Klement v Randles
[2010] VSCA 336
•17 December 2010
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2009 3702
| JIRI KLEMENT | Applicant |
| v | |
| PETER JAMES RANDLES | Respondent |
S APCI 2009 3808
| JIRI KLEMENT | Appellant |
| v | |
| PETER JAMES RANDLES | Respondent |
---
| JUDGES | MAXWELL P and EMERTON AJA |
| WHERE HELD | MELBOURNE |
| DATE OF JUDGMENT | 17 December 2010 |
| MEDIUM NEUTRAL CITATION | [2010] VSCA 336 |
---
PRACTICE AND PROCEDURE – Costs – Appeal – Respondent executor wholly successful – Costs of executor to be paid out of trust funds, unless otherwise ordered – Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 63.26 – Applicant without means – Respondent’s costs to be borne by estate – Consideration of discretion to order indemnity costs – Discretion not exercised.
---
| APPEARANCES: | ||
| The parties relied on written submissions filed by the Applicant/Appellant in person and by Lennon Mazzeo Lawyers on behalf of the Respondent. | ||
THE COURT:
On 25 June 2010, the Court delivered its reasons and made orders dismissing Reverend Klement’s appeal in proceeding No 3808 of 2009 (‘the executor proceeding’) and refusing leave to appeal in proceeding No 3702 of 2009 (‘the possession proceeding’). Both matters arose from the administration by the respondent of the estate of Reverend Klement’s mother, Ludmilla Klement, also known as Sister Francis Klement.
The respondent now seeks an order in each proceeding that Reverend Klement pay his costs. In the executor proceeding, he seeks an order that those costs be paid on an indemnity basis. Further, the respondent seeks orders that, insofar as Reverend Klement does not pay those costs, the respondent is entitled to recover his costs from the undistributed residuary estate of Ludmilla Klement in accordance with r 63.26 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic).
Reverend Klement has filed written submissions resisting the orders for costs sought by the respondent in both matters and submitting that the respondent should pay ‘all costs’.
The Supreme Court (General Civil Procedure) Rules 2005 (Vic) make provision for the costs of executors. Rule 63.26 provides that unless the Court otherwise orders, a party who sues or is sued as trustee is entitled to the costs of the proceeding out of the fund held by the trustee insofar as the costs are not paid by any other person. Rule 63.33 provides that where a party who is sued as trustee is entitled to be paid costs out of any fund that the party holds in that capacity, the costs shall, unless the Court otherwise orders, be taxed on a solicitor and client basis.
Brief background
Ludmilla Klement made a will dated 30 May 2002 (the ‘Will’) in which she appointed the respondent as executor and trustee of her estate. She died on 27 July 2005 and, on 8 May 2006, the respondent obtained a grant of probate of her estate.
Under the terms of the Will, Reverend Klement was given a life interest in Mrs Klement’s property at 105 Collier Crescent, West Brunswick (the ‘property’) on the condition that he pay all rates and taxes and other outgoings and keep the property in good and habitable state of repair, and that he keep the property insured for its full value, to the satisfaction of the trustee of the Will. The Will further provided that on Reverend Klement’s death certain small payments ($1,000) would be made to Mrs Klement’s daughter and grand-daughter, as well as to three named religious institutions, and that the remainder of her estate would be bequeathed to her other son, Stanislav Klement.
As a result of Reverend Klement’s refusal to pay rates and the property’s general state of disrepair, the respondent formed the view that Reverend Klement was no longer capable of living in the property. On 13 May 2008, the respondent commenced the possession proceeding with a view to selling the property. He proposed to assist Reverend Klement to find alternative accommodation using the proceeds from the sale, as stipulated in the Will.
On 1 October 2008, judgment was entered against Reverend Klement in default of defence. Reverend Klement unsuccessfully applied to have the default judgment set aside, and then appealed the refusal to a judge in the trial division of the Supreme Court. On 15 December 2008, Habersberger J dismissed the appeal in the possession proceeding. Reverend Klement’s application for leave to appeal to this Court was unsuccessful.
On 13 March 2009, Reverend Klement applied to the Supreme Court to have the respondent removed as executor of the Will. Although Reverend Klement did not identify a specific power or provision on which he relied for the relief sought, the judge below considered the grounds for the application as expressed by Reverend Klement and concluded that ‘the basis of the application must be that the [respondent] is unfit to act in the office of executor’ in accordance with s 34(1)(c) of the Administration and Probate Act 1958 (Vic). Davies J refused Reverend Klement’s application, stating that on the evidence before her, there was no evidence that the respondent was not discharging his functions as executor properly, that there had been any misconduct on his part in that or any other capacity, that he had breached his duties as executor in any sense or that he had any conflict of interest in acting as executor. The appeal brought by Reverend Klement from her Honour’s decision was dismissed.
Application for costs against Reverend Klement
In the possession proceeding, the respondent relies upon his affidavit sworn on 20 March 2009, in which he deposed to having formed the opinion that Reverend Klement was no longer capable of living in the trust property and to his subsequent attempts to assist Reverend Klement. He deposed that upon advising Reverend Klement of his decision, he recommended that Reverend Klement obtain assistance from Legal Aid and/or Moreland City Council, and also offered to provide funds for Reverend Klement to find alternative accommodation. The respondent now points to the fact that Reverend Klement rejected those offers and steadfastly refused to move out of the property. In the course of argument before this Court, Reverend Klement apparently changed his mind and said that he did not want to continue living in the property.
The respondent therefore submits that the application for leave to appeal was unnecessary, that Reverend Klement should have obtained advice and that he could have either filed an amended defence, if one was available, or negotiated a solution with the respondent. All that has happened as a consequence of his filing the application for leave to appeal is that the trust will have fewer funds with which to provide for his maintenance and advancement.
In the executor proceeding, the respondent submits that he has been frustrated in his stewardship of the estate by Reverend Klement’s refusal to accept the terms of the Will. He contends that Reverend Klement’s stated reasons for seeking his removal as trustee would frustrate the trust established by the Will and simply enable Reverend Klement to use trust funds for his own purposes.
For his part, Reverend Klement makes a variety of submissions concerning the respondent’s conduct in each proceeding and in the hearings below which are said to bear on the question of costs.
First, he contends that the use of a barrister, ‘sometimes with an associate’, was unnecessary.[1] We do not consider that this submission is relevant to whether costs should follow the event. Rather, it is a matter that may be agitated in any taxation of costs.
[1]As Mr Simon appeared alone for the respondent in this Court and in the hearings before Davies J and Habersberger J, we infer that ‘an associate’ refers to an instructing solicitor. There is, of course, nothing unusual or untoward in counsel appearing instructed by a solicitor in the courts of this state, most especially in the Court of Appeal.
Secondly, Reverend Klement complains about the judges below. These complaints are not relevant to the question of the respondent’s entitlement to costs.
Thirdly, Reverend Klement submits that the respondent should not have his costs because he aimed to ‘bring the case to a rapid end’ and confined his ‘strategy’ to the minimum relevant issues without exploring ‘the ethical, medical and religious’. This is not a reason for declining to award the respondent his costs. To the contrary, it suggests that the respondent has conducted the litigation efficiently and has not incurred unnecessary costs.
Fourthly, Reverent Klement submits that the respondent could have adopted a ‘more conciliatory attitude’ and explored the possibility of mediation. The Court has little knowledge of the steps taken by either party to resolve the dispute except for the fact, confirmed at the hearing of the application and appeal, that the respondent made an approach to Reverend Klement with a view to settling the proceedings and giving Reverend Klement the opportunity to acquire a house in the country from the proceeds of the sale of the property. In any event, it appears from his submissions to be Reverend Klement’s position that he would have accepted ‘only’ a judge acting as mediator. That possibility was removed by Reverend Klement’s desire to represent himself.[2]
[2]It is the Court’s policy that an Associate Judge will only mediate a dispute between parties who are legally represented.
Finally, Reverend Klement submits that costs should be awarded in his favour on the basis that he should have won ‘the case’: ‘Indeed I’m the only side which has had a case. His case [the respondent’s case] should have foundered from the start on the basis of the Lyons judgment (VCAT, c. 8/05).’ Reverend Klement is not entitled by this means to go behind the Court’s decisions. He did not ‘win’ either his application in the possession proceedings or his appeal in the executor proceedings; he was unsuccessful in obtaining what he sought in each proceeding. This submission is without merit.
There is no reason to award Reverend Klement his costs of either proceeding, if any were incurred. He was unsuccessful in both proceedings. In the possession proceeding, Reverend Klement did not, at any stage, put on a defence. Then, at almost the very last point in the convoluted course of the possession proceedings, he conceded that he had no desire to remain in the property. In the executor proceeding, Reverend Klement pursued a course which was doomed to failure because it was based on the false premise that the Court would re-write the Will in line with Reverend Klement’s belief that there were better ways of using the assets of the estate than as provided by the Will.
In both proceedings, the respondent should be compensated for his costs. The question is how.
The overriding principle is that costs are in the discretion of the Court, but there is a general rule that costs follow the event. This applies in probate cases as in other cases.[3] In some cases, however, costs will be borne directly by the estate rather than by the unsuccessful party. One such case is where the litigation is brought about by the conduct or due to the ‘fault’ of the testator. Another is where the unsuccessful party has reasonably been led into the litigation by a bona fide belief and has felt it desirable to inquire into the testamentary dispositions in issue.[4] These exceptions are not presently applicable.
[3]Nicholson v Knaggs (No 3 —Severance And Costs) [2009] VSC 328, [38]; Middlebrook v Middlebrook (1962) 36 ALJR 216, 217.
[4]Twist v Tye [1902] P92, 93–4; Brown v Sandhurst Trustees Ltd (No 2) [2009] VSC 406.
Given the manner in which Revered Klement conducted his case in both the possession proceeding and the executor proceeding, in the normal course and in accordance with accepted legal principle, an order for costs would be made against him.
But we see no utility in ordering Reverend Klement to pay costs. He is evidently without means. The Court heard from him at length about his refusal to accept the payments for which he may be eligible from the Commonwealth. We do not understand him to have any other source of income. Although he has a roof over his head, he lives without gas and electricity and apparently survives by foraging. His circumstances are peculiar and particularly difficult.
In the circumstances, an order for costs against Reverend Klement would be wholly symbolic. We see no benefit in such symbolism, particularly given Reverend Klement’s history of mental illness. We also take into account that Ludmilla Klement’s intention, as manifested in the Will, was that her estate be used to provide Reverend Klement with the support that he plainly needs for the duration of his life.
In the special circumstances of this case, we consider that the respondent’s costs should be borne by the estate rather than by Reverend Klement personally.
Indemnity costs
We understand that the application for indemnity costs is made against Reverend Klement personally. As we have concluded that costs should not be awarded against Reverend Klement personally, the question of whether costs should be awarded on an indemnity basis is moot. Nonetheless, we set out below the reasons why we would not have awarded costs on an indemnity basis.
In the executor proceeding, the respondent submits that he should have his costs of the appeal on an indemnity basis for the following reasons:
(1) the respondent endeavoured to settle the appeal;
(2)Reverend Klement was advised that he could avail himself of the services of the self-represented litigants’ coordinator who was in a position to put him in touch with pro bono legal services;
(3)the appeal was ‘commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success’;[5]
(4)the appeal was for an ulterior purpose, namely the appointment of Reverend Klement and/or judiciously selected friends of similar co-Slavic Catholic or Orthodox religions, including perhaps a Slavic solicitor, to be executors;
(5)Reverend Klement sought to remove the respondent on the basis that he had failed to act on behalf of the deceased when she was alive; and
(6)a trustee in the respondent’s position should not have to bear the costs of a proceeding for his removal, if he is not found to have breached his duties as trustee.
[5]Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 401 (Woodward J).
We deal with these grounds in turn.
The first two grounds can be quickly disposed of. There is no evidence before the Court about a proposed settlement and, in particular, no evidence that would enable the Court to infer that Reverend Klement’s rejection of any offer was unreasonable. As to Reverend Klement’s failure to obtain legal advice and/or representation, a refusal to obtain pro bono legal assistance (if that were the case) would not be a basis for awarding costs on an indemnity basis. A person is entitled to appear for themselves in Court and to argue their own case, with or without professional legal assistance.
The third and fourth points require closer examination. They are related, in that where a party properly advised should know that they have no chance of success, ‘the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of known facts or clearly established law’.[6]
[6]Ibid.
The respondent has identified Reverend Klement’s desire to have an executor of his own choice appointed as the relevant ‘ulterior purpose’ for which he brought the executor proceeding and pursued the appeal. Reverend Klement has made his wish abundantly clear that he or someone chosen by him (who satisfies his particular religious and racial criteria) replace the respondent as the executor of his mother’s estate in order to deal with the estate in accordance with his own plans, which include, most prominently, the establishment of a ‘religious and charitable trust’.
It is, however, important that Reverend Klement’s wider purpose not be confused with his immediate purpose in the present case. In Williams v Spautz,[7] the High Court distinguished between bringing proceedings to a successful conclusion, so as to take advantage of an entitlement or benefit which the law gives the litigant in that event, and bringing proceedings when the purpose is not to prosecute them to a conclusion but to use them as a means of obtaining some advantage for which they are not designed or some collateral advantage beyond what the law offers.[8]
[7](1991) 174 CLR 509.
[8]Ibid 526–7 (Mason CJ, Dawson, Toohey and McHugh JJ). Their Honours gave the following example of the distinction:
‘Thus, to take an example mentioned in argument, an alderman prosecutes another alderman who is a political opponent for failure to disclose a relevant pecuniary interest when voting to approve a contract, intending to secure the opponent’s conviction so that he or she will then be disqualified from office as an alderman by reason of that conviction, pursuant to local government legislation regulating the holding of such offices. The ultimate purpose of bringing about disqualification is not within the scope of the criminal process instituted by the prosecutor. But the immediate purpose of the prosecutor is within that scope. And the existence of the ultimate purpose cannot constitute an abuse of process when that purpose is to bring about a result for which the law provides in the event that the proceedings terminate in the prosecutor’s favour.’
We cannot infer that Reverend Klement did not intend to prosecute the proceeding to a conclusion or that his immediate purpose in commencing and continuing it was anything other than securing the removal of the respondent as executor for reasons that, in Reverend Klement’s belief, related to the respondent’s unfitness to act in the office of executor. These reasons included Reverend Klement’s perception of the respondent’s conduct toward him and his mother, and his own assessment of the manner in which the executor was required to deal with his mother’s estate.
The question remains whether, motive aside, Reverend Klement commenced or continued a case which was so hopeless as to demonstrate ‘some wilful disregard of known facts or clearly established law’. In this context, the Court must make allowance for Reverend Klement’s lack of knowledge of the law, unfamiliarity with court practices and lack of objectivity as an unrepresented litigant, while also acknowledging and giving fair weight to the hardship and expense to which the respondent has been subjected in defending the appeal.[9] In the special circumstances of this case, we are not satisfied that the appeal was commenced or continued in wilful disregard of known facts or clearly established law, notwithstanding that it was fundamentally misconceived.
[9]Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd [2000] NSWSC 159, [13] (Hodgson CJ in Eq); Salfinger v Niugini Mining (Australia) Pty Ltd (No 4) [2007] FCA 1594, [7] (Heerey J).
We understand the respondent’s fifth ground to be no more than an instance of what he considers to be Reverend Klement’s wilful disregard of clearly established law.
Finally, we consider that the proposition that ‘[a] trustee in the respondent’s position should not have to bear the costs of a proceeding for his removal, if he is not found to have breached his duties as trustee’, adds little to the claim for indemnity costs against Reverend Klement. The respondent’s position as executor is protected by his ability to recover his costs from the estate, on a solicitor and client basis, under rr 63.26 and 63.33.
Conclusion
The orders of the Court in each proceeding will be that the respondent is entitled to his costs (on a solicitor and client basis) out of the undistributed residuary estate of Ludmilla Klement.
---
6
6
0