Molnar v Butas (No 4)

[2018] VSC 165

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST

S CI 2017 03738

IN THE MATTER of the Estate of ROZALIA WRIGHT, deceased

ANDREAS 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 JUDGMENT:	16 April 2018
CASE MAY BE CITED AS:	Molnar v Butas (No 4)
MEDIUM NEUTRAL CITATION:	[2018] VSC 165

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COSTS — Where plaintiff’s application to remove executor of deceased’s estate unsuccessful — Where application contrived and without a proper basis — Costs to follow the event — Indemnity costs ordered — No point of principle.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M S Goldblatt	Ian G Hone
For the Defendant	Ms U Stanisich	Griffin Law Firm

HER HONOUR:

1. Rozalia Wright died on 5 September 2015, aged 78 years.  She was survived by her son (‘the defendant’) and her half-brother (‘the plaintiff’).  The estate of the deceased was left to the defendant, his wife and the plaintiff as tenants in common in equal shares.  Probate of the deceased’s will dated 7 May 2006 was granted to the defendant on 15 September 2016.

1. On 22 November 2017, the Court dismissed the plaintiff’s application for the removal of the defendant as the executor of the estate of the deceased.  The Court determined that the plaintiff’s grounds for the removal of the defendant as the executor of the estate were contrived, without substance and there was no proper basis for the removal of the defendant.[1]

   [1]Molnar v Butas (No 3) [2017] VSC 711 (22 November 2017) [35].

1. The parties were unable to agree on the costs of the application and written submissions were subsequently filed with the Court.

Orders sought by the parties

1. The plaintiff seeks for the costs of both the plaintiff and the defendant to be borne by the estate, assessed on the standard basis.

1. The defendant seeks orders that the plaintiff personally pay the defendant’s costs of and incidental to the proceeding, assessed on an indemnity basis.

Plaintiff’s submissions

1. The plaintiff submits that where a beneficiary of an estate makes an application, the common course is for the costs to be borne by the estate.  The plaintiff submits he had real and legitimate grounds to claim that the defendant had misconducted himself as the executor of the estate.  Notwithstanding that the Court determined there was no proper basis upon which to bring the application and that the application was contrived and without substance, these views arose with the benefit of hindsight and the explanations and submissions of the defendant, which were not available to the plaintiff when he instituted the application.

Defendant’s submissions

1. The defendant submits he was the successful party in resisting the application.  Further, there are no special circumstances in this proceeding that displace the usual rule that costs follow the event and the defendant’s costs should be paid by the plaintiff. 

1. The prima facie position is that costs be assessed on the standard basis. Rule 63.28 of the Supreme Court (General Civil Procedure) Rules 2015 provides that the Court may award costs to be taxed on an indemnity basis where there are unusual or special circumstances.  Special circumstances include conduct that causes loss of time to the Court and to other parties, commencing or continuing proceedings for an ulterior motive and commencing or continuing a proceeding in wilful disregard of known facts or clearly established law.

1. The defendant submits that the special circumstances that justify an order that the plaintiff pay the defendant’s costs on an indemnity basis are that the application caused the defendant to be embroiled in further unnecessary litigation, was misconceived, was without a proper basis and wasted costs and the Court’s time.

Costs principles

1. The usual order as to costs is that a successful party in litigation is entitled to an award of costs in its favour and the unsuccessful party bears the liability for the costs of the unsuccessful litigation.[2]  The prima facie position in respect of costs in litigation is for the costs to be assessed on the standard basis.  The purpose of a costs order is to compensate the successful party and not to punish the unsuccessful party.

   [2]            Oshlack v Richmond River Council (1998) 193 CLR 72, 97 [67].

1. A special costs order will only be made where the proceeding exhibits a special or unusual feature or special circumstances.  Each proceeding must be considered on its own facts and, specifically, whether those facts support the making of a special order for costs.  In Ugly Tribe v Sikola, Harper J identified the following circumstances as warranting a special costs order, noting that the categories of circumstances are not closed:

(a)        the making of an allegation, known to be false, that the opposite party is guilty of fraud;

(b)        the making of an irrelevant allegation of fraud;

(c)        conduct which causes loss of time to the court and to other parties;

(d)       the commencement or continuation of proceedings for an ulterior motive;

(e)        conduct which amounts to a contempt of court;

(f)         the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law; and

(g)        the failure until after the commencement of the trial, and without explanation, to discover documents, the timely discovery of which would have considerably shortened and very possibly avoided the trial.[3]

[3]Ugly TribeCo Pty Ltd v Sikola [2001] VSC 189 (14 June 2001) [7]–[8] (citations omitted). See also Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 (14 September 2012). The decision at first instance was affirmed by the appellate decision on the issue of special costs: Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd [2013] VSCA 237 (6 September 2013) [538]–[551].

1. Where an action has been commenced or pursued in circumstances where an applicant, properly advised, should have known he had no chance of success it may be presumed to have been commenced or continued for some ulterior motive or in wilful disregard of the known facts or established law.  It is not a prerequisite to the power to award special costs that a collateral purpose or a species of fraud be established.  The discretion is enlivened when, for whatever reason, a litigant persists in, what on proper consideration should be seen to be, a hopeless case.[4]

   [4]G E Dal Pont, Law of Costs (LexisNexis Butterworths, 3^rd ed, 2013) 549–50 [16.51].

1. Practitioners and litigants must also have regard to the overarching obligations contained in the Civil Procedure Act 2010 and the overarching purpose of the Act to ‘facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’.[5]  These obligations include not making a claim that does not have a proper basis.[6]

   [5]Civil Procedure Act 2010, s 7(1).

   [6]Civil Procedure Act 2010, s 18.

Consideration

1. The plaintiff‘s submission that where a beneficiary of an estate makes an application the common course is for the costs to be borne by the estate is inaccurate.  The usual costs principles apply to an application for the removal of an executor by a beneficiary.  There are no grounds for the plaintiff’s costs to be paid by the estate in view of the Court’s reasons for dismissing the plaintiff’s removal application.  To order that the costs of the application be paid out of the estate would unduly deplete the assets of the estate and reward the plaintiff notwithstanding that his application was dismissed.

1. The plaintiff’s submission that the result of the application was reached by the Court on material that was not available to him when he commenced the application is misconceived, having regard to the overarching obligations that apply to the plaintiff, his solicitor and counsel, in particular, the obligation to not make a claim that does not have a proper basis.

1. The plaintiff’s application falls within the range of circumstances that justify a special costs order being made as his application was contrived, without substance and did not have a proper basis.

1. Accordingly, the Court will order that the plaintiff personally pay the defendant’s costs of and incidental to the proceeding, to be taxed on an indemnity basis in default of agreement, and the plaintiff personally pay his own costs.