IMO the Will and Estate of Peter Robert Nelson Peers, deceased (No 2)
[2015] VSC 68
•5 March 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2013 6337
IN THE MATTER of the Will and Estate of PETER ROBERT NELSON PEERS, deceased
| BEVERLEY JOAN GILLARD (in her capacity as an Executor of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) | Plaintiff |
| v | |
| MAHONS with YUNCKEN & YUNCKEN (in its capacity as solicitors for the Executors of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) and others (according to the schedule attached) | Defendants |
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JUDGE: | DALY AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 13 February 2015 |
DATE OF JUDGMENT: | 5 March 2015 |
CASE MAY BE CITED AS: | IMO the Will and Estate of Peter Robert Nelson Peers, deceased (No 2) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 68 |
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EXECUTORS AND ADMINISTRATORS – Application by a co‑executor pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2005 – Costs – Application successful in part – Entitlement of trustees to indemnification of property for legal costs incurred in pursuing and defending legal proceedings – Relevance of Civil Procedure Act 2010 (Vic) – Application of overarching obligations to trustees’ right to indemnify from trust property for legal costs - Relevance of offers of compromise – Whether plaintiff had acted unreasonably in rejecting offers of compromise.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | In person | |
| For the First Defendant | No appearance | |
| For the Second Defendant | Mr T M Dowling | Martin Irwin & Richards |
HER HONOUR:
This matter arises out of a dispute between the plaintiff (‘Dr Gillard’) and the second and third defendants (‘co‑executors’) concerning certain claims made by and actions taken by her in this proceeding, ostensibly in her capacity as one of the co‑executors of the estate of her late father (‘estate’). Following the publication of my judgment and reasons in relation to the substantive matters in the proceeding on 8 October 2014,[1] it was necessary to convene a further hearing concerning the question of costs. In the judgment, I held that Dr Gillard was entitled to be indemnified from the estate for the costs of repairs carried out at her instigation upon a property which formed part of the estate (‘repair costs’), subject to accounting for any payment to her in partial reimbursement of the repair costs. However, I found that she had not discharged the onus upon her to justify her conduct in issuing this proceeding insofar as it sought to review the costs charged to the estate by its solicitors, the first defendant (‘costs summons’).
[1][2014] VSC 500.
Dr Gillard brought the costs summons without the consent and against the wishes of the second and third defendants, who are the co‑executors of the estate. Dr Gillard reached a settlement with the first defendant on 30 June 2014. No evidence was before me at the initial hearing on 17 July 2014 as to the terms of settlement as between her and the first defendant, making it impossible for the Court to determine whether there was any measurable benefit to the estate by reason of Dr Gillard bringing the costs summons. Indeed, that document is still not before the Court. However, I can infer that there was a payment of some amount by the first defendant to the estate, as the balance of the estate’s bank account has increased by approximately $6,000 since the first hearing, to stand at $34,368.80. There is no evidence, however, of whether the estate has incurred further expenses, or whether further expenses will be incurred before the estate is finalised.
The parties are as far apart on the question of costs as they have been on just about every issue concerning the administration of the estate. Dr Gillard seeks that the repair costs of $8,774 be paid to her in full, on the basis that she has repaid her brother the $2,109 contribution he had made to the repair costs (although the cheque has not been presented). She seeks orders that the co‑executors pay the costs she has incurred by reason of her engagement of her former solicitor prior to the issue of this proceeding and during the course of this proceeding in the sum of $42,479.55, that the balance of the estate (after payment to her of the repair costs) be distributed equally between the four beneficiaries, and that the co‑executors bear their own costs of the proceeding.
The co‑executors seek the following orders:
(a) Dr Gillard be indemnified for repairs undertaken to the property at 17 McKenzie Street, Murrayville, Victoria (‘McKenzie Street property’) in the sum of $6,665, to be paid out of the estate;
(b) Dr Gillard’s claims otherwise be dismissed;
(c) Dr Gillard bear her own costs of the proceedings;
(d) there be no order as to the first defendant’s costs of the proceeding;
(e) the co‑executors’ costs of the proceedings in respect of the claims made by Dr Gillard as against the first defendant and all costs incurred after 1 July 2014 be paid by Dr Gillard on an indemnity basis, to be taxed in default of agreement; and
(f) the co‑executors’ costs of the proceeding otherwise be indemnified out of the estate to be taxed in default of agreement.
Dr Gillard represented herself at the reconvened hearing.[2] She relied upon various affidavits and written submissions filed and served by her since 8 October 2014, and largely confined her oral submissions to commenting upon the written submissions filed and served by the co‑executors. In summary, Dr Gillard submitted as follows:
[2]Mr Michael Kennedy was granted leave to cease acting for Dr Gillard on 17 September 2014.
(a) the task of administering her father’s estate should have been simple, and many questions arise as to why it has taken five years to settle the estate and who was responsible for the time and costs involved;
(b) new evidence has emerged that the co-executors never inspected the McKenzie Street property, in breach of their duties as executors to the beneficiaries to protect the assets of the estate;
(c) the dispute over the repair costs was pivotal to holding up the administration of the estate;
(d) she engaged Michael Kennedy in October 2012, initially on a pro bono basis, to try and resolve issues and disputes about the administration of the estate;
(e) the co-executors stubbornly refused to finalise the administration of the estate, and their attitude was influenced by acrimony about the terms of her late father’s will and a report made by her to the local council by her regarding the condition of one of their family’s properties and the resulting issue of a demolition order by the Council;
(f) she did not act unreasonably in the conduct of her duties as an executor: she is a well-respected medical professional, and has always fulfilled her executorial duties in a business-like manner;
(g) the co-executors’ solicitors acted unreasonably in refusing to concede the repair costs as a valid estate expense;
(h) her recourse to the Court in respect of the legal costs charged by the first defendant to the estate was reasonable, and many of the difficulties and challenges she faced in the administration of the estate could be laid at the feet of the first defendant;
(i) she initially rejected Michael Kennedy’s advice that she go to court, but he assured her that he would act on a pro bono basis. Accordingly, when she failed to resolve the dispute with the first defendant in March 2013, she accepted his advice to go to court;
(j) in October 2013, without prior notice, Michael Kennedy insisted on working on a commercial basis. He went to extraordinary lengths to achieve unity between the co‑executors but to no avail;
(k) the conduct of the co‑executors’ solicitors in November 2012 and in June/July 2014 made it impossible to settle as they kept insisting on Michael Kennedy’s costs being paid on a party-party basis;
(l) in general terms, the co‑executors did not act in the interests of the beneficiaries. They coveted the estate property and they acted out of frustration regarding their failure to receive the estate property and the demolition order. They falsely accused her of undue influence over her late father and showed undeserved animosity to her which clouded their judgement when dealing with her claim for the repair costs; and
(m)her conduct in bringing this proceeding was not highhanded but borne out of a strong desire to have a third party (that is, the Court) look objectively at the issues that impacted so adversely on the beneficiaries of the estate.
The co-executors made the following submissions in respect of the costs of the proceeding:
(a) trustees are generally entitled to the costs of any application to the Court as part of their general right of indemnity and will only lose that right of indemnity if there is misconduct on their part. However, they concede that it is necessary to examine whether any expenses were properly or improperly incurred;
(b) in the current case the co‑executors were placed in the invidious position where they did not agree to the issue of the costs summons and their position in that regard has been vindicated. Further, the circumstances were such that it was not improper for the executors to oppose the claim for repair costs. There was certainly sufficient evidence to suggest that the claim was not a proper claim against the estate, and Dr Gillard’s refusal to acknowledge the partial reimbursement of the repair costs to her was unreasonable; and
(c) the co-executors made numerous attempts to resolve the dispute in the period between May and July 2014, making substantial concessions to Dr Gillard. However, Dr Gillard’s conduct prevented settlement being achieved by reason of her unreasonable insistence that the co-executors bear their own costs of the proceeding, including their costs of the cost summons.
Dr Gillard relied upon affidavits sworn by her on 31 October 2014 and 3 December 2014, and an affidavit sworn by her sister, Dr Valerie Peers on 5 December 2014. These affidavits are reasonably lengthy, and depose, in summary, to the following matters:
(a) the difficulties Dr Gillard faced in her role as the co‑executor of the estate, the merits of her claim for the repair costs, her grievances regarding the conduct of the first defendant, her dealings with Michael Kennedy, and the reason why she brought this proceeding against the first defendant and the co‑executors;
(b) a conversation that Dr Gillard and Dr Peers had with the co‑executors in Murrayville on 21 November 2014, when the co‑executors were said to have admitted that they had not inspected the McKenzie Street property to ascertain what repair works were needed; and
(c) the terms of two offers she made to the co‑executors on 17 October 2014 and 30 October 2014, and the rejection of those offers.
The co‑executors relied upon affidavits sworn by Sheryle Peers on 25 November 2014 and Christopher Peers on 12 February 2015, which were largely confined to exhibiting correspondence between the parties regarding settlement between 26 May 2014 and 16 July 2014 (the day prior to the first hearing).
The co-executors rely upon all of the offers made by them in the relevant period, but in particular, the terms of an offer in a letter dated 1 July 2014, the day after Dr Gillard reached a compromise with the first defendant (“1 July letter’). The relevant parts of the letter, which was endorsed ‘without prejudice save as to costs’, are reproduced below:
Further to our telephone conversation earlier today, we have obtained our clients’ instructions and we are instructed to reject your client’s counteroffer.
Our clients have instructed us to make a further counteroffer which is made without any admission of liability and solely on a commercial basis, the terms of which are as follows:
1.Our clients, as co-executors, agree that the amount of $6,665.00 is paid to your client from estate funds in full and final settlement of your client’s claim against our clients in relation to the works carried out by Mr Smith inclusive of interest;
2.Our clients will agree to set aside the cost order made against your client on 17 February 2014 that she pay all of our clients’ costs relating to the Summons;
3.Your client as a co-executor and trustee agree that 50% of our clients’ costs incurred in this matter, as calculated on a party party basis, be paid from the estate funds;
4.Your client advise in writing of the legal costs she has incurred in this matter solely in relation to her claim against our clients as the Second and Third Defendants and calculated on a party party basis and subject to our clients’ acceptance of the quantum of your client’s costs, 50% of those costs be paid from estate funds.
5.The parties enter into a Deed of Settlement containing, inter alia, a full and final release in relation to all matters concerned with the administration of the estate and the current proceedings in the Supreme Court; and
6.Each of the parties undertake to each other to do all things necessary as co‑executors to wind up the Estate as quickly as possible.
In relation to paragraph 3 of the proposed terms of the offer, we advise that our clients’ costs calculated to today’s date are $14,956.12.
This offer shall remain open for acceptance to 5.00pm 4 July 2014 whereupon it shall immediately lapse.
If this matter proceeds and your client fails to obtain a result more favourable than that which has been offered, our clients reserve their right to produce this letter to the Court and apply for an order for costs against your client on an indemnity basis in accordance with the principles applied in Calderbank v Calderbank [1975] 3 All ER 33.
The offer in the 1 July letter appears to have been made in response to an offer made in a lengthy letter from the then solicitor for Dr Gillard to the solicitors for the co‑executors dated 26 June 2014. The terms of this offer were as follows:
The Plaintiff seeks the agreement of your clients as co-executors to settle and resolve the dispute between them on the following basis:
1.Your clients as co-executors agree that the amount of $8,774 is paid to the Plaintiff from the funds of the estate representing full and final settlement of all claims by the Plaintiff in relation to the works done by Mr Smith at 17 McKenzie Street.
2.Your clients as co-executors agree to waive the cost order made on their behalf against the Plaintiff on 17 February 2014.
3.Your clients shall accept payment of $7,000 from the funds of the estate in full and final settlement of all of their claims against the Plaintiff and the estates.
4.Your clients as co-executors agree that the remaining funds of the estate are applied to meet the costs of the Plaintiff in her proceedings in the Supreme Court (SCI 2013 6337) in full and final settlement of her claims against the estate; to the extent such funds are available after meeting the costs of winding up of the estate.
5.Each of our clients provide to the others through a Deed of Settlement or otherwise a full and final release of each other in relation to all matters concerned with the administration of the estate and the said proceedings in the Supreme Court.
6.Each of our clients undertake to the others to do all things reasonably necessary as co-executors to facilitate the distribution of the remaining assets of the Estate and its winding up as quickly as possible.
This offer is open for acceptance within three calendar days from the date of this letter and is made without prejudice to any settlement which may be reached between the Plaintiff and the First Defendant.
If you wish to discuss any aspect of this offer in an attempt to clarify and resolve any outstanding issues, or if you wish me to meet with you or your Counsel in Melbourne to that end, please contact me as soon as possible.
While later offers were in somewhat different terms (and in some instances terms more favourable to the estate and Dr Gillard than the 1 July letter), the co‑executors contend that it was unreasonable for Dr Gillard to reject this offer.
I propose to make the following orders:
(a) the plaintiff be indemnified for repairs undertaken to the property at 17 McKenzie Street, Murrayville, Victoria in the sum of $6,665, to be paid from the estate;
(b) the plaintiff’s claims be otherwise dismissed;
(c) there be no order as to the first defendant’s costs of the proceedings;
(d) the plaintiff’s costs of the proceeding, insofar as they relate to the claim for the repair costs, be paid from the estate, not to exceed at $6,665;
(e) the second and third defendants’ costs of the proceedings in respect of the claims made by the plaintiff as against the first defendant up to 7 July 2014, and fifty per cent of their costs of the proceeding incurred after that date, be paid from the estate on an indemnity basis; and
(f) fifty per cent of the second and third defendants’ costs of the proceeding after 7 July 2014 be paid by the plaintiff on an indemnity basis;
(g) there be otherwise no order as to costs.
In relation to paragraph (a) of the orders, while Dr Gillard has deposed that she has repaid her brother his contribution to the repair costs, the evidence is that the relevant cheque has not been presented. Accordingly, Dr Gillard should receive the sum of $6,665 from the estate. Paragraphs (b) and (c) of the orders reflect the fact that, apart from the repair costs and the parties’ costs of this proceeding, all other matters have fallen away.
Turning now to the question of costs, the starting point in proceedings such as the current case is r 63.26 of the Supreme Court (General Civil Procedure) Rules 2005, which provides as follows:
Unless the Court otherwise orders, a party who sues or is sued as trustee or mortgagee shall be entitled to the costs of the proceeding out of the fund held by the trustee or out of the mortgaged property in so far as the costs are not paid by any other person.
However, Dr Gillard and the co‑executors are also parties to civil litigation, and as such, they and their legal representatives are subject to the overarching obligations imposed by the Civil Procedure Act 2010 (Vic) (‘Act’).
The overarching obligations under the Act, in my view, provide a fresh lens through which the approach traditionally taken by the Court to costs and expenses incurred by trustees and/or executors ought to be viewed. While there are some slight differences in the authorities between the position of executors and trustees, and between executors acting unanimously and those acting unilaterally, a trustee and/or executor has generally been favoured by the Court with, in effect, the benefit of the doubt: in order for trustees and executors not to receive an indemnity from the trust property in relation to expenses they have incurred, including legal costs, would require a finding that the expense had been ‘improperly incurred’,[3] or that there had been some misconduct on the part of the executor or trustee.[4]
[3]Nolan v Collie (2003) 7 VR 287, at [51] and [53].
[4]Turn v Hancock (1882) 20 Ch D 303.
However, litigants in civil proceedings who are trustees or executors are subject to the overarching obligations under the Act in the same way as all other litigants. While my researches have not revealed any authorities which have directly considered the question of the impact of the Act upon a trustee’s general right to indemnity from trust property, there is authority to suggest that it is appropriate to consider the purpose of and obligations imposed by the Act when considering the entitlement of a trustee or executor to recover costs from trust property or a deceased estate.[5]
[5]Whitehead v State Trustees (No 2) [2011] VSC 516, at [6].
Section 12 of the Act provides that:
the overarching obligations prevail over any legal obligation, contractual obligation or other obligations which a person to whom the overarching obligations apply may have, to the extent that the obligations are inconsistent.
This provision is relevant to the positions adopted by each of Dr Gillard and the co‑executors in this proceeding. While the primary purpose of Dr Gillard in this proceeding was to seek to review the costs charged to the estate by the first defendant, she persisted with the claim for the repair costs and the costs of what I ultimately was not satisfied was a justifiable proceeding in the face of reasonable offers made on the part of the co‑executors. In turn, the co‑executors persisted in defending a very modest claim for repair costs, ostensibly out of concern for the interests of the other beneficiaries, notwithstanding that the legal costs incurred in doing so may well have outstripped the value of the claim. The co‑executors have not sought their costs in respect of the claim in respect of repair costs prior to 1 July 2014, and, properly so. In my view, trustees and executors should be discouraged from engaging in excessive disputation, perhaps in part fuelled by a misguided belief that their legal costs will always be recoverable from the estate.
In relation to paragraph (d) of the orders, Dr Gillard was substantially successful in validating her claim for the repair costs, and as such should be entitled to some costs in that regard. However, it should be kept in mind that the sum claimed was less than $10,000, and she stubbornly refused to acknowledge the contribution she received from her brother. As well as owing duties to the beneficiaries of the estate, Dr Gillard, as a party to this proceeding, owes, among other things, an overarching obligation pursuant to s 24 of the Act to
use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to –
(a) the complexity or importance of the issues in dispute; and
(b) the amount in dispute.
Consistently with the objective of proportionality, Dr Gillard should not be able to recover costs in excess of the value of the claim.
In relation to paragraphs (e), (f) and (g) of the orders, having regard to the size of the balance of the estate, the subject matter of the proceeding, the findings I made on 8 October 2014, and the terms of the offers and counter offers made in the proceeding, and, in particular, the offer made by the co‑executors to Dr Gillard on 7 July 2014, where the co‑executors offered to bear their own costs of the proceeding, I consider that some responsibility for the costs incurred by the parties in this proceeding ought to be borne by Dr Gillard, rather than the estate.
In particular, Dr Gillard’s refusal to accept that she should not receive an indemnity from the estate for her costs of the costs summons, in circumstances where the co‑executors were prepared to bear their own costs, and her conduct in issuing the costs summons was ultimately found to have been unjustifiable, was manifestly unreasonable. The co‑executors had been prepared to accept the claim for repair costs, subject to Dr Gillard accounting for any reimbursement in respect of the repair costs, and were prepared to meet Dr Gillard’s legal costs in respect of those repair costs, subject to some verification. In my view, the co‑executors were prudent in insisting upon some verification of Dr Gillard’s legal costs, having regard to the lengthy and discursive nature of correspondence emanating from her solicitor’s office which was in evidence, and the conduct of the proceeding to date, including the issuing on Dr Gillard’s behalf of what appears on its face to be an entirely unmeritorious summary judgment application. Indeed, the co‑executors were under an obligation to the beneficiaries of the estate to ensure that these legal costs were properly incurred.
It is for these reasons that I conclude that Dr Gillard ought to bear some personal responsibility for the costs of this proceeding, and that a fair result is that she pay half of the co‑executors’ costs of this proceeding in so far as they were incurred after 7 July 2014.
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SCHEDULE OF PARTIES
S CI 2013 06337
BETWEEN:
| BEVERLEY JOAN GILLARD (in her capacity as an Executor of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) | Plaintiff |
| - and - | |
| MAHONS WITH YUNCKEN & YUNCKEN (in its capacity as solicitors for the Executors of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) | Firstnamed Defendant |
| CHRISTOPHER NELSON PEERS (in his capacity as an Executor of the Will and Trustee of the Estate of PETER ROBERT NELSON PEERS, deceased) | Secondnamed Defendant |
| SHERYLE ANN PEERS (in her capacity as an Executor of the Will and Trustee of the Estate of | Thirdnamed Defendant |
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