Lathwell v Lathwell
[2008] WASCA 256 (S)
•10 DECEMBER 2008
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA |
| TITLE OF COURT : | THE COURT OF APPEAL (WA) | |
| CITATION | : | GWENYTHE MURIEL LATHWELL as Executrix of the Estate of GILBERT THORLEY LATHWELL (Dec) -v- LATHWELL [2008] WASCA 256 (S) |
| CORAM | : PULLIN JA |
BUSS JA
LE MIERE AJA
| HEARD | : | 23 OCTOBER 2008 |
| DELIVERED | : | 10 DECEMBER 2008 |
| SUPPLEMENTARY | ||
| DECISION | : | 23 FEBRUARY 2009 |
| FILE NO/S | : | CACV 71 of 2007 |
| BETWEEN | : | GWENYTHE MURIEL LATHWELL as Executrix of the Estate of GILBERT THORLEY LATHWELL (Dec) Appellant |
| AND | ||
| CAMILLE KRISTY LATHWELL First Respondent | ||
| AMANDA GAY DAVIDSON Second Respondent | ||
| BETTINA JOSE LATHWELL Third Respondent | ||
| PAULETTE JOANNA LATHWELL Fourth Respondent | ||
| ON APPEAL FROM: | ||
| Jurisdiction | : | SUPREME COURT OF WESTERN AUSTRALIA |
| Coram | : MASTER SANDERSON | ||
| Citation |
| ||
| File No |
| ||
| Catchwords: |
Costs - Unsuccessful appeal - Whether costs should be paid from the deceased estate - Whether costs should be paid by the appellant personally
Legislation:
Nil
Result:
Appellant to pay respondents' costs of appeal to be taxed
Category: B
[2008] WASCA 256 (S)
Representation:
Counsel:
| Appellant | : | Mr D L Jones |
| First Respondent | : | Dr J J Hockley |
| Second Respondent | : | Dr J J Hockley |
| Third Respondent | : | Dr J J Hockley |
| Fourth Respondent | : | Dr J J Hockley |
Solicitors:
| Appellant | : | Young & Young |
| First Respondent | : | Talbot Olivier |
| Second Respondent | : | Talbot Olivier |
| Third Respondent | : | Talbot Olivier |
| Fourth Respondent | : | Talbot Olivier |
Case(s) referred to in judgment(s):
Cumming v Sands [2001] NSWSC 507
Dijkhuijs (Formerly Coney) v Barclay (1988) 13 NSWLR 639
McGregor v McGregor (No 2) [1919] NZLR 286
Mead v Watson (2005) 23 ACLC 718
National Trustees Executors and Agency Co of Australasia Ltd v Barnes (1941)
64 CLR 268
Nowell v Palmer (1993) 32 NSWLR 574
Re Aitken and Barron's Bill of Costs (1932) 49 WN (NSW) 224
Re Beddoe (1893) 1 Ch 547
Rowan v Roche [2005] WASCA 6
Talbot v NRMA Ltd [2000] NSWSC 608; (2000) 50 NSWLR 300
Turner v Hancock (1882) 20 Ch D 303
| REASONS FOR JUDGMENT OF THE COURT | [2008] WASCA 256 (S) |
REASONS FOR JUDGMENT OF THE COURT: The Court of Appeal dismissed the appellant's appeal and reserved the question of costs. The parties were given the opportunity to file written submissions. Both have done so and they have been taken into account.
2 The respondents seek an order that the appellant, in her personal
capacity, pay the respondents' costs of the appeal to be taxed. The unsuccessful appellant on the other hand, seeks an order that the taxed costs of both the appellant and the respondents be paid from the deceased estate the subject of the appeal.
3 The appellant relies in effect, on the principle that ordinarily in
litigation relating to the administration of an estate, a trustee (or executor) is entitled as of right to costs out of the estate if the costs are properly or reasonably incurred. See Turner v Hancock (1882) 20 Ch D 303; Re Aitken and Barron's Bill of Costs (1932) 49 WN (NSW) 224; National Trustees Executors and Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268, 277 (Williams J). The principle is important because as Jessel MR said in Turner v Hancock (305):
It is not the course of the Court in modern times to discourage persons from becoming trustees by inflicting costs upon them if they have done their duty, or even if they have committed an innocent breach of trust.
4 However, as the general principle makes clear, a trustee may not be
permitted to indemnity out of the estate if costs are not properly or reasonably incurred. It is not enough that trustees (or executors) honestly believe that they should engage in litigation; they must also act reasonably (Talbot v NRMA Ltd [2000] NSWSC 608; (2000) 50 NSWLR 300 [24]) and see McGregor v McGregor (No 2) [1919] NZLR 286; Mead v Watson (2005) 23 ACLC 718 [12] (Sheller, Ipp and Tobias JJA); Jacobs' Law of Trusts in Australia, (7th ed, 2006) [2110]. In Re Beddoe (1893) 1 Ch 547, a trustee was not allowed to retain out of the trust funds, certain costs of defending an action where there was no reasonable cause for defending it and he had neglected to ask the opinion of the court before embarking on the defence. See Lindley LJ (558).
5 The appellant referred to the case of Rowan v Roche [2005] WASCA 6 in which the executor appealed (as had the person who was named as the sole beneficiary of the deceased estate). The appellant points to Murray J's comment at [11] that the executor participated in the appeal 'as was proper, given his role as executor of the estate' and stated [32] that the executor justified his 'active participation in the proceedings by reference to a proper consciousness that he owes a duty to preserve the
| REASONS FOR JUDGMENT OF THE COURT | [2008] WASCA 256 (S) |
estate and, to the extent proper, the disposition by Will made by the
deceased' (emphasis added).6 The words 'to the extent proper' indicates the need to examine the
reasonableness or propriety of the executor's conduct in instituting the appeal. Murray J revealed at [20] that the executor did not complain that there should have been no order made. His complaint was about the form of the order 'saying that there might be difficulty in realising' a specific sum of money which was ordered by the master. He submitted that the order should have been that the respondent be paid a specified percentage of the net value of the estate.
7 The appellant referred to two cases, namely Cumming v Sands [2001] NSWSC 507 and Nowell v Palmer (1993) 32 NSWLR 574. In Cumming's case, Hamilton J made a costs order against the first defendant personally, notwithstanding that she defended the proceedings in her capacity as executrix of the estate. Hamilton J stated that the litigation had been conducted in reality by the first defendant to keep the fund or as much as possible of it from the plaintiff and to defend it in the first defendant's personal interest [12]. Hamilton J followed the decision of the Court of Appeal in Nowell's case, in which Mahoney JA said (Meagher and Handley JJA agreeing) at 581 - 582, that if a legal personal representative acts in accordance with proper principles, she will be safeguarded as to costs and that in an appropriate case, her costs which she is ordered to pay in an unsuccessful defence of the estate, may be ordered to be paid out of the estate. His Honour continued:
However, in the present case, the appellant, in defending the proceeding, was not acting as, or merely as, the executrix of the estate. She was, in a real sense, defending her own interests. She was the sole beneficiary of the estate. In addition, she had purported to distribute the estate to herself and to an extent, the proceeding brought against her was a proceeding by way of tracing the assets in the estate … to secure an accounting in respect of them … I do not think that in these circumstances the principle to which I have referred should apply. The proceeding was essentially a defence by the appellant of her own interests [9].
8 The appellant contends that Nowell's case was decided, because as Mahoney JA said, the appellant had 'purported to distribute the estate to herself and, to an extent, the proceedings brought against her was a proceeding by way of tracing the assets in the estate to which the respondent was entitled and to secure an account in respect thereof'. The appellant also submits that in Cumming's case, the litigation was primarily concerned with an application by a plaintiff for imposition of an
| REASONS FOR JUDGMENT OF THE COURT | [2008] WASCA 256 (S) |
equitable charge against a property in which she had expended moneys as a tenant and in which she subsequently received a one-half interest under the will of a co-proprietor. The other half interest was held by the defendant who had been a co-executor of the estate of which the property was an asset at the time the tenant had expended moneys on the improvements. The appellant submits that Cumming's case and Nowell's case are distinguishable because they involved disputes with executors arising during or after the administration of an estate. In neither of those cases was the executor defending the will. The appellant submits that when the provisions of the will were varied to a significant extent by the order of the master, the executrix 'properly commenced the appeal in the exercise of her duty to defend and preserve the will' and that she acted 'properly and reasonably' and should be indemnified for her legal costs out of the estate.
9 There is no doubt that in any first instance litigation which involves
an attempt to alter the provisions of the will, the duty of the executor as the defender of the will, is to participate in those proceedings. The correct statement of the duty is that the executor should participate so as to place before the court evidence which will have any bearing on issues which arise during the proceedings. This duty would involve the disclosure of evidence, positive or negative, in relation to those issues. See Dijkhuijs (Formerly Coney) v Barclay (1988) 13 NSWLR 639, 654 (Kirby P, Hope & Mahoney JJA agreeing).
10 The appellant discharged that duty in the hearing before the master.
As a result, a costs order was made indemnifying the appellant in relation to those costs.
11 The question then is whether it was reasonable for the appellant to
institute the appeal. The appellant has not revealed what legal advice she received before appealing. Legal advice would have been necessary before the appellant, acting as a personal representative, could reach a conclusion that an appeal based on legal grounds was likely to succeed. In circumstances where the appellant was not only the legal representative of the estate, but also a beneficiary and the sole beneficiary, it was necessary for her to demonstrate that she separated her personal interests from her interest as executrix. Any legal advice, if given, would have to have been shown to be from a lawyer who was requested to give legal advice to the appellant in her capacity as legal representative, ignoring the personal interests. It should be added that in Re Beddoe the trustee obtained legal advice but Lindley LJ said that he was 'compelled to say' that counsel had made a mistake in the advice which was given and that
| REASONS FOR JUDGMENT OF THE COURT | [2008] WASCA 256 (S) |
obtaining legal advice provided no 'indemnity' to the trustee (558).
Bowen LJ in Beddoe, said that it was:[N]o answer in the mouth of a trustee who has embarked in idle litigation to say that he honestly believed what his solicitor told him, if his solicitor has been wrong-headed and perverse. Costs, charges and expenses which in fact have been unreasonably incurred, do not assume in the eye of the law the character of reasonableness simply because the solicitor is the person who was in fault (562).
See also Mead v Watson [12].
12 In the circumstances, a 'safe course' (Jacobs' Law of Trusts in Australia [2110]), would have been to seek advice of the court before instituting an appeal.
13 In the absence of any evidence from the appellant about steps taken
to obtain legal advice, in view of this court's conclusion about the lack of merit in the appellant's grounds of appeal, and in view of the appellant's significant personal interest in appealing, the conclusion is that the appellant acted unreasonably in instituting the appeal. As a result, the orders of the court in relation to the appeal, should be that the appellant in her personal capacity, pay the respondents' costs of the appeal to be taxed.
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