Kenneth Walter Waddell v Allan William Waddell as executor of the Estate of the late Ronald John Waddell (No. 4)
[2012] NSWSC 287
•28 March 2012
Supreme Court
New South Wales
Medium Neutral Citation: Kenneth Walter Waddell v Allan William Waddell as executor of the Estate of the late Ronald John Waddell (No. 4) [2012] NSWSC 287 Hearing dates: 20 March 2012 Decision date: 28 March 2012 Jurisdiction: Equity Division Before: Slattery J Decision: The plaintiff’s share of the residue of the estate should not bear any part of the estate’s liability to the plaintiff for the costs of the proceedings.
Catchwords: PROCEDURE - costs - general rule costs follow the event - costs out of a fund - plaintiff successful in action against a defendant executor upon an equitable estoppel to enforce promises a testator made to devise a 10 acre block of land to the plaintiff - defendant reasonable in defending the action - whether the executor should pay the costs of all parties and be indemnified for those costs out of the 10 acre block - whether the plaintiff's share of the residue of the estate should bear any part of (i) the defendant/executor's costs of defending the proceedings, and (ii) the estate's liability to pay the plaintiff's costs of the proceedings. Cases Cited: Ledgerwood v Perpetual Trustee Co Limited (No. 2) (Young J, New South Wales Supreme Court, 25 August 1997, unreported)
Murdocca v Murdocca (No. 2) [2002] NSWSC 505
Sharp v Lush (1879) 10 Ch D 468
Waddell v Waddell as Executor of Estate of Waddell [2011] NSWSC 1174
Waddell v Waddell as Executor of Estate of Waddell (No. 2) [2011] NSWSC 1688
Kenneth Walter Waddell v Allan William Waddell as executor of the Estate of the late Ronald John Waddell (No. 3) [2012] NSWSC 252
Wyndham v Mackenzie (1918) 25 CLR 172Category: Costs Parties: Plaintiff- Kenneth Walter Waddell
Defendant- Allan William WaddellRepresentation: Plaintiff- L. Ellison SC
Defendant- A. Hill
Plaintiff- J.J.Francis
Defendant- M. Boemi
File Number(s): 2010/00158898 Publication restriction: No
Judgment
This is the fourth judgment in these proceedings, a judgment solely relating to the issue of costs. The Court's three previous judgments determined the substantive issues in the proceedings: Waddell v Waddell as Executor of Estate of Waddell [2011] NSWSC 1174; Waddell v Waddell as Executor of Estate of Waddell(No. 2) [2011] NSWSC 1688; Kenneth Walter Waddell v Allan William Waddell as executor of the Estate of the late Ronald John Waddell (No. 3) [2012] NSWSC 252. As a result of those judgments, the parties are agreed upon the short minutes of order set out at the end of these reasons, except on the issue of costs. This judgment should be read with the Court's three prior judgments. Parties, events and things referrred to in this judgment are described in the same way as they were in the earlier three judgments.
The plaintiff contends that instead of the form of Order 9 set out at the end of these reasons that the Court should order that "the burden of the payments ordered in 7 and 8 herein fall upon that part of the estate of the deceased which does not otherwise pass to the plaintiff". Order 7 is an order that the estate pay the plaintiff's (Ken's) costs of the proceedings a party/party basis ("the plaintiff's costs"). Order 8 is an order that the defendant's costs of the proceedings be paid out of the estate on the indemnity basis ("the executor's defence costs"). The defendant resists the making of that order and submits that the appropriate order should be either:
"The plaintiff's costs should be charged on the realty comprised in folio identifier 1/836106 and known as 373 Galston Road, Galston"
or
"The plaintiff's costs should be paid from the residue of the estate""
The respective contentions on both sides of these costs issues may be shortly stated.
The Parties' Contentions
Ken contends that as one of four adult children who share equally (as to one quarter each) in the residue of the deceased's estate that, absent a special order, the costs of the plaintiff and of the defendant are testamentary expenses which will all be paid out of residue. The effect of costs coming out of residue will be that: (1) Ken will end up paying one quarter of his own plaintiff's costs, because of the deduction of those costs from estate liabilities before his share of residue is ascertained, and (2) Ken will pay one quarter of the estate's/defendant's costs of contesting the proceedings against him.
Ken says that as he was successful in his claim costs should follow the event and the plaintiff should receive a costs order in the ordinary way. But Ken further submits that he should not be required to bear the extra burden of paying a quarter of his own costs resulting from his success; nor should he be required to pay a quarter of the costs of the estate in defending the proceedings, the executor's defence costs. It is said that it would be a paradox if Ken had to contribute to the unsuccessful defence of his own successful claim. Indeed Ken submits that unless an order is made of the kind he proposes, quarantining his share of the estate from the executor's defence costs and the plaintiff's costs, then surprisingly, Ken may have to pay more in legal costs in succeeding in his claim than any of his three siblings have paid in unsuccessfully defending the claim (once his own solicitor/client legal costs are taken into account). Ken's point is that no part of Civil Procedure Act, ss 56 or 98 compels the result that a successful party should be out of pocket to a greater degree than an unsuccessful party.
The estate takes issue with Ken's submissions and contends that the exercise of the costs discretion here is analogous to those cases in which there is a dispute about the ownership of property but the dispute can be attributed to the conduct of a testator. Then it is often appropriate that the representative of the testator pays everybody's costs and indemnifies itself out of the particular piece of property: cf Ledgerwood v Perpetual Trustee Co Limited (No. 2) BC970806, (Young J, New South Wales Supreme Court, 25 August 1997, unreported) at [3]-[4].
But the estate says in any event that the executor's defence costs are testamentary expenses of a uncontroversial kind and they should be charged on the whole of the residue of the estate in accordance with well accepted authority: Murdocca v Murdocca (No. 2) [2002] NSWSC 505 and Sharp v Lush (1879) 10 Ch D 468 per Jessel MR at 470. Ken accepts this part of the estate's submissions.
In my view, neither side is entirely correct in their analysis.
First, although this is a dispute about a particular piece of property; it is more than that. It is not analogous with those cases: where because of some ambiguity in a will a number of parties who are entitled under the will are disputing their respective entitlements; and where as a result, it is appropriate that the executor pays all parties' costs and indemnifies himself out of the particular asset concerned: cf Ledgerwood v Perpetual Trustee Co Limited (No. 2) BC970806, (Young J, New South Wales Supreme Court, 25 August 1997, unreported). Although the dispute here is in part caused by the deceased's ambiguous statements and dealings during his lifetime, it is also a dispute which resembles ordinary two party litigation, in which the plaintiff has advanced a case alleging what he did on the family farm and what conversations he had with the testator and others. The plaintiff's case was tested and the defendant called countervailing evidence. But the plaintiff's case survived the attack on it. The appropriate result in the application of Civil Procedure Act, s 98 and Uniform Civil Procedure Rules, r 42.1 is that costs should follow the event. The defendant/executor should pay the plaintiff's costs of the proceedings. Indemnifying the executor out of the 10 acre block to be conveyed to the plaintiff, simply throws the whole burden of costs back on the successful plaintiff.
The defendant's alternative contention is that the costs of the suit, both the executor's costs and any costs now to be ordered by the plaintiff against the estate, are testamentary expenses and should be a charge on the residue of the estate: see Wyndham v McKenzie (1918) 25 CLR 172 at 177. The plaintiff accepts this. But the real question here is whether all of those costs, the executor's defence costs, and the plaintiff's costs ordered against the estate, should be borne equally by residue or whether the plaintiff's share of residue should be quarantined from some of them. The plaintiff's point is simple, he should not have to pay his own costs of success or the defendant's costs of failure in this litigation. I do not accept the defendant's argument that in this case in which the Court should order that all costs, the plaintiff's costs and the defendant's costs, should be charged on residue. But the two parts, defence costs and plaintiff's costs should be distinguished.
The plaintiff is on strong grounds when he submits that it is contrary to accepted notions of justice for him to have to reimburse the estate (by accepting a lower distribution from estate residue) in order for him to indemnify the estate against the estate's liability to pay him costs for his success in the action. In substance, such a result would directly subtract from the costs order in his favour and would in effect mean that he could not recover all his party/party costs against the estate. There is no proper basis demonstrated for depriving the plaintiff of recovery of his own party/party costs in this way.
But the executor's defence costs are in a different category. Ken has conceded, appropriately if I may say so, that the defendant's conduct in contesting these proceedings was reasonable. The case was factually contentious. It involved conversations between several individuals and the deceased over a lengthy period. The estate was entitled to test the evidence of these other people. The plaintiff's case involved one important conversation between the plaintiff and the testator which also depended for its effect upon the evidence of these other persons. The Court ultimately accepted all their evidence. This is not a case where a plaintiff could say to the Court that the defendant was foolhardy to have defended it, or that the proceedings should have been compromised. It was a case that was decided upon the credit of a number of witnesses, after they had been tested in court. The defendant's conduct and that of his legal advisors in taking this course was entirely reasonable, despite the fact that they have been unsuccessful. This is not a case in particular where the defendant's conduct points clearly to some unreasonable partisanship against the plaintiff, such that the plaintiff's share of residue should not have to bear the risk of foolhardy decision making. Because of the reasonableness of the defendant's conduct, I am of the view it is appropriate for the defence costs to be borne equally by the whole residue, even though the estate was unsuccessful against the plaintiff and that will be the Court's order.
Conclusion and Orders
For the foregoing reasons I conclude that it is not appropriate for the executor to pay the costs of all parties and to indemnify himself out of the 10 acre block the Court has ordered to be conveyed to the plaintiff. Equally, the plaintiff should not have to indemnify the estate against any part of the order for costs which he has obtained against he estate, so his share of residue will not bear that burden. But, because the defendant has reasonably conducted the defence of the proceedings, the estate's defence costs should be borne equally by all shares of residue of the estate.
The orders made below also give effect to my previous judgments to the extent that final orders have not otherwise already been made. Both parties have had a measure of success on this costs argument, but the plaintiff has been more successful overall. The plaintiff's costs of this argument are included among the party/party costs he may recover against the estate.
The orders of the Court will therefore be: -
The Court notes:
1.On 4 November 2011, a Consent Declaration was made as follows:
"The Defendant holds the whole of the realty comprised in Folio Identifier 1/836106 and known as 373 Galston Road, Galston ("the subject land") on trust for the Plaintiff."
2.On 4 November 2011, the Court noted the agreement of the parties as follows:
"The Plaintiff has exclusive use of the subject land until the resolution of any appeal in these orders or final order in the absence of any appeal."
The Court orders:
3.The Defendant do all things necessary to transfer ("the transfer") the subject land to the Plaintiff.
4.Order 3 stayed pending determination of Appeal in proceedings 2012/35890.
5.The transfer is conditional upon the payment by the Plaintiff to the Defendant of:
(i)The sum of $167,869.00.
(ii)Interest in the sum of $9,947.71.
6.Statement of Claim otherwise dismissed.
7.The Plaintiffs' costs on the party/party basis be paid out of the estate of the deceased.
8.The Defendant's costs on the indemnity basis be paid out of the estate of the deceased.
9.The plaintiff's share of residue should not bear any part of the estate's liability to the plaintiff for the costs of the proceedings.
10.Liberty to apply on seven days notice with regard to the implementation of order 3 herein.
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Decision last updated: 28 March 2012
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