Fast and Ors v Rockman and Ors (No.2)
[2015] VSC 431
•27 August 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
PROBATE LIST
S PRB 2012 7166
| JOHN CLAUDE FAST AND ORS | Plaintiffs |
| v | |
| MATHEW MYER ROCKMAN AND ORS | Defendants |
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JUDGE: | McDONALD J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 29 and 30 April 2015 |
DATE OF JUDGMENT: | 27 August 2015 |
CASE MAY BE CITED AS: | Fast and Ors v Rockman and Ors (No.2) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 431 |
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COSTS — Executors failed to tender schedule of family trusts in earlier Supreme Court proceedings — current proceedings unnecessary if schedule had been tendered in earlier proceedings — no explanation by executors for their failure to tender schedule — inconsistent explanations by executors’ solicitors and counsel for failure to tender schedule — executors ordered to personally bear costs of proceedings and to pay costs of fourth to sixth defendants.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr N O’Bryan SC | Kenna Teasdale Lawyers |
| For the First to Third Defendants | No appearance | |
| For the Fourth Defendant | Mr SF McNab | Park Lawyers |
| For the Fifth and Sixth Defendants For the Seventh Defendant | Dr K Hanscombe QC No appearance | Taussig Cherrie & Fildes Lawyers |
HIS HONOUR:
When I delivered judgment in this matter on 22 July 2015, I provided the parties as well as the plaintiffs’ solicitors, Kenna Teasdale Lawyers (‘KT’), with an opportunity to file submissions on the question of whether the costs of the proceeding should be paid out of the estate. At [31] of my judgment I concluded that the costs of the current proceedings could have been avoided if:
(a)the plaintiffs had annexed to the final Will prepared by Mr Rockman’s solicitors in August 2010 the Schedule referred to in cl 15 of the final Will; and/or
(b)the plaintiffs had tendered the Schedule in evidence before Habersberger J and made submissions as to why the document was incorporated by reference into the final Will.[1]
[1]Fast & Ors v Rockman & Ors [2015] VSC 337, [31].
In their written submissions, the plaintiffs submit that Mrs Rockman, in her capacity as litigation guardian for the fifth and sixth defendants, should pay the plaintiff’s costs on a standard basis.[2] They submit:
·Costs should follow the event. The plaintiffs have succeeded in establishing incorporation by reference, which was ‘the plaintiffs’ principal argument at the hearing’[3] and ‘the case focussed upon incorporation by reference as the most likely basis for giving effect to Mr Rockman’s testamentary intentions.’[4]
·The proceeding would not have been necessary if Mrs Rockman had not challenged the validity of cl 15 and the Schedule in the Part IV proceedings.[5]
·Given Mrs Rockman’s position, ‘the executors had no alternative but to commence the present proceeding to obtain judicial determination of the challenge to cl 15.’[6]
·Rule 63.26 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) relevantly provides:
Unless the Court otherwise orders, a party who sues or is sued as trustee … shall be entitled to the costs of the proceeding out of the fund held by the trustee … in so far as the costs are not paid by any other person.
·It is ‘understandable that it was not felt necessary to attach the schedule electronically to every email which was sent’[7] to Mr Rockman or his executors in the weeks leading up to Mr Rockman’s death.
[2]Plaintiffs, ‘Executor’s submissions in connection with the costs of their application for declaration’ dated 5 August 2015, 1 [1].
[3]Ibid 3 [8].
[4]Ibid.
[5]Ibid 1 [2] and 2 [4].
[6]Ibid 2 [5].
[7]Ibid 3 [9].
The plaintiffs’ submission do not address their failure to tender the Schedule in evidence in the proceedings before Habersberger J.
Prior to the hearing before Habersberger J, the executors filed submissions which included the following:
As there are insufficient funds in the estate to pay all the pecuniary legacies under either will, a question of abatement will arise. This will be addressed at the hearing of the application.[8]
[8]Fifth and Sixth Defendants, ‘Fifth and Sixth Defendants’ Outline of Submissions regarding Costs’ dated 5 August 2015, 2-3 [6].
Prima facie, this submission is a reference to the operation of cl 15 of the final Will in conjunction with the Schedule referred to therein. Absent any meaningful explanation to the contrary, an inference arises that the executors turned their mind to the existence of the Schedule and the question of whether or not it formed part of the final Will, prior to the hearing before Habersberger J. Despite this, the executors did not provide any evidence in the proceedings before Habersberger J of the existence of the Schedule.
In the Part IV proceedings, which were the catalyst for the current proceedings, the following exchange took place before McMillan J and Mr O’Bryan SC, counsel for the executors:
McMillan J:I don’t understand, if you spent all that time before Justice Habersberger concerning what was the final will of the deceased, that something as — what is going to be significant such as the schedule, has not been talked about in the past.
Mr O’Bryan: It is most unsatisfactory, Your Honour, but there it is and we will apply — we’re in the process of applying for probate.[9]
[9]Transcript of Proceedings, Rockman v Fast and Ors (Supreme Court of Victoria, S CI 2013 01852, McMillan J, 13 October 2014), T122, LL6-13.
The plaintiffs’ submissions on costs are critical of the conduct of the fifth and sixth defendants in the Part IV proceedings in challenging the validity of cl 15 of the final Will. This criticism is not justified.
Cl 5 of the final Will of Mr Rockman refers to a Schedule ‘attached to this my Will.’[10] Cl 15 refers to the ‘entities named in the Schedule’.[11] The Schedule referred to in cl 5 and that referred to in cl 15 of the final Will are one and the same (i.e. a Schedule attached to the final Will). Plainly, at the time Mr Rockman’s final Will was admitted to probate, no Schedule was attached. Absent the Schedule, cl 15 has no work to do. However, the balance of the final Will operates in accordance with its express terms, including the bequests totalling $2.5 million to five of Mr Rockman’s children. Absent the declaration that the Schedule was incorporated by reference, the fifth and sixth defendants were entitled to receive in full the bequests of $500,000.
[10]Exhibit PCB-14 to the affidavit of Philip Carey Brown sworn 20 October 2011 in proceeding S PRB 2010 14109, propounded by the Plaintiffs as the deceased's last will, which was admitted to probate by paragraphs 1 and 2 of the order of Habersberger J made on 6 March 2013.
[11]Ibid.
Whilst the court has upheld the plaintiffs’ submission that the Schedule was incorporated by reference, that outcome was by no means inevitable. As Dr Hanscombe submitted, Exhibit ELC19[12] did not in fact list all of Mr Rockman’s family trusts. There were four trust which came into existence between March 2006 and November 2008, which did not appear on the list of 14 family trusts set out in the Schedule. This omission raised a legitimate issue as to whether Exhibit ELC19 was in fact the Schedule referred to in cl 15 of the final Will.
[12]Affidavit of Eleanor Lisa Coates sworn 20 November 2014, exhibit “ELC-19” (‘Exhibit ELC19’).
Further, a significant proportion of the hearing before me was taken up with submissions on behalf of the plaintiffs seeking rectification of the final Will. The application for rectification was of an entirely different character to the application for a declaration that the Schedule was incorporated by reference. The application for rectification proceeded on the basis that the final Will did not reflect Mr Rockman’s testamentary intentions. On the other hand, the application for a declaration that the Schedule was incorporated by reference proceeded on the basis that the Will did give effect to Mr Rockman’s testamentary intentions, albeit that it was necessary for the Schedule to be incorporated into the final Will in order to achieve this outcome. If the incorporation by reference of the Schedule was clear-cut, there would have been no basis for bringing an application for rectification of the final Will.
Whilst the submissions on behalf of the executors do not address the reasons for the failure to have tendered the Schedule in evidence before Habersberger J, the submissions filed on behalf of KT do address this issue. Paragraphs 5 and 12 of these submissions are as follows:[13]
The estate of Mr Rockman is large and is complex. KT has consequently retained, on behalf of the plaintiffs, highly qualified counsel Norman O’Bryan SC throughout all of the proceedings. Mr O’Bryan has been extensively involved in the preparation of documentation, with key forensic decision making and as an advocate at the various hearings. …
Whilst it would have been possible to raise the issue with Habersberger J prior to the actual grant of probate by the Court this was not considered necessary by counsel retained by the plaintiffs having regard to the legal effect of the doctrine of incorporation by reference, and the perceived absence of any need to seek any Court determination in respect of the application of the doctrine, no issue having been taken by any party about either the existence or legal effect of the Schedule at the hearing before Habersberger J.
[13]Kenna Teasdale Lawyers, ‘Submissions of Kenna Teasdale Lawyers in Connection with the Costs of the Application for Declarations’ dated 5 August 2015, 2-3 [5] and [12].
Contrary to the submissions set out above, the executors did raise an issue regarding the legal effect of the Schedule. The written submissions filed on behalf of the executors expressly raised the issue of abatement. This submission is explicable only by reference to the operation of cl 15 of the final Will in conjunction with the Schedule.
Having regard to the contents of paragraphs 5 and 12 of KT’s submissions, I provided Mr O’Bryan SC with an opportunity to file an answering submission. His submissions included the following:[14]
In 2014, when the issue of the validity of clause 15 of the informal Will was raised by Counsel for Mrs Rockman in a submission made during the course of Part IV proceedings, I expressed the view to my instructing solicitors (Kenna Teasdale) and my clients (the executors) that the legal doctrine of incorporation by reference did not depend for its legal effect upon a grant of probate in respect of the document which was incorporated by reference and that, accordingly, it should not be necessary for a separate application for probate to be made in respect of the schedule, providing the legal tests for incorporation were met, which I considered was the case. I assume that paragraph 12 of the submissions of Kenna Teasdale filed 5 August 2015 refers to this view that I expressed orally in 2014.
[14]Norman O’Bryan SC, ‘Submissions of Norman J O’Bryan SC in response to the request of the Honourable Justice McDonald’ dated 13 August 2015, 1-2.
Plainly, the submissions filed by KT are not referring to any advice provided by Mr O’Bryan in 2014 in the context of the Part IV proceedings. Rather, at face value those submissions refer to advice provided by Mr O’Bryan during the proceedings before Habersberger J in 2012. On the one hand, the submissions of KT suggest that the failure to tender the Schedule in the proceedings before Habersberger J was the result of advice from Mr O’Bryan that it was not necessary to do so ‘having regard to the legal effect of the doctrine of incorporation by reference’.[15] On the other hand, the submissions of Mr O’Bryan are to the effect that he provided advice to the executors regarding the effect of the doctrine of incorporation by reference in 2014 when the validity of cl 15 of the final Will was raised by counsel for Mrs Rockman, during the course of the Part IV proceedings.
[15]Kenna Teasdale Lawyers, ‘Submissions of Kenna Teasdale Lawyers in Connection with the Costs of the Application for Declarations’ dated 5 August 2015, 2 [12].
It is not possible for the court to reconcile the apparent inconsistency between the submissions of KT and Mr O’Bryan as to the failure of the executors to have tendered the Schedule in the proceedings before Habersberger J. A determination of whether the failure to tender the Schedule in the proceedings before Habersberger J was a result of advice given by Mr O’Bryan in 2012 could only be based upon evidence.
The competing submissions of KT and Mr O’Bryan leave the court in a position where the circumstances relating to the failure to tender the Schedule in the proceedings before Habersberger J are unclear.
However, in my view it is clear that the beneficiaries of Mr Rockman’s estate should not be disadvantaged by the costs of the present proceedings being borne by the estate. Although the fourth to sixth defendants have been unsuccessful in resisting the plaintiffs’ application for a declaration that the Schedule is incorporated by reference into the final Will, the present proceedings and the costs thereof are directly attributable to the executors’ failure to tender the Schedule in evidence in the proceedings before Habersberger J.
The executors had the carriage of the proceedings before Habersberger J. They must bear primary responsibility for the failure to have tendered the Schedule in evidence in those proceedings. If the executors believe that their failure to do so was a result of the conduct of KT and/or Mr O’Bryan, they may have the capacity to mitigate any financial impact arising from the orders which I propose to make. I propose to order that the executors bear their own costs of the proceedings. Further, I shall order that the executors be personally liable for the costs of the fourth to sixth defendants. The orders of the court will be:
1.The court declares that the Schedule which is Exhibit ELC19 to the affidavit of Eleanor Lisa Coates sworn 20 November 2014, which is attached to this judgment marked ‘A’ is incorporated into the final Will of Irvin Peter Rockman admitted to probate on 6 March 2013.
2.The plaintiffs are to bear their own costs of this proceeding.
3.The plaintiffs are personally liable for the costs of the fourth to sixth defendants, including reserved costs. Such costs are to be paid on a standard basis.
Annexure A
FIRST SCHEDULE- LIST OF IRVIN ROCKMAN’S FAMILY TRUSTS AS AT 1 APRIL 2010
- The 1965 Irvin Peter Rockman Trust
- The I.P. Rockman Family Investment Trust No.1
- The 1993 Ipr Trust
- The I.P.R Gembrook Trust
- The 1965 Marion Borderie Trust
- The 1965 Russell Rockman Trust
- The Irvin Bulleen Trust
- The 1965 Lionel Rockman Trust
- The Rockman Home Loan Trust
- The 380 St Kilda Road Unit Trust
- The Dolphin Unit Trust
- The Second Portsea Unit Trust
- Irvin Peter Holdings Trust
- Crayfish Properties Trust
IN WITNESS whereof I have hereunto set my hand this 1st day of April 2010.
SIGNED AND ACKNOWLEDGED by the )
said Testator in the presence of us both )
present at the same time who in his presence )
at his request and in the presence of each )
other hereunto subscribed our names as )
attesting witnesses: )
Signature: Signature:
Name: Name:
Address: Address:
Occupation: Occupation:
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