Lee v Australian Executor Trustees Ltd as trustee of the Estate of the Late Ronald William Lee [No 4] - [2021] WASC 257

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   LEE -v- AUSTRALIAN EXECUTOR TRUSTEES LTD AS TRUSTEE OF THE ESTATE OF THE LATE RONALD WILLIAM LEE [No 4] [2021] WASC 257
CORAM:   KENNETH MARTIN J
HEARD:   29 JUNE 2021
DELIVERED          :   29 JUNE 2021
PUBLISHED           :   28 JULY 2021
FILE NO/S:   CIV 2856 of 2018
BETWEEN:   JOHN ANTHONY CAMPBELL LEE
Plaintiff
AND
AUSTRALIAN EXECUTOR TRUSTEES LTD AS TRUSTEE OF THE ESTATE OF THE LATE RONALD WILLIAM LEE
First Defendant
FAY EILEEN LEE
Second Defendant

Catchwords:

Costs application - Costs paid out of deceased's estate - Costs awarded on indemnity basis - Professional trustee appointed - Broad order

Application to vary past orders - Invocation of liberty to apply - Property of deceased estate - Proprietary estoppel claim - Beneficial ownership of estate property

Legislation:

Rules of the Supreme Court 1971 (WA)

Result:

Costs orders made

Application to vary past orders allowed

Category: B

Representation:

Counsel:

Plaintiff	:	Mr M Curwood SC
First Defendant	:	Mr M McKenna
Second Defendant	:	Mr T O Coyle

Solicitors:

Plaintiff	:	Croftbridge
First Defendant	:	Gilbert + Tobin
Second Defendant	:	Solomon Hollett Lawyers

Case(s) referred to in decision(s):

Australian Executor Trustees Ltd v Lee [2020] WASC 463
Autodesk v Dyason (No 2) (1993) 176 CLR 300; 111 ALR 385
Lee v Australian Executor Trustees Ltd as Trustee of the Estate of the late Ronald William Lee [No 3] [2020] WASC 447
Oshlack v Richmond River Council (1998) 193 CLR 72
Turner v Hancock (1882) 20 Ch D 303

KENNETH MARTIN J:

(This judgment was delivered extemporaneously on 29 June 2021 and has been edited from the transcript.)

Background

On 4 December 2020, I handed down reserved reasons for decision in Lee v Australian Executor Trustees Ltd as Trustee of the Estate of the late Ronald William Lee [No 3] [2020] WASC 447. The reasons followed a trial I had heard between 14 October to 21 October 2020. The trial had been between John Lee, the plaintiff and the first defendant trustee company, Australian Executor Trustees Ltd - who was appointed by order of the court as trustee of the estate of the late Ronald William Lee ('Ron'). Also a defendant was John's mother and Ron's widow, Fay Eileen Lee. She was the second defendant, and there were some counterclaims both by and against her, which I discuss later. Throughout these reasons, as was the position in the primary reasons and for ease of reference, I refer with no disrespect intended, to Lee family participants by their first names.
Essentially, the litigated claim by the plaintiff, John, against his father's estate (represented by the first defendant), was a claim to the full legal and beneficial ownership over a series of lots of rural land at Bullsbrook, Western Australia - referred to in the reasons as 'the Bullsbrook farm'.
John's action was based upon an equitable cause of action invoking proprietary estoppel. Ultimately, I found in favour of John on the basis of various promises made to him by his late father in his lifetime about John eventually receiving ownership of the Bullsbrook farm; promises which John had then relied upon to his detriment. Along the way, I rejected various trial arguments about undue influence alleged to have been exerted by Fay over Ron, in terms of resolving various issues.
At the end, I also dismissed the defendants' counterclaims, essentially on all sides. In the final reasons, I concluded at [102] and [103]:
Consequently, John has succeeded in making good his proprietary estoppel claim against Ron's estate. AET's cross-claim against John and Fay have failed.
At [103], I said further:
The parties will now be provided with the reasons for the purpose of crafting final orders. They should also confer as to orders over costs orders and hopefully provide an agreed minute of orders to my associate within seven days of the publication of these reasons.
Those reasons for decision post trial were published on 4 December 2020. The parties co-operatively conferred and duly provided what was, in effect, an agreed minute of orders on 11 December 2020 which implemented my reasons by some agreed orders giving effect to those reasons for decision (folio 135).
There ensued some email correspondence passing between my chambers and the parties, in terms of some adjustments sought to the submitted consent orders. For instance, the word 'shall' was consensually inserted before the word 'do' in as proposed orders 2 and 3. I also issued further post trial orders addressing the practicalities of taking the account and for a conferral process to that end that was to happen.
The consent orders of 14 December 2020 (folio 136), followed. Relevantly, by order 1 (emphasising that these orders were made by consent at the time), I declared that the first defendant trustee company, namely AET, held the seven different rural lots as identified therein at par 1(a), on trust for John - effectively vindicating his successful proprietary estoppel claim post trial over the Bullsbrook farming property.
By my following order 2, that AET shall do all things necessary to transfer to John the Certificates of Titles comprising the farm and all and any registration of ownership documentation for the machinery, plant, livestock and vehicles on the farm.
The balance of the consent orders essentially allowed the parties to make written submissions concerning costs orders under a timetable following the making of the orders (see especially order 8). Under order 9, I afforded the parties liberty to apply, with respect to the implementation of those orders.
Consequently, I am now faced with two pending applications
- namely the plaintiff's application (via letter) addressing the issue of costs orders (folio 138), and a further application by the plaintiff (via letter) seeking to vary order 2 of my orders made on 14 December 2020 (folio 144).

Evidence relied upon

On the disputed issue of costs orders, I hold and refer primarily to the affidavits of Ms Lukic sworn 12 March 2021, Mr Lethbridge affirmed 2 March 2021 and Mr Eaton affirmed 8 June 2021. These are augmented by the parties' helpful written submissions - namely John's written submissions of 15 June 2021; AET's submissions of 22 June 2021; and Fay's submissions of 22 June 2021.
I also hold the benefit - which I obviously did not during the trial
- of seeing Allanson J's reasons as were provided in matter CIV 1780 of 2020. Those reasons had been suppressed after his Honour's decision was delivered on 25 September 2020. That was the position until after my orders of 14 December 2020 in this action: see Australian Executor Trustees Ltd v Lee [2020] WASC 463, when his Honour's reasons were unsuppressed.
His Honour's reasons, as published, essentially explain why he had been disinclined to make the orders implementing a proposed settlement conditionally reached between the parties to this action - in the face of opposition by other members of the Lee family represented at that hearing. More specifically, the opposition was from the two sisters of John who, under Ron's intestacy (arising upon the outcome of Ron's unsuccessful attempt to dispose of any of his property by an ineffective will instrument), took a one third interest each (with John) from the residual two-thirds of Ron's estate (the other one third interest going to Ron's widow, Fay).

Costs application

The first question to be resolved is over the parties' rival positions in relation to the costs of the trial. It is trite that costs orders are made exercising the discretion of the court in a judicial way, but by reference to well established principles bearing on the exercise of a judicial discretion. McHugh J's reasons in Oshlack v Richmond River Council (1998) 193 CLR 72 explain how the task is to be approached: see generally his Honour's reasons at [51] to [101].
I hold the unique benefit of being the case manager for some time before trial, then trial judge. Further, I have now had the benefit of the parties' extensive written submissions on the issue of trial costs. What I am faced with, essentially, is an alignment of position over proposed costs orders as between Fay as second defendant, with John as plaintiff - by contrast to a rival position - as advocated by the first defendant, AET.
AET's position from its minute of proposed orders of 12 March 2021 (folio 142) seeks an order that its costs of the proceeding be paid from the estate of the late Ron Lee on an indemnity basis and otherwise - by AET's proposed order 2 - that there be no order as to costs.
The rival position advocated by the plaintiff, John, under his minute of proposed orders (folio 137), supported by Fay, effectively seeks to have AET pay the cost of John's claim and further, for John to receive the costs on AET's ultimately unsuccessful counterclaim, including all reserved costs to be taxed if not agreed, along with some adjustment to the scale limits under the proposed order 2 and 3. By proposed order 4, John also seeks that AET's costs be paid from the estate and, by order 5, that AET and Fay's costs otherwise are determined on the basis that each would otherwise bear their own costs of the action and the counterclaim of AET and Fay's counterclaim.
Another factor lurking in the background now, is a question over a potential insolvency of Ron's estate, influenced potentially by what precise costs orders I eventually make. Some issues about that are explained by the attachment RJE1 found in Ryan Eaton's affidavit affirmed 8 June 2021 (folio 150), pertaining to the statement of assets and liabilities of Ron's estate at that time as there identified.

Costs disposition

Weighing up all the considerations with the evidence now before me as discussed, I render the following observations.
First of all, it seems to me that the dominant cause of all problems the parties have encountered (which has driven them into long-term litigation with all the resulting costs expenditures necessarily involved) must, with due respect, be seen as attributable to the late Ron Lee himself. He is the man who died leaving an estate of many millions of dollars in terms of assets, but with a wholly inadequate homemade will - that did not validly dispose of any of his property. Every problematic issue which has since emerged for resolution could have been avoided had there been a valid will for Ron - which dealt appropriately with the assets of his estate of many millions of dollars. A viable will might have cost Ron a few hundred dollars in fees to prepare. But what has ensued after his death, essentially looks to me to be over $1 million worth of essentially wasted costs being incurred in litigation arising between members of the Lee family and with AET needing to be engaged as his trustee at a professional cost.
The second problem is that the parties could not settle this litigation before the trial. There was a late attempt by way of attempted compromise, which the court in the end could not approve. Consequently, the parties were, in effect, driven to court to resolve the issues between them - particularly John's main issue by way of his proprietary estoppel claim in respect of the Bullsbrook farm. As the trial judge, my assessment is that at least three-quarters of the trial, assessed by reference to the overall issues, the time expended and the range of documents to be reviewed, was associated with that pivotal estoppel claim by John. True enough, there were the ancillary issues concerning to the counterclaims and the like. But overwhelmingly, my assessment is that the trial was chiefly concerned with John's proprietary estoppel claim, which was ultimately successful.
A third general point I must make is that it is undoubtedly in the interests of justice that marginal or just arguable causes of action (like the counterclaims in this matter) that are pleaded to be raised before a court for a trial, ought still be capable of being pared back, or even thoroughly resiled from at trial - without the party who has brought them being exposed to an undue punishment, essentially, by adverse costs orders in relation to the taking of an earlier tactical course to run the claim. It is in the interests of justice overall that parties be strongly encouraged, rather than discouraged, to listen to and heed professional advice and have the courage to follow a sensible course - even at a late stage of the litigation. However late in the piece, making hard judgment calls is the way competent and honourable legal practitioners must act. Frequently, they have a difficult enough job advising and urging their clients to take the appropriate course. A court ought not to adopt a course that provides an unduly harsh disincentives against late concessions. Viewed on a wider basis, that would be against the interests of justice.
My fourth general point builds on the first. The late Ron Lee, having died without a viable will and having thereby created, in effect, an intestacy, sowed the seeds of Lee family discord. This in turn, has created an undeniable need for the appointment of a professional trustee company to act as the administrator of his large estate. In due course, the first defendant, AET, necessarily became the appointed professional trustee of Ron's estate. In turn, AET cannot be legitimately criticised for engaging competent lawyers to assist it in a difficult and complex task - especially in the face of the Lee family discord. Nor should AET be subjected to adverse costs orders for doing its job.
Regarding the work of AET and its lawyers, on no occasion, either as the case manager or as the trial judge, did I observe any level of misconduct or unreasonable conduct on the part of the first defendant. Quite the contrary, in fact. The plaintiff John was properly put to the proof at a trial of his proprietary estoppel case. I ought to observe that that was no small evidentiary hurdle for John to overcome. Many proprietary estoppel actions commenced in this court fall away or fail.
The plaintiff (John's) case here was essentially a factual case without much, if any, directly supporting documentation. I did not assess John's cross‑examination or any of the questions put to John - to exceed what was fair in all the circumstances. It was entirely proper for John to be fairly challenged by counsel for AET in terms of firstly, formalities, secondly, John's establishing of relevant representations by his late father, thirdly, John's reliance and lastly, the ensuing detriments that John suffered in a proprietary way - in order to prove this equitable cause of action.
Accordingly, although John in the end succeeded at trial, and although to that extent AET might on one view be assessed as having failed in the estate's resisting of John's claim - such an assessment would be far too bland. This was no ordinary case. Rather, this was the case of the trustee of Ron's estate doing its job properly. Under such circumstances, my assessment is that AET ought not to be left out of pocket in terms of its incurring of expended legal costs that were necessarily going to be incurred by a trial - in order for John to surmount the high hurdle of evidentiary proof he needed to at a trial, under circumstances where an approved compromise could not be agreed.
My fifth point is that it would be a mistake for parties to look back at a judge's reasons delivered after a long trial, using the full lense of hindsight and to then proceed on the basis that now resolved disputed issues were easy, or that problematic issues as determined by the judge - were never the subject of any real uncertainty. It is all too easy to look back in hindsight to brush aside formerly complex matters as obvious or self-evident. That would be a major error. The pre trial issues in this case were never so overwhelmingly obvious as to be a subject of summary determination. There needed to be a trial, and it is misleading to look back now and render ex post facto assessments as to what now looks clear and what was not.
My sixth point is related to the second point I have already made, which is that John winning on his proprietary estoppel case was the dominant and consuming aspect of this trial and that it was no small thing for John to have achieved. The underlying problem as I have also said, was caused by Ron, essentially through him failing to honour promises made to John about the Bullsbrook farm, either prior to his death or under the terms of an effective will. In the circumstances, it was proper for John to establish - and he did establish - his case by his trial evidence on oath in the face of some legitimate cross-examination.
The seventh point is that it is unsatisfactory to resolve costs issues by reference to trying to place all the different issues into silos to then try and quantify them by some sort of arithmetic or empirical way. The costs exercise does not lend itself to precise arithmetical division, or unduly rigid issue apportionments. Instead, what is called for is a simpler broad sword approach that effectively will render substantive justice for the particular circumstances of the action, but without attempting to descend into some stratified dissection of all the various issues, in terms of separate weighting as regards achieving a just costs outcome.
My last point is that the work most Perth commercial lawyers undertake for many years has been charged to clients on the basis of an engagement under a fee agreement using time-costing aspects. That is simply a fact of life as to the way commercial litigation is overwhelmingly run. That has been so, essentially for all of my professional life in the law of over 40 years. It would be naive to proceed on any other basis in my view as regards AET and the lawyers it necessarily engaged to assist it in this action.

Ultimate costs evaluation

Weighing all those considerations on the present application and taking account of the parties' helpful written and oral submissions by counsel and the submitted evidence, I am of the end view that AET's approach under orders 1 and 2 of its minute of proposed costs orders is the more appropriate and should be implemented. I will incorporate those orders as sought by AET as follows (see folio 142). It reads:
1.The First Defendant's costs of the proceeding be paid from the Estate on an indemnity basis.
2.Save for order 1, there be no order as to costs.
Reaching this view, namely that the first defendant should be fully indemnified for its costs in acting as a professional trustee of Ron's estate, including for funds it has expended by reference to its engaged lawyers, I apply the approach by reference to the costs orders decision in Lathwell v Lathwell [2008] WASCA 256 (S). At [3], Pullin JA's observations endorsed a principle as was stated by Master of the Rolls, Lord Jessel, from Turner v Hancock (1882) 20 Ch D 303. There, the Master of the Rolls said (at 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.
Times are even more modern - but the principle holds. There are, of course, some exemptions to that principle and an equity text will, in fact, recount them at great length. But for the present circumstances, my view is that, having listened to the cross-examinations of the trial witnesses and evaluated the parties' positions and submissions during trial, AET, as the first defendant, effectively did the job required of it as trustee and acted properly at all times in this action.
Although John points to a so-called usual rule in terms of a successful party in litigation being awarded their taxed costs - for the present case my view is that AET ought to be indemnified for its costs. The required participation of a trustee, in a context of a proprietary estoppel claim as was ultimately established, lends itself to a broad costs order. This will be in terms of, first of all, a full indemnification of AET from out of the assets of the estate for the trustee, but second, that otherwise as between John and Fay in terms of their respective successes or the failure that Fay suffered on some issues - that overall such trial issues were relatively minor in the scheme of things. Consequently, a broad order as proposed by AET by its proposed order 2, would be appropriate in terms of there ultimately being no order as to costs towards John and Fay.

That is the extent of the first defendant's minute in relation to costs that at that end I accept. That is my ruling on trial costs.

Transfer application

I turn to the second major issue, which is the order sought by AET, but is opposed. I refer to the rival minutes of John and AET, by reference to order 2 of my orders of 14 December 2020. By that order 2, I had then ordered:
The first defendant shall do all things necessary to transfer to the plaintiff the Certificate of Titles comprising the Farm and all and any registration of ownership documentation for machinery, plant, livestock and vehicles on the Farm.
As seen, there were no caveats or qualifications in terms of subjecting the Farm to any equitable charge in favour of AET as trustee, or by any relief of that kind, in the way of any potential derogation away from the full force of the declared equitable ownership of John under order 1, and then by order 2 by the mandatory order requiring the transfer to him.
By his application via letter dated 29 April 2021 (folio 144) in alignment with the Rules of the Supreme Court 1971 (WA) O 42, John, represented by his lawyers Croftbridge, has sought a variation to order 2 of the December 2020 orders, namely that I add the words 'within 14 days after this order is made', after the word 'shall'. It is argued that this, in effect, is a legitimate invocation of the liberty to apply as was granted - with respect to the implementation of my orders as made on 14 December 2020. Further, the amendment would ensure AET complies with that order within 14 days of the date of the new order.
By its response to the plaintiff's application, AET submitted a rival minute (folio 149) now seeking to vary order 2, so it would read, after the word 'shall', by adding extra words:
... as soon as practicable following finalisation of the Estate's accounts and subject to abatement (if applicable) and the Estate's outstanding liabilities being satisfied.
Essentially, the proposed abatement issue clash represents fundamentally distinct points of view in relation to a use of the Bullsbrook property by AET.
The view of the first defendant, AET, is that notwithstanding the court's prior orders made vis-à-vis John's beneficial interest, that AET may make a legitimate recourse to that trust property - which it owns legally, to the extent the estate otherwise may find itself in need of more funds in order to meet liabilities. On AET's view, this should be the case even though the court may declare, (as I have already now declared) that in fact those farming properties are beneficially owned by John.
The counter-position of John is that the court has now finally determined after a trial that he is, in fact, the full beneficial owner of those Bullsbrook properties, by the engagement with an equitable proprietary estoppel. Accordingly, in the eyes of a court of equity, John says the person who holds or controls the legal ownership of the property (which will eventually be AET once the titles over the farming property are transferred from the name of Ron to AET, as the trustee of Ron's estate - with such transfer not yet occurring for various reasons including caveats owing to Fay) must afford full cognisance to the underlying ownership of John in the eyes of equity over such land.

Evaluation - transfer application

Weighing the parties' rival arguments, my view is that different factual situations involving the proving of a proprietary estoppel can be capable of delivering different results - as regards an asset subject to a proprietary estoppel being used to fund the additional expenses of a deceased estate.
As I indicated during dialogue with counsel - it may be, for instance, that if the promise of Ron to John, as was relied upon detrimentally by John had been different (ie, for example, I will leave the property to you in my will), that would be one thing as regards an estate enjoying some charge over the asset. However, that situation must be contrasted to a wholly different promise (ie, to leave you the farm some time after you turn 50 or 60, or at some age birthday which is reached). A slight change in the facts is capable of bearing on the equitable relief towards a promise that is ultimately not honoured.
I also raised in dialogue with counsel that the cause of action in equity for proprietary estoppel, which John has ultimately succeeded upon after trial, is more than just his establishment of the more fluid bare remedial constructive trust. John's successful establishment of a proprietary estoppel in his favour over the farm sees equity at its most powerful - declaring the ownership of property in favour of John in a way that effectively overcomes any shortcomings in the formal state of the legal title associated with the property.
If I am wrong about a prima facie assessment that the Bullsbrook property is now fully equitably owned by John (as was declared earlier under order 1 of my orders made on 14 December 2020) and so, is not vulnerable now to being used to fund estate expenses - then there is a second difficult obstacle AET cannot overcome. On 14 December 2020, after my reasons had been in the parties' hands for a week, and after they had held a reasonable opportunity to consider them and confer over them, the parties consented to the court issuing the order, seen as order 2 of the 14 December 2020 orders. That consent order was subsequently confirmed and extracted. There was no mistake or slip. It is now too late to recall that order.
In this respect, I refer to general principles associated with the effect extracted final orders (more particularly consent orders) as is discussed by the High Court in Autodesk v Dyason [No 2] (1993) 176 CLR 300; 111 ALR 385.
At that end then, I cannot, with respect, accept AET's base submission that order 9 of my 14 December 2020 orders - namely, that the parties have liberty to apply - can, in effect, let me give with the one hand to John, but then take away from him with the other, by exposing his Bullsbrook properties to a potential liability or charge for further costs of the estate in terms of its ongoing administration. That seems to me to be something well beyond an implementation of order 1 and order 2 under the liberty to apply that was given.
Consequently, for all those reasons I cannot accept the submission of AET and instead will accede to the plaintiff's application with a minor qualification. I will, as counsel came to accept, allow a period of 21 days from the making of the new order for the transfer of the relevant property to John to occur. That is my ruling on the plaintiff's transfer application.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
DM
Judicial Support Officer
28 JULY 2021