In the Estate of Wenham (No 2)

In the Estate of Wenham, the executor sought an order that they be granted liberty to apply in the proceedings to a Master of the Court for orders relating to the issues of the "personal assets" and other claims for reimbursement. The respondents did not oppose the making of this order. The executor’s application was necessary due to deficiencies in the drafting of the will, which necessitated the application. The court found that the water licence, an undistributed asset, should remain available to meet the costs of the application.

The court considered whether the executor should be deprived of their right to indemnity for the costs incurred in bringing the application. It was noted that an executor is normally entitled to costs out of the estate in litigation relating to the administration of the estate unless they have been guilty of misconduct. The court found that the application was a necessary incident of the administration of the estate and not pure inter partes litigation. Therefore, the executor should not be deprived of their right to indemnity for the costs incurred in bringing the application.

The court made the following orders: Mr Hanak should pay Mr Dalitz’s costs of the s 69 application on the standard costs basis, Mr Hanak should pay the executor’s costs of the application for advice and direction on an indemnity basis, the executor is not entitled to recover their costs and expenses of administering the estate by a charge over the water licence 118583-0, and the executor is granted liberty to apply in these proceedings to a Master of the Court for orders relating to the issues of the "personal assets" and other claims for reimbursement described in the affidavits of Jodi Scott Hanak.

The court also considered whether the executor was entitled to an indemnity in respect of the costs incurred in bringing the s 69 application. The court found that an executor is entitled as of right to indemnity out of the estate for expenses properly incurred, that is, all costs except those which are of an unreasonable amount or have been unreasonably incurred. The concept of proper expenditure excludes conduct demonstrating want of prudence or diligence. Expenses and liabilities that are improperly incurred, such as acting beyond power, in bad faith, or exercising power with an absence of care and diligence that a person of ordinary prudence should exercise, are excluded from the right of indemnity, and should be borne by the trustee personally. In cases of doubt, the estate should bear the executor’s costs.