Denby v Power (No 2)
[2016] VSC 739
•5 December 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S CI 2016 02781
| LYNNE MAREE DENBY | Plaintiff |
| v | |
| DAMIEN JAMES POWER (who are sued both personally and in their capacity as executors of the will and estate of PETER GERARD POWER, deceased) | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | Written submissions filed 17 and 18 October 2016 |
DATE OF RULING: | 5 December 2016 |
CASE MAY BE CITED AS: | Denby v Power & Anor (No 2) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 739 |
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COSTS — Where application for removal of executors and trustees successful — Whether costs claimed by plaintiff are reasonable and proportionate — Whether executors’ costs expended in administering the estate reasonable and proportionate
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Kelly & Chapman | |
| For the Defendant | Harding Stenning & Co |
HER HONOUR:
The plaintiff successfully sought the removal of the defendants as executors of the will and trustees of the estate of the Peter Gerard Power on the basis that they were in a conflict between interest and duty.[1] Judgment was delivered on 6 September 2016.
[1]Denby v Power & Anor [2016] VSC 535 [8]-[12] (6 September 2016) (‘the judgment’).
The remaining issues to be determined are the plaintiff’s costs of and incidental to the proceeding and the defendants’ costs incurred in their administration of the estate.
The plaintiff’s costs of and incidental of the proceeding
The plaintiff divides her costs into two components: her costs incurred prior to the commencement of the proceeding on 15 July 2016 at $26,583.41 and her costs incurred after that date at $14,475.14 – in total an amount of $41,058.55.
The costs of $26,583.41 are detailed in memoranda of costs rendered to the plaintiff by her solicitor. They cover the work undertaken to establish the five grounds of conflict between interest and duty relied upon by the plaintiff in her removal application. The work relating to those grounds would ordinarily be considered costs of and incidental to the proceeding.[2]
[2]Check Dal Pont [17.4} claims $35,000 for her costs of and incidental to this proceeding.
The plaintiff submits that she should be allowed 80 per cent of this sum as representing her costs reasonably incurred, that is, the amount of $21,000.
The costs of $14,475.14 are also set out in memoranda of costs rendered to the plaintiff by her solicitor. The plaintiff has rounded this figure down to $14,000 and submits that these costs were also reasonably incurred and the amount is a reasonable amount.
With these reductions, the plaintiff seeks the sum of $35,000 for her costs of and incidental to the proceeding. The plaintiff seeks that the defendants personally pay those costs.
The defendants’ response to the plaintiff’s claim for the costs of the proceeding
The defendants accept that they should personally pay the plaintiff’s costs of and incidental to the proceeding on the standard basis.
The defendants say that a reasonable and proportionate estimate of the plaintiff’s costs incurred as from 20 May 2016 when the plaintiff’s solicitors threatened the removal application is $14,450. The defendants do not address the plaintiff’s costs incurred prior to the commencement of the proceeding other than that they accept that the term ‘costs of and incidental to the proceeding’ include costs incurred prior to the commencement of the proceeding.
Consideration of the plaintiff’s costs of and incidental of the proceeding
Costs assessed on the standard basis are all costs reasonably incurred and of reasonable amount.[3] Costs of and incidental of the proceeding include the costs incurred as part of the preparation of the litigation.
[3]Supreme Court (General Civil Procedure) Rules 2015, r 63.30
The memoranda of costs rendered to the plaintiff prior to the commencement of the proceeding relate to her costs incurred in establishing the five grounds of conflict between interest and duty upon which the plaintiff was successful.
The defendant’s assessment of the plaintiff’s costs after the commencement of the proceeding is closely aligned to the amount claimed by the plaintiff, with the principal difference being the inclusion of an amount of $1,100 for the costs submissions whereas the plaintiff has not included the costs for that item in the $14,475.14.
It is appropriate that the plaintiff has reduced the amounts claimed for her costs as it allows for the costs for any work that does not fall within the grounds relied on by her. Standard costs are not intended to indemnify the actual amount of costs rendered to the plaintiff. In the circumstances of this proceeding, I am satisfied that the amount of $35,000 is a reasonable amount for the plaintiff’s costs of and incidental to the proceeding and that those amounts have been reasonably incurred by her for the purposes of this proceeding.
The defendants’ costs incurred in their administration of the estate
At trial, it was common ground that the defendants claimed they had incurred costs of around $43,000 for their administration of the estate. Pursuant to orders made at trial, the defendants were required to provide details of these costs to the plaintiff. These details were provided. The total of the costs as provided amounted to $47,642.40.
The defendants submit they are entitled to some costs in the administration of the estate despite it being determined that they were in conflict between their interest and duty. In their written submissions, the defendants accept that the sum of $48,192 has been disbursed to them from the estate. They agree to reimburse the estate the difference between that amount and the amount found by the Court to be their costs for the administration of the estate. They submit the proper amount is $14,153.40 as quantified in their submissions being the work properly chargeable for their administration of the estate.
Plaintiff’s position on defendant’s claim for $14,153.40 for costs incurred in the administration of the estate
The plaintiff considers that of the memoranda of the defendants’ costs amounting to $47,642.40 only the amount of $3,500 was properly and reasonably incurred by the defendants. This was for obtaining the grant of probate at $1,713.50 and collecting in the other estate assets that were subsequently discovered at $1,700. The remaining amount relates to the defendants’ work that related to the five grounds of conflict between interest and duty successfully relied on by the plaintiff for which there should be no indemnity for their costs.
Consideration of the defendants’ costs of the administration of the estate
Trustees are ordinarily entitled as of right to indemnity out of the trust for expenses properly incurred, that is, all costs except to the extent that they are of an unreasonable amount or have been unreasonably incurred.[4] The concept of proper expenditure excludes conduct that demonstrates want of prudence or diligence.[5] Expenses and liabilities that are improperly incurred, such as acting beyond power, in bad faith or exercised power ‘with an absence of care and diligence that a person of ordinary prudence should exercise’ are not caught by the right of indemnity and should be borne by the trustee personally.[6]
[4]Trustee Act 1958, s 36(2); Supreme Court (General Civil Procedure) Rules 2015, r 63.26.
[5]Dal Pont, Equity and Trusts in Australia (Lawbook Co, 5th ed, 2011) 689, 679 citing Turner v Hancock (1882) 20 Ch D 303, 305; Re Beddoe [1893] 1 Ch 547, 558; Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287, 303–10 (Ormiston JA); Dimos v Skaftouros [2004] VSCA 141 (20 August 2004). Dodds-Streeton AJA referred to National Trustees Executors & Agency Company of Australasia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268.
[6]G E Dal Pont, ‘Equity and Trusts in Australia’ (Lawbook Co, 5th ed, 2011) 679–80 [23.135] citing Re O’Donogue [1998] 1 NZLR 116, 121; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) [2001] FCA 1628; (2001) 188 ALR 566, 606; Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287.
Where a trustee fails in litigation, his or her costs may be allowed out of the estate. Where a trustee succeeds, his or her costs would ordinarily be allowed out of the estate. At the same time, any ‘indemnity must be given effect to in such a way as to make the burden fall upon the beneficiaries equitably having regard to the circumstances under which the costs, charges and expenses were incurred’.[7]
[7]Wales & Ors v Wales & Ors [2014] VSCA 101 (27 May 2014) [72]
The amount of $14,153.40 now claimed by the defendants includes the work done for which the plaintiff assesses at $3,500 and accepts was properly and reasonably incurred by the defendants.
The estate is an extremely modest estate of $122,000. It should have been able to have been called in and finalised efficiently and with a minimal costs incurred. Of the remaining amount of $10,653.40 now claimed by the defendants, it is apparent that many of the items relate to the five grounds of conflict between interest and duty,[8] for example, there are several items that relate to attempts to obtain the will file when there was no challenge to the will on foot and other work undertaken for the purpose of undermining the plaintiff’s position as sole beneficiary of the estate and for the benefit of the deceased’s sons. For these reasons, I am satisfied that the defendants’ costs of their administration of the estate should allowed at $3,500. This means that the defendants are to reimburse the sum of $44,692 to the estate of the deceased.
Plaintiff’s costs of this application for costs
[8]Denby v Power & Anor [2016] VSC 535 (6 September 2016) [35].
The plaintiff seeks her costs of $1,350 for the application for costs to be paid by the defendants personally. The defendants submit the appropriate fee for the plaintiff’s costs is $1,100.
The costs application required a detailed analysis of the various memoranda of costs provided by the defendants’ solicitors. I am satisfied that the amount of $1,350 for the application for costs is reasonable in the circumstances and that those costs should be paid personally by the defendants.
Orders
I will make orders as follows:
(a) The defendants personally pay the plaintiff’s costs of and incidental to the proceeding fixed in the sum of $35,000.
(b) The defendants personally reimburse the estate of the deceased the sum of $44,692.
(c) The defendants personally pay the plaintiff’s costs of the costs application fixed in the sum of $1,350.
(d) Otherwise the proceeding be dismissed.
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