King v Big - [2021] TASSC 6

[2021] TASSC 6

COURT: SUPREME COURT OF TASMANIA

CITATION: King v Bigg [2021] TASSC 6

PARTIES:  KING, Jacqueline Louise
  v
  BIGG, Neil Patrick

WORRALL, Peter Royston
SJA CUSTODIANS PTY LTD
ZEALRIDGE CUSTODIANS PTY LTD

FILE NO:  2885/2019
DELIVERED ON:  2 March 2021
DELIVERED AT:  Hobart
HEARING DATE:  19 February 2021
JUDGMENT OF:  Blow CJ

CATCHWORDS:

Procedure – Costs – General rule: costs follow event – Where action settled or otherwise determined without hearing – Application for revocation of grant of probate and removal of trustees – Orders initially opposed but later consented to – Application for executors and trustees not to be indemnified from estate and trusts.

Re Minister for Immigration and Ethnic Affairs; ex parte Qin (1997) 186 CLR 622, distinguished.
Aust Dig Procedure [1481]

REPRESENTATION:

Counsel:
             Applicant:  S B McElwaine SC
             Respondents:  S Taglieri SC
Solicitors:
             Applicant:  Timothy Williams
             Respondents:  HWL Ebsworth Lawyers

Judgment Number: [2021] TASSC 6
Number of paragraphs: 20

Serial No 6/2021
File No 2885/2019

JACQUELINE LOUISE KING v NEIL PATRICK BIGG,
PETER ROYSTON WORRAL, SJA CUSTODIANS PTY LTD
ZEALRIDGE CUSTODIANS PTY LTD

REASONS FOR DETERMINATION BLOW CJ

2 March 2021

In these proceedings there is a dispute as to what orders I should make as to costs. The proceedings have concluded, except in relation to costs. For the purposes of a costs application, the applicant wishes to rely on some affidavits that were filed in the course of the proceedings. A number of passages in those affidavits were objected to by the respondents. Before those objections could be determined, orders were made disposing of the proceedings, except as to costs. The applicant now contends that I should receive affidavit evidence in relation to the costs dispute, and therefore determine the evidentiary objections. The respondents contend that I should make orders as to costs without receiving the affidavit evidence, and without determining the evidentiary objections. For the reasons set out below, I have concluded that I must allow the parties to present affidavit evidence, and must therefore determine the evidentiary objections.
The costs dispute relates to an application for the revocation of a grant of probate and the removal of two companies from positions as trustees of different trusts. The proceedings concern the affairs of the late Stephen James Atkinson, who died on 14 July 2018. His widow, Jacqueline Louise King, is the applicant in the proceedings.
Some weeks before his death, Mr Atkinson made a will by which he appointed the respondents Neil Patrick Bigg and Peter Royston Worrall to be his executors. Probate of that will was granted to them on 15 August 2018. Under that will the applicant is entitled to 96% of the residuary estate. According to an affidavit filed by the executors, the net value of the estate was $7,866,921. On 3 December 2018 the applicant made an application to this Court pursuant to the Testator's Family Maintenance Act 1912 ("the TFM Act") for further provision out of the estate.
In 1997 Mr Atkinson arranged for the establishment of a discretionary family trust named the S Atkinson Family Trust. In August 2018, some weeks after Mr Atkinson's death, Mr Bigg and Mr Worrall became appointors of that trust, caused the respondent Zealridge Custodians Pty Ltd to be incorporated with themselves as its only directors and shareholders, and appointed that company to be the trustee of that trust. Under its trust deed, the applicant and her son are amongst the beneficiaries. In September 2020 the applicant asserted that the then known net value of the assets of the trust was approximately $2.4 million, but that was not admitted by the respondents.
In June 2014 Mr Atkinson arranged for the establishment of another discretionary family trust named the SJA Trust. In August 2018 Mr Bigg and Mr Worrall caused the respondent SJA Custodians Pty Ltd to be incorporated with themselves as its only directors and shareholders, and caused that company to be appointed as the trustee of the SJA Trust. The applicant is within the class of beneficiaries under the trust deed. There is untested evidence that Mr Bigg stated that the assets of the trust were about $6.77 million in February 2019.
Mr Atkinson knew a woman named Carly Waszczak-Gadd. There is evidence suggesting that he had a sexual relationship with her for about 17 years up to the time of his death. If that is correct, the relationship started in or about 2001, about four years before he married the applicant. On 8 June 2018, the day Mr Atkinson made his will, he arranged for the establishment of another discretionary trust called the Seventeen Trust. Ms Waszczak-Gadd is within the class of beneficiaries under its trust deed. The applicant and her son are not. Mr Worrall is a legal practitioner. The Seventeen Trust was set up by his firm. The respondents have admitted that $2.25 million was transferred to that trust on 26 June 2018. In August 2018 Mr Bigg and Mr Worrall caused a company named Seventeen Custodians Pty Ltd to be incorporated with themselves as its only directors and shareholders, and caused that company to be appointed as trustee of the Seventeen Trust.
During 2019 Ms Waszczak-Gadd made an application to this Court under the TFM Act for provision to be made for her out of Mr Atkinson's estate. She contends that she and he were in a "significant relationship" within the meaning of the Relationships Act 2001. In the proceedings that I am concerned with, the applicant contended that Ms Waszczak-Gadd had not been in a significant relationship with Mr Atkinson, and that she was therefore ineligible for provision out of the estate under the TFM Act.
There was a falling out between the applicant and the two executors, Mr Bigg and Mr Worrall. On 5 November 2019 the applicant filed an originating application seeking the revocation of the grant of probate, the appointment of someone else to administer the estate, the removal of SJA Custodians Pty Ltd and Zealridge Custodians Pty Ltd as trustees of their respective trusts, and the appointment of new trustees. Affidavits were filed on behalf of the applicant and the respondents. In May 2020 Wood J made an order under s 192A of the Evidence Act 2001 for advance rulings as to the admissibility of evidence. Written submissions were filed as to the various evidentiary objections. In June 2020 Wood J made orders for the delivery of pleadings. A statement of claim, a defence, and a reply were filed.
Meanwhile, in April 2020 the executors filed an interlocutory application seeking judicial advice as to whether they should continue to oppose the originating application. There was a dispute as to whether this Court had jurisdiction to provide such advice. On 7 August 2020 Wood J held that it did.
In late August 2020 the respondents decided that they would no longer oppose the orders sought by the applicant for the revocation of the grant of probate and the removal of the trustees. On 2 September 2020 I made orders removing and replacing the various respondents as executors and trustees.
The applicant had been seeking other orders, but discontinued the application insofar as it related to those other orders. On 13 November 2020 I made an order that she pay the costs of the discontinued parts of her originating application from 30 June 2020 onwards.
Subsequently the applicant sought the following orders as to costs:
"(i)that the respondents pay the applicant's costs of and incidental to this proceeding on a party and party basis and that they not be indemnified for those costs out of the assets of the estate of Stephen Atkinson, of the SJA Trust and or the S Atkinson Family Trust; and
(ii)that the respondents bear their own costs of this proceeding personally and not be indemnified for those costs out of the assets of the estate of Stephen Atkinson, the SJA Trust and or the S Atkinson Family Trust."
The respondents oppose the making of those orders. They are seeking orders in the following terms:
"(a)subject to the costs order made on 13 November 2020 in respect of the discontinued parts of the proceedings, each party is to pay their own costs of and incidental to the proceedings; and
(b)that the respondents be indemnified for their costs referred to in paragraph (a) in the following proportions or other proportion [sic] assessed by the court –
50% indemnity from the Estate; and
25% indemnity from the SJA Trust; and
25% indemnity from the S Atkinson Family Trust."
Counsel for the respondents made submissions to the effect that, because the proceedings had concluded without the need for any findings as to whether the conduct of her clients warranted their removal as executors and trustees, it would not be appropriate to engage in a hearing on the merits, and that it would therefore be inappropriate to order either the applicant or the respondents to pay the costs of the litigation. She relied on the decision of McHugh J in Re Minister for Immigration and Ethnic Affairs; ex parte Qin (1997) 186 CLR 622. In that case, his Honour said at 624-625:
"... it is first necessary to state the principles which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means.
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. ...
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. ...
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings." [Footnotes omitted.]
However this not simply a case in which one party is seeking an order for costs and the other is arguing that there should be no order. This is a case in which the applicant is seeking an order depriving the respondents of their rights of indemnity from the deceased estate and the two trusts on the basis of alleged breaches of fiduciary duties.
The applicant's principal contentions can be summarised as follows:
·     That in meetings and correspondence from December 2018 to March 2019 Mr Bigg and Mr Worrall sought to negotiate a compromise between the applicant and Ms Waszczak-Gadd in relation to claims by both women in respect of the estate, the S Atkinson Family Trust and the SJA Trust, seeking to advance the interests of Ms Waszczak-Gadd to the detriment of the applicant.
·     That the funds transferred to the Seventeen Trust came from the assets of Mr Atkinson and/or the SJA Trust and/or the S Atkinson Family Trust.
·     That, to the extent that those funds came from the personal assets of Mr Atkinson, the applicant had a beneficial interest in them pursuant to a constructive trust in accordance with the principles discussed by the High Court in Baumgartner v Baumgartner (1987) 164 CLR 137.
·     That Mr Worrall and Mr Bigg controlled Seventeen Custodians Pty Ltd in its capacity as the trustee of the Seventeen Trust when its trust property included money that was held upon constructive trusts for the benefit of the applicant, the SJA Trust, and the S Atkinson Family Trust.
The applicant contends that in those circumstances the executors and trustees breached their fiduciary duties and therefore are not entitled to indemnities from the estate or the trusts. Her counsel relies on Attorney-General v Murdoch (1856) 2 K & J 571,69 ER 910; Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42, 237 CLR 66 and Wareham v Marsella (No 2) [2020] VSCA 118.
The respondents deny all the applicant's allegations as to breaches of duties. They contend that it was appropriate for Mr Bigg and Mr Worrall to discuss the potential rights of Ms Waszczak-Gadd in relation to the estate, the SJA Trust and the S Atkinson Family Trust and to explore the possibility of a settlement. They deny that the funds received by the Seventeen Trust were the subject of any constructive trust. Their counsel argued that I should follow the decision of McHugh J in Qin and that the presentation of affidavit evidence in relation to the costs dispute, with the inevitable determination of objections and so forth, would be unnecessary, irrelevant, unjust to the parties, and too costly.
According to an outline of submissions filed on behalf of the applicant in November 2020, the respondents' costs in relation to the proceedings then exceeded $425,000.
I accept that a court should usually make no order as to costs when a hearing becomes unnecessary and each party has acted reasonably in the litigation. However this is an unusual case because the applicant is contending that the respondents are not entitled to the usual indemnities as executors and trustees because of breaches of fiduciary duties. Qin is distinguishable for that reason. The applicant is entitled to apply for the respondents to be deprived of the usual indemnities. The Court has a duty to afford her procedural fairness in relation to that application. The dispute involves serious allegations of misconduct, including allegations against a legal practitioner. The respondents' claims for indemnification are substantial. The only appropriate course in the circumstances is to allow the parties to present affidavit evidence in relation to the costs proceedings, and to determine any objections to that evidence. Subject to any further submissions from the parties, I will therefore proceed to receive affidavit evidence and to rule on the evidentiary objections in respect of which written submissions were made last year.