Equity Trustees v Pistorino
[2017] VSC 17
•1 FEBRUARY 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2016 000030
| EQUITY TRUSTEES LIMITED (ACN 004 031 298) AS EXECUTOR AND TRUSTEE OF THE ESTATE OF AGOSTINO PISTORINO (DECEASED) | Plaintiff |
| v | |
| ANTONIO PISTORINO | Defendant |
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JUDGE: | ELLIOTT J |
WHERE HELD: | MELBOURNE |
DATE OF HEARING: | 1 FEBRUARY 2017 |
DATE OF JUDGMENT: | 1 FEBRUARY 2017 |
CASE MAY BE CITED AS: | EQUITY TRUSTEES v PISTORINO |
MEDIUM NEUTRAL CITATION: | [2017] VSC 17 |
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COSTS – Trustees – Where trustees sought orders approving adoption and signing of draft accounts of a deceased estate – Matter resolved by consent – Trustees’ entitlement to costs on indemnity basis - Necessary and proper parties’ entitlement to costs – Costs properly incurred.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms K P Hanscombe QC with Mr A P Dickenson | Aitken Partners |
| For the Defendant | Mr D C Oldfield | Piper Alderman |
| Joanne Connell | In person |
HIS HONOUR:
A. Introduction
On 16 February 2016, the plaintiff, Equity Trustees Limited (“Equity Trustees”), applied for orders approving the adoption and signing by Equity Trustees of the draft accounts of the estate of Agostino Pistorino (“the Estate”) for each of the financial years ended 30 June 2008 to 30 June 2013. Equity Trustees was appointed the executor and trustee of the Estate pursuant to orders made by the court on 27 August 2010. The then draft accounts of the Estate were exhibited to an affidavit filed and served at the commencement of the proceeding.
At the time the proceeding commenced, Giovanna Connell (“Connell”) was named as the first defendant and Antonio Pistorino (“Pistorino”) was named as the second defendant.
The will of Agostino Pistorino (“the Deceased”) provided for the income of the Estate to be paid to his wife, Aurelia Pistorino (“Aurelia”), during her lifetime, then, upon her death, for the balance of the Estate to be divided into 2 equal shares to be held on 2 individual testamentary trusts, known as the Giovanna Connell Trust and the Antonio Pistorino Trust. Connell and Pistorino are the primary objects of these 2 testamentary trusts. They are sister and brother and are the children of Aurelia and the Deceased.
Pursuant to the will, Connell and Pistorino were to be appointed as executors and trustees of the Estate, together with the Deceased’s then accountant (“the Deceased’s Accountant”). The appointment duly occurred after the death of the Deceased on 5 January 1999.
On 4 May 2016, Equity Trustees filed an amended originating process by which it also sought an order approving the adoption and signing of the draft accounts of the Estate for the year ended 30 June 2014.
On 4 May 2016, in response to certain “queries” made by Agostino in writing after the proceeding commenced, Equity Trustees served amended draft accounts. These were exhibited to an affidavit of the same date, which referred to the fact that Equity Trustees had obtained advice from its accountants and tax advice from a senior barrister as a result of the queries raised.
By a further amended originating process filed 25 November 2016, Equity Trustees made minor further amendments, but in substance sought the same orders with respect to the draft accounts for the financial years ended 30 June 2008 to 30 June 2014 inclusive. The further amended draft accounts had been provided by Equity Trustees on 24 November 2016.
On 11 March 2016, the court ordered that persons with interests in the Estate be given notice of the proceeding.
Various interlocutory orders were made on 6 May 2016, 17 June 2016, 15 July 2016, 29 July 2016, 26 August 2016, 27 September 2016 and 21 October 2016. It is not necessary to go into the detail of all these interlocutory orders, of which all but the first were made by consent and on the papers. It is sufficient to note that, on 6 May 2016, each of the then parties appeared before the court, with both Equity Trustees and Pistorino represented by senior and junior counsel. The orders made included that Connell cease to be a party to the proceeding. From that point, Pistorino was the only defendant.[1] Pistorino still maintained there were outstanding matters with respect to some of the accounts. Until to this time Connell had represented herself.[2]
[1]On 5 May 2016, Connell filed an affidavit stating she consented to the draft accounts, as served on 4 May 2016, for the years ended 30 June 2008 to 30 June 2014.
[2]As a general principle, self-represented litigants are not entitled to an order for costs: Cachia v Hanes (1994) 179 CLR 403, 409.5 (Mason CJ, Brennan, Deane, Dawson and McHugh JJ); see also Sahin vNational Australia Bank Ltd [2013] VSCA 93, [34] (Neave JA and Ferguson AJA); Batrouney v Forster (No 2) [2015] VSC 541, [167] (Robson J).
On 25 November 2016, a directions hearing was held at which certain issues were raised with respect to the draft accounts by the parties and the court. It was agreed that orders would be made by consent allowing Equity Trustees to further amend the relief sought. The parties agreed to confer on the issues raised and the directions hearing was adjourned to 9 December 2016.
On 9 December 2016, orders were made by consent in the proceeding.[3] Relevantly, those orders were as follows:
[3]On that occasion, Equity Trustees was represented by junior counsel and Pistorino by his solicitor.
Approval of draft accounts
1.Pursuant to rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic), subject to paragraphs 2 and 3 below, the court approves the adoption and signing by the plaintiff of the draft accounts of the Estate for the financial years ended 30 June 2008, 30 June 2009, 30 June 2010, 30 June 2012 and 30 June 2013, being part of exhibit “BMP-1” to the affidavit of [Biago Marco] Pizzacalla sworn 24 November 2016, for the purposes of the administration of the Estate and the preparation of tax returns of the Estate for each of those years.
2.The approval in paragraph 1 above for the financial years ended 30 June 2012 and 30 June 2013 is subject to any necessary adjustments consequent upon the finalisation of the draft accounts of the Estate for the financial year ended 30 June 2011.
3.The approval in paragraph 1 above for the financial year ended 30 June 2013 is subject to the 2nd paragraph in Note 1 to the financial statements being replaced with the following:
The financial statements have been prepared in accordance with the significant accounting policies disclosed and court orders below, which the trustees have determined to be appropriate. Such accounting policies are consistent with the previous period unless stated otherwise.[4]
[4]By these orders, the court approved the draft accounts for the financial years ending 30 June 2008, 30 June 2009, 30 June 2010, 30 June 2012 and 30 June 2013. The court made no ruling regarding the draft accounts of the Estate for the financial years ending 30 June 2011 and 30 June 2014 and none was sought.
On that occasion, orders were also made for steps to be taken in order that a hearing on the question of costs could proceed, including with the involvement of Connell.
The hearing today was concerned solely with the appropriate orders to be made with respect to costs and the final disposition of this proceeding.
B. Background
As at 23 November 2000, the Estate had total assets valued at $24,242,480.75 and total liabilities of $913,402.18. A significant amount of the assets consisted of shares and units in trusts, including property trusts. Probate was granted on 15 January 2001.
Issues arising out of the administration of the Estate have been numerous and protracted. Prior to the commencement of this proceeding, no fewer than 8 proceedings were commenced in this court, which included proceedings commenced by each of Connell, Pistorino and Aurelia, amongst others. Save to record that these proceedings reflected a completely dysfunctional relationship between Connell, Pistorino and Aurelia, and that they ultimately culminated in, amongst other things, Equity Trustees becoming the executor and trustee of the Estate, it is unnecessary to go into much detail.
Further, at the time that Equity Trustees was appointed in the 2011 financial year (to replace Connell and another trustee previously appointed), the relevant accounts for the financial years ending 30 June 2008, 30 June 2009 and 30 June 2010 had not been finalised. Prior to that time, the Deceased’s Accountant had prepared the accounts for the Estate and also related company accounts for the period 1999 to 2007.
Again without descending to the detail, Connell, Pistorino and others with an interest in the Estate have had numerous advisers over the years.
Upon its appointment, Equity Trustees sought from the parties and their various lawyers and accountants, copies of all Estate financial documents so as to enable the finalisation of the Estate accounts.
After Equity Trustees’ inquiries had been responded to, the information required to complete the financial accounts was still incomplete. Not all source documents were made available. In short, there were serious issues arising out of the appropriateness of the initial draft accounts the subject of this proceeding by reason of the unfortunate history of the Estate.
Aurelia died on 1 May 2015, leaving Connell and Pistorino and their respective related interests as the remaining beneficiaries of the Deceased’s will.
This proceeding was commenced to address the issues arising from the somewhat unsatisfactory position in which Equity Trustees found itself.
C. Relevant principles
With a minor exception, there was no real dispute between the parties as to the applicable principles concerning the costs of a proceeding of this nature. As a general rule, a trustee is entitled to its litigation costs, including an application for directions, out of the Estate on an indemnity basis unless costs have not been incurred properly.[5] The onus is on the party seeking to deny indemnity to demonstrate costs have been improperly incurred.[6]
[5]See Nolan v Collie (2003) 7 VR 287, 303-04 [44], 307-308 [53] (Ormiston JA with whom Batt and Vincent JJA agreed); Cody v Cody [No 2] [2013] VSC 401, [14]-[16] (McMillan J); Wales v Wales [2015] VSCA 345, [41] (Kyrou, McLeish JJA and Ginnane AJA).
[6]See Rigby v Tiernan [2016] VSC 352, [107]-[114], especially [112] (McMillan J).
Equally, the authorities indicate that every person who is a necessary or proper party to the litigation is entitled to its costs on the same basis.[7] However, on this point, Equity Trustees took exception. It submitted that a person in the position of Pistorino should only receive costs on a standard basis. No authority was relied upon in this regard.
[7]See, for example, Re Pasminco Ltd (subject to deed of company arrangement) (No 2) (2004) 49 ACSR 470, 482 [36] (Finkelstein J) citing Hicks v Wrench (1821) 6 Madd 93; 56 ER 1026. See also Rigby v Tiernan [2016] VSC 352, [104] (McMillan J).
D. Position of Equity Trustees
Notwithstanding the prima facie entitlement of Equity Trustees to its costs, Pistorino submits that not all of Equity Trustees’ costs have been properly incurred. A number of issues are raised.
D.1 Errors in draft accounts
Pistorino observes, correctly, that the accounts as originally placed before the court contained errors. Prior to the commencement of the proceeding, Equity Trustees had retained accounting and legal advisors for the purpose of preparing the draft accounts. It was submitted by Pistorino that the costs spent by Equity Trustees in correcting the draft accounts subsequent to the commencement of the proceeding “resulted from an absence of care and diligence on the part of [Equity Trustees]”.
It is unclear as to why it is said that Equity Trustees failed to exercise due care and diligence. There was no suggestion that the professional advice sought before the commencement of the proceeding was other than properly sought, or that the professional advisors retained were anything other than suitable for the task. Further, in a case as complicated as this, it would be expected that such advice would be sought. Furthermore, if there were errors in the accounts that needed to be corrected, those costs would have been incurred regardless of the existence of the proceeding. It is not clear how it is said that corrections made to the accounts during the course of the proceeding were costs incurred above and beyond what would have been incurred in any event.
An additional matter relevant to this issue is that the accountant retained initially by Equity Trustees became seriously ill, and eventually passed away on 4 January 2016. In those circumstances, it had not been possible for Equity Trustees to raise queries with that accountant who had prepared the draft accounts for some time before the proceeding commenced.
Finally, there is no expert evidence, or any other evidence that I was specifically directed to, to suggest that the errors that were ultimately identified and agreed to ought to have been apparent to an independent professional trustee.
In summary, there is nothing to indicate that Equity Trustees was acting other than diligently in relying on the expert advice that it obtained and the draft accounts as initially presented.
D.2 Conferral of respective accountants
Pistorino suggested on 26 February 2016 that the respective accountants for the parties confer. It was not agreed that the conferral occur until June 2016. It was contended that the delay of 3 months or so “resulted in the unnecessary costs of the amended draft accounts, which accounts were subsequently further amended following the accountants’ conferral”.
There is no evidence before the court to establish that the delay resulted in unnecessary costs, or that the amended draft accounts did not assist with the ultimate resolution of the issues in dispute.
That deals with this issue, but for completeness it is noted that between late February 2016 and June 2016, Equity Trustees did not stand idle. As referred to above,[8] it sought independent accounting and tax advice in response to the queries that had been raised. It is hardly surprising that Equity Trustees would take such a course in a case like this. Not taking such steps might have been remiss of it, but, in the circumstances, it is not necessary to explore this issue. The short point is that a substantial part of the time was used in properly identifying the correct position in relation to issues raised before agreeing to the proposed conferral.
[8]See par 6 above.
D.3 Approval sought for financial years from 2008 to 2014
Pistorino contended that it was unnecessary for Equity Trustees to seek approval of the accounts with respect to each of the financial years 2008 to 2014. In essence, it was contended that the 2008 draft accounts formed the “baseline” from which Equity Trustees could then prepare the remaining outstanding accounts. In oral submissions, the complaint in this regard was reduced to the draft accounts for the 2013 and 2014 financial years.
It is sufficient to deal with this point to note the fractious history concerning the affairs of the Estate. In my view, it was prudent for Equity Trustees to seek approval beyond the 2008 financial year to provide some certainty moving forward. Further, the process of the finalising of these accounts has largely occurred outside the court process by conferral between the parties. It is not clear how it is said that the costs incurred were increased by the fact that the 2013 and 2014 draft accounts were also referred to in the relief sought. If there were any additional costs beyond those that would have been incurred in any event in finalising these accounts, it would be expected the amount would be trivial. There was no evidence to suggest otherwise.
Finally, it should be noted that amendments to the accounts after the proceeding commenced included amendments made for the financial years after 2008, including 2013.
D.4 Senior and junior counsel retained by Equity Trustees
Exception is taken by Pistorino to the appearance of senior counsel at a directions hearing on 25 November 2016 and the hearing before the court today. It was suggested that it was not reasonable for both senior and junior counsel to appear when it was apparent that Equity Trustees’ application was not opposed on 25 November 2016 and the remaining issues before the court today were not so complex as to warrant the retention of 2 counsel.
With respect to the hearing on 25 November 2016, the position of Pistorino became clear during the course of the hearing. Further, the court of its own motion raised issues of substance with respect to the accounts that needed to be addressed. In my view, it could not have been apparent to Equity Trustees that the hearing on 25 November 2016 would be straightforward. Indeed, in my view, it was not. Further, the sums involved in this case were substantial and justified the involvement of senior counsel.
As to the appearance of senior counsel today, significant issues have been raised with respect to costs. Although specific amounts have not been the subject of evidence before the court, it is plain that the costs in contention on this application are also substantial. Further, Pistorino’s submissions were potentially quite serious, as they might have been understood to suggest that Equity Trustees, as a professional trustee, had been acting improperly. Given these matters, and the retention of senior counsel prior to this time, including by Pistorino, it was not inappropriate for senior counsel to appear today.
It follows that, subject to 1 further matter to be raised, the usual order should be made with respect to Equity Trustees’ costs of this proceeding namely, that those costs be paid out of the Estate on an indemnity or a trustee basis.
E. Costs of Pistorino
As noted above,[9] Pistorino was joined as a defendant from the outset of this proceeding and there was no suggestion that he was anything other than a proper party to the proceeding. Equity Trustees does not oppose an order for Pistorino’s costs to be paid out of the Estate, but seeks that they be made only on a standard basis.
[9]See par 2 above.
Connell adopts a different position. Essentially, Connell submits that the position adopted by Pistorino in an earlier proceeding has resulted in unnecessary costs being incurred in this proceeding.
By way of elaboration, in a proceeding commenced on 7 April 2009 by Aurelia, Pistorino filed an affidavit on 21 September 2009 stating that he refused to respond to allegations made against him by Connell on the basis that filing an affidavit as to his administration of the Estate might incriminate him. Connell contends that if Pistorino had complied with court orders in the earlier proceeding and filed an affidavit concerning the administration of the Estate, many of the issues in this proceeding would not have arisen.
Privilege against self-incrimination is a common law right that a person is entitled to exercise.[10] Further, this is not the occasion to examine the nature and extent of the allegations made by Connell in another proceeding. The incontrovertible facts are that Equity Trustees was appointed as trustee in circumstances where there were complications and gaps in the records of the Estate. Those complications and gaps needed to be addressed in a satisfactory manner so that the administration of the Estate could be advanced for the benefit of both Connell and Pistorino.
[10]See Pyneboard Pty Ltd v Trade Practices Commission (1983) 152 CLR 328, 337.5 (Mason ACJ, Wilson and Dawson JJ), 346.3 (Murphy J), 351.2 (Brennan J).
There has been no suggestion by Equity Trustees that Pistorino, through his advisers, has acted anything other than appropriately in seeking to assist in the finalisation of the accounts in this proceeding. With some minor exceptions, this finalisation has occurred as a result of the efforts and cooperation of the parties without the involvement of the court.
Connell made the further submission based on the fact that, save for an amendment to the notes, there were no substantive changes to the 2008 draft accounts. It was submitted that Pistorino had not acted properly in failing to agree to these accounts and the 2009 draft accounts until November or December 2016. However, Pistorino’s agreement to the 2008 and 2009 draft accounts occurred when he agreed to all the other accounts that were the subject of the orders on 9 December 2016. In my opinion, it would be unfair on Pistorino, and somewhat artificial, to consider his position based on the 2008 and 2009 draft accounts alone.
Accordingly, there is no proper basis to deprive Pistorino of his costs. In line with the authorities, they will be awarded on an indemnity basis out of the Estate.
F. Costs ordered to be paid out of the income of the Estate
Connell submitted that any orders made with respect to costs should not be paid out of the corpus of the Estate, but rather from the income of the Estate. Whilst acknowledging that, generally speaking, Equity Trustees and Pistorino would be entitled to have their costs paid from the corpus, Equity Trustees and Pistorino do not oppose an order that the costs be paid from the income account. Further, it is acknowledged that this may result in a better outcome for the beneficiaries.[11]
[11]The parties acknowledged that certain of Equity Trustees’ costs have already been paid from the corpus by order of the court. The orders made will include provision that Equity Trustees shall, as income becomes available to the Estate, reimburse the corpus account in respect those costs.
Conclusion
Orders will be made accordingly.
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