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Murdocca v Murdocca (No 2)

Murdocca v Murdocca (No 2)

Case [2002] NSWSC 505 25 June 2002

Equitable Personal Obligation

Unjust Enrichment

Testamentary Expenses

Costs

Litigation Concerning Deceased Estates

Equity

Succession Law

Civil Litigation & Procedure

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CITATION: Murdocca v Murdocca (No2) [2002] NSWSC 505

CURRENT JURISDICTION: Equity

FILE NUMBER(S): SC 3726/00

HEARING DATE(S): 16 May 2002

JUDGMENT DATE: 25 June 2002

PARTIES :

Cosimo Murdocca (Plaintiff)
Antonio Murdocca (Second Defendant)

JUDGMENT OF: Campbell J

COUNSEL : C Harris (Plaintiff)
D Marks (Second Defendant)

SOLICITORS: Business Law Office (Plaintiff)
Roderick B Harris & Co (Second Defendant)

CATCHWORDS: EQUITY - general principles and maxims of equity - interest payable when late performance of equitable personal obligation - effect on payment of interest of payee's conduct causing the delay in performance of equitable personal obligation - appropriate rate of interest - SUCCESSION - EXECUTORS AND ADMINISTRATORS - proceedings to enforce transfer of specific devise of land - construction of will needed to decide plaintiff's entitlement to the devise - whether costs of proceedings are testamentary expenses - principles in accord with which costs of litigation concerning deceased estates are awarded - how those principle interact with rules for order of application of assets in administration of estates - present status of practice established by Patching v Barnett [1907] 2 Ch 154 - present status of approach to costs based on Roberts v Graham (1917) 17 SR (NSW) 676 - PROCEDURE - costs - litigation concerning construction of will

LEGISLATION CITED: Equity Act 1901
Government of Ireland Act 1920 (UK)
Land Transfer Act 1897 (UK)
Supreme Court Act 1970
Trustee Act 1925
Wills, Probate and Administration Act 1898

CASES CITED: Adam v Mullen, Holland J, Supreme Court of NSW, 15 December 1976, unreported
Allen v Attorney General (1914) 15 SR (NSW) 41
Attorney General for New South Wales v Metcalfe (1904) 1 CLR 421
Ballard v Shutt (1880) 15 Ch D 122
Davies v Littlejohn (1923) 34 CLR 174
Fowler v Nield (1961) SR (NSW) 152
Hagan v Waterhouse (1994) 34 NSWLR 308
Hermann v Charny [1976] 1 NSWLR 261
Higstrim v Ray (1895) 16 NSWLR (Eq) 1
Hungerfords v Walker (1989) 171 CLR 125
In Re Betts; Doughty v Walker [1907] 2 Ch 149
In Re Buckton; Buckton v Buckton [1907] 2 Ch 406
In Re Cunningham; Sprowle v Quested (1914) 31 WN (NSW) 44
In Re Drax; Savile v Drax [1903] 1 Ch 781
In Re Groom [1897] 2 Ch 407
In Re Hall-Dare; Le Marchant v Lee Warner [1916] 1 Ch 272
In Re Jones; Elgood v Kinderley [1902] 1 Ch 92
In Re Stone; Read v Dubua (1936) 36 SR (NSW) 508
In Re White; White v White (1910) 10 SR (NSW) 304
Lawrence v Broderick (1974) 1 BPR 9115
Lloyd v Frape (1922) 23 SR (NSW) 11
McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623
Metcalfe v O'Kennedy (2) (1904) 4 SR (NSW) 633
Moran v House (1924) 35 CLR 60
Morgan Equipment Company v Rodgers [No.2] (1993) 32 NSWLR 467
Muller v Marriott (1921) 22 SR (NSW) 100
Murdocca v Murdocca [2002] NSWSC 159
O'Brien v Ritchie (1931) 48 WN (NSW) 85
Patching v Barnett [1907] 2 Ch 154
Perpetual Trustee Co Ltd v Paling (1924) 25 SR (NSW) 56
Perpetual Trustee Company (Limited) v Thomas (1942) 59 WN (NSW) 100
Re Rooke; Jeans v Gatehouse [1933] Ch 970
Robertson v Graham (1917) 17 SR (NSW) 676
Sharp v Lush (1879) 10 Ch D 468
Trustees Executors and Agency Co Ltd v Ramsay (1920) 27 CLR 279
Wallersteiner v Moir [No.2] [1975] 1 QB 373
Watson v Ralph (1982) 148 CLR 646
Wyndham v Mackenzie (1918) 25 CLR 172

DECISION: Interest awarded, at Schedule J Supreme Court rates; Principles appropriate to adversary litigation applied in making costs order; Orders made in paragraph 82 judgment.

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

25 JUNE 2002

3726/00 COSIMO MURDOCCA v ANTONIO MURDOCCA & ANOR

JUDGMENT – (Interest and Costs)

1 HIS HONOUR: I gave judgment in this matter on 27 March 2002 (Murdocca v Murdocca [2002] NSWSC 159). On 16 May 2002 the matter was listed before me again to determine questions of costs. On that occasion, counsel for Antonio made application for certain other orders. I reserved judgment concerning some of the applications which were made, namely those concerning interest, and costs as between Cosimo and Antonio.

Interest on Unpaid Amount Which There is Equitable Personal Obligation to Pay?

2 Counsel for Antonio made application for an order that Cosimo should pay interest on the sum of $512,500, from 29 December 1998 until the date of payment.

3 It is the effect of my earlier judgment that, on 29 December 1998 Cosimo became entitled, under Clause 5 of his father’s will, to the whole of the Windsor Road property, subject to an equitable personal obligation to pay Antonio $512,500. From that date, Cosimo stopped making rental payments to Antoni, which Clause 5 obliged him to pay for the part of the Windsor Road property which comprised the Testator’s home.

4 I have set out, in paragraphs 45 and following of my earlier judgment, the sequence of events, concerning proposed transfer of the land, after December 1998. In essence, Cosimo promptly required the transfer of the land to him, and the taking of appropriate valuations, but Antonio refused to co-operate. It was impossible for Cosimo to make the payment which I have held he was obliged to make, because of Antonio’s refusal to co-operate. It has only been with my judgment in the matter that any resolution has been reached concerning whether on the true construction of the will Antonio was entitled to an interest in the land, whether the correct date for valuation of the land was five years from the date of death (29 December 1998) or the date of transfer, and whether Antonio’s allegations that there was an agreement or estoppel, whereby a different arrangement would be substituted for the provisions of the will, could be made good. As well, it was only in the course of the hearing that agreement was reached between the brothers about the value of the land as at 29 December 1998.

5 Section 94 Supreme Court Act 1970 allows the ordering of interest “in any proceedings for the recovery of any money (including any debt or damages or the value of any goods).” Both parties agree that the present case does not fit within section 94. I agree. None of the orders sought by Cosimo were for the payment of money.

6 Equity has a broad jurisdiction to order the payment of interest whenever a person who is under an equitable obligation to pay a sum of money fails to do so. In Hungerfords v Walker (1989) 171 CLR 125, at 148 Mason CJ and Wilson J said:

Wallersteiner v Moir [No.2]

La Pintada

7 Some examples of the circumstances in which the equitable jurisdiction to award interest has been exercised are set out in Mason and Carter Restitution Law in Australia, page 959-964. They include requiring a defaulting fiduciary (including a defaulting trustee) to pay interest, and requiring payment of interest when effecting restitutio in integrum when a contract is rescinded. If a mortgagor came to equity to redeem, and had not given adequate notice of intention to redeem, equity would require the payment of interest in lieu of notice (Ashburner’s Principles of Equity, 2nd ed. Page 215). Equity treats an equitable charge on land as bearing interest, even if there is no specific agreement to pay interest (In Re Drax; Savile v Drax [1903] 1 Ch 781). See also Hermann v Charny [1976] 1 NSWLR 261, at 269 per Hutley JA, with whom Glass and Samuels JJA agreed.

8 If Cosimo had failed to pay the $512,500 through intransigence, or indolence, I would have no doubt that an Equity Court would order interest be payable upon that sum from 29 December 1998 until the date of payment.

9 The present question is whether the situation should be any different when the substantial cause of his failure to pay is Antonio’s conduct, of the kind I have earlier outlined.

10 Counsel for Antonio relies on a line of cases whereby the purchaser of real estate, who goes into possession prior to payment of the purchase price, is obliged to pay interest on the purchase price (Davies v Littlejohn (1923) 34 CLR 174 at 186; Lawrence v Broderick (1974) 1 BPR 9115 at 9117-9118 and cases there cited). That interest is part of the money secured by the vendor’s lien which equity recognises in that circumstance.

11 Ballard v Shutt (1880) 15 Ch D 122 concerned a purchaser’s application for specific performance of a contract for sale of land. Denman J said, at 124:

even though such delay be attributable to the vendor,

12 In Re Priestley’s Contract [1947] 1 Ch 469 Romer J considered a situation where the purchaser had been let into possession of real estate, the vendors were in default in demonstrating that they had good title, and the purchasers resisted paying interest on the unpaid purchase price. The decision, that interest should be paid, was made on the basis of the express conditions of the contract. However, Romer J referred, at 479-480 to the general equitable principle whereby a purchaser taking possession before completion should pay interest on the unpaid purchase price. At 482 his Lordship said:

“I am not sorry to arrive at this conclusion because it accords with the principles which have been accepted as fair and equitable in the decisions to which I have referred.”

13 Counsel for Cosimo sought to distinguish the position of a purchaser under a contract of sale who is let into possession early by saying that, in that situation, the purchaser obtains possession when he has no title to it, whereas here Cosimo was entitled to possession of the property, under the terms of the will. I do not accept that this is a valid distinction. The basis of the equity whereby interest is payable, under a vendor’s lien by a purchaser who goes into possession prior to completion, is the inequity of the purchaser having both the land, and the purchase price, without any adjustment being made. Here, while Cosimo was entitled to possession of the Windsor Road land from 29 December 1998, he was only entitled to it on terms of paying $512,500, which he did not do.

14 The purpose of equity awarding interest is to seek to ensure that persons who perform their equitable obligations, but not in a timely fashion, do not benefit from the delay. The power is not one which is designed to punish the late payer (Wallersteiner v Moir [No.2] [1975] 1 QB 373, at 388 per Lord Denning MR). Rather, the awarding of interest is a means of ensuring that, once equitable obligations are eventually performed, the outcome is, for all parties, as close as it can in practice be made to what the outcome would have been if the equitable obligations had been performed on time. In the present case, if Cosimo were not to pay interest, he would receive a windfall benefit from having had both the land, and the $512,400. It is inequitable that he should receive any such windfall benefit, even when it is Antonio’s conduct which is the substantial cause of Cosimo’s delay in paying.

15 In these circumstances, it is appropriate that Cosimo pay interest.

16 There was no dispute about the proposition that, if interest was payable, it should be payable from 29 December 1998.

Rate of Interest

17 The next matter of dispute concerned the rate at which interest should be payable. Antonio’s counsel submitted that interest should be payable at the rates under Schedule J of the Supreme Court Rules (the rates at which section 94 interest is payable, unless otherwise ordered). Counsel for Cosimo submitted that the appropriate interest rate was the rate payable on legacies, under section 84A Wills, Probate and Administration Act, and Part 49, Rule 9 of the Supreme Court Rules.

18 The rates of interest payable under Schedule J of the Supreme Court Rules for the relevant period are as follows:

29 December 1998 to end of 29 February 2000	9.5%
Beginning of 1 March 2000 to end 31 August 2000	10%
Beginning of 1 September 2000 to end of 31 August 2001	11%
Beginning of 1 September 2001 to end of 28 February 2002	10%
After 28 February 2002	9%

Wills, Probate and Administration Act

(1) Subject to subsection (2), where interest is payable on any legacy or on any arrears of an annuity in accordance with the will or instrument pursuant to which the legacy or annuity is payable or with any enactment or rule of law, that interest shall, unless the will or instrument otherwise provides, or the Court otherwise orders, be payable at such rate as may be prescribed in a regulation made under section 153.

(2) Where an executor or administrator, in accordance with any power conferred on the executor or administrator in that behalf, appropriates any property in or towards satisfaction of any legacy (other than an annuity), the legatee shall be entitled to the income from the property so appropriated, and interest shall not be payable out of any other part of the estate on so much of the legacy as has been satisfied by the appropriation.

19 Part 49 Rule 9 of the Supreme Court Rules provides:

Wills, Probate and Administration Act 1898

(2) Subrule (1) has effect subject to any directions in the will and unless the Court otherwise orders.”

20 The Wills, Probate and Administration Regulation 1998 (which commenced on 1 September 1998) provides, in Clause 6, that the prescribed rate for the purpose of section 84A(1) of the Act is 6% per year.

21 It is true that there is some analogy between the amount which Cosimo is obliged to pay Antonio, and a legacy. It is the amount which the testator, by the provisions of his will, directed that Antonio was to receive, as a result of the distribution of the testator’s estate. However, the analogy with a legacy is far from complete. The money was to be paid to Antonio by Cosimo, not from the testator’s own assets. Nor were the executors of the will responsible for seeing to the payment.

22 At least part of the justification for allowing a lower rate of interest to be paid on legacies than is paid under Schedule J, is that it is recognised that executors often need time to get estate assets in, then are limited in the return they can get on estate assets held pending payment of a legacy. This state of affairs affects both when executors are liable to pay interest on legacies, and the rate of such interest. The “executor’s year” where, unless there is a contrary provision in the will, interest on many but not all legacies starts to run only at the expiration of one year from the date of death of the testator, limits the circumstances where executors are liable to pay interest at all. Hutley, Woodman and Wood, in Succession, Cases and Materials, 4th ed page 479-480, explain the varying times when interest starts to be payable on legacies as follows:

Walford v Walford

Re Raine

Clarke v Sewell

Re Pollock; Pugsley v Pollock

Spurway v Glynn

Re Richards

Re Raine

Re: Churchill

Re Hardgrave

23 Even if interest has started to run on a legacy, the executor is often not able to invest so as to earn a full commercial return because his or her obligation is to distribute a gift under the will with reasonable speed once the gift has become payable – thus, investment is often short-term, between getting an asset in and distributing it or its proceeds, and often short-term investments do not yield as well as longer term investments. Further, sometimes estate assets need to be held, in circumstances where they are not optimally productive, or not productive at all, pending sale for purposes of administration. When the executor is under these practical constraints in the investments he or she can make with the estate assets, it is understandable that less than a full commercial rate of interest is payable on legacies.

24 These considerations which relate to legacies often do not translate to situations where an equitable obligation is not performed on time. In Hagan v Waterhouse (1994) 34 NSWLR 308, at 391-393 Kearney J gave reasons why it was no longer appropriate for trustees in breach of trust to be charged a special “soft” rate of interest. In Morgan Equipment Company v Rodgers[No.2] (1993) 32 NSWLR 467, at 486-487 Giles J ordered interest to be paid at Schedule J rates on the principal sum required to be paid pursuant to an equity of contribution. Here, Cosimo has had the land continually since the testator’s death, and had full opportunity to use it for commercial purposes. While the period one needs to focus on, to determine the appropriate rate of interest, is the period after 29 December 1998, Cosimo’s possession of the land prior to that date meant that, from 29 December 1998, the land was able to be used as Cosimo chose, without any need for a “start-up period”. In my view it is also appropriate to charge Schedule J rates here.

25 No submission was put that interest should be charged on a compound basis. Accordingly, the interest payable will be simple interest.

Costs – Offer of Compromise

26 On 7 July 2001 the solicitors for Cosimo made an offer of compromise. It was drawn up as a document under the Court Rules. It correctly named Cosimo as the plaintiff, and both Guiseppe and Antonio as defendant. The text of the document was as follows:

“The Plaintiff offers to compromise the Defendant’s action in the following manner:

1. By making a principal offer of payment for the Defendant’s potential share in the (residue of the) estate of Late E Murdocca in the amount of $598,100 plus $2,000 for costs.

2. This offer is an open offer.

3. This offer shall be open for a period of 28 days only.

Supreme Court Rules

27 I have some doubt about whether the form of the offer, containing as it does the phrase “plus $2,000 for costs” complies with Part 22 of the Rules. I also notice that its text does not deal very well with the fact that there are two defendants. The offer of a compromise concerning a potential share in the residue of the estate is quite inappropriate – the dispute between Cosimo and Antonio related to the realty dealt with by Clause 5 of the will, not the residue of the estate.

28 An offer of compromise has effect on costs in circumstances set out in Part 52A Rule 22 (4):

“Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the court otherwise orders, the plaintiff shall, subject to Rule 33, be entitled to an order against the defendant for the plaintiff’s costs in respect of the claim from the day on which the offer was made, assessed on an indemnity basis in addition to his costs incurred before and on that day, assessed on a party and party basis.”

29 It is the effect of the interest order which I have made that, as at 7 July 2001, the amount properly payable by Cosimo to Antonio was more than $598,100 (and was also more than $600,100). Thus, the occasion for the offer of compromise to have an effect on costs has not arisen, even assuming it was a valid offer of compromise within the Rules, and even assuming it related to the dispute in this litigation.

Costs – Effect of these Proceedings being Partly Ones to Construe a Will

30 Counsel for Antonio accepts that, insofar as the proceedings involved a claim that there was an agreement or estoppel that the will would not be given effect to, the usual rule, that costs follow the event, will apply. However, counsel for Antonio submits that part of the litigation was in substance a will construction suit, that ordinarily the costs of a will construction suit will be payable from the estate, and in the present case (where the estate has all been distributed, and where the construction problem related to just the provision of the will which dealt with the Windsor Road land), the appropriate order is one which achieves a result which is as close as possible to having the costs of the will construction litigation paid from the land. That effect would be achieved, he submits, if Antonio and Cosimo were to bear their own respective costs concerning the portion of the case connected with construction of the will.

31 Counsel for Cosimo, however, asserts that the proceedings are in substance adversary proceedings, even in relation to the construction of the will, and so costs should follow the event for the entirety of the proceedings.

32 To decide between these competing contentions requires the statement of some facts, and an examination of principle.

33 The deceased’s will was one which appointed his three sons Guiseppe, Cosimo and Antonio as executors and trustees. Probate was granted to those three men on 22 March 1994.

34 At the time of his death, the deceased owned two lots of land, and various items of personalty. Each lot of land was the subject of a specific devise, one of those specific devises being made by Clause 5 of his will, the subject of the present litigation. The residuary clause of his will was:

I GIVE DEVISE AND BEQUEATH

GUISEPPE MURDOCCA, COSIMO MURDOCCA

ANTONIO MURDOCCA

ANGELA EGIZIANO

GUISEPPINA FRASCA

35 The proceedings were commenced by a summons which Cosimo filed on 25 August 2000, naming Guiseppe and Antonio as defendants. It sought the following orders:

“1. A Declaration that the Plaintiff is entitled to the sole and absolute proprietorship of the property described as RMB 64 Windsor Road, Kellyville (“the property”) in accordance with the provisions of the Will of the late Ernesto Murdocca (“the Will”).

2. An Order that the Defendants perform their duties and obligations as Executors of the Will.

3. An Order that the Defendants do all such things and execute all such documents as may be properly and reasonably required to effect the terms of the Will and specifically the vesting of ownership in the property in the Plaintiff.

4. An Order in the event that the Defendants refuse or fail to execute the documents or do things necessary to vest the property in the Plaintiff, the Plaintiff have the power and authority of the Defendants to do those things necessary to vest the property in him.

5. Damages from the Defendants personally.

6. An Order that the Defendants personally pay the Plaintiff’s costs of this action.

7. Such other Orders as the Court may deem appropriate.”

36 The case went to trial on issues arising from an Amended Statement of Claim filed 12 February 2002, and the defences to that claim. The prayers for relief in the Amended Statement of Claim included:

“An order that the first and second defendants pay the plaintiff’s costs personally.”

37 Section 46C of the Wills, Probate and Administration Act 1898 provides:

“(2) Where the estate of a deceased person is solvent the deceased person’s real and personal estate shall, subject to the provisions of any Act as to charges on property of the deceased and to the provisions, if any, contained in the deceased person’s will, be applicable towards the discharge of the funeral, testamentary and administrative expenses, debts, and liabilities, payable thereout in the order mentioned in Part 2 of the Third Schedule.”

38 Part 2 of the Third Schedule is as follows:

“1 Assets undisposed of by will, subject to the retention thereout of a fund sufficient to meet any pecuniary legacies.

2 Assets not specifically disposed of by will but included (either by a specific or general description) in a residuary gift, subject to the retention out of such property of a fund sufficient to meet any pecuniary legacies, so far as not provided for as aforesaid.

3 Assets specifically appropriated or disposed of by will (either by a specific or general description) for the payment of debts.

4 Assets charged with or disposed of by will (either by a specific or general description) subject to a charge for the payment of debts.

5 The fund, if any, retained to meet pecuniary legacies.

6 Assets specifically disposed of by will, rateably according to value.”

39 As a consequence of section 46C, and of the terms of Clause 6 of the deceased’s will, the deceased’s testamentary expenses are payable from his residuary estate.

Testamentary Expenses

40 In Sharp v Lush (1879) 10 Ch D 468 Jessel MR said, at 470:

“I cannot distinguish between “executorship expenses” and “testamentary expenses.” As I understand the words “executorship expenses”, they are expenses incidental to the proper performance of the duty of the executor in the same way as testamentary expenses are, neither more nor less.

Now what is the proper performance of the duty of an executor? It is ascertaining the debts and liabilities due from the testator’s estate, the payment of such debts and liabilities, and the legal and proper distribution of the estate among the persons entitled.

It has been held that if the executor is unable to decide these questions for himself he may obtain the assistance of a Court of Equity to decide them for him, and the costs occasioned by the suit instituted by him for that purpose will be allowed to him—that is, not only his own costs but the costs of the other parties to the suit.

Again, it has been held that it makes no difference as regards the incidence of the costs, that instead of the executor coming as Plaintiff to ask for the direction of the Court, one of the beneficiaries comes and asks for the same direction in a proper case. In that case also the administration costs—that is, the costs of the suit—are borne in the same way as if the executor himself paid them. I mention that because, although in the case before me one of the executors is Plaintiff, he filed his bill in the character of a beneficiary; but I do not consider that as creating a distinction.”

Sharpe v Lush

Allen v Attorney General

Lloyd v Frape

Re Rooke; Jeans v Gatehouse

Wyndham v Mackenzie (1918) 25 CLR 172

“testamentary expenses”

cum testamento annexo

41 Woodman, Administration of Assets (Law Book Company 1964) page 10-11 says that testamentary expenses include:

“(a) the costs and expenses of obtaining a grant of probate or administration

(b) the costs and expenses of getting the assets of the deceased into the hands of the personal representative

(c) the costs and expenses of obtaining proper legal advice, including costs of any application to the Court as to the interpretation of a will or as to entitlement on intestacy;

McIntosh (No.2); Perpetual Trustee Co Ltd v McIntosh

McIntosh; Perpetual Trustee Co Ltd v McIntosh

Wyndham v Mackenzie (1918) 25 CLR 172

42 All of these expenses except the costs of application to the court to interpret the will or decide entitlement on intestacy are likely to be ones incurred by the executor or administrator. Some of the costs of such an application to the court are likely to be incurred by parties to the litigation other than the executor or administrator. Even so, they are still testamentary expenses if they need to be incurred to enable the proper administration of the estate to take place.

The Originating Summons Procedure in Administration of Estates

43 There has long been provision, like that now contained in Part 68 of the Supreme Court Rules, whereby (Rule 2(2)):

“Proceedings may be brought for the determination of any question which could be determined in administration proceedings, including any question -

(a) arising in the administration of an estate or in the execution of a trust …”

44 This Court was first able to answer specific questions arising in the administration of a deceased’s estate, without undertaking the full administration of the estate in 1880 (Sir Frederick Jordan, Supplement to Chapters on Equity in New South Wales, Administration of the Estates of Deceased Persons, 3rd ed. 1948, pages 42-43; reprinted in Sir Frederick Jordan, Select Legal Papers, Legal Books Pty Ltd 1983). Section 11 of the Equity Act 1901 was the section under which, for most of the time between then and the enactment of the Supreme Court Act 1970, such proceedings were brought. It said:

“It shall not be obligatory on the Court or Judge to make a decree or order whether on summons or otherwise for the administration of any trust or of the estate of any deceased person if the questions between the parties can be properly determined without such decree or order.”

Parkers Practice in Equity

Supreme Court Procedure Act 1900

Equity Act 1901

Re Wilson

Templeton v Leviathan Pty Ltd

Seton

Ewing v Orr-Ewing

In Re Blake

45 As to the history of administration actions, see also McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 634-635 per Young J.

46 In the time when the court itself could take over the administration of the entire estate when there was a problem concerning any aspect of the administration of the estate, for the court to decide how the costs of the administration itself should be borne was just one aspect of the administration of that estate. After the originating summons process was introduced, so that it was no longer necessary for the court to take over the administration of the entire estate to solve one problem that had arisen in the estate, an originating summons seeking construction of the will would also commonly seek the decision of the court as to how the costs of the suit should be provided for. When that sort of a summons was taken out, the question of how the costs should be provided for was itself a question arising in the administration of the estate, appropriate to be answered under the originating summons procedure.

47 It has frequently been decided that, when executors use the originating summons procedure to have the Court decide questions about the construction of a will, where the need to approach the court arises from the testator’s use of unclear language, it is appropriate for the costs of all necessary parties to the application to be treated as testamentary expenses, and paid from the residue of the estate (Higstrim v Ray (1895) 16 NSWLR (Eq) 1; InRe Groom [1897] 2 Ch 407 at 411; InRe Hall-Dare [1916] 1 Ch 272.)

The Practice Established by Patching v Barnett

48 An English practice arose whereby, if an estate consisting of both realty and personalty was being administered by the court, the costs of that administration action were, to the extent to which they had been increased by the presence of realty, ordered to be borne by the realty. Patching v Barnett [1907] 2 Ch 154 (which, notwithstanding the date of the report, is a decision of the English Court of Appeal in 1881 – it had earlier been reported in (1881) 45 LT 292 and in (1881) 51 LJ (Ch) 74) concerned a mixed fund of real and personal estate, of a testator who had directed that his testamentary expenses be paid by his executrix out of his personal estate not specifically bequeathed. The report includes the following exchange in argument between counsel for the devisee of the heir-at-law and Jessel MR:

Pickford v Brown

Ripley v Moysey

Re Middleton

[Jessel MR: That is not the practice of the court now. The costs of administering the real estate are never thrown on the personal estate.]

There is another point, the testator has directed his testamentary expenses to be paid out of his personal estate not specifically bequeathed. According to the modern decisions, testamentary expenses include the costs of an administration suit; and we ask the court to say that whatever may be the general rule, the costs of this suit are, by virtue of the testator’s express direction, to be borne by the personal estate.

[Jessel MR: It does not follow that the real estate should not bear part of the costs of the suit. Take the case, for instance, where the real estate has been sold. It does not mean that. Testamentary expenses, I suppose, do not include the costs of the real estate.]

Re Young

Young v Dolman

[Jessel MR: Why? Taking the accounts of the personal estate is of course what the executors have something to do with. I am quite clear that the Court had a right to throw part of these costs upon the real estate.”

49 It his judgment, Jessel MR said, at 155-156:

“I think it important to say that in the administration of real and personal estate the modern rule is that the costs exclusively occasioned by the administration of the real estate are thrown upon the real estate. The general costs of the suit are borne by the personal estate, but what I will call the increased costs arising from administering the real estate are, as a rule, thrown upon the real estate …”

50 The decision in In Re Middleton, which Millar QC had relied upon in his exchange with Sir George Jessel MR came on appeal to the Court of Appeal in February 1882. It concerned an estate in which there was a partial intestacy, as to some items of personalty, and all realty. A suit for administration had established the identity of the heiresses at law of the testatrix, and of her next of kin. A differently constituted Court of Appeal (Jessel MR, Brett LJ and Holker LJ) followed Patching v Barnett in apportioning the costs of the administration between realty and personalty, and held that there had never been any contrary practice to the rule Jessel MR laid down in Patching v Barnett.

51 The Land Transfer Act 1897 (UK) altered the previous manner in which property devolved on death in England, by vesting real estate in the personal representative, and by directing the real estate to be administered in the same manner as the personal estate. Prior to the Land Transfer Act 1897 (UK) real estate disposed of by will direct to a devisee (ie not to the executor on certain trusts) did not vest in the executor. In such a case, if a creditor of the deceased wished to have real estate of the deceased applied in payment of debts, it was necessary for the creditor to commence an administration suit. In such a suit, a creditor could, in some circumstances, gain access to real estate of the deceased through the doctrine of marshalling, or if the will was construed so that real estate passed to the devisee charged with debts of the deceased – see generally Woodman, Administration of Assets (Law Book Company 1964) page 38-42. Section 2(3) of the Land Transfer Act 1897 (UK) said:

“In the administration of the assets of a person dying after the commencement of this Act his real estate shall be administered in the same manner, subject to the same liabilities for debt, costs, and expenses, and with the same incidents as if it were personal estate: provided that nothing herein contained shall alter or affect the order in which real and personal assets respectively are now applicable in or towards the payment of funeral and testamentary expenses, debts or legacies, or the liability of real estate to be charged with the payment of legacies.”

52 In In Re Jones; Elgood v Kinderley [1902] 1 Ch 92 a question arose as to whether the enactment of the Land Transfer Act had altered the rule laid down in Patching v Barnett. The dispute arose in relation to whether those costs of an administration action which would be incurred regardless of whether realty was being administered should, since the passing of the Land Transfer Act 1897, be apportioned between realty and personalty. Buckley J held that it was the effect of section 2(3) of the Land Transfer Act that the rule in Patching v Barnett continued to apply, because of the words commencing “provided that …” which I have just quoted.

53 In In Re Betts; Doughty v Walker [1907] 2 Ch 149 Kekewich J considered an originating summons in the estate of a testatrix who left a will under which she gave all her real estate to “A”, and, subject to payment of her debts, funeral and testamentary expenses, bequeathed her personal estate to “A”. “A” died in her lifetime. The originating summons involved an inquiry to identify the testatrix’s heir-at-law. The will had been executed in 1883, and counsel argued that at that time, “testamentary expenses” was a narrower term than it had become since the Land Transfer Act 1897. Kekewich J held that the costs of the inquiry, which was completely concerned with the administration of the real estate, were testamentary expenses. He said, at 153:

In Re Jones

54 The manner of apportioning costs of administration between realty and personalty which had been laid down in Patching v Barnett, was applied in New South Wales. In Metcalfe v O’Kennedy (2) (1904) 4 SR (NSW) 633 there was a suit for administration of the general estate of a testatrix. The only question raised in the pleadings was as to the proper construction of the will so far as it concerned the real estate. On the authority of Patching v Barnett, A H Simpson CJ in Eq held that, in circumstances where the sole question for determination of the court had related to the real estate, the whole costs of the suit should come out of the proceeds of sale of the real estate, and not out of the personalty. In In Re White; White v White (1910) 10 SR (NSW) 304 A H Simpson CJ in Eq decided a question of construction of a will which related to only part of the testator’s real estate. His Honour said:

Patching v Barnett

In re Middleton

In re Betts

Metcalfe v O’Kennedy

55 In Wyndham v Mackenzie (1918) 25 CLR 172 the High Court considered the will of a New South Wales testator which gave the residue of his estate on trust for sale and conversion, payment of (inter alia) testamentary expenses, and division in a certain manner. Harvey J had held, at first instance, that the direction as to “testamentary expenses” in the will, should be construed as referring only to such proportion of the stamp duty on the estate, and the trustee company’s corpus commission, as was referable to the personal estate. In so doing, he had followed In Re Jones; Elgood v Kinderley [1902] 1 Ch 92, and In Re Betts; Doughty v Walker [1907] 2 Ch 149, and applied the rule in Patching v Barnett. The joint judgment of Isaacs, Gavan Duffy and Rich JJ held that Harvey J had been mistaken in so doing. Their Honours pointed out that the decision of Buckley J in In Re Jones depended upon the proviso contained in section 2(3) of the Land Transfer Act 1897 (UK), but that in New South Wales the Probate Act 1990 and the Wills, Probate and Administration Act 1898 (both of which vested a deceased’s real estate in the executor) contained no analogous provision. They said, at 181:

Land Transfer Act

Tasker’s case

Patching v Barnett

Wills, Probate and Administration Act

56 In Moran v House (1924) 35 CLR 60 the High Court considered an originating summons taken out by the administrator with the will annexed of a deceased’s estate. The will included a provision that, “one year after a home rule government is granted to Ireland”, certain realty should be sold and the proceeds held on a particular charitable trust. The substantial question for decision concerned whether the Government of Ireland Act 1920 (UK) was one whereby, “a home rule government is granted to Ireland”. The trial judge had ordered that the costs of the summons be paid out of the testator’s personalty, as to which there had been an intestacy. Isaacs ACJ and Gavan Duffy J, at 67, said:

“The second question relates to the direction as to costs. These were dealt with, not as a matter of discretion, but as a matter of rule. This is not a general administration, and the litigation was and is really confined to the real estate. Even in general administration the costs so far as increased by the administration of the real estate must be borne by that real estate (see cases cited in Annual Practice 1924, page 1247). The costs here were occasioned wholly by the testator’s disposition of the real estate. That is the sole disposition that has caused the difficulty, and, in our opinion, it is just that the real estate should bear the cost of clearing itself. The order as to costs should be varied so as to read: ‘that the costs of the parties other than the administrator of and incidental to this application be paid out of the real estate of the testator’.”

57 Starke J dissented from this decision concerning costs, on the ground that the costs were ‘testamentary expenses’ and payable out of the general personal estate of the deceased; they were not within the rule in Patching v Barnett because answering individual questions relating to the administration of the real estate did not suffice to come within that rule. The decision of the majority does not involve any reinstatement of the rule in Patching v Barnett. Rather, the decision of the majority is the simple application of a judicial discretion concerning the manner in which the costs of litigation should be borne.

Robertson v Graham

58 In Robertson v Graham (1917) 17 SR (NSW) 676 Harvey J dealt with an originating summons to construe the provisions of a will which made gifts to two of the testator’s children. The will made other gifts besides these. The will contained a direction for payment of testamentary expenses out of residue. Harvey J said, of the costs of the summons:

“The direction to pay testamentary expenses does not cover these costs. In my opinion the costs of ascertaining upon what trusts trustees hold property, devised or bequeathed to them in trust, are prima facie not testamentary expenses. They are expenses of administering the trust. In cases where matters of administration are brought before the court and occasion is taken to obtain in such a suit a declaration of the trusts upon which trustees hold the trust property, it may be proper if no extra expense is incurred, to pay the whole costs out of the estate in the ordinary course of administration. But where the question of construction is merely raised because the trustees having received the funds desire to know how their trust should be administered, in such a case I think the proper rule should be that the trust fund bears the costs. The duty of the executor as regards the trust fund ends when the executors have paid the debts and duties and have apportioned the duties, if necessary, and have handed the fund over to the trustees. Where the executors are also trustees the same rule must apply. If the construction of the will is not necessary for the purpose of true administration of the estate the estate as a whole should not bear the costs.”

59 In Muller v Marriott (1921) 22 SR (NSW) 100 Street CJ in Eq considered an originating summons, where the question for determination concerned the construction of particular gifts in the will, and where the will contained a direction for payment of testamentary expenses out of residue. Maughan KC and Jordan are recorded (at 101) as submitting, “The decision of Harvey J in Robertson v Graham (17 SR 676) is not in accordance with authority.” Street CJ in Eq delivered a judgment which said nothing about that submission, but implicitly accepted it. The judgment was (at 101-102):

“I am dealing with a case of a mixed fund, and the difficulty, which has arisen in construing the will, is entirely attributable to the ambiguity of the language used by the testator. R 15 of the Supreme Court of 18 November 1915 has no applicability to a case of this kind where the proceedings are rendered necessary by the obscurity of the language of the will. In those circumstances the costs of all parties should be paid out of the residuary estate.”

60 In Perpetual Trustee Co Ltd v Paling (1924) 25 SR (NSW) 56 Maughan AJ followed Muller v Marriott, and declined to follow Robertson v Graham.

61 In In Re Stone; Read v Dubua (1936) 36 SR (NSW) 508 the court considered an estate whose testatrix had directed all her real and personal estate to be given to her trustees, on trust to sell, pay funeral and testamentary expenses and duties, out of the residue to pay certain general legacies, and to divide the residue into three equal parts, for three named persons. Two of those named persons pre-deceased the testatrix, and a next-of-kin enquiry could find no next-of-kin of the testatrix. The question for the court was whether, insofar as the lapsed shares included real estate, they passed to the Crown as bona vacantia, or whether the executors were able to keep them for their own benefit. Having decided that the executors were obliged to hand the proceeds of the real estate to the Crown, a question arose of whether the costs of the proceedings should be paid out of the residue generally, or out of the two lapsed shares of residue. Jordan CJ said, at 524-525:

Wills, Probate and Administration Act

inter alia

“testamentary expenses”

Allen v Attorney-General

Re Baumgarten

In re Hall-Da

Re Giles

cestuis que trust

In re Reeve’s Trusts

In re Groo

In re Vincent

cestuis que trust

“testamentary expenses”

In re Clemow

Re Baumgarten

In re Vincent

In re Hall-Dare

Perpetual Trustee Co v Paling

Wills, Probate and Administration Act, 1898

R C Archbishop v Lawlor

In re Levien

62 Both Long-Innes CJ in Eq, and Davidson J agreed with the reasons of Jordan CJ concerning costs (at 533). While Robertson v Graham was not expressly over-ruled, this reasoning is inconsistent with it.

63 In these circumstances, the reasoning of Harvey J in Robertson v Graham can no longer be regarded as an acceptable basis on which to require the assets which are the subject of litigation concerning entitlements in a deceased estate, to bear the costs of that litigation.

Legislative Provisions Enabling a Court to Decide how Costs of Litigation Concerning Entitlements in Deceased Estates are Borne

64 Costs rules were made, under the Equity Act 1901, on 18 November 1915. Rule 15 of those Rules says:

“The costs of inquiries to ascertain the persons entitled to any legacy, money, or share or otherwise incurred in relation thereto, shall be paid out of such legacy, money or share, unless the court or a judge otherwise directs.”

65 Perpetual Trustee Company (Limited) v Thomas (1942) 59 WN (NSW) 100 concerned a woman who died intestate, leaving a husband. A next-of-kin inquiry was held to ascertain who were the persons entitled to her estate, apart from the husband. Nicholas CJ in Eq held that, pursuant to Costs Rule 15, the husband’s entitlement should bear no part of the costs of the inquiry. Nicholas CJ in Eq said, at 101:

Shuttleworth v Howarth

Daniell’s Chancery Practice

‘… if the residuary estate has ultimately to be divided amongst different classes of persons, the practice is for the costs of all the claimants to be paid out of the general estate, before any apportionment is made, even though the effect of such a mode of payment is to diminish the fund of one class of claimants to an extent materially greater than the amount of costs due to that particular class.’

In Re Reeve’s Trusts

In Re Gibons’ Will

Graham v Lord Clinton

‘It may be that the existence of that rule brings before the mind of the judge, who has to deal with the costs, that he ought not to be too ready – as was, perhaps, the case before that order was passed - to direct that the costs of enquires as to particular shares should come out of the corpus of the estate.’

“otherwise direct”

In Re Stone

Re Phillips

66 In In Re Groom [1897] 2 Ch 407 North J said that if Rule 14B of the English Order 65 applied, he would give a direction that costs be paid out of the residue, because the difficulty which occasioned the litigation had been caused by the language used by the testator. In In Re Hall-Dare; Le Marchant v Lee Warner [1916] 1 Ch 272 at 277 Younger J said:

In Re Groom

67 While Costs Rule 15 has now been repealed, a more expansive provision than Costs Rule 15 was made by section 93(3) Trustee Act 1925:

“In any proceedings with respect to the management or administration of any property subject to a trust or forming part of the estate of a testator or intestate, or with respect to the interpretation of the trust instrument, the court may, if it thinks fit, order any costs to be paid out of such part of the property as in the opinion of the court is the real subject matter of the proceedings.”

68 This subsection is in terms wide enough to cover the ground formerly covered by Costs Rule 15 (though with different effect if the court does not make a positive decision about where the costs should fall), and also to enable the court to order the costs of construing a particular clause of a will out of the property which is the subject of that clause.

69 Section 76 Supreme Court Act 1970 says:

“(1) Subject to this Act and the rules and subject to any other Act—

(2) In subsection (1) the expression “costs” includes—

(a) costs of or incidental to proceedings in the Court, including the administration of estates and trusts; …”

70 This confers a very wide discretion. It enables the Court to decide who should bear the costs of litigation before it quite independently of whether those costs do, or do not, amount to testamentary expenses.

How the Discretion Concerning Costs in Administration Actions is Exercised

71 There is guidance as to how the judicial discretion concerning costs in administration actions should be exercised. In In Re Buckton; Buckton v Buckton [1907] 2 Ch 406 Kekewich J considered an originating summons, taken out by a beneficiary under a will against the trustee of the will and those claiming the residuary estate of the testator. The summons sought a declaration about the interest which the plaintiff had under the will. Kekewich J made some general observations about the manner of disposing of cost questions on administration summonses. He said, at 414-415:

“In a large proportion of the summonses adjourned into court for argument the applicants are trustees of a will or settlement who ask the Court to construe the instrument of trust for their guidance, and in order to ascertain the interests of the beneficiaries, or else ask to have some question determined which has arisen in the administration of the trusts. In cases of this character I regard the costs of all parties as necessarily incurred for the benefit of the estate, and direct them to be taxed as between solicitor and client and paid out of the estate. It is, of course, possible that trustees may come to the Court without due cause. A question of construction or of administration may be too clear for argument, or it may be the duty of trustees to inform a claimant that they must administer their trust on the footing that his claim is unfounded, and leave him to take whatever course he thinks fit. But, although I have thought it necessary sometimes to caution timid trustees against making applications which might with propriety be avoided, I act on the principle that trustees are entitled to the fullest possible protection which the Court can give them, and that I must give them credit for not applying to the Court except under advice which, though it may appear to me unsound, must not be readily treated as unwise. I cannot remember any case in which I have refused to deal with the costs of an application by trustees in the manner above mentioned.

There is a second class of cases differing in form, but not in substance, from the first. In these cases it is admitted on all hands, or it is apparent from the proceedings, that although the application is made, not by trustees (who are respondents), but by some of the beneficiaries, yet it is made by reason of some difficulty of construction, or administration, which would have justified an application by the trustees, and it is not made by them only because, for some reason or other, a different course has been deemed more convenient. To cases of this class I extend to operation of the same rule as is observed in cases of the first class. The application is necessary for the administration of the trust, and the costs of all parties are necessarily incurred for the benefit of the estate regarded as a whole.

There is yet a third class of cases differing in form and substance from the first, and in substance, though not in form, from the second. In this class the application is made by a beneficiary who makes a claim adverse to tother beneficiaries, and really takes advantage of the convenience procedure by originating summons to get a question determined which, but for this procedure, would be the subject of an action commenced by writ, and would strictly fall within the description of litigation. It is often difficult to discriminate between cases of the second and third classes, but when once convinced that I am determining rights between adverse litigants I apply the rule which ought, I think, to be rigidly enforced in adverse litigation, and order the unsuccessful party to pay the costs. Whether he ought to be ordered to pay the costs of the trustees, who are, of course, respondents, or not, is sometimes open to question, but with this possible exception the unsuccessful party bears the costs of all whom he has brought before the Court.”

72 His Honour held, at 416, that the application before him,

“… is in form adverse litigation, but in substance it is amicable procedure for determining speedily and inexpensively a question the solution of which must sooner or later be found for the benefit of all concerned, including the trustees.”

73 In In Re Halston [1912] 1 Ch 435 Eve J considered a will where an interest in remainder in all the testator’s freehold property was given to a named person. The person of that name had, as the testator well knew, died as a baby 17 years before the date of the will. A brother of the deceased child was given a similar, but not identical, name. This brother was well known to the testator. The brother brought proceedings against the testator’s heiress-at-law, to establish that he was the intended beneficiary. That contention succeeded. Eve J said, at 439, concerning costs, that:

In Re Buckton

74 In Re Buckton has been followed in New South Wales. In In Re Cunningham; Sprowle v Quested (1914) 31 WN (NSW) 44 Simpson CJ in Eq dealt with an originating summons where the plaintiff claimed a declaration as to the construction of the will of a deceased, and an inquiry as to whether he, the plaintiff, was the lawful and only issue of the testator’s daughter. After it had been held that the plaintiff was the issue of the testator’s daughter, a question of costs arose. Simpson CJ in Eq recognised that the court had jurisdiction to allow the defendants’ costs out of the land or fund in dispute, but did not exercise that jurisdiction. He said, at 45:

In Re Buckton

In Re Halston

75 In O’Brien v Ritchie (1931) 48 WN (NSW) 85 Long-Innes J considered an originating summons, taken out by the son of a testatrix, against the executors, seeking the determination of questions concerning the interest which the plaintiff had under the testatrix’s will, and whether the testatrix died intestate as to certain assets. Long-Innes J held that the litigation fell within the third of the classes identified by Kekewich J in In Re Buckton. He said, at 86:

“It is made by way of originating summons, and is no doubt occasioned by difficulties of construction; difficulties sufficient no doubt to have justified an application by the trustees had they thought it advisable to make any such application; but it is quite apparent to my mind that their abstention from making that application was not because for some reason or other a different course was deemed more convenient, that is, that it was more convenient that the application should be made by the plaintiff; but because an attempt to effect a compromise having failed, they preferred to stand on their strict rights whatever they might be.

On the other hand, I am satisfied that the case comes within the third class, and that it is in substance adverse litigation, depending no doubt upon difficulties of construction; and, adopting the language of Kekewich J (at page 416) it is in form also adverse litigation, notwithstanding that it takes the form of an originating summons, which asks that the plaintiff’s costs should be provided for.

It is a case in which the plaintiff, on the one side, and the defendants, on the other, conceived themselves respectively to have certain rights. They took different views as to those rights, but both sides apparently regarded the matter as not free from doubt. The defendants were willing to compromise; the plaintiff was not, or, if he were at one time willing to do so, refused to accept the terms suggested. He held a certain opinion, which I have held to be wrong; he backed his opinion, and lost, the defendants backed theirs, and won; in the result I must treat this as hostile litigation, and the order will be that the plaintiff must pay the defendant’s costs as between party and party, and there will be no order as to the plaintiff’s costs.”

Re Preston’s Estate

76 If litigation which seeks to construe a will falls within the first or second of the categories identified by Kekewich J in In Re Buckton, the court is, in substance, carrying out the same task as it would have carried out had it been administering the estate itself. The appropriate question for the court to ask, in those circumstances, is where does the proper administration of the assets of the estate require the costs of the litigation to fall. The starting point of that inquiry will be whether the costs of the litigation are testamentary expenses, and if so where section 46C of the Wills, Probate and Administration Act, and the terms of the will itself, cause the burden of testamentary expenses to fall. However, even in the first two categories identified by Kekewich J, the court also has a discretion conferred on it, under section 93(3) Trustee Act, to order any costs to be paid out of such part of the property as in the opinion of the court is the real subject matter of the proceedings, and under section 76 Supreme Court Act 1970 to order the costs of the proceedings to be borne in such way as the Court thinks just. If such a discretion is exercised, it displaces the provision which section 46C makes concerning how testamentary expenses are to be borne. Section 46C needs to be construed as being subject to the statutory provisions which enable the court to make a costs order which displaces the order of application of assets under section 46C. Before exercising any such discretions, the court would need to be persuaded that there was a sufficient reason to depart from what would otherwise be the appropriate order of application of assets. In exercising any such discretion, the court ought be wary of placing reliance on cases which have decided how costs should be borne, which were decided at a time when the legal framework within which administration of estates occurs was different to that which now applies in New South Wales.

77 When the litigation falls into the third category identified by Kekewich J, the court is not, in substance, exercising the same jurisdiction as it used to carry out the administration of estates. It is concerned only with who, out of the parties before it, should pay the costs of any other of the parties before it. In so deciding, the court does not need to be concerned about whether any of those parties are entitled to be indemnified, in whole or in part, for any costs order which might be made against them from any estate. The ordinary principles concerning costs in adversary litigation, including the practice whereby costs follow the event, operate. (However, when a court is making an order that an executor pay the costs of adversary litigation it might on occasions be appropriate to note that the executor appeared to be justified in putting the opposite party to proof of his claims, and in being a party to the proceedings – see Adam v Mullen, Holland J, Supreme Court of NSW, 15 December 1976, unreported, extracted in Ritchie’s Supreme Court Practice, Practice Decisions page 8547-8548).

78 (Different principles to those which I have been discussing, apply to the awarding of costs for litigation relating to administration of deceased’s estates where the costs involved are those of an appeal. Beyond noting that the principles for costs on appeal are different, less sympathetic to payment of the costs from the estate than the principles applied at first instance, but still not always completely assimilated to the costs of party/party litigation, I will discuss those principles no further (cf Attorney General for New South Wales v Metcalfe (1904) 1 CLR 421 at 428; Trustees Executors and Agency Co Ltd v Ramsay (1920) 27 CLR 279; Watson v Ralph (1982) 148 CLR 646; Fowler v Nield (1961) 61 SR (NSW) 152.))

Exercising the Discretion in this Case

79 Applying the principles appropriate to first-instance litigation concerning will construction to the present case, the proceedings took the form, from the outset, of adversary proceedings. While the executors and trustees of the will would have needed to know the answers to the questions which were answered by my earlier judgment, to be able to carry out their duties as trustees, this was not a joint approach to the court by the executors, for an answer to those questions. Nor was it a case where the executors permitted Cosimo to be the plaintiff purely as a matter of convenience.

80 Even though the costs of litigation to construe a will are often testamentary expenses, no party submitted that the costs should be, even in part, borne by the residuary beneficiaries. Both the will, and section 46C, would require testamentary expenses to be paid before the residue is ascertained, and hence in practice borne by the residuary beneficiaries. Even the submission that the costs of construction of the will should be paid from the property in dispute would lead, in my view, to an unjust result. It would be a result whereby Cosimo, having needed to bring the proceedings essentially because of the intransigent attitude of Antonio, and having won, would then be required to bear part of the costs of the proceedings. That result is not one which I would, in the exercise of any discretion concerning costs, permit to arise.

81 There is one respect, however, in which Antonio has had success. He has succeeded in the claim for interest which I have earlier dealt with in this judgment. That claim occupied roughly half of the hearing time on 16 May 2002. He should have a costs order to reflect that limited success.

Order

82 In addition to the orders made in my previous judgement, I make the following declaration and order:

1 Declare that the plaintiff is obliged to pay interest on the sum of $512,500 referred to in Order 1 made in these proceedings on 27 March 2002, from 29 December 1998 to the date of payment, at the rates laid down in Schedule J of the Supreme Court Rules .

2 Order the plaintiff to pay one half of the second defendant’s costs of the hearing on 16 May 2002.

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Last Modified: 06/25/2002

Details

AGLC: Murdocca v Murdocca (No 2) [2002] NSWSC 505
Case: [2002] NSWSC 505
Decision Date: 25 June 2002

CaseChat Overview and Summary

The case of Murdocca v Murdocca (No 2) involved a dispute between family members regarding the interpretation of a will and the associated costs of litigation. The matter was heard in the Supreme Court of New South Wales. The central issue was whether the costs of the proceedings, which involved the interpretation of a will to determine the plaintiff's entitlement to a specific devise of land, should be considered testamentary expenses.

The court was required to decide several legal issues. Firstly, it needed to determine the appropriate rate of interest payable when there was late performance of an equitable personal obligation, considering the conduct of the payee that caused the delay. Secondly, it had to decide whether the costs of litigation concerning the deceased's estate should be treated as testamentary expenses and how these principles interact with the rules for the order of application of assets in estate administration. Lastly, the court had to consider the current status of the practice established by Patching v Barnett and the approach to costs based on Roberts v Graham.

The court held that the appropriate rate of interest should be determined based on the principles of equity, considering the circumstances of the delay. Regarding the costs of litigation, the court ruled that they could be considered testamentary expenses if they were reasonably incurred in the administration of the estate. The court also noted that the principles established in Patching v Barnett and Roberts v Graham remained relevant, but they must be applied in a manner consistent with modern legal principles. The court ordered that the costs of the proceedings be treated as testamentary expenses and should be paid from the estate before other debts and expenses.

Orders