’s costs because his claims were reasonably and legally arguable on the material that was available. Mr Templeman, on the other hand, sought an order that Mr Walsh pay his costs of responding to Mr Walsh’s claims on the indemnity basis. I concluded that there was no basis for an order for indemnity costs and that the appropriate order was the Costs Order.

9. The question before the Court that gave rise to the Costs Order was primarily whether Mr Walsh’s costs should be paid out of the Fund. I rejected that contention. The further question was whether Mr Walsh should be ordered to pay Mr Templeman’s costs on the indemnity basis. I rejected that contention. The final question was whether Mr Walsh should be required to pay Mr Templeman’s costs as an unsuccessful litigant. I concluded that, since the proceedings were properly characterised as adversarial, there was no reason why costs should not follow the event. The question of whether any liability of Mr Walsh should be limited to the assets of the estate of the late Jeanette Walsh was not raised in the submissions made by either party in support of their respective applications for costs orders.

10. Whatever may be the provisions of the Bankruptcy Act and their effect in relation to insolvent deceased estates, the question that I resolved by the Costs Reasons concerned the liability of Mr Walsh to Mr Templeman for Mr Templeman’s costs of dealing with the question of entitlement to the Fund, as between the two deceased estates. The addition of the words “in his capacity as administrator of the estate of Jeanette Irene Walsh” signified no more than that Mr Walsh was acting as administrator of a deceased estate in making a claim on behalf of the estate to entitlement to the Fund. Mr Walsh was the party to the proceedings and the order against him is an order against him personally and not limited to the assets of the estate.

11. Clearly enough, Mr Walsh would be entitled to be indemnified out of the estate of Jeanette Walsh in respect of any liability that he incurred to Mr Templeman in the conduct of the proceedings. However, in so far as he was making a claim as a litigant, albeit as administrator of a deceased estate, he exposed himself to personal liability in respect of costs that may be awarded against him if he were unsuccessful in prosecuting that claim. Mr Walsh was a beneficiary of the estate of Jeanette Walsh and therefore stood to gain from the success of the claim that he made in the proceedings on behalf of the estate.

12. Thus, Mr Walsh has a personal liability to Mr Templeman. The words in question were not intended to operate as a limitation on any liability that he incurred. They were intended to do no more than indicate that, since he was conducting the proceedings in his capacity as administrator of the estate of Jeanette Walsh, he would ordinarily be entitled to be indemnified out of the assets of that estate. Similarly, the words “in his capacity as the administrator of the estate of Lucille Mary Kathleen Marshall (nee Walsh)” were intended to have the same operation in relation to Mr Templeman. However, neither of those estates is presently before me.

13. It would be inappropriate for Mr Walsh not to bear the risk of loss in pursuing a claim from which he stood to gain a benefit. Whether there was an error on the part of the Bankruptcy Judge or not, it is apparent that his Honour interpreted the Costs Order in a manner different from the effect that was intended.

14. However, there is a question of whether UCPR r 36.17 authorises any “correction” of a “mistake or error” in the present circumstances. UCPR 36.17 must be construed so as to give effect to the overriding purpose found in s 56 of the Civil Procedure Act 2005 (NSW). Further, the Court’s inherent jurisdiction extends to protecting the integrity of the administration of justice and that jurisdiction is not confined to acting under UCPR r 36.17. The Court has jurisdiction to correct a duly entered order where the order does not truly represent what the Court intended to pronounce. The jurisdiction to amend an order is not limited to a case where the order is directly contrary to the Court’s intention but extends to its amendment to remove ambiguity that may have unforeseen or unintended legal consequences. [3]

    3. See Newmont Yandal Operations Pty Ltd v The J Aron Corporation [2007] NSWCA 195; 70 NSWLR 411.

15. Absent the provisions of UCPR r 36.17 and the inherent jurisdiction of the Court to protect the integrity of the administration of justice, the Court has very limited power to set aside or vary a judgment or order once it has been entered. [4] Further, the exercise of power under the inherent jurisdiction or UCPR 36.17 must be regarded as exceptional. [5] In determining whether a proposed variation is justified, it is appropriate to pose a hypothetical question as to whether the supposed error, if it had been drawn to the attention of the Court or the parties at the relevant time, would have been corrected as a matter of course. [6] Even where there is jurisdiction and power to vary an order, the nature and extent of the desired variation, delay in bringing application for variation and any explanation for the delay are important considerations. Once litigation is complete, parties to the litigation should be entitled to consider themselves free from further agitation of a controversy that has been quelled. [7] That is to say interest rei publicae ut sit finis litium: there is a public interest in the finality of litigation.

    4. See Bailey v Marinoff [1971] HCA 49; 125 CLR 529 at 530.

    5. See Newmont Yandal Operations Pty Ltd v The J Aron Corporation at [29].

    6. See Hatton v Harris [1892] AC 547 at 558.

    7. See Hanave Pty Ltd v LFOT Pty Ltd [2004] FCAFC 180;136 FCR 566 at [4].

16. In the present case, the application to vary the Costs Order was made by notice of motion filed on 28 September 2021. However, that application should not have come as a surprise to Mr Walsh. It is clear enough that Mr Templeman has been pursuing Mr Walsh for the costs ordered by the Costs Order, first by having the costs assessed, then by having judgment entered in the District Court, and finally by serving a bankruptcy notice on Mr Walsh.

17. In the circumstances, I consider that the appropriate course is to order that the Costs Order be amended to read as follows:

“Jack Edward Walsh pay the costs of Russell Eric Templeman in relation to the motion of 18 September 2017”.

I do not consider that there should be any order as to the costs of the Amendment Motion, which should be otherwise dismissed.

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Endnotes

Amendments

06 December 2021 - Coversheet amendment

Decision last updated: 06 December 2021