Kossert v Margaret Gerda Ruggi as Executor of the Will of Peter Korps [No 3]
[2012] WASC 454
•28 NOVEMBER 2012
KOSSERT -v- MARGARET GERDA RUGGI as Executor of the Will of PETER KORPS [No 3] [2012] WASC 454
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2012] WASC 454 | |
| 28/11/2012 | |||
| Case No: | CIV:1961/2001 | 29 AUGUST 2012 | |
| Coram: | KENNETH MARTIN J | 29/08/12 | |
| 6 | Judgment Part: | 1 of 1 | |
| Result: | Costs capped | ||
| B | |||
| PDF Version |
| Parties: | EDITH KOSSERT MARGARET GERDA RUGGI as Executor of the Will of PETER KORPS MARGARET GERDA RUGGI MAIJA LAPSA |
Catchwords: | Inheritance Act (Family and Dependents Provision) Act 1972 (WA) Costs application Cap on legal costs on all sides of one-third likely value of estate Turns on own facts |
Legislation: | Inheritance Act (Family and Dependants Provision) Act 1972 (WA), s 14(6) |
Case References: | Kossert v Ruggi [No 2] [2012] WASC 191 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
MARGARET GERDA RUGGI as Executor of the Will of PETER KORPS
First Defendant
MARGARET GERDA RUGGI
Second Defendant
MAIJA LAPSA
Third Defendant
(Page 2)
Catchwords:
Inheritance Act (Family and Dependents Provision) Act 1972 (WA) - Costs application - Cap on legal costs on all sides of one-third likely value of estate - Turns on own facts
Legislation:
Inheritance Act (Family and Dependants Provision) Act 1972 (WA), s 14(6)
Result:
Costs capped
Category: B
Representation:
Counsel:
Plaintiff : Ms J M McKenzie
First Defendant : Mr M W Fatharly
Second Defendant : Mr M W Fatharly
Third Defendant : No appearance
Solicitors:
Plaintiff : McCallum Donovan Sweeney
First Defendant : Kott Gunning
Second Defendant : Kott Gunning
Third Defendant : No appearance
Case(s) referred to in judgment(s):
Kossert v Ruggi [No 2] [2012] WASC 191
(Page 3)
- KENNETH MARTIN J:
(These reasons were delivered orally and have been edited from the transcript.)
1 On an Inheritance (Family and Dependants Provision) Act 1972 (WA) (the Act) application, by s 14(6), 'The court may make such order as to costs of any proceeding under this Act as it deems just.' See also the Court's Consolidated Practice Directions 9.2.2.15 and 9.2.2.16.
2 Here, the overwhelming consideration is one of proportionality in the context of an estate of very modest value and where there is a very deserving plaintiff. The only real asset of the estate is a house and land at 62 Charles Street, Northam. Doing a rough calculation after the inevitable expenses of a sale, based upon an estimated average sale price of $232,000, allowing $7,000 for costs of sale, the executor is looking at a net realisable sum of about $225,000. That is in an overall context where, as previous reasons explain, there is a legitimate and pressing need to secure an almost 89-year-old woman's future at Collie by building a granny flat for her, which will cost at least $137,000 (see Kossert v Ruggi[No 2] [2012] WASC 191.
3 Sometimes it is difficult to confront the reality that the practice of law is labour-intensive. Lawyers may legitimately work on a litigation file in a way that causes time to be expended. But until the result is known, the bill for time expended keeps growing - if time expended is the sole criterion for charging the client. A conceptual difficulty with time billing as a basis for fees levied by lawyers upon their clients is that no holistic perspective may be applied in terms of the proportionality of the end charge and the result that is delivered by the work done by the lawyers.
4 This action has run since 2001. Having now reached its culmination in 2012, I can apply the perspective of hindsight towards the remaining asset of an estate that will, when sold, only realise about $225,000. In 2012 I can look back on the amount of legal costs incurred on all sides and can recognise that in the overall scheme of things, they are very high. They are simply not economically justifiable, measured in terms of the net value of this estate.
5 Having said that, there did need to be resolved here quite a difficult issue in terms of a residual intestacy under the late Mr Korps' will. There was also an intrusion (from Latvia) of a potential residuary claimant, and
(Page 4)
- a determination was required in order to, in essence, rewrite Mr Korps' will under the Act.
6 I accept the plaintiff's lawyers carried the burden of most of that work and, as Mr Fatharly candidly told me today, the first defendant executor played a mostly passive role.
7 However, even that passive role has over 11 years built up a very substantial costs exposure for Ms Ruggi as both first and second defendant. I am very mindful of the position of an executor, effectively as a class of trustee. There is a strong body of case law that says a trustee acting reasonably will usually be indemnified out of the estate. My difficulty here is that this estate is a small one and this matter has dragged on for 11 years. At the end of the day, as a matter of overall justice, I must put Ms Kossert's needs first, and s 14(6) encourages me to that end.
8 Whilst not deprecating any lawyer's work, the immediate needs of Ms Kossert are paramount. It would be devastating, as I have mentioned in my previous reasons, if the small estate was to be substantially consumed by legal costs, leaving a survivor of a concentration camp without even the very modest provision she needs to assist her in her last years.
9 There will be costs of sale of the Northam property, for which the estimate is $7,000. The figure of $12,714.80 represents expenses incurred by the first defendant, as explained in her submissions as to costs at pars 7(a)(i) - (iii). The sum of $2,580.55 (plus interest) remains payable to the Water Corporation. The estimated cost of building the granny flat at Collie are $137,000.
10 There are also legal expenses that have been incurred by Ms Ruggi. These are identified in paragraphs 26 and 27 of her affidavit, sworn 1 August 2012. In broad summary, Ms Ruggi is currently indebted to a NSW law firm (Cassidy's) for an unpaid amount of $7,708.51, as well as to Perth solicitors (Kott Gunning) for $17,428.92.
11 The amount she has already paid by her own funds, $2,970.00 to Cassidy's, and $33,631.27 to Kott Gunning, totals $36,601.27 expended (see pars 26(b)(ii) and 27(b)(ii) of her affidavit). There are further debts as between the two law firms of $25,137.43. That is approximately $61,738.70 in legal fees, without reference to further unbilled work in progress.
(Page 5)
12 How do I cut the Gordian costs knot here? There must be some pain irrespective. I, of course, recognise the position of an executor. I do not think a sub-issue that emerged late over whether the executor signed or did not sign a costs agreement with Kott Gunning is relevant in the overall scheme of things. My responsibility under s 14(6) of the Act is to make, as regards costs, orders I assess to be just.
13 The plaintiff and Ms Ruggi, the executor, are, at the end of the day, mother and daughter. In the context of an estate likely to realise only $225,000, after costs from a sale of 62 Charles Street, I do not think the estate can be allowed to bear legal costs of more than one-third of $225,000. That allows a total amount of legal costs, between all parties, of $75,000.
14 How should that $75,000 be apportioned as between the parties? At present the plaintiff has claimed $43,000 towards her legal costs, with $3,000 going to Northam solicitors Mayberry Hammond & Co, leaving the plaintiff's Perth solicitors to receive an amount of $40,000 (see the calculation in paragraph 27 of her written submissions). That amount is less than half what they would have charged on a time billing basis over the course of their engagement, since taking over from Mayberry Hammond & Co until now. But in the overall scheme, $40,000 is still too high. Here, a time billing regime is simply productive of potential injustice. I would reduce the claimed amount to $35,000, then add $3,000 for what is still due to Mayberry Hammond & Co. That will make the amount allowed for the plaintiff's legal costs $38,000.
15 In respect of the position of the first and second defendants' solicitor's costs, I would make the allowance of $37,000.
16 Together, those allowances for legal costs amount to $75,000, being one-third of $225,000.
17 I am cognisant that Ms Ruggi is currently exposed for unpaid legal fees, both to Cassidys and to Kott Gunning, and that she is already somewhat out of pocket for costs she has met. From the allowance of $37,000, she can meet her debts and can also receive some measure of reimbursement.
18 A cap on legal costs will no doubt be an unpalatable result for those concerned. It is a product, in the end, without criticising anybody, of the stark economic reality of there being insufficient funds in this estate to go any further.
(Page 6)
19 In order to deliver justice, and applying principles of proportionality by reference to the power I am called on to exercise under s 14(6), I will make these costs orders and allowances in terms:
1. Pursuant to s 14(6) of the Inheritance (Family and Dependants Provision) Act 1972 (WA):
(a) legal costs as between all parties be capped at $75,000, being a present assessment as to a one-third value of the net sale proceeds of 62 Charles Street, Northam.
(b) there be allowed to the First and Second Defendants from the proceeds of the sale of 62 Charles Street, Northam for their legal costs the fixed amount of $37,000.
(c) there be allowed to the Plaintiff from the proceeds of the sale of 62 Charles Street, Northam for her legal costs the fixed amount of $38,000.
2. There be liberty to apply generally as to the implementation of these orders as to costs.
0
1
1