Molnar v Butas
[2017] VSC 298
•29 May 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S CI 2016 03185
BETWEEN:
| ANDRAS MOLNAR | Plaintiff |
| v | |
| ZOLTAN BUTAS (in his capacity as the executor of the estate of ROZALIA WRIGHT, deceased) | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 29 May 2017 |
CASE MAY BE CITED AS: | Molnar v Butas |
MEDIUM NEUTRAL CITATION: | [2017] VSC 298 |
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COSTS – Application by plaintiff to restrain the defendant’s previous solicitors from acting for defendant – Plaintiff seeks costs from the defendant’s previous solicitors on an indemnity basis – Defendant’s previous solicitors seek costs of responding to application.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Erhardt Lawyers | |
| For the Defendant | Griffin Law Firm | |
| For Ryans Law Offices | Ryans Law Offices |
HER HONOUR:
Introduction
The defendant is the executor and trustee of the will and estate of his mother, Rozalia Wright deceased. He is the deceased’s son and a beneficiary under her will. The defendant retained Ryans Law Offices (‘Ryans’) to act on his behalf as executor and trustee of the deceased’s estate.
The plaintiff is a beneficiary under the will of the deceased and her half brother.
An allegation of a conflict of interest on the part of Ryans was first made by the plaintiff’s solicitors in a letter dated 11 April 2016. The letter asserted the plaintiff ‘is or was’ a client of Mr Ryan of Ryans and that there was a ‘clear conflict of interest’ as Mr Ryan had previously advised the plaintiff that ‘in no circumstances can [the defendant] touch the monies of his mother’s estate (prior, we surmise, to the completed probate of same).’
Ryans denied there was an apparent or perceived conflict and sought clarification of the allegation around that time as the estate of the deceased was in a position to be distributed to the beneficiaries. By letter dated 12 May 2016, the plaintiff’s solicitors responded stating that Mr Ryan ‘has already acted on behalf of our client … and his partner’. Ryans again sought clarification and also advised that it did not act for the plaintiff.
By letter dated 30 May 2016, the plaintiff’s solicitors maintained there was a conflict of interest for the following reasons:
(a) In February 2016, the plaintiff attended Ryans’ office with his partner and Mr Ryan said he could not act for both the plaintiff and the defendant;
(b) On 24 February 2016, Mr Ryan asked for the telephone number of the deceased’s accountant which was provided to him by Mr Abe Aliu;[1]
(c) On 1 February 2016, Mr Ryan prepared a will for the plaintiff’s partner.
[1]Mr Aliu holds a power of attorney for the plaintiff.
Ryans accept that the plaintiff attended on Mr Ryan with his partner when she gave instructions for her will. At that attendance, the plaintiff said he wanted to revoke his will and Mr Ryan provided advice as to the effect of a revocation of a will and the plaintiff signed a brief document revoking any prior wills. Ryans also accept that it sought clarification of the assets of the deceased, and that the plaintiff, not Mr Aliu, provided Ryans with the name of the deceased’s accountant.
Ryans state that at the times the plaintiff saw or was in contact with Mr Ryan, no reference was made by the plaintiff that he was proposing to seek further provision from the estate or claim a constructive trust over the deceased’s property.
When the allegation of a conflict of interest was raised, Ryans undertook an internal review of all relevant files, sought counsel’s advice and contacted the Ethics Advice Line of the Law Institute of Victoria. All advice received by Ryans was in the negative on the conflict of interest issue.
On 15 June 2016, the plaintiff lodged a caveat over the deceased’s property and, on 11 August 2016, commenced this proceeding seeking relief that includes a declaration that the deceased’s property is held on trust for him.
On 27 October 2016, the plaintiff filed a summons seeking to restrain Ryans from acting for the defendant in the proceeding on the basis of the alleged conflict of interest. The application was returnable on 18 November 2016. The plaintiff did not explain the reasons for the delay of approximately five months in making the restraint application.
On 17 November 2016, the defendant instructed Ryans not to defend the application and to cease acting for him. The reasons for his instructions were commercial.
At 12.42 pm on the same day, Ryans sent an email to the plaintiff’s solicitors attaching an unfiled notice of solicitor ceasing to act for the defendant and advised that the application on 18 November 2016 was unnecessary. Ryans also requested that the application be withdrawn so as to avoid unnecessary costs being incurred by both parties. In response to an email received from the plaintiff’s lawyers subsequent to this email, Ryans again advised it no longer acted for the defendant and attached the original email that invited the plaintiff’s solicitors to withdraw the application.
Ryans filed the notice of solicitor ceasing to act at 9.14 am on 18 November 2017.
The plaintiff’s solicitors did not withdraw the application. The hearing on 18 November 2016 was adjourned to 25 November 2016. At the second hearing, the plaintiff abandoned its position of seeking costs against the defendant personally and instead sought costs against Ryans. The plaintiff’s solicitors did not notify Ryans of the claim for costs against it, with Ryans becoming aware of the claim on 2 December 2016 on receipt of the plaintiff’s costs submissions.
Plaintiff’s application
The plaintiff seeks an order that Ryans personally pay his costs of and incidental to his application on an indemnity basis, claimed at $13,911.67.
Ryans’ response to plaintiff’s application
Ryans oppose the orders sought by the plaintiff and, in any event, dispute the quantum of the claimed costs.
It also seeks an order that the plaintiff or the plaintiff’s solicitors pay the costs incurred by Ryans in responding to the plaintiff’s application for costs.
The quantum of the plaintiff’s costs
The issue of the quantum of costs claimed by the plaintiff only becomes relevant if the plaintiff is successful in his application for costs.
The plaintiff’s costs of and incidental to the restraint application includes all correspondence with Ryans from April 2016 to the filing of the application. The correspondence that addresses the conflict of interest allegation is dated before the plaintiff’s proceeding commenced in June 2016. Between 5 to 20 per cent of that correspondence concerns the conflict issue, with the remainder dealing with the administration of the estate. Costs for work in relation to the administration of the estate cannot be considered costs of and incidental of the restraint application.
The plaintiff has claimed costs for the period after Ryans’ notice of ceasing to act was filed. These costs include a ‘conference before application’ at $551 and a fee of $2,753 for the plaintiff’s solicitor to attend at court on 18 November 2016. The plaintiff has also claimed costs of $1,422.20 for a letter to Ryans dated 24 November 2016. This letter has not been provided to the Court and its contents are unknown. Neither Ryans nor the plaintiff’s solicitors refer to this letter in their submissions. The plaintiff has also claimed costs of $551 for a conference on 24 November 2016, being the day before the adjourned date of the plaintiff’s summons, instructing counsel at $463.20 on 25 November 2016, travelling to court at $194.88 and a fee of $2,753 for ‘solicitor agent as counsel’.
The claimed costs for work done after the filing of the notice ceasing to act were incurred as a result of the plaintiff’s actions. The plaintiff was given sufficient notice that Ryans no longer acted for the defendant. As the plaintiff wished to pursue the issue of costs, the plaintiff’s solicitors should have adjourned the hearing of the application on the papers and sought that the questions of costs be dealt with on the papers. The claimed costs after the filing of the notice of ceasing to act are not reasonable in those circumstances.
The plaintiff claims a 20 per cent loading for skill, care and attention for the majority of items. A loading may be factored into costs pursuant to item 17 of the scale, but it is generally calculated at a much lower rate of between 8 to 12 per cent. A higher loading is not warranted in respect of this application.
On balance, the plaintiff’s costs claimed at $13,911.67 are grossly excessive.
Conflict of interest allegations against Ryans
A claim that another solicitor is knowingly in a conflict of interest situation is a serious allegation. It must be particularised so that it can be assessed and responded to in a meaningful manner. The correspondence from the plaintiff’s solicitors on 11 April, 13 May and 30 May 2016 failed to outline the conflict of interest claim and failed to particularise the grounds or surrounding circumstances that founded the claim.
Even if Ryans had told the plaintiff that the defendant, as executor of the deceased’s estate, could not distribute the estate’s assets until probate had been completed, this information is the usual information that is provided to beneficiaries in the course of the administration of an estate and is unlikely to be characterised as legal advice. If it is characterised as legal advice within a solicitor-client relationship, it does not constitute relevant confidential information and does not give rise to a conflict of interest. Further, neither Ryans requesting the telephone number of the deceased’s accountant nor their preparation of a will for the plaintiff’s partner are, without more, sufficient to claim a conflict of interest.
In an affidavit by the plaintiff’s solicitor sworn 26 October 2016, Mr Hardy Erhardt deposed that in 2015 the plaintiff discussed the defendant’s conduct towards the plaintiff with Ryans and that Ryans advised him that it could not act for either the plaintiff or the defendant ‘given the relationships’ and the plaintiff was charged $150 for this advice. No evidence of the alleged charge of $150 or payment was exhibited by Mr Erhardt and no explanation is given for the absence of an affidavit from the plaintiff on this issue.
Ms Ayse Sahinbas, solicitor at Ryans, deposed that she searched the records of Ryans and did not find any account rendered to the plaintiff and found no evidence of receipt of any money from the plaintiff. The Court is not satisfied that Ryans provided this advice to the plaintiff or that the plaintiff was charged $150.
Notably, it is evident in the three letters available to the Court that, at the same time as claiming that Ryans was in a position of conflict, the plaintiff’s solicitors continued to communicate with Ryans as the defendant’s solicitors in advancing their client’s position in relation to other disputes concerning the estate of the deceased.
I am satisfied that Ryans acted reasonably in assessing the claim of conflict of interest against it, including taking independent advice on the issue. The plaintiff’s submission that the fact that Ryans was instructed to file a notice of ceasing to act for the defendant was ‘a capitulation’ by Ryans or an abandonment of the defendant is rejected. The defendant made that decision for sound commercial reasons.The plaintiff’s submission that Ryans refused to accept it was in a conflict of interest is not borne out by the evidence.
Further, Ryans had no knowledge of the application for costs made against it until it received the plaintiff’s written submissions. This failure was not explained by the plaintiff’s solicitors.
Other matters relied on by the plaintiff
The plaintiffs seek the costs of the application on an indemnity basis. In claiming indemnity costs, the plaintiff’s submissions set out an awareness of the applicable principles in seeking costs against a solicitor yet they fail to identify the principles they relied upon, such as an ulterior purpose, abuse of process, or an unreasonable continuation of proceedings which have little or no prospects of success. If the plaintiff had been successful in his claim for costs, there would be no basis for an order for indemnity costs.
The plaintiff’s submissions sought to rely on contraventions of sections 16, 18 and 20 of the Civil Procedure Act 2010 and breach of the Legal Profession Uniform Law Australian Solicitors’ Conduct Rules 2015 concerning direct contact of clients. No application for the costs against Ryans was made under the Civil Procedure Act 2010. An alleged breach of the conduct rules is misconceived in the circumstances of this application in this Court.
Conclusions
In my view, the application to restrain Ryans from acting for the defendant should not have been made. The claim of conflict of interest was not particularised in a meaningful manner. If the application had been heard based on the allegations set out in the letters from the plaintiff’s solicitors, it would have been highly likely that it would be dismissed. For these reasons, the plaintiff’s application for costs should be dismissed and the plaintiff should pay Ryans’ costs of the application.
The plaintiff’s application to restrain Ryans has caused delay, wasted costs and has wasted the time of the defendant and the Court. This is the type of conduct that falls within the circumstances described in the cases dealing with indemnity costs orders.[2] In my view, Ryans’ costs should be assessed on an indemnity basis, rather than on the standard basis.
[2]Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (14 June 2001); Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 (14 September 2012), [12]-[18]. The decision at first instance was affirmed by the appellate decision on the issue of special costs: Sunland Waterfront (BVI) Ltd & Anor v Prudentia Investments Pty Ltd & Ors [2013] VSCA 237 (6 September 2013) [538]–[551].
Orders
Accordingly, I will order as follows:
(a) The plaintiff’s application for costs of the summons filed 27 October 2016 be dismissed; and
(b) The costs of Ryans of and incidental to preparing an affidavit and the submissions in response to the plaintiff’s claim for costs be paid by the plaintiff on an indemnity basis, to be taxed in default of agreement.
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