Collett v Knox

Case [2010] QSC 132

SUPREME COURT OF QUEENSLAND

CITATION:

Collett & Anor v Knox & Anor [2010] QSC 132

PARTIES:

Frederick James Collett

First Applicant

And

Karen Elizabeth Pountney

Second Applicant

And

John George Knox

And

Margaret Evelyn Knox

as executors of the estate of Gladys Ellen Knox (deceased)

Respondents

FILE NO/S:

S43/08

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court Mackay

DELIVERED ON:

23 April 2010

DELIVERED AT:

Mackay

HEARING DATE:

16-18 February 2010

FINAL SUBMISSIONS: 

10 March 2010

JUDGE:

McMeekin J

ORDER:

1.      I direct the respondents to file on or before 4pm on 7 May 2010 such further affidavits and submissions as they might be advised addressing the issues of what expenses the respondents can reasonably require be paid out of the estate; what costs, if any, the parties should be entitled to out of the estate; and the appropriate form of orders that are required to give effect to these reasons.

2.      I direct the applicants to file such further affidavits and submissions as they might be advised in response to the respondents’ material on or before 4 pm on 14 May 2010.

3.      Liberty to apply on two days notice.

CATCHWORDS:

SUCCESSION – FAMILY PROVISION AND MAINTENANCE – PRINCIPLES UPON WHICH RELIEF GRANTED – APPLICATION OF SURVIVING PARTNER – APPLICATION OF WIDOWER OR MALE PARTNER – where applicant's status as the de facto partner of the deceased is disputed – where cohabitation and other indicia of a de facto relationship between the deceased and the applicant persisted for over two decades – whether the applicant can claim a life interest in the property he shared with the deceased

SUCCESSION – FAMILY PROVISION AND MAINTENANCE – PRINCIPLES UPON WHICH RELIEF GRANTED – APPLICATION OF CHILDREN – ADULT DAUGHTERS – where estrangement in the deceased's latter years – whether disentitling conduct – whether adequate and proper provision made from the estate

SUCCESSION – EXECUTORS AND ADMINISTRATORS – RIGHTS, POWERS AND DUTIES – OTHER CASES – where applicants sought further provision – where there is a greater obligation on executors to consider the impact of costs of litigation on an estate  – whether the executors should receive their costs out of the estate

Acts Interpretation Act 1954 (Qld), s 32DA

Succession Act 1981 (Qld), s 5AA, s 41(1), 41(2)(c)

Cumming v Sands [2001] NSWSC 507

Dijkhuijs (Formerly Coney) v Barclay (1988) 13 NSWLR 639

Ford v Simes [2009] NSWCA 351

Hughes v National Trustees, Executors & Agency Co of Australasia Ltd (1979) 143 CLR 134

Jackson v Riley (unreported) – 3701/1987 – 24 February 1989 – BC8902497

Lathwell as Executrix of the Estate of Gilbert Thorley Lathwell (Dec) v Lathwell [2008] WASCA 256

Luciano v Rosenblum (1985) NSWLR 65

McCosker v McCosker (1957) 97 CLR 566

Nowell v Palmer (1993) 32 NSWLR 574

Re Beddoe (1893) 1 Ch 547

Re Coventry [1979] 3 All ER 815

Re Crowley [1949] St R Qd 189

Re Simpson [1950] Ch 38

S v B [2004] QCA 449

Singer v Berghouse (1994) 181 CLR 201

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Collett v Knox [2010] QSC 132
Case
[2010] QSC 132
Decision Date

CaseChat Overview and Summary

Collett v Knox involves claims for family provision by the deceased's de facto husband, Mr Collett, and her daughter, Mrs Pountney. The dispute centres on whether adequate and proper provision has been made for them from the estate. The court had to decide if Mr Collett was the de facto partner of the deceased for the purposes of claiming under the Family Provision Act, and if Mrs Pountney's estrangement from her mother disentitles her from claiming. Additionally, the court examined the executors' conduct in incurring substantial legal costs and whether these costs should be paid from the estate.

The court found that Mr Collett was indeed the de facto husband of the deceased for over two decades, and thus entitled to a life interest in the Mt Ossa property. The court held that Mrs Pountney's estrangement from her mother, while significant, did not disentitle her from claiming, as the estrangement was largely due to the deceased's conduct. The court concluded that adequate provision for Mrs Pountney's proper maintenance and support was not made, and she should receive a portion of the estate.

Regarding the executors' conduct, the court found that the substantial litigation costs incurred were not reasonable, as the executors were actively advancing their own interests rather than impartially assessing the claims. The court ruled that the executors should not be indemnified for these costs from the estate and directed the parties to provide further affidavits and submissions on the issue of reasonable costs and appropriate orders.

The court ordered the respondents to file further affidavits and submissions on the issues of reasonable expenses, costs to be paid from the estate, and appropriate orders. The applicants were directed to respond within a specified timeframe, with liberty to apply for further time if needed.

Orders

Orders of the court

1. I direct the respondents to file on or before 4pm on 7 May 2010 such further affidavits and submissions as they might be advised addressing the issues of what expenses the respondents can reasonably require be paid out of the estate; what costs, if any, the parties should be entitled to out of the estate; and the appropriate form of orders that are required to give effect to these reasons.

2. I direct the applicants to file such further affidavits and submissions as they might be advised in response to the respondents’ material on or before 4 pm on 14 May 2010.

3. Liberty to apply on two days notice.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

A person aged 100 years has a life expectancy of 2.5 years according to the Australian Bureau of Statistics published tables based on 2003-05 data.[24] If the interest allowed is limited to a life interest in the Mt Ossa property, as claimed, then the expected postponement of the beneficiaries’ interest in the estate is probably of short duration.[24]Table 7.34 at type="1">In my view the jurisdiction to make a claim is enlivened.Conclusion re Mr Collett’s ClaimA finding that Mr Collett was the spouse of the deceased for the purposes of the legislation is of significant importance to this issue. I envisage that it would be a very rare case where the first obligation of a spouse of 20 to 30 years is not to ensure that their partner is provided with a home, if able to do so. I note Powell J’s dictum in Luciano v Rosenblum[25] to the effect that as a “broad general rule” the duty of a testator to a widow is “to ensure that she is secure in her home, to ensure that she has an income sufficient to permit her to live in the style to which she is accustomed, and to provide her with a fund to enable her to meet any unforeseeable contingencies”. Whilst I am dealing with a putative widower I see no reason why the “broad general rule” should not apply here. [25](1985) 2 NSWLR 65 at 69-70. In my view the minimum required is that Mr Collett be granted a life interest in the Mt Ossa property. The only remaining matter to determine is whether the estate should be diminished, as the respondents claim, by litigation costs incurred so that effect cannot be given to this life interest. I return to that problem later. Mrs Pountney’s Claim – the Jurisdictional IssueThe respondents contend that the following factors militate against the enlivenment of the jurisdiction:(a) the size of the estate;(b) Mrs Pountney is relatively well off;(c) Mrs Pountney fell out with the deceased and had no communication with her in the last three years of her life, a time when the deceased was in poor health and in need of assistance;(d) Conversely the executors are not so well off and had an excellent relationship with the deceased, particularly in her later years, and provided her with considerable care and assistance when most needed.Significantly the respondents contend that Mrs Pountney’s conduct towards the deceased was such that, irrespective of any other factor, it disqualified her from succeeding in her claim. The relationship between the deceased and Mrs Pountney was very close until the falling out over the estate of Jim Knox. There is no question but that to that time she had behaved in every way as a dutiful daughter should. The respondents are critical of Mrs Pountney for suing her mother as administratrix of her husband’s estate and for her lack of contact thereafter. Section 41(2)(c) of the Act provides that the court may:“refuse to make an order in favour of any person whose character or conduct is such as, in the opinion of the court, disentitles him or her to the benefit of an order, or whose circumstances are such as make such refusal reasonable.”Mr Crow, for the respondents, has drawn my attention to the comments of Bergin CJ in Equity in Ford v Simes: “However in my view it is very important for the maintenance of the integrity of the process in these types of applications that this Court acknowledge once again the entitlement of testators, in certain circumstances, to make no provision for children: The Pontifical Society for the Propagation of the Faith and Saint Charles Seminary, Perth v Scales (1961) 107 CLR 9. This is particularly so in respect of children who treat their parents callously, by withholding without proper justification, their support and love from them in their declining years. Even more so where that callousness is compounded by hostility.”[26][26][2009] NSWCA 351 at [71].The reason for the estrangement appears to lie in the deceased’s wish to maximise her entitlement to her deceased husband’s assets, with scant regard for the truth. She appears to have rejected her daughter for seeking to increase her inheritance and for doing so by revealing the long separation of the deceased from her husband and the true nature of her relationship with Mr Collett. To some extent these are inferences drawn from the competing affidavits filed in the Victorian proceedings but also from Mrs Pountney’s evidence where she claimed that the estrangement commenced when her mother told her: "Bugger off. I want your father's house. Don't need you any more."[27] Nonetheless these inferences seem to me to be soundly based.[27]T1-114/20Whilst I am not ideally positioned to judge the merits of Mrs Pountney’s suit in her father’s estate, I can observe that generally I was impressed with her evidence and thought her reliable. She claims that following the separation of her parents she cared for her father well beyond what would normally be expected of a 15 year old and continued to do so for the rest of his life. She claimed to have done considerably more than her siblings in that regard. The notes provided by the deceased to her Victorian solicitors confirm the provision of support in the early years to some considerable degree.[28] If Mrs Pountney’s contentions were accurate then she probably had a good moral claim on her father’s bounty. Whether a court would have altered the intestacy provisions would depend on other factors, principally financial ones, about which I have no sufficient evidence. In the end a compromise was reached and an amount paid to Mrs Pountney of $100,000 and after legal costs $69,000 – a net gain of about $35,000 on her entitlement.[29] But the compromise was not reached before the deceased filed an affidavit effectively accusing her daughter, falsely as I have found, of deliberately misleading the court in relation to her relationships with the two men. [28]Affidavit of Ian Alexander Moffatt filed 9 March 2010 at p5 of handwritten notes dated 26 July 2005.[29]Mrs Pountney swears to having paid debts of her father’s estate totalling $7,399 thereby further reducing her net gain from the litigation.If the deceased took exception to her daughter seeking to increase her inheritance in these circumstances, as it seems that she did, then I do not consider that it was Mrs Pountney who was treating her mother callously. Her mother had publicly made false allegations against her, and, thereafter, withheld from her the affection and regard that a parent normally holds for their child. The respondents also rely on a threat made by Mrs Poutney concerning the deceased to her friend Mrs Beale. The precise terms of the statement are in dispute and probably do not matter. It is plain that Mrs Pountney was very upset at her mother’s conduct at the time. There is no suggestion that she made the threat direct to her mother. It reflects the degree of hurt that Mrs Pountney had suffered. It does not seem to me to weigh significantly in the scales The respondents point out that the deceased did extend an olive branch at one stage – she sent to Mrs Pountney a letter on her birthday in October 2005 and a recipe a month later. Mrs Pountney’s wounds were too deep to permit her to respond. Her evidence in this regard was as follows:“Okay. I think you said you got some ginger beer recipe or something; is that right?‑‑ Oh, yes, yes, she did mail me a ginger beer recipe.All right. Did you contact her after that?‑‑ No.Why?‑‑ I don't know, I just didn't. I was frightened of being told, "Bugger off." I didn't want to hear it, so I didn't.All right. And before that your relationship had been what with your mother? How - what sort of relationship had you had before that?‑‑ Close, very close”.There is an interrelationship between the conduct said to disentitle an applicant to relief and the strength of the need for provision from the estate. The stronger the applicant's case for relief, the more reprehensible must have been that person's conduct to disentitle them to the benefit of any provision: Hughes v National Trustees, Executors & Agency Co of Australasia Ltd.[30] [30](1979) 143 CLR 134, 156 per Gibbs J.In Lathwell as Executrix of the Estate of Gilbert Thorley Lathwell (Dec) v Lathwell it was said: “Conduct amounting to disentitling conduct must refer to character or conduct of such a nature as to entitle the court to say that the applicant has forfeited or abandoned his or her moral claims on the testator.”[31][31][2008] WASCA 256 at [33].In my view Mrs Pountney’s conduct should not be so characterised. As was observed in Lathwell, “[i]f the estrangement is entirely caused by the unreasonable conduct or attitudes of the testator and sustained by the unreasonable conduct of the testator, then the estrangement alone could not amount to disentitling conduct on the part of the applicant.”The deceased could have picked up the phone and called her daughter. She did not. Neither did the daughter contact her mother. I accept that Mrs Pountney could have done more to repair the ties with her mother although that might be the counsel of perfection.[32] In my view her conduct was sufficiently justified such that Mrs Pountney ought not to be disqualified from any possible claim. The estrangement was due to the conduct of both but principally of the deceased and was maintained by both, almost in equal degree.[32]Her account of the attempts at making contact in December 2004-January 2005 suggest that the deceased actively sought to exclude her: see her affidavit filed 9 July 2008 at paras 53-54.It is relevant that for most of her life Mrs Pountney was on good terms with her mother and, after the birth of her children, they were close. That close period of their relationship covered nearly a quarter century. And it is relevant too that as a young teenager Mrs Pountney was deprived of her mother’s attention as a result of the separation of her parents. They kept in touch through letters and cards and eventually Mrs Pountney was able to travel to Queensland and did so, travelling to Queensland for Christmas holidays frequently. Mrs Pountney provided care for her mother over some three months as she recovered from a broken femur following a fall in 1998 and again for a short time in 2000 after another fall. Until the falling out over her father’s estate, Mrs Pountney’s behaviour towards her mother was unimpeachable. I turn now to the other relevant factors. It is true that the estate is a modest one – but at the time of death it exceeded $225,000 in value. It was not so small as to be incapable of accommodating the just demands of the potential beneficiaries. There are certainly many cases of awards being made in much more modest estates. The point is that whilst the courts endeavour to discourage applications in small estates that does not mean that applications cannot be made or that, when made, they will not be considered on their merits: Re Coventry [1979] 3 All ER 815 at 820 per Lord Goff.I do not accept that Mrs Pountney is relatively well off. Her personal income is extremely modest – in the 2008 year her income tax assessment notice shows a taxable income of $3,807. She is, and was at the time of death, supported by her husband but his income too is modest – about $820 net per week in 2008-09. Their living expenses take most of what they have. They take no holidays. She and her husband have debts of some $67,000 apart from the mortgage debts. She deposed to having savings and shares of about $19,360 in July 2008. Otherwise their savings are principally in superannuation funds and they are modest. Their children remain dependant to some degree.The respondents point to the unencumbered home and the three investment properties owned by Mr David Pountney as a sign of wealth, and compare that to their own circumstances. After accounting for the mortgage encumbrances the net equity in those investment properties was only of the order of $160,000 to $200,000 at the time of death. The mortgage payments exceed the rental income.As at the time of death Mrs Poutney was entering an age where it is not uncommon for health issues to impact on earning capacity. She is a manual worker. Her residual earning capacity is limited. In July 2008 she deposed to having anxiety and breathing problems. Effectively if her husband died, became incapacitated, or if they divorced, Mrs Pountney would have only limited assets and resources to fall back on. At the time of death she had a life expectancy of over 35 years.The respondents are not wealthy either but they are in comparable circumstances – they have an unencumbered home and live modestly, with few frills, on their pension. They have a small amount of savings and the Mt Ossa land. They have the advantage of no debt. They can legitimately claim to have provided the significant care for the deceased in her latter years.In my view balancing out these various considerations leads to the conclusion that adequate provision for Mrs Pountney’s proper maintenance and support was not made by the deceased. Given the size of the estate, the long period of excellent relations, the dutifulness of Mrs Pountney over that time, the reasons for the falling out, Mrs Pountney’s health, her modest asset base, her limited earning capacity, and the relatively limited claim on the deceased’s bounty that the respondents can demonstrate, it was appropriate that some provision be made.Conclusion re Mrs Pountney’s ClaimAgain matters are complicated by the disbursement of the estate on legal fees. If all legal fees were met from the estate, and all expenses met for which the respondents contend, then the net amount left for distribution would be between approximately $70,000 and $107,000. Matters are further complicated by Mr Collett’s claim, which this applicant supports.Again putting Mr Collett’s position to one side, a comparison between those competing for the testatrix’s benefit suggests that there is not a great difference in their positions. Very little is known about the son Paul’s circumstances at the time of death save that he had cancer, said to be of the brain, from which he died two months after the deceased. It does not appear that he had any great claim on her affections, they having been estranged for many years, nor any need of her assistance. He has children but I know nothing of their circumstances.So far as Mrs Pountney and the respondents are concerned, both are in modest circumstances. Both are not necessitous in the sense that they cannot survive without assistance. Both could do with a little more, particularly to assist in their retirements, and the potential for unforseen expenses to arise. Neither based their lives on any testamentary gift. Both assisted the deceased at times in her life when she needed it. The deceased could legitimately have considered that Mrs Pountney had been favoured over and above Mr John Knox in the eventual distribution from their father’s estate, although Mrs Pountney maintains, with some apparent justification, that she had earned some additional consideration there, and her net gain was not great. Mr and Mrs Pountney have the greater asset base, no doubt acquired at considerable sacrifice over the years given their modest incomes, but which presumably also reflects the distribution from the father’s estate. The testatrix could not assume that Mr Pountney’s support of his wife would necessarily last. Ill health, accident and divorce (albeit an apparently remote risk here) can intervene. Absent that support she has relatively limited means. Ignoring Mr Collett’s claim for the moment, I can draw no great distinction between Mrs Pountney and the respondents, save that the deceased favoured the respondents – though the events of the last four years of her life seemed to have loomed large in that regard. That favouring was justified to the extent that it reflected the care provided by them in the last few years, and the greater asset base available to Mrs Pountney.Whilst I retain a discretion to order that no provision be made, in my view a “wise and just” testatrix would have allowed a roughly equal division between her son and daughter. Acknowledging that the deceased wished to benefit the respondents to a greater degree, and the justification for that approach, subject to the appropriate treatment of Mr Collett’s claim, I would allow 55% of the assets of the estate to the respondents and 35% to this applicant whilst allowing for a legacy to Paul of 10%, roughly in line with deceased’s treatment of him in her will.The Executors’ ConductI have referred earlier to the legal fees said to have been incurred by the executors totalling over $70,000. Mr Collett estimated his legal fees at $25,000 to $30,000. Presumably Mrs Pountney’s are not greatly different. In respect to $25,000 of the respondents’ legal fees, Mr Knox indicated in an affidavit filed a few days before trial that the executors had granted a mortgage over the Mount Ossa property in order to secure those fees. He says: “Irrespective of the outcome of these proceedings the property at Mount Ossa – Seaforth Road will have to be sold to meet the estate’s legal costs and outlays”.[33][33]Paragraph 7 of the affidavit filed 10 February 2010.Underlying that statement by Mr Knox is an assumption that it is the executor’s right to tie the court’s hands by the incurring of whatever costs the executors desire. Mr Collett claims a life interest in the Mount Ossa property. That claim would necessarily be defeated if Mr Knox’s assertion is accurate. The applicants contend that this assertion does not accurately represent the law. First, I observe that it has long been recognised that where executors receive notice of such a claim then they are under a duty to preserve the trust estate until the claim is resolved: Re Simpson [1950] Ch 38 at 42; Re Crowley [1949] St R Qd 189 at 192.Second, the assumption that Mr Knox makes is that the court has no power to supervise or limit the executors in their expenditure of estate funds on litigation of this type. That assumption I examine more closely below. As a general proposition I consider it accurate to assert that before embarking on expensive litigation the executors need to give careful consideration to what amounts they will expend and how best they should discharge their duties. Resort to generalisations that executors are entitled or obligated to uphold the will may provide no guidance at all in some cases. In my view this is such a case. Consistent with that view is the observation of Holmes JA in Underwood & Anor v Sheppard, a case involving family provision claims: “The learned judge’s observation that the obligation to consider the impact of costs on the estate applied with greater force to the executors than to the beneficiaries is unimpeachable. Executors bear a fiduciary duty to which they must have regard in conducting litigation affecting the estate; beneficiaries do not.”[34] [34][2010] QCA 76 at [16].Third, it seems to me that Mr Knox’s statement overlooks a matter of significance. The effect of s 41 of the Act is to impose on every testator or testatrix an obligation to make “adequate and proper” provision for their spouse and children. If they fail to do so the court not only has the power, but the obligation, to ensure that is done, upon application being made. Notions that an executor can effectively determine the fate of an application by vigorously contesting it, irrespective of the sense or merits in doing so, are in my view misguided and wrong. Executors cannot ignore the duty that lay on the testator. Thus when an application is made or notified the executor’s obligation is to objectively assess the evidence, impartially assess the merits of that application, and if necessary compromise the suit. That there is this obligation is consistent with the Practice Direction governing applications of this type.[35] Paragraph 2(b) describes one of the objects of the Practice Direction as “encouraging the early consensual resolution of applications” and para 8(b) requires that the standard directions “contain a dispute resolution plan designed to exhaust the prospects of a consensual resolution of the application”.[35]Practice Direction No 8 of 2001.Turning to the facts here there are four significant features of note – first, so far as Mr Collett’s claim is concerned this is not what I might call the more “normal” type of claim where there is no doubt about the eligibility of the applicant to claim but doubt about what might be considered “adequate and proper” provision. The converse is the case here. The factual issue to be resolved, Mr Collett’s right to claim, was one that effectively determined the outcome of his claim. On any view of the facts Mr Collett has lived at the Mt Ossa property for some decades. He seeks to be allowed to see out what are likely to be his few remaining years in that home. He is a pensioner in poor health and with virtually no savings. He is partially blind. The home has been, in some ways, adapted to his disabilities. If he is accepted in his claim that he was the de facto husband of the deceased, not only within the last two years of her life but for decades beforehand, then it seems to me clear beyond argument that he would be entitled to that life interest. His claim on the deceased’s bounty far exceeded that of any other beneficiary. Secondly, it would have been apparent from the outset that the cash reserves available to the estate were such that the effect of the executors’ conduct, if their contentions are accepted, is to determine the fate of the application – to take away from the court the power to award the applicant the life interest that he seeks in the Mt Ossa Property. The executors would no doubt have realised that if Mr Collett’s claims were established then he would clearly be entitled to have his costs paid. It is the executors who would have needlessly caused him expense. His costs are estimated at $30,000. He is a pensioner without significant assets. It would have been evident that to force him to litigation would almost certainly result in a need to sell the principal asset in the estate, if the executors too were to get their costs. Thirdly, the executors were not disinterested bystanders. By the terms of the will the property at Mount Ossa was left to the respondents. Thus they had a direct personal interest in opposing Mr Collett’s claims. The real issue in this case, at least so far as Mr Collett’s claim is concerned, was the determination of whose interest should take priority – the life interest that Mr Collett claims or the respondents’ interest in realising the Mt Ossa asset? Similarly in respect of Mrs Pountney’s claim. What the executors seek to do, under the guise of their upholding the will, is advance their own interest, but using the estate funds to do so. That is not an unusual feature of claims of this type. But where self interest and duty potentially conflict then there needs to be careful consideration of the options available and the wisdom of pursuing litigation regardless of the impact on the estate, and if it is to be pursued, how it is to be pursued. Finally, a worrying aspect is the way in which the litigation was conducted. Despite this being a modest estate a three day trial was undertaken, principally on the issue of Mr Collett’s status to apply. Twenty years ago Cohen J of the NSW Supreme Court expressed this view in relation to family provision litigation in small estates, with which I agree:“In my opinion the legal profession in both branches has an obligation to reduce the costs of litigation as much as possible when the amounts in dispute are so small. If the parties cannot reach a compromise then it seems to me that by consultation their legal advisers, both solicitors and counsel, should seek to find all means of defining the real issues and confining the evidence in relation to them. Where cross-examination will be unlikely to alter the substance of a witnesses’ evidence it should be dispensed with. The heavy expense of bringing those witnesses from distant places should be actively avoided... it requires everyone in all cases to look somewhat further than [fighting for one’s client's interests] and to look at what the final issue will be. Because everybody has stood by their respective clients so well there is practically nothing to be argued about. The plaintiff and the principal beneficiary will have to bear the heavy expense of the litigation with little left for them at the end. It is most regrettable and I think it shows up the need for early consultation and early advice to clients as to what at the end they will be facing.”[36][36]Jackson v Riley (unreported) - 3701/1987 – 24 February 1989 – BC8902497.Despite the obligation that Cohen J identified, so long ago, this litigation was pursued vigorously. That over $70,000 has been expended by one side principally on this issue of the de facto relationship I find disturbing. As well, some odd things were done here. While it can be said that witnesses such as Mrs Jacqueline Duncan, Ms Eileen Evans and Mrs Beale had some relevant evidence to give, it seems to me inescapable that the respondents ought to have realised that the weight that could be afforded their evidence was slight. Mrs Duncan believed that the deceased and her husband had never separated. Ms Eileen Evans and Mrs Beale believed that the marriage between the deceased and Jim Knox had continued after they again became friendly. I am quite satisfied that the respondents knew those beliefs to be wrong. The respondents knew perfectly well that the deceased and her husband had separated and in the relevant and critical sense had remained separated. If these witnesses were so little in touch with the deceased’s relationships to be oblivious of these matters then, in so modest an estate, what real purpose was to be gained by advancing them as witnesses of any weight on the issue of her relationship with Mr Collett? And it was of some significance that the respondents’ submission made only passing and, with respect, incomplete and inaccurate reference to the deceased’s diaries.[37] This, the most compelling of the available evidence, was simply ignored.[37]Although not made explicit the reference made seems to be to Ex 8 which covers a period of three days out of the 34 years in question.The respondents rely on the principle that ordinarily a trustee or executor is entitled as of right to be indemnified for expenses incurred before paying out the trust funds to anyone else: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367; J A Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691 at [50]; Nick Kritharis Holdings Pty Ltd (In Liq) v Gatsios Holdings Pty Ltd [2001] NSWSC 343 at [9] to [11]. However, there is a qualification to that rule. The true principle is that the trustee or executor is so protected where the costs have been properly and reasonably incurred. Re Beddoe (1893) 1 Ch 547 is often cited in this regard. There a trustee was not allowed to retain out of the trust funds certain costs of defending an action. It was held that there was no reasonable cause for defending it. He had neglected to ask the opinion of the court before embarking on the defence. Lindley LJ explained: “But a trustee who, without the sanction of the Court, commences an action or defends an action unsuccessfully, does so at his own risk as regards costs, even if he acts on counsel’s opinion; and when the trustee seeks to obtain such costs out of his trust estate, he ought not to be allowed to charge them against his cestui que trust unless under very exceptional circumstances. If indeed the judge comes to the conclusion that he would have authorised the action or defence had he been applied to, he might, in the exercise of his discretion, allow the costs incurred by the trustee out of the estate…”[38][38]At 557.Bowen LJ in the same case stressed: “If there be one consideration more than any other which ought to be in the mind of a trustee, especially the trustee of a small and easily dissipated fund, it is that all litigation should be avoided, unless there is such a chance of success as to render it desirable in the interests of the estate that the necessary risk would be incurred.”[39][39]At 562.Nowell v Palmer[40] and Cumming v Sands[41] are each examples of cases where executors were required to pay the costs personally in an unsuccessful defence of the estate against claims brought. Both cases share with this case the fact that in truth the executor was defending his or her own personal interest.[40](1993) 32 NSWLR 574.[41][2001] NSWSC 507.Mahoney JA in Nowell v Palmer put the principle in this way[42]: “Mr Anderson, in his submission, had in mind, I think, the attitude which the courts have traditionally taken to the costs of legal personal representatives in defending proceedings brought against an estate. If the legal personal representative acts in accordance with proper principles, she will be safeguarded as to costs; in an appropriate case, her costs and/or the costs which she is ordered to pay in an unsuccessful defence of the estate may be ordered to be paid out of the estate: see Re Estate of Paul Francis Hodges Deceased; Shorter v Hodges (1988) 14 NSWLR 698 at 709-710; see generally Halsbury's Laws of England, 4th ed, vol 17, pars 917-919, vol 37, par 721. However, in the present case, the appellant, in defending the proceeding, was not acting as, or merely as, the executrix of the estate. She was, in a real sense, defending her own interests. She was the sole beneficiary of the estate. In addition, she had purported to distribute the estate to herself and, to an extent, the proceeding brought against her was a proceeding by way of tracing the assets in the estate to which the respondent was entitled and to secure an accounting in respect of them: see, eg, Re Diplock; Diplock v Wintle [1948] Ch 465; affirmed sub nom Minister of Health v Simpson [1951] AC 251. I do not think that in these circumstances the principle to which I have referred should apply. The proceeding was essentially a defence by the appellant of her own interests.”[42]At 581 – 582.The complicating feature of family provision cases is that for a very long time the courts have held that it is the executor’s duty to place all relevant evidence before the court, both positive and negative: Dijkhuijs (Formerly Coney) v Barclay (1988) 13 NSWLR 639, 654 (Kirby P, Hope & Mahoney JJA agreeing). In my view that does not mean that the traditional requirement that the executors act properly and reasonably is discarded. In Gwenythe Muriel Lathwell As Executrix Of The Estate Of Gilbert Thorley Lathwell (Dec) v Lathwell[43] the Court of Appeal in Western Australia held in relation to the costs of an appeal in a family provision case:“However, as the general principle makes clear, a trustee may not be permitted to indemnity out of the estate if costs are not properly or reasonably incurred. It is not enough that trustees (or executors) honestly believe that they should engage in litigation; they must also act reasonably (Talbot v NRMA Ltd [2000] NSWSC 608; (2000) 50 NSWLR 300 [24]) and see McGregor v McGregor (No 2) [1919] NZLR 286; Mead v Watson (2005) 23 ACLC 718 [12] (Sheller, Ipp and Tobias JJA); Jacobs' Law of Trusts in Australia, (7th ed, 2006) [2110].”[43][2008] WASCA 256 (S) at [4]Here there was no impartial placing before the court of all the competing evidence. That would have required little in the way of costs. Rather the respondents were actively and aggressively advancing their own interests. By reason of the four factors that I have earlier mentioned I consider that the respondents have not acted reasonably in incurring the substantial costs that they have in unsuccessfully defending Mr Collett’s suit. I should mention that very little time at all was spent on any other aspect of the claims. I do not conceive that executors in the position of those here are entitled to hide behind their appointment and claim that they have no choice but to litigate as hard as they can, incurring whatever expense they desire, and force their opponent to do the same, in an effort to defeat his claim and preserve their own interest.In my view the circumstances cried out for responsible executors to seek the direction of the court as to the appropriate course to take. There were alternatives open to the court. A case appraisal may have been ordered with the cost consequences to the challenger to be borne personally if the dispute continued and the result was less favourable to their view than the appraiser’s decision.[44] Alternatively the Public Trustee may have been appointed and, given the modest size of the estate, the probable effect on it of litigation, and the matters in issue, the executor might well have been directed to preserve the estate, agree to abide the order of the court, and let the parties litigate with their own funds if so minded, with the usual costs orders protecting the successful party.[44]See Uniform Civil Procedure Rules 1999, r 344.I do not accept the respondents’ argument that their expenditure has the result that the Mt Ossa property must necessarily be sold to satisfy their claim for an indemnity before the justice of Mr Collett’s claim be met.ConclusionBefore expressing a final conclusion it will, regrettably, be necessary to hear again from the parties. Mr Crow, for the respondents, has submitted that I cannot accede to the applicants’ arguments unless and until I am aware of any offers made. I agree. He submits, as well, that this is not a claim on notice under s 8 of the Trusts Act 1973 (Qld) for the executors to account for their conduct.[45] The respondents may wish to place material before me relevant to the matters I have discussed. Again I agree that they should be given the opportunity to do so. [45]That lack of notice may be due to the late notice of the expenditure of all the estate’s cash funds – the affidavit was filed late but I am not privy to any prior communications that may have passed between the parties.Thus to the extent that I express a conclusion it is subject to the further submissions that the parties might be advised to make.It seems to me that I have two possible courses open. One is to first allow the parties their reasonable costs and expenses out of the estate. I would limit Mrs Pountney’s costs to $30,000.[46] That will mean that the Mt Ossa home will be sold and the estate will be greatly reduced as I have indicated. Mr Collett’s claim on the testatrix’s bounty far exceeded that of the children. He will need sufficient funds to provide himself with a home over the next few years. Assuming that the estate is reduced in this way, I would allow him the whole of it to assist him in obtaining adequate accommodation.[46]Contrary to the Practice Direction, Mrs Pountney has not indicated her probable costs. She has filed considerably more affidavit material than Mr Collett but I limit her to the range that he has indicated. As well see the approach of Young CJ in Eq in Carroll v Cowburn [2003] NSWSC 248 where he limits the costs awarded to the entitlement obtained.The alternative course is to limit the executors to expenses that they can demonstrate were reasonably required, require them to discharge or otherwise satisfactorily deal with the mortgage over the Mt Ossa property, pay Mr Collett’s costs from the estate, grant him the life interest in the Mt Ossa estate that he seeks, and delay the payment of the residuary benefits until after his death. Effectively the parties can at that time then recover their costs out of their entitlement, albeit limited to that entitlement.I observe that in assessing the reasonableness of any expense two things are relevant: the reasonableness of the step taken and the reasonableness of the cost incurred in the taking of that step. I direct that the parties to file such further affidavits and submissions that they might be advised addressing the issues of what expenses the respondents can reasonably require be paid out of the estate; what costs, if any, the parties should be entitled to out of the estate; and the appropriate form of orders that are required to give effect to these reasons. The respondents are to do so within 14 days and the applicants to reply within 7 further days. In giving those directions I do not mean to discourage the parties from exploring a consensual resolution of the outstanding issues and so minimising the expense that will inevitably result if formal proof and further contest is required. In case it transpires that further time is needed I give liberty to apply to the parties.

Ratio Decidendi

Legal Principle Established

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