Leonoff v Addario & Ors

[2007] NSWSC 285

CITATION:	Leonoff v Addario & Ors [2007] NSWSC 285
HEARING DATE(S):	23 February 2007
JURISDICTION:	Equity Division
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	23 February 2007
DECISION:	Declaration that after payment of costs of sale, proceeds to be divided into five shares (one for each residuary beneficiary), legacy to be reimbursed with interest from shares of two defaulting executors.
CATCHWORDS:	EXECUTORS – Administration of estates – where joint executors in dispute as to application of proceeds of estate property - where two of three joint executors had appropriated for own benefit sum set aside for legatee – costs.
LEGISLATION CITED:	(NSW) Conveyancing Act, s 66G (NSW) Supreme Court Rules Pt 68, r 2
PARTIES:	Laura Alexandra Leonoff (plaintiff) Anna Addario (first defendant) Ludmila Leonoff (second defendant) Vera Campobossi (third defendant) Natalie Leonoff (fourth defendant)
FILE NUMBER(S):	SC 4605/06
COUNSEL:	Laura Leonoff (in person) (plaintiff) JJ Young (second defendant)
SOLICITORS:	Webster O'Halloran (second defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Friday 23 February 2007

4605/06 Laura Alexandra Leonoff v Anna Addario & 3 Ors (Costs)

JUDGMENT (ex tempore)

1 HIS HONOUR: The plaintiff Laura Alexandra Leonoff, the first defendant Anna Addario, the second defendant Ludmila Leonoff, the third defendant Vera Campobossi and the fourth defendant Natalie Leonoff are the children of the late Linda Rosley who died on 28 November 1983, leaving a will dated 17 May 1983, probate of which was granted on 22 April 1985 to Laura, Anna and Ludmila, the executors named in the will, by which she gave a legacy of $5,000 to her granddaughter (Laura's daughter) Alana, empowering her trustees to invest the legacy and apply the whole or part for the benefit, maintenance and education of Alana while she remained a minor, with authority to pay it to her testamentary guardians, Anna and Ludmila, on terms that they open a savings bank account in the name of Alana and hand the bank book to the testamentary guardians, with any drawings from the bank account opened in Alana's name by her testamentary guardians to be applied for her benefit, maintenance and education. The deceased gave, devised and bequeathed the rest and residue of her estate after payment of all funeral and testamentary expenses to her daughters Laura, Ludmila, Vera, Anna, and Natalie, to be divided equally amongst them. So far as I can now ascertain, the estate comprised a property at 69 Courallie Avenue Homebush, at the time of probate said to be worth $70,000; a home unit at 2/237 Raglan Street, Mosman, then said to be worth $130,000; furniture at Homebush, said then to be worth $3,000; jewellery, said to be worth $2,000; $63 in current accounts; $1,781 on deposit, and $513 in taxation credits. The deceased also held upon trust for Alana, Ludmila and Vera various other sums in bank accounts.

2 The Mosman unit was sold in or about 1985 for $120,000. Out of the proceeds of that sale, the legacy of $5,000 for Alana was apparently paid into an account opened with the ANZ Bank at its Martin Place branch by the testamentary guardians nominated for Alana in the deceased's will, namely, Anna and Ludmila. There is some difference in the evidences as to when this took place, but the most conservative view, which is that deposed to by Ludmila in her affidavit, is that in 1989, she caused a savings account to be opened - she says, at the Royal Bank - and deposited therein the sum of $5,000 for payment of the bequest to Alana. I do not think that there can be any sensible doubt that when the $5,000 dollars was separated from the rest of the estate funds and paid into whatever account it was paid into, it was then appropriated to the legacy in the hands of the testamentary guardians.

3 In or about 1986, Anna and Ludmila, who also happened to be the testamentary guardians of Alana, commenced proceedings against Laura in which they sought Laura's removal as an executor and trustee of the deceased's will. There is no evidence before me as to the terms on which that action was ultimately disposed of, but it is clear enough that it failed, because Laura remains an executor; and, from some of the contemporaneous correspondence, it seems likely that it was not pursued further after evidence had been given by Mr W V Windeyer, as his Honour then was, in Laura’s case, following which the proceedings were adjourned with liberty to restore on five days' notice. There is no evidence that any order was made which would have entitled Anna and Ludmila to recover their costs of those proceedings out of the estate.

4 It seems that the solicitor who acted for Anna and Ludmila in those proceedings, one Maurice Marshan, was not paid by them, and he obtained a consent judgment against them in the Local Court for his costs on 30 August 1989. They did not honour an undertaking to pay the judgment debt by instalments. Ultimately, after extensive attempts to locate them, Mr Marshan discovered in 1992 an account with the ANZ Bank that was in their name. On 3 February 1993, he had a garnishee order issued out of the Local Court at Balmain in favour of his firm as judgment creditor against Anna and Ludmila as judgment debtor and the Australia and New Zealand Banking Group Limited as garnishee, attaching debts up to the amount of $8,588 to answer the judgment. It is not in dispute and, indeed, Ludmila herself deposes, that the subject of that garnishee was the account into which the $5,000 for Alana had been paid. Although Ludmila deposes that that was appropriated in payment of legal costs and administering the estate, it will be apparent from the history I have so far set out that this does not appear to be so; rather, it appears to have been in satisfaction of legal costs owed by Anna and Ludmila to their solicitor for acting for them in the proceedings for the removal of Laura, and there is no evidence that they were entitled to charge those costs against the estate. It therefore seems quite plain that Anna and Ludmila have received from the estate a benefit at the expense of the beneficiary Alana for which in the ultimate administration of the estate they must account.

5 Mr Young, who appears for Ludmila, has helpfully provided an interest calculation on $5,000 adopting an average rate of 10 per cent over the period. I think, so far as rate is concerned, that is a fair approach. However, having regard to the evidence that when Laura checked the account in 1993 all that remained was $11.72, that the garnishee order authorised and required the payment of $8,588, and that Laura's affidavit of 20 February 2007 deposes to $7,610 having been garnisheed, which figure is corroborated by a bank account, I should conclude that the amount garnisheed was plainly $7,610. I observe that account is styled Leonoff A Addario, Leonoff L A, and the addresses are A Addario Leonoff and LA Leonoff. There are two possible explanations for this. One is that the account was in the name of the three executrices Anna Addario, Ludmila Leonoff and Laura Leonoff; another, which tends to be supported by the way in which initials and names are arranged, is that the initial Leonoff is in fact taking the A from the end of the second line, and that that is Alana, followed by A Addario and Ludmila Leonoff. But even if the account was in the name of the three executrices I do not think it makes the slightest difference, because the $5,000 or $7,610 which was beneficially property of Alana was taken to satisfy a liability not of the three executrices but of two of them, nor in their capacity as executors.

6 Next, it seems to me that, although Mr Young's calculation is for a period of 13 years, from February 1993 to February 2007 is according to my calculations, 14 years; I therefore propose to allow interest at 10 per cent per annum for a period of 14 years on a principal sum of $7,610.

7 A dispute arose between Laura, on the one hand, and Ludmila, on the other, as to whether the Homebush property which Laura continued to occupy after their mother's death should be sold, or whether Laura should be permitted to purchase it. That dispute continued unresolved for many years - indeed, for decades - and the relationship between the parties deteriorated, as did the condition of the property and the furnishings and the contents. On the evidence, I conclude that the furnishings and contents have no significant market value.

8 It was in that context that on 1 September 2006 Laura filed a summons in this court seeking injunctive relief restraining the defendants from damaging the estate's property or her own personal effects and furniture and, in effect, a non molestation order. Ludmila filed a cross-claim on 18 September 2006 seeking, in effect, the removal of Laura as a trustee of the estate and the sale of the Homebush property. On 19 September 2006 I made orders for the sale of the Homebush property pursuant to the (NSW) Conveyancing Act, s 66G, appointing Perpetual Trustee Company Limited as trustee for that purpose. That sale has now been completed, for a total price of $526,000, and after payment of agent's commission, advertising fees, rubbish removal and installation of a smoke detector there remains standing to the credit of the estate with Perpetual a sum of $509,862.78.

9 Although in their inception these proceedings were of a different character, they really now take the nature of an administration suit. (NSW) Supreme Court Rules Pt 68, r 2, provide that proceedings may be brought for any relief which could be granted in administration proceedings and for the determination of any question which could be determined in such proceedings, including any question as to the rights or interests of a person claiming to be a creditor of the estate or entitled under the will or on the intestacy of a deceased person. Proceedings may be brought for directing any act to be done in the administration of an estate which the court could order to be done if the estate were being administered under the direction of the court. The present proceedings now fall within those rules.

10 Essentially there remain two issues, there being evidence that, save for the application of the proceeds of sale, the payment of associated costs and the satisfaction of Alana's legacy, nothing else remains to be done in the administration of the estate. I am prepared to accept that, more than 20 years having elapsed, it would by now have become apparent if there were any outstanding creditors of the deceased.

11 So far as the costs of the sale are concerned, Perpetual is a creditor of the estate within the rules to which I have referred. An affidavit has been sworn by an officer of Perpetual which annexes vouchers for the various disbursements incurred, shows the basis upon which Perpetual's fees are calculated, and includes professional legal fees of Perpetual's solicitors, Bartier Perry; the total amount is $21,725.37, of which about $11,557.37 are the fees of Bartier Perry. Bartier Perry's invoices are lump sum invoices, but they contain some narrative describing the work done, which is charged in accordance with a costs agreement. It may be that Perpetual would be entitled to have Bartier Perry's costs assessed but, as things stand, Perpetual has incurred a liability to Bartier Perry in that amount and I ought to proceed on the basis that Perpetual proposes to pay it, it not being evidently or manifestly excessive in the circumstances. Otherwise, the basis of Perpetual's charges are clear. Many are disbursements, and its trustee fee is in accordance with the basis upon which it agreed to act. Ms Laura Leonoff has asked that I defer consideration of Perpetual's fees to allow them to be further investigated. It seems to me that it is improbable in the extreme that the costs and delay which would be occasioned by any such further investigation would be justified by any reduction that might be achieved in that amount. The administration of this estate has taken not much shorter a period than the administration in Jarndyce v Jarndyce, and ought to be brought to an end now. I would not do so if it did not appear on their face that Perpetual's charges were reasonable but, having carefully examined the affidavit and the vouchers, I conclude that Perpetual's charges do appear to be reasonable, and I will authorise their payment of the balance of proceeds of sale.

12 The second defendant applies for her costs of the proceedings. It seems to me that the second defendant's costs fall within two categories. On the application for the appointment of trustees for sale of the Homebush property, the prima facie rule is that the costs of an application under section 66G are paid out of the proceeds of sale. It was obviously necessary that this matter be brought to a head and an order obtained for the sale of the property, and I see no reason why the second defendant should not have her costs of the application for sale.

13 The more difficult question is whether her costs, to the extent that they go beyond that, should be borne out of the proceeds of sale or should be to her own account or borne by one of the other parties. Although it is a somewhat rough hewn approach, it can be said from Ludmila's affidavit that her costs up to 22 September 2006, including counsel's fees, which essentially were the costs of the obtaining the order for sale, amount to $7,512.62. Her additional costs since then amount to a further $4,000, and the filing fee on the cross-claim, which was not included in the original bill. The filing fee on the cross-claim was a necessary cost of obtaining the order for sale and I will treat it part of the original bill, bringing the costs of obtaining the order for sale to a total of $8,173.62.

14 The remaining costs are essentially related to today's application. In that respect, the second defendant's motion was necessary to bring before the court the application for the payment out of the proceeds, first to Perpetual, secondly, to the beneficiaries and thirdly in respect of her own costs of obtaining the order. Orders substantially to the effect of those sought in that notice of motion will be made. Although the second defendant did not entirely succeed on the argument in respect of the legacy to Alana, overall it seems to me that the notice of motion and costs incurred today were a necessary incident of winding up the estate, and she should have her costs of doing so out of the estate.

15 Accordingly, I declare that the proceeds of sale of the Homebush property ought to be applied in the following manner and priority:

1. In payment to Perpetual of its costs and fees, in the sum of $24,725.37;
2. In payment to Webster O'Halloran, the solicitors for the second defendant, of the sum of $12,173.62;
3. In division of the balance then remaining into five equal shares and payment of one such share each to Laura, Vera, and Natalie;
4. In payment from the two remaining shares to Alana of the sum of $18,264;
5. In payment of the balance of those two remaining shares to Ludmila and Anna equally.

16 I order that each of the parties do all things, give all consents and authorities and execute all documents necessary or convenient to procure and facilitate the distribution of the said funds in accordance with order 1.

17 After I delivered the above reasons, Ms Laura Leonoff sought an additional order to the effect that there be paid out of the estate before division a sum of approximately $450 being professional fees and disbursements to James Pappas, solicitor, contained in a fee note dated 2 February 2007, in respect of his having acted for Ms Leonoff concerning an option proposed to be granted to one Mr Kuwarti for the sale of the Homebush property. It was Mr Kuwarti who ultimately purchased the property when Perpetual sold it. The costs in question are part of a total of $3,109 for services rendered by Mr Pappas, largely for advising Ms Leonoff separately. There is no evidence that Mr Pappas was engaged on behalf of the estate. Rather, it seems he was engaged by Laura alone. I have the gravest doubt that, even if an adjournment were granted, ultimately Laura could succeed on this application, but the application was not contained in the notice of motion Laura filed on 13 February 2007 in accordance with my previous directions, nor was it contained in her subsequent notice of motion which over objection I granted leave to file in court and made returnable and have otherwise dealt with today, although it was referred to at least in passing in her supporting affidavit of 20 February 2007 again, served out of time which contains Mr Pappas's bill as the last annexure.

18 The reason why Ludmila has obtained an order that the costs of her application to this court be paid out of the proceeds of sale is that where a party brings proceedings for the appointment of trustees for sale of jointly held property, the practice of the court is to treat the costs of the application as one of the incidents of joint ownership of property so that the costs are borne by all of the parties out of the proceeds. It is not a question of one of the parties or one of the beneficiaries being ordered to pay Ludmila's costs, but a recognition that in order to realise the property at all, the application had to be made and the costs of making that application are recoverable out of the proceeds of sale. The costs of one of several executors separately instructing a solicitor about a potential sale is quite a different matter from an application to the court for an order for sale. I am afraid, therefore, that even if I acceded to the application which Mr Young foreshadows he would otherwise make for an adjournment. I doubt that the position would be any different. In any event, the costs of an adjournment are simply not justified when what is in question is a fraction of the sum of $450. I am afraid, therefore, that I will not make an order for the payment of Laura’s claimed costs of $450 out of the proceeds of sale.

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