Johnson v Krishnan

[2008] NSWSC 665

CITATION:	Johnson v Krishnan [2008] NSWSC 665
HEARING DATE(S):	30 June 2008
JUDGMENT DATE :	30 June 2008
JURISDICTION:	Equity Division Probate List
JUDGMENT OF:	Palmer J
EX TEMPORE JUDGMENT DATE:	30 June 2008
DECISION:	Leave to discontinue granted; all parties to have costs out of estate.
CATCHWORDS:	COSTS – DISCONTINUANCE – Whether circumstances of case justified departure from ordinary rule that discontinuing party must pay opponent’s costs.
CATEGORY:	Procedural and other rulings
PARTIES:	Rejina Johnson (Plaintiff/Cross Defendant) Vincent Surend Krishnan (Defendant/Cross Claimant)
FILE NUMBER(S):	SC 102506/06
COUNSEL:	M.K. Rollinson (Plaintiff/Cross Defendant) P. O’Brien (Sol) (Defendant/Cross Claimant)
SOLICITORS:	Worthington Williams (Plaintiff/Cross Defendant) Harris & Co (Defendant/Cross Claimant)
LOWER COURT JURISDICTION:	Compensation Court

102506/06 Estate of Parvati Krishnan: Johnson v Krishnan

JUDGMENT – Ex tempore
30 June, 2008

1    This is a dispute as to the terms upon which the Defendant should have leave to discontinue his Cross Claim. The Plaintiff says that the Defendant should have leave only on terms that he pay the Plaintiff's costs of the suit. The Defendant says that both his and the Plaintiff's costs of the suit should come out of the estate which gave rise to the proceedings.

2    The facts are very unusual. As the proceedings concern the members of a family, I will, for the sake of brevity and without intending any disrespect, refer to the parties by their first names.

3    The Plaintiff (“Regina”), is one of the eight surviving children of Parvati Krishnan who died domiciled in New South Wales on 4 July 2003. Parvati left a will dated 26 November 1993 whereby she appointed Regina as executor. I will call this the First Will. The First Will was granted probate on 20 May 2005. The Defendant (“Vincent”) claimed that Parvati had made a Second Will dated 25 January 2002 under which he was appointed executor. I will call this the Second Will.

4    Under the First Will, Parvati's estate was divided equally amongst her eight surviving children. Under the Second Will two of the children received no share, their share being given to another child, Edward, who received a three-eighths share of the estate. Vincent received a one-eighth share of the estate under both wills.

5    Because Vincent was in possession of a purported will made after the First Will, of which probate had already been granted, Regina, through her solicitors, required him to commence proceedings for revocation of the grant of probate of the First Will and to prove the Second Will.

6    There was some delay on the part of Vincent in doing so. Accordingly Regina commenced these proceedings by way of Summons in February 2006, in which she sought an order that Vincent file a Statement of Claim seeking probate of the Second Will. In addition, she sought that an account be taken of the dealings of Vincent with the estate of his mother and with the estate of his brother, Eric. Eric had been domiciled in British Columbia at the date of his death. He pre-deceased Parvati. As Eric was unmarried and died intestate his estate, comprising some apartments, passed to Parvati and his father, if his father survived him. It is not presently known whether the parties' father is still living.

7    In response to Regina's Summons on 5 June 2006, Vincent filed a Cross Claim in these proceedings in which he sought a grant to him of probate of the Second Will and a consequent revocation of the grant of probate of the First Will.

8    In a Defence to the Cross Claim filed on 13 June 2006, Regina denied that the Second Will was the will of Parvati, said that the purported signature of Parvati on the will was not her signature and said that, in any event, Parvati did not know and approve of the contents of the Second Will.

9    Both sides prepared affidavit evidence. Regina's solicitors procured a report from a forensic document examiner which was provided to Vincent's solicitors in early 2006. That report strongly suggested that the signature of Parvati on the will was a forgery.

10    Affidavits from seven other deponents, including Regina, were obtained. Amongst them was an affidavit from Edward dated 5 July 2006 in which he expressed surprise at the existence of the Second Will and that his mother would have wished to change the provisions of the First Will.

11    In response, Vincent swore an affidavit in May 2006 and his solicitors procured affidavits from six other witnesses, two of whom swore that they had witnessed Parvati's signature on the Second Will and that she had understood its contents.

12    On 12 December 2007, this matter was fixed for trial to commence on 30 June 2008 for seven days. On 6 May 2008 at pre-trial directions I was informed that the parties were engaged in settlement discussions. By consent, I referred the matter to mediation. The mediation was unsuccessful.

13    Shortly before the trial was due to commence, Vincent's solicitor advised my Associate that Vincent would seek leave to discontinue the Cross Claim, which would effectively bring the whole proceedings to an end, and that the only question for debate was costs.

14 Mr Rollinson of Counsel, who appears for Regina, says that by virtue of UCPR 42.19(2), Vincent, as the party discontinuing a claim for substantial relief, must pay Regina's costs of the suit, “unless the Court orders otherwise” and Vincent has not demonstrated any ground for departing from the usual course.

15    Mr O'Brien, solicitor, who appears for Vincent, says that the facts of the case and, in particular, the somewhat strange circumstances in which Vincent seeks discontinuance, justify not only a departure from the usual costs rule on discontinuance but, indeed, warrant an order that Vincent's costs be paid out of Parvati's estate. The facts upon which Mr O'Brien relies are as follows.

16    During 2007 the parties had been endeavouring to negotiate a settlement under which either all beneficiaries other than Vincent bought out Vincent's share of the estate or else Vincent bought out the shares of the other beneficiaries.

17    There was a difficulty in that, while Vincent believed that his father might still be living in India, the other beneficiaries believed that their father was dead. If the father was living, he was entitled to a half share of Eric's estate and Parvati's estate would be diminished accordingly. Regina's solicitors were purporting to act for all beneficiaries other than Vincent in these negotiations. It is significant that they purported to act for Edward who was the principal beneficiary under the Second Will.

18    On 12 June 2007 Vincent's solicitor wrote to Regina's solicitors making a certain offer to buy out the shares of the other beneficiaries in the estate. However, they said:

“Please clarify whether you act for all of the other beneficiaries. If not your client should indemnify our client against any claims to be made by them. In any event there should be a general indemnity given by your client(s).
…
If you are not acting for all beneficiaries, your client must indemnify our client against any claim to be made by any such beneficiaries.”

Mr Rollinson concedes that Regina's solicitors did not respond to these requests for clarification.

19    However, on 29 January 2007 Edward had sent two e-mails to Regina's solicitors. The first was as follows:

“i was very surprised to hear that margaret holmes and regina johnson (my two eldest sisters) were omitted from any entitlement in the will of 2002.

if anyone deserved an extra share it should have been given to the abovementioned, for they have done a lot for all of the siblings.

it has been brought to my attention that in this will of 2002 of my mother, parvata krishnan, i have been allocated 3/8 entitlement.

in the interests of equality, i authorise the legally appointed executor to allocate 2/8th of my entitlement to margaret holmes and regina johnson to receive 1/8th share each.

i would also like to mention that to date, apart from verbal generalizations, vincent surend krishnan has no given me any detailed explanation or account of income and spending associated with the estate.”

The second e-mail, sent shortly afterwards, said:


“regarding my previous mail i would like to update and be final.

i had mentioned that margaret holmes and regina johnson deserved extra shares, as such, i hereby authorize the legally appointed executor to allocate my 3/8th shares in the following manner.

1/8th share to margaret holmes
2/8th share to regina johnson.”

20    Regina's solicitors did not communicate these instructions from Edward to Vincent's solicitors until they forwarded copies of the e-mails under cover of a letter dated 5 May 2008 which Vincent's solicitors received on 6 May 2008. Edward confirmed those instructions by an e-mail sent later in May 2008.

21    Mr O'Brien says, and Mr Rollinson concedes, that neither Vincent nor his solicitors were made expressly aware of the instructions which Edward had given on 29 January 2007 until 6 May 2008. Mr O'Brien says that had Vincent known in January 2007 that Edward renounced any claim on the estate under the Second Will, he would not have continued with the Cross Claim, as the only beneficiary who had any interest in propounding the Second Will did not wish to take the additional benefit conferred by it. Mr O'Brien says that until Edward's position with regard to the Second Will was made clear to Vincent, Vincent as executor of that will had a duty to propound it.

22    Mr Rollinson says in response that Vincent must have been aware from early 2007 onwards that Edward wished to forego any benefit under the Second Will. He says that the fact that Edward provided an affidavit in support of Regina's case must have made this clear. It must also be clear, he says, from the fact that Regina's solicitors were negotiating a settlement on behalf of Edward amongst the other beneficiaries. Finally, Mr Rollinson says, if Vincent had been uncertain about Edward’s position as to the Second Will, he should have made inquiries directly of Edward.

23    I am unable to accept Mr Rollinson's submissions. First, the affidavit of Edward, although it is supportive of Regina's case generally, does not expressly disclaim the additional benefits given to him under the Second Will. The affidavit was prepared by Regina's solicitors in June or July 2006. However, by January 2007, they had had very clear instructions from Edward as to his position under the Second Will. It would have been easy enough for Regina's solicitors to provide a second affidavit in which those instructions were made clear, unless, of course, those instructions had changed in the meantime.

24    Second, and very importantly, Vincent's solicitors inquired directly and unequivocally of Regina's solicitors by the letter of 12 June 2007 whether those solicitors also represented Edward. For a reason unexplained, they received no response.

25    I do not accept that in those circumstances it was incumbent upon Vincent to inquire further and directly of Edward. I accept that from early 2007 onwards, Vincent and Edward were not on good terms. Edward was apparently communicating with Vincent's solicitors through Regina's solicitors. Edward had instructed Regina's solicitors as to his position in January 2007. It was incumbent on Regina's solicitors to communicate Edward's instructions to Vincent's solicitors and to confirm that they were authorised to convey those instructions, particularly as Vincent’s solicitors had sought clarification in June 2007 as to whether Regina’s solicitors represented Edward. As I have said, Edward's instructions to Regina's solicitors were not communicated by them to Vincent's solicitors until 6 May 2008.

26    As executor of the Second Will, Vincent had a duty to propound it unless there was clear evidence that it was not a valid will. Apparently two witnesses have been prepared to testify that the will was genuine. Therefore, Vincent acted reasonably in prosecuting the Cross Claim until it became expressly clear that the only person taking a substantial benefit under that Second Will in fact wished to disclaim it. That did not occur until 6 May 2008.

27    I accept that thereafter Vincent's solicitors endeavoured to settle the proceedings but the sticking point has been whether Vincent's costs should come out of the estate. I accept that as the estate is very small, Vincent and his solicitors acted reasonably in seeking leave to discontinue the Cross Claim so as to avoid incurring costs which otherwise would entirely swallow the estate.

28    In my opinion, Vincent and his solicitors have acted reasonably in prosecuting the Cross Claim until 6 May 2008. Thereafter, the inability to settle has been due to the costs dispute which I am now called upon to decide.

29    I conclude that the unusual circumstances of this case require a departure from the usual costs order upon discontinuance. I order that the Defendant/Cross Claimant be granted leave to file a Notice of Discontinuance and that the Defendant/Cross Claimant's costs of the suit be paid out of the estate on the trustee basis. The Plaintiff's costs of the suit will also be paid out of the estate on the trustee basis.

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