Perpetual Trustee Company Ltd v The Bays Healthcare Group Inc (Costs Ruling)
[2024] VSC 421
•18 July 2024
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2022 04099
IN THE MATTER of an application pursuant to Order 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 for directions in relation to the administration of the estate
- and –
IN THE MATTER of the will and estate of CHARLES FRANCIS JONES, deceased
BETWEEN:
| PERPETUAL TRUSTEE COMPANY LIMITED (IN ITS CAPACITY AS EXECUTOR AND TRUSTEE OF THE WILL AND ESTATE OF CHARLES FRANCIS JONES, DECEASED) | Plaintiff |
| v | |
| THE BAYS HEALTHCARE GROUP INCORPORATED & ANOR (according to the attached Schedule) | Defendant |
---
JUDGE: | Ierodiaconou AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 March 2024 |
DATE OF RULING: | 18 July 2024 |
CASE MAY BE CITED AS: | Perpetual Trustee Company Ltd v The Bays Healthcare Group Inc (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2024] VSC 421 |
---
COSTS – Costs of application for judicial advice – Whether costs incurred in the proper administration of the estate – Whether plaintiff trustee entitled to indemnity from the estate – Whether plaintiff trustee liable for defendants’ costs without indemnity from the estate – Whether plaintiff trustee liable for defendants’ costs on indemnity basis.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr A Burnett of counsel | Rigby Cooke Lawyers |
| For the First Defendant | Mr J McComish of counsel | David Davis & Associates |
| For the Second Defendant | Mr J Rizzi of counsel | Carroll Goldsmith Lawyers |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Background......................................................................................................................................... 1
Applicable principles...................................................................................................................... 13
Submissions...................................................................................................................................... 15
Plaintiff’s submissions................................................................................................................ 15
Defendants’ submissions........................................................................................................... 17
Consideration.................................................................................................................................... 18
HER HONOUR:
Introduction
In this proceeding, the plaintiff trustee sought judicial advice regarding the distribution of charitable gifts in the estate of the late Charles Francis Jones. The judgment records my finding that the plaintiff’s application was unnecessary and should not have been commenced.[1] The parties disagree over how costs consequential to judgment in this proceeding should be awarded. The plaintiff trustee seeks to have its costs paid out of the estate on an indemnity basis. The defendant beneficiaries, both registered charities, strongly oppose this. The defendants say the plaintiff should bear its own costs and pay the defendants’ costs on an indemnity basis and without recourse to the estate.
[1]Perpetual Trustee Company Ltd v The Bays Healthcare Group Inc [2023] VSC 727, [123] (‘Judgment’).
Background
These cost reasons assume familiarity with the judgment. To the correspondence between the parties from 1987 to 2006 detailed in the judgment,[2] I add the following relevant background.
[2]Judgment, [102].
In or around October 2020, the second defendant’s solicitor first contacted the senior trust manager of the plaintiff, regarding the distribution of the estate.[3]
[3]Exhibit “EMD-1” to the affidavit of Eleanor Davis sworn on 7 March 2024 (‘Davis affidavit’), 10.
On 1 July 2021, the second defendant’s solicitor wrote again to the plaintiff, including a detailed chronology of the Andrew Kerr Development Fund and submissions as to the second defendant’s entitlement to the bequest in the estate.[4] In the conclusion of the letter, the second defendant asserted that the Andrew Kerr Development Fund may have changed its name and legal form, however, it had not ceased to exist.[5]
[4]Exhibit “EMD-1” to the Davis affidavit, 5-9.
[5]Exhibit “EMD-1” to the Davis affidavit, 9.
On 10 August 2021, the plaintiff’s legal counsel emailed the second defendant’s solicitor, noting that the plaintiff was still in the process of obtaining legal advice about the estate. The email noted that the plaintiff had received similar submissions from the first defendant about its links to the entities named in the will, and was considering making an application to the Court for advice.[6] Although not apparent from this email, the plaintiff later said it understood at this time that the first defendant was asserting an entitlement to 100% of the residue of the estate, while the second defendant was asserting an entitlement to 50% of the residue of the estate.[7]
[6]Exhibit “DM-1” to the affidavit of Domenico Madrigrano sworn on 28 June 2023 (‘Madrigrano affidavit’), 36.
[7]Judgment, [103].
On 13 October 2021, the second defendant’s solicitor wrote to the plaintiff. He outlined his client’s frustration about the lack of update since the 10 August 2021 email, and the initial contact 12 months earlier.[8] The second defendant’s solicitor wrote that he was instructed that if the plaintiff did not make its foreshadowed application within 28 days, then the second defendant would make an Order 54 application to the Court.
[8]Exhibit “EMD-1” to the Davis affidavit, 10.
On 1 December 2021, the defendants’ solicitors sent a joint letter to the plaintiff stating they considered the proper course was for the plaintiff to distribute the residuary estate to the defendants in equal shares.[9] They outlined the respective histories of the Mornington Bush Nursing Hospital and Andrew Kerr Development Fund, and confirmed there were no other claimants to the charitable gifts. They asked that the plaintiff pay the final bequests as soon as possible.
[9]Exhibit “DM-1” to the Madrigano affidavit, 39.
In the judgment, I recounted that “[n]otwithstanding the resolution of this conflict, the plaintiff continued to foreshadow, and eventually commenced this application for judicial advice”.[10]
[10]Judgment, [104].
On 4 May 2022, the first defendant’s solicitor wrote to the plaintiff, copied to the second defendant’s solicitor, explicitly outlining his client’s frustration and annoyance with the delays:[11]
Further to my telephone discussion with Ms Phelan of the Bays, I confirm that I am to telephone and write to Mr Madrigano [sic]:
• To express the frustration and annoyance of Ms Phelan and the board of the Bays that the matter was still underway after more than a year.
• To express their added frustration and annoyance at the further delays and non-communication since end of March despite your assurances that we would receive updates as to your progress (or lack of progress).
• To confirm that a further complaint would be lodged with the Perpetual in-house complaints resolution process to note the above, and also to confirm that if matters were not progressed to our satisfaction that we would seek instructions to make formal complaint to ASIC for breach of duties.
• As a final step, if matters were still not resolved then we would seek instructions to make our own Application for Directions to the Court.
I also discussed this aspect with [the second defendant’s solicitor] who confirmed that the Andrew Kerr board is also frustrated by these delays and total absence of communication. We were both particularly aggrieved by the absence of any communication whatsoever since our meeting with you both at the end of March this year despite your assurance that we would receive updates on your progress (or lack thereof).
[11]Exhibit “EMD-1” to the Davis affidavit, 11-12 (emphasis added).
It is evident from the 4 May 2022 letter that the defendants’ patience with the plaintiff’s delay was understandably at an end. They indicated they would escalate the matter if the plaintiff did not progress it, and foreshadowed litigation as a last resort.
On 6 May 2022, the plaintiff responded to the first defendant’s solicitor by email, copied to the second defendant’s solicitor, acknowledging receipt of the 4 May 2022 letter. The email noted that a substantive response would be provided upon legal counsel’s return from leave after 16 May 2022 and that the plaintiff was looking to act ‘with prudence’.[12]
[12]Exhibit “EMD-1” to the Davis affidavit, 14.
On 9 May 2022, the second defendant’s solicitor emailed the plaintiff, copied to the first defendant’s solicitor, criticising this response and citing the defendants’ immense frustration with the plaintiff’s ongoing delay and lack of communication in the matter, and foreshadowing a complaint to ASIC. The second defendant’s solicitor stated:[13]
[13]Exhibit “EMD-1” to the Davis affidavit, 13 (emphasis added).
There is no other way to describe your response below but than utterly contemptuous of your responsibilities.
It is now May 2022, on behalf of our client I wrote to you on 1 July 2021, detailing our client’s position.
I received an email from you on 10 August 2021 in reply advising me that Bays Healthcare Group made similar points to their links to the entities named in the Will …
Now, nine months since your email it appears that Perpetual’s position has not progressed, notwithstanding the joint submission made by [the first defendant’s solicitor] and my clients in December 2021.
When [the first defendant’s solicitor] and I met with you and Mr Madrigano [sic] in late March, we both left that meeting with the belief that the matter would be progressing, noting the appointment of Mr Teese from Rigby Cooke Lawyers who was about to brief counsel. You also gave an undertaking that we would be provided updates, however brief. I note my email requesting an update from you in late April did not receive the courtesy of a reply.
Your email below now indicates that we must wait for you to return from annual leave before receiving a “substantive update”…
I look forward to receiving your update following your return from annual leave.
On 24 May 2022, the plaintiff retained Rigby Cooke, solicitors. The plaintiff sought advice on the distributions of the deceased estate. On 31 May 2022, the plaintiff’s solicitor emailed the defendants’ solicitors, stating that he intended to inform them within 21 days of the plaintiff’s position regarding distributions of the estate and any Court application. This would include “a timeframe within which a distribution will be made and to whom, or alternatively, within which any application to Court (if any) will be made, conscious of Perpetual’s obligations as executor and as a model litigant…”.[14] The email referred to the defendants’ threatened complaint to ASIC and asked that the defendants await the foreshadowed letter before taking any further steps regarding a complaint to ASIC.
[14]Affidavit of Christian Teese sworn on 21 February 2024 (‘Teese affidavit’), [5]; Exhibit “CLT-1” to the Teese affidavit, 1-2.
The second defendant’s solicitor emailed in reply the same day, copying the first defendant’s solicitor, noting that they looked forward to further updates as indicated.[15]
[15]Teese affidavit, [6]; Exhibit “CLT-1” to the Teese affidavit, 1.
On 24 June 2022, the plaintiff’s solicitor emailed the defendants’ solicitors stating that the plaintiff would apply to the Court for judicial advice on the proper basis of the distributions to the defendants from the estate.[16] The reason for this was stated as being “the amount sought to be distributed and issues of construction which attend cl 3(c)(ii)”. The plaintiff’s solicitor stated that he anticipated that the application would be filed by 29 July 2022 subject to receiving assistance or input from the defendants as necessary.[17] He wrote:[18]
The application for judicial advice will identify all the material facts and the issues of construction, but also put forward Perpetual’s proposed construction of the Will. In doing so, I foreshadow that Perpetual will be seeking an opinion, advice or direction that in the circumstances it would be justified in taking a certain course. I am pleased to foreshadow that the proposed course would be either:
(a)distributing to Bays and Andrew Kerr Care on the basis that there is an obligation to do so on the proper construction of the Will having regard to the charitable intent of the relevant gift and the application of authorities concerning when a charity does and does not cease to exist; or
(b)if there is no obligation to distribute as contended by the first proposed course, distributing to Bays and Andrew Kerr Care pursuant the proper exercise of Perpetual’s discretion, having regard to the principles which inform the exercise of Perpetual’s discretion.
[16]Teese affidavit, [8](b).
[17]Exhibit “CLT-1” to the Teese affidavit, 3.
[18]Exhibit “CLT-1” to the Teese affidavit, 3 (emphasis added).
The 24 June 2022 email showed that there was no practical utility in the application as, regardless of the outcome, the plaintiff intended to make distributions to the defendants and the defendants agreed with the proportion to be distributed. There was no controversy.
On 26 July 2022, the first defendant’s solicitor emailed the plaintiff’s solicitor, copied to the second defendant’s solicitor, enquiring as to how the plaintiff was progressing with the application and whether the defendants would receive a copy on 29 July 2022.[19]
[19]Teese affidavit, [9]; Exhibit “CLT-1” to the Teese affidavit, 4-5.
The plaintiff says the defendants did not outline any objections to the application to Court in the 26 July 2022 email.[20] This is unsurprising given that the defendants wished to receive the distributions and the plaintiff had long delayed making those distributions and foreshadowed that it required judicial advice. In other words, the plaintiff gave the defendants little option but to assist the plaintiff in progressing the litigation.
[20]Teese affidavit, [9].
On 29 July 2022, the plaintiff’s solicitor replied that they were working hard to complete the application material. He stated that there had been a short delay in its preparation due to illness but that the application was “well underway and being settled with counsel”. The plaintiff’s solicitor said that he would provide a further update by 5 August 2022.[21]
[21]Exhibit “CLT-1” to the Teese affidavit, 4.
The plaintiff’s solicitor deposes to three primary reasons for the delay in finalising the application documents. First, the extent of material that the plaintiff provided to Rigby Cooke required more time than anticipated. Second and relatedly, preparing the opinion to be exhibited to the supporting affidavit needed more time than anticipated. Third, his primary instructor resigned in August 2022, which contributed to the delay in obtaining instructions on draft material.[22]
[22]Teese affidavit, [11](c).
On 5 August 2022, the second defendant’s solicitor emailed the plaintiff’s solicitor, copied to the first defendant’s solicitor, asking whether the application would be filed that day.[23] The plaintiff’s solicitor replied later the same day, stating that the draft originating motion and summons were ready to file, subject to instructions. Further, he stated that the supporting affidavit material was with counsel, and he expected it to be finalised for instructions by the following Wednesday.[24]
[23]Exhibit “CLT-1” to the Teese affidavit, 7.
[24]Exhibit “CLT-1” to the Teese affidavit, 7.
On 12 August 2022, further to a missed phone call from the second defendant’s solicitor, the plaintiff’s solicitor emailed the defendants’ solicitors stating that he expected the affidavit to be finalised that afternoon with instructions for its filing to be obtained over the weekend.[25] He wrote he would report back by Monday.
[25]Teese affidavit, [12]; Exhibit “CLT-1” to the Teese affidavit, 11.
On 15 August 2022, the first defendant’s solicitor emailed the plaintiff’s solicitor, copied to the second defendant’s solicitor, enquiring about the foreshadowed update.[26] The same day, the plaintiff’s solicitor emailed the defendants’ solicitors stating that he expected to finalise the affidavit material the following day and provide it to them shortly after that. He stated:[27]
It is my expectation, subject to final instructions, that each of your clients will be named as parties to the application and that Perpetual will seek for the application to be heard, rather than disposed of on the papers, so that any issues from the Court’s side can be addressed promptly. As presently drawn, our expectation is that the hearing will take 2 hours.
It is also my expectation that some additional evidence may be needed from [the first defendant] in support of the application – but this will not delay its filing.
[26]Exhibit “CLT-1” to the Teese affidavit, 12-13.
[27]Teese affidavit, [13]; Exhibit “CLT-1” to the Teese affidavit, 12 (emphasis added).
The first defendant’s solicitor responded, stating that they looked forward to receiving an update and settled documentation and stating, “[p]lease let us know the details of any additional evidence you may require from our client in due course”.[28]
[28]Exhibit “CLT-1” to the Teese affidavit, 16.
On 16 August 2022, the first defendant’s solicitor emailed the plaintiff’s solicitor, copied to the second defendant’s solicitor, asking whether he intended to provide an update and copies of the settled documentation that day.[29]
[29]Exhibit “CLT-1” to the Teese affidavit, 15.
On 17 August 2022, the plaintiff’s solicitor replied that further amendments were being made due to additional material arising from a conference with counsel. He noted that he would update the parties as soon as possible, including “what further material (if any) will be sought from the proposed defendants”. If further material from the defendants was required, he said it would not delay the filing of the court documents.[30]
[30]Exhibit “CLT-1” to the Teese affidavit, 15.
The plaintiff says that the defendants did not object to the application in their email correspondence of 15 and 16 August 2022.[31] However, it was clear that the defendants wished to progress the matter. The correspondence above shows that. Moreover, at this point, the defendants were waiting to know precisely what material the plaintiff required to progress the matter.
[31]Teese affidavit, [15].
On 13 September 2022, the plaintiff’s solicitor emailed the defendants’ solicitors apologising for being difficult to contact recently. He cited court hearing commitments as the reason, and stated he would provide an update the following day.[32] In response to this email, the second defendant’s solicitor cited his client’s increasing frustrations and sought a specific explanation for why the matter continued to be delayed. He stated:[33]
Further to my email below, we anticipate your update tomorrow will be providing the parties with a clear timeframe within which the application will be filed that will be adhered to.
We met with Perpetual in March, and nearly six months later, despite the assurances from Perpetual, there has (apart from your involvement) been little progress.
We note in the last update you provided on 15 August you told us that you would “provide a further update tomorrow afternoon” and we have received nothing since.
It would be helpful to explain to my client what exactly the delay is. They are growing increasingly frustrated and quite reasonably seek from you an explanation for the delay.
[32]Exhibit “CLT-1” to the Teese affidavit, 22.
[33]Exhibit “CLT-1” to the Teese affidavit, 20.
On 15 September 2022, the plaintiff’s solicitor emailed in reply, thanking the defendants’ solicitors for their patience and citing court hearing commitments and a change of instructor of the plaintiff to be contributing to the delay. He said the extra time taken to finalise the material would ultimately benefit the defendants and that in good faith the proposed relief to be sought had already been indicated to the defendants.[34]
[34]Exhibit “CLT-1” to the Teese affidavit, 20.
On 16 September 2022, the plaintiff’s solicitor emailed the defendants’ solicitors and confirmed its final advice had been sent to the plaintiff, including final drafts of the originating summons and supporting affidavit. He stated that he expected that the application would be issued the following week.[35]
[35]Exhibit “CLT-1” to the Teese affidavit, 23.
On 12 October 2022, the plaintiff’s originating motion was filed with the Court. On 13 October 2022, the plaintiff’s supporting affidavit was filed.
On 9 November 2022, the plaintiff’s solicitor emailed the defendants’ solicitors enclosing proposed minutes of consent.[36] He stated:[37]
In summary, our view is that there are certain matters raised in the plaintiff’s affidavit material which are best supported by a short further affidavit from your clients. These are the matters which are drawn from extraneous materials either submitted by your respective clients or based on information provided by your clients. For example, the matters set out in paragraphs 24 to 27 of the affidavit in support, and also, the matters which are set out in paragraph 31 of the affidavit, together with the supporting exhibits.
While the plaintiff considers that the matters set out in the affidavit in support form a strong basis for the relief sought, the nature of the information and the exhibits is such that the Court would be assisted by supporting affidavit material from the defendants which deposes to and/or exhibits their first-hand knowledge of the same matters.
Consequently, we propose that the orders provide an opportunity for each of your clients to file supporting responsive affidavit material. The purpose for the responsive material is noted in summary in other matters.
[36]Teese affidavit, [21].
[37]Exhibit “CLT-1” to the Teese affidavit, 24 (emphasis added).
On 10 November 2022, ahead of a directions hearing listed the following day, the first defendant’s solicitor responded to the plaintiff’s solicitor, saying he had reviewed the plaintiff’s proposed consent orders with the second defendant’s solicitor. The second defendant’s counsel wished to further consider the orders. The first defendant’s solicitor outlined his client’s position that the plaintiff should not be entitled to indemnity costs.[38] He wrote:[39]
Regarding the Summons and the proposed Orders sought, my client instructs that it will resist the claim for indemnity costs by the Plaintiff as set out in Item 4. This is because your client’s lack of response and continuing delays in addressing the clearly-stated concerns of our client (and of Andrew Kerr) required a substantial undertaking of work and expense on the part of both Defendants.
Because the matters to be resolved have not changed in all this time, the bulk of our client’s costs would have been avoided had the Plaintiff made its current application nearly two years ago as it had then proposed and when it had been fully capable of doing so.
Your client will recall that at one stage I made a formal complaint through Perpetual’s internal complaint process, which at the time elicited a degree of further progress.
Yet, further delays and a continuing lack of response gave rise to a potential claim against your client regarding contravention of its duties under s601UAA of the Corporations Act 2001. It was unfortunate that this aspect had to be raised, yet matters were again enlivened for a time.
The essential grievance by my client is that the value of the share investments that would have otherwise been applied to its planned extensive and necessary infrastructure works significantly declined in value due to the conduct of your client.
While this raises aspects which are secondary to the proposed Orders sought for tomorrow’s Directions Hearing, and may yet be elicited by affidavit in response, nevertheless these aspects relate to the merits of the indemnity costs without review by taxation in default of agreement claimed by your client.
[38]Exhibit “CLT-1” to the Teese affidavit, 27-8.
[39]Exhibit “CLT-1” to the Teese affidavit, 28 (emphasis added).
Later that afternoon, the plaintiff’s solicitor replied to the first defendant’s solicitor, stating that the parties must deal with the substantive relief before discussing costs. He relayed his understanding that counsel for the first defendant wished to discuss whether additional specific questions should be included in the originating motion.[40]
[40]Exhibit “CLT-1” to the Teese affidavit, 27.
On 11 November 2022, there was a directions hearing before Keith JR. The orders made noted in paragraph B of Other Matters:
The defendants wish to have the opportunity to file any additional affidavit material in support of the substantive relief sought in the plaintiff’s application which sets out the defendants’ first hand knowledge of certain of the matters deposed to by the plaintiff in support of its application.
The plaintiff says that no objection was raised at the directions hearing to the application, nor did the defendants say it was unnecessary. Instead, there was co-operation.[41] As already discussed, plainly the defendants wished to progress the matter to obtain their distributions. Objecting to judicial advice at this stage would simply have caused further delay.
[41]Teese affidavit, [28].
On 30 November 2022, the plaintiff’s solicitor emailed the defendants’ solicitors, stating that the plaintiff did not intend to amend the originating motion. He further stated:[42]
Having regard to several of the authorities which we have considered in the context of Perpetual’s application, we do not consider it necessary for the Originating Motion to be amended to include questions for determination. Our view is that the specific questions for determination ought to be the subject of submissions. For example, the parties may contend that certain questions ought to be put to the Court by way of submission in order to provide a foundation for the relief sought, but that other questions are not necessary.
Our view is the parties ought to confer and agree in relation to the specific questions to be put to the Court by way of submissions and that the Court’s judgment can set out those questions by reference to the submissions. This was the course adopted by the Court and Her Honour Justice Cameron in Re Estate of Henry Brough Smith; Perpetual Trustee Company Ltd v Uniting (Victoria and Tasmania) Ltd [2020] VSC 378 and also by Her Honour Justice McMillan in Re Foord [2019] VSC 444.
In the circumstances, we propose to circulate the questions we consider ought to be addressed to the Court by way of submission, and to seek your input and agreement to those proposed questions prior to the next return of the matter of directions.
[42]Exhibit “CLT-1” to the Teese affidavit, 32.
On 30 November 2022, the first defendant’s solicitor wrote to the plaintiff’s solicitor, copied to the second defendant’s solicitor, querying in detail the basis for the plaintiff’s intention to claim indemnity costs for the application.[43]
[43]Exhibit “EMD-1” to the Davis affidavit, 17-18.
On 2 December 2022, the first defendant’s solicitor emailed the plaintiff’s solicitor, copied to the second defendant’s solicitor, seeking clarification as to what input was sought from them regarding the proposed questions for the Court, and in turn whether a timeline extension for the affidavits in response would be required. The plaintiff’s solicitor promptly replied, stating that he did not think the deadline needed to be extended, that the proposed questions would be circulated the following week and that the matters to be addressed by the defendants’ responsive affidavits were outlined in the advice annexed to the plaintiff’s initial affidavit.[44]
[44]Teese affidavit, [31]; Exhibit “CLT-1” to the Teese affidavit, 33.
On 13 December 2022, the plaintiff’s solicitor emailed the defendants’ solicitors enclosing the proposed questions to be put to the Court by way of submissions.[45] On 14 December 2022, the first defendant’s solicitor emailed the parties noting that counsel had reviewed the questions for submission and provided his proposed amendments.[46]
[45]Teese affidavit, [33]; Exhibit “CLT-1” to the Teese affidavit, 36.
[46]Teese affidavit, [35]; Exhibit “CLT-1” to the Teese affidavit, 37.
On 15 December 2022, Keith JR made consent orders providing further time to comply with the 11 November 2022 orders.
On 10 January 2023, the second defendant’s solicitor emailed the parties noting that the 15 December 2022 orders contained a slip and querying whether it was necessary to correct the order per the slip rule.[47]
[47]Exhibit “CLT-1” to the Teese affidavit, 39.
On 8 February 2023, the second defendant’s solicitor, on behalf of the parties, and further to some discussion, emailed the Court noting that the 15 December 2022 orders contained a slip by referring to the defendants’ forthcoming affidavits as “in opposition to” as opposed to “responsive to” the plaintiff’s application.[48] Englefield JR made orders on 28 April 2023, amending the 15 December 2022 orders to make the parties’ requested change. Paragraph B of those orders records that “all parties to this proceeding seek the same relief”. Paragraph 3 of the orders required the parties to file joint submissions by 19 May 2023. Further timetabling orders were later made.
[48]Exhibit “CLT-1” to the Teese affidavit, 41.
On 8 August 2023, Keith JR made final timetabling orders by consent, and listed the matter for trial on 17 October 2023.
On 17 October 2023, the trial proceeded as listed. On the same day, I made orders for distribution. The parties were in agreement as to the orders. Paragraph A of Other Matters records that reasons were to follow.
On 6 December 2023, I published the judgment.
On 2 February 2024, the plaintiff served the defendants with an unsealed copy of its application for leave to appeal.[49]
[49]Davis affidavit, [6]; Exhibit “EMD-1” to the Davis affidavit, 50-75.
On 6 February 2024, the first defendant’s solicitor wrote a detailed letter to the plaintiff’s solicitor saying the application for leave to appeal was incompetent, lacked a proper basis and had no real prospect of success.[50] On the same date, the plaintiff’s solicitor wrote to the defendants’ solicitors stating that the application for leave documents were submitted for filing but not accepted. Further, he stated that as costs orders consequential to the judgment had not been made, the plaintiff would not proceed with the filing of the application for leave to appeal “at this time”.[51]
[50]Exhibit “EMD-1” to the Davis affidavit, 77-81.
[51]Exhibit “EMD-1” to the Davis affidavit, 83.
On 7 February 2024, the proceeding was listed for orders consequential to judgment. This hearing was adjourned until 20 March 2024 as the parties required more time to submit material. The defendants referred to time wasted by the plaintiff’s attempt to file an incompetent appeal of the judgment; that is, to file an appeal although orders had not been made.
On 20 March 2024, the costs hearing proceeded as listed. It was common ground then that the plaintiff had yet to make distributions to the defendants.
Applicable principles
Rule 63.26 of the Supreme Court (General Civil Procedure) Rules2015 (Vic) (‘Rules’) provides that unless the Court otherwise orders, a party who sues as trustee is entitled to the costs of the proceeding out of the fund held by the trustee insofar as the costs are not paid by any other person.
In Defina v Matina,[52] McMillan J set out the well-established principles applicable to a trustee’s right of indemnification:[53]
Trustees are ordinarily entitled to costs out of the estate in litigation relating to the administration of the trust estate, unless they have been guilty of misconduct. In respect of their costs, trustees are entitled as of right to indemnity out of the trust for expenses properly incurred, that is, all costs except to the extent that they are of an unreasonable amount or have been unreasonably incurred. The concept of proper expenditure excludes conduct demonstrating want of prudence or diligence.
[52][2017] VSC 106.
[53]Ibid [23] (citations omitted).
Her Honour then stated:[54]
Expenses and liabilities that are improperly incurred, such as acting beyond power, in bad faith or exercising power ‘with an absence of care and diligence that a person of ordinary prudence should exercise’ are not caught by the right of indemnity and shall be borne by the trustee personally…
The onus to prove that a trustee should not be indemnified rests with the party seeking to deny the right of indemnity to demonstrate that costs have been improperly incurred.
[54]Ibid [24]-[25] (citations omitted).
I gratefully adopt also the summary of principles set out by her Honour in Marks v Evans (No 2).[55]
[55][2023] VSC 158, [13]-[21]. This summary cites authorities to which both parties referred in their submissions.
As Moore J recently held in Re Lidgett (No 2),[56] these well-established principles are consistent with the provision made in r 63.26 of the Rules, and “subject to the discretion of the Court, give rise to a prima facie entitlement of the [trustee] for her costs of the proceeding”.[57] His Honour referred to Marks v Evans (No 2), stating the following:[58]
In relation to the observation by the Court of Appeal in Wales v Wales that it is ‘very often appropriate’ for a trustee or executor to seek judicial advice, McMillan J remarked that it does not mean that judicial advice should be sought ‘as of course’ by executors or trustees before the exercise of their powers. ‘The ability to have recourse to the Court for directions and advice does not replace the trustee’s duty to consider the relevant issue for himself or herself’. Her Honour continued:
Trustees have been denied their costs where they have unnecessarily applied to the Court, made applications that had little or no merit, made applications for advice where the legal position was clear, litigated unreasonably, or incurred unnecessary expenses in litigation.
[56][2024] VSC 364.
[57]Ibid [12].
[58]Ibid [13] (citations omitted).
In Mantovani v Vanta Pty Ltd (No 3),[59] McMillan J said in respect of ordering indemnity costs:[60]
The prima facie position is for costs to be ordered by the Court on the standard basis … However, the Court has discretion to award costs other than on the standard basis where a proceeding exhibits a special feature or circumstance.[61] The circumstances in which the Court may consider a special costs order are not closed, and depend upon the facts of the relevant case.[62] A special costs order usually means an order for costs on an indemnity basis … Some circumstances which have been held to warrant a special costs order include where a party commences or continues a proceeding for an ulterior motive or in wilful disregard of known facts or clearly established law.[63]
[59][2022] VSC 357.
[60]Ibid [9].
[61]Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’), r 63.28.
[62]Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [8] (Harper J).
[63]Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399, [14] (Croft J); Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [7].
Further, the Civil Procedure Act 2010 (Vic) applies to all parties. Pursuant to s 24, an overarching obligation on the parties is to:
use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to–
(a) the complexity or importance of the issues in dispute; and
(b) the amount in dispute.
Section 20 imposes an overarching obligation to co-operate with the other parties and the court in connection with the conduct of the proceeding.
Submissions
Plaintiff’s submissions
The plaintiff seeks orders that its costs be paid out of the estate. It characterises its proceeding as “practically successful”, as the Court made orders reflecting the relief set out in its originating motion and did not decline to provide the directions sought. The plaintiff submits that its conduct did not amount to misconduct, nor was it the case that the plaintiff used the judicial advice procedure improperly.[64] The timing of the application is said by the plaintiff to be adequately explained by the evidence, and there is no delay of the kind that would warrant denying the plaintiff an indemnity.[65]
[64]Such as occurred in Re O’Donoghue [1998] 1 NZLR 116 and Marks v Evans (No 2) [2023] VSC 158, as referred to in the Judgment.
[65]Citing Re Sir Colin and Lady MacKenzie Trust (No 2) [2020] VSC 335 (McMillan J).
The gravamen of the plaintiff’s submission is that while the Court may have ultimately deemed the application unnecessary in its judgment, the defendants actively participated throughout it, and that conduct of the defendants is relevant to the question of costs. The plaintiff points to the statement of John Dixon J in Bolitho v Banksia Securities Ltd (No 13)[66] that “costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs in issue”.[67] The plaintiff says the defendants “actively encouraged and cajoled” the plaintiff to progress with the application, acquiescing to it, and providing supportive affidavits and joint submissions to the Court. The defendants did not indicate any opposition to the application’s existence until filing submissions for the final hearing. Therefore, the defendants should share responsibility for the costs incurred to all parties.
[66][2020] VSC 706.
[67]Ibid [3].
The plaintiff says the defendants’ last-minute submission that the application was unnecessary amounted to approbation and reprobation as considered in Fried v National Australian Bank Ltd.[68] The defendants agreed on the nature of the judicial advice sought, in that the advice related to the distribution of funds to them. The application was foreshadowed early to the defendants, as a means of accessing the repository of their documents regarding the entities’ history, rather than as a means of putting the defendants to proof. The defendants participated and engaged, and only showed their opposition to the application at this last juncture. The Court should have regard to this as approbation, demonstrating inconsistency.
[68][2000] FCA 910, [30]-[33] (Weinberg J).
Defendants’ submissions
The defendants say the application, and the joinder of the defendants, was wholly unnecessary, to the extent that it disentitles the plaintiff from indemnification from the trust fund. No real doubt — factual or legal — was ever raised that the defendants were not the proper recipients of the bequests such as to justify the application. The plaintiff should not have joined the defendants and put them to the expense of preparing affidavits to set out historical matters that were not truly disputed; any alleged evidentiary gap could have been addressed by correspondence. At every stage, the plaintiff chose the course that involved delay and expense. The defendants also point to what they describe as a “longstanding policy against unnecessary joinder in charity cases”.[69]
[69]National Trustees Executors & Agency Co of Australasia Ltd v Attorney-General (Vic) [1978] VR 374, 376 (McInerney J).
The defendants say it is fanciful for the plaintiff to argue that they approved of or willingly acquiesced to the plaintiff’s conduct. Regarding the pre-litigation correspondence, the defendants submit their disapproval has been explicit and longstanding. Citing Avery v Manno,[70] the defendants contend there is no right to object to or seek summary judgment of, an Order 54 application, and, accordingly, it is unsurprising that the defendants sought to co-operate to bring the unnecessary litigation to an end as quickly as possible.
[70](2020) 62 VR 281, [52]-[54] (Derham AsJ).
Noting that the trustee’s right of indemnity extends only to expenses properly and reasonably incurred, the defendants reject any contention which the plaintiff may have made that a denial of indemnity is limited to a narrow concept of misconduct. Contrary to the plaintiff's submission, the defendants submit that the onus is on the plaintiff trustee to show that its costs and expenses were properly incurred for the benefit of the trust.[71]
[71]Citing Wareham v Marsella (No 2) [2020] VSCA 118, [18] (Tate, McLeish and Hargrave JJA).
The plaintiff’s conduct on the whole was unnecessary, wasteful, dilatory and inconsistent with its overarching obligations. It brought proceedings that lacked a proper basis warranting indemnity costs against it,[72] without recourse to the trust fund.
[72]Citing Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 233-4 (Sheppard J); Sheppard v The Uniting Church in Australia Property Trust (Victoria) [2020] VSC 12, [27] (John Dixon J).
Consideration
Before considering the appropriate cost orders in this proceeding, I will briefly address some matters of principle raised by the parties’ submissions. However, they have limited, if any, impact on my determination.
Firstly, an application for judicial advice pursuant to Order 54 may be made with or without joining beneficiaries. Reference was made by the defendants to National Trustees Executors & Agency Co of Australasia Ltd v Attorney-General (Vic)[73] as authority for the proposition that there is a longstanding policy against joinder in charity cases. That case is of no assistance here as McInerney J was there considering circumstances in which it may be necessary or proper for a trustee to add defendants other than the Attorney-General.
[73][1978] VR 374, 376 (McInerney J).
Secondly, I reject the proposition that a summary dismissal application cannot be brought with respect to an application for judicial advice. In Avery v Manno, Derham AsJ observed that such an application was novel. However, his Honour’s rejection of the summary dismissal application was not because it was novel, but rather because it was made on an incorrect basis.[74] That is, the defendant wrongly asserted that the proceeding had no real prospect of success on the basis that disputed questions of fact cannot be determined in an application for judicial advice per Order 54 of the Rules.[75]
[74]Avery v Manno (2020) 62 VR 281, [52].
[75]Ibid [34]-[35].
Thirdly, I firmly reject the plaintiff’s submission that the doctrine of approbation and reprobation is engaged. The plaintiff relies on the decision of Weinberg J in Fried v National Australia Bank Ltd[76] as a statement of the relevant principles.[77] The plaintiff says the doctrine is engaged because the defendants have changed their position; initially they complained the proceeding had not been brought sooner and took up the plaintiff’s offer of filing supporting affidavits, and proposed amendments to the specific questions to be asked in the motion, and now they assert it was unnecessary. This submission is misconceived. The doctrine concerns alternative and inconsistent rights. Here, the defendants have been steadfast in their assertion of rights since December 2021, namely that the plaintiff ought to make distributions equally to them and in a timely manner.
[76][2000] FCA 910, [30]-[33].
[77]Ibid [28]-[33].
Fourthly, I accept the plaintiff’s submission that the onus is on the defendants in this case to establish that the costs of the proceeding were improperly incurred. So much is authoritatively established by the Court of Appeal in Wales v Wales[78] and Nolan v Collie.[79] The authorities relied upon by the defendants are distinguishable.[80]
[78][2015] VSCA 345, [41]-[42] (Kyrou and McLeish JJA and Ginnane AJA).
[79](2003) 7 VR 287, 306 [50] (Ormiston JA, Vincent and Batt JJA agreeing).
[80]Wareham v Marsella (No 2) [2020] VSCA 118 (Tate, McLeish and Hargrave JJA); Rouse v IOOF Australia Trustees Ltd (No 3) [1999] SASC 208 (Lander J); and Re Lonnex Pty Ltd (in liq) (No 2) (2019) 57 VR 238 (Whelan, McLeish and Hargrave JJA). These cases deal, for example, with the appeal costs of trustees who unsuccessfully challenged their removal as trustees, and which party bears the onus on the question of indemnity, once it has been found appropriate to order a trustee to pay personally the costs of an appeal they have brought following an unsuccessful request for advice or directions.
Turning now to the appropriate cost orders to be made in this proceeding.
I am satisfied that the defendants have established that the costs of the proceeding were improperly incurred. The plaintiff should bear its costs of the proceeding rather than have them paid out of the deceased estate. Moreover, the plaintiff, rather than the estate, should pay the defendants’ costs on an indemnity basis. The reasons for my findings follow.
Firstly, I held that the application for judicial advice was unnecessary and should not have been commenced.[81] I reject the plaintiff’s submission that its application was necessary and successful because judicial advice was given. Certainly, judicial advice was given on whether the defendants were continuations or successors of the institutions named in the will. However, as ruled, there was no practical significance to that issue,[82] and the lack of practical utility of the application was apparent from at least June 2022, when the plaintiff demonstrated its intention to make distributions to the defendants and the defendants agreed with the proportion to be distributed. There was no controversy. The fact that the plaintiff obtained the advice it sought “does not serve to change the character of the whole application from one which was unjustified and unnecessary to one which was properly pursued”.[83]
[81]Judgment, [123]-[129].
[82]Judgment, [128].
[83]Marks v Evans (No 2) [2023] VSC 158, [52].
Secondly, the defendants’ participation in and co-operation with the application does not absolve the plaintiff of the consequences of a finding that its application was unnecessary. The defendants could not force the plaintiff to make a distribution, save by filing their own application. However, from at least August 2021, the plaintiff foreshadowed its application for judicial advice. It is entirely unsurprising that the defendants considered their best means of obtaining the distribution from the plaintiff was to support and progress its application, rather than object and halt its progress. It would have been counterproductive for the defendants to object to an application seeking orders that the plaintiff was justified in distributing the bequests to them — an outcome they had been seeking since the life tenant's death. Notwithstanding, the defendants continued to make clear their ongoing and understandable discontent and frustration with the approach adopted by the plaintiff.
Thirdly, I accept the defendants’ characterisation of the plaintiff’s conduct as dilatory and inconsistent with its overarching obligations. I refer to several matters by way of example. In August 2021, the plaintiff asserted to the defendants that it was obtaining legal advice and foreshadowed an application for judicial advice. Rigby Cooke was not retained, however, until May 2022. What steps, if any, the plaintiff took in that period to progress the matter have not been identified. By June 2022, the plaintiff’s intention to distribute the bequests to the defendants in equal shares was formed. Despite the application being “well underway and being settled” in July 2022, the plaintiffs did not file it until October 2022. It was not until November 2022, following the filing of the application, that the plaintiff first identified to the defendants with any specificity what extra material it asserted was necessary for them to put before the Court.
Accepting that some delays due to personal leave, other commitments and resignations of key personnel are inevitable, the delay in this case is difficult to justify in circumstances where there was never any real dispute as to the distributions that would occur. As the first defendant’s solicitor identified to the plaintiff in November 2022:
Because the matters to be resolved have not changed in all this time, the bulk of our client’s costs would have been avoided had the Plaintiff made its current application nearly two years ago as it had then proposed and when it had been fully capable of doing so.
Further, significant periods elapsed in which the plaintiff failed to respond to the defendants’ clearly stated and reasonable concerns. It is difficult to discern from the plaintiff’s conduct any serious attempt to adopt a pragmatic approach to the matter or any awareness or acceptance of the need to use reasonable endeavours to ensure costs incurred were reasonable and proportionate having regard to the complexity or importance of the issues in dispute — there being no real issue in dispute at all. This is despite the fact that the plaintiff is a professional trustee and asserts an awareness of its obligations as a model litigant.
The plaintiff submits the conduct of the litigation must be considered “having regard to the significant size of the estate and whether steps taken were reasonable and proportionate”. The significant size of the bequests diminishes in relevance where the plaintiff fails to identify any controversy about who would receive the estate. This was not a case where the plaintiff sought to protect itself against the risk of distributing very substantial sums of money to the wrong beneficiaries. The recipients of the fund and their respective shares were identified and agreed upon well before the plaintiff filed the application. In fact, distributions had already been made to the defendants in their previous corporate forms, and correspondence from the plaintiff had identified them as entitled beneficiaries.[84] I do not consider it was reasonable and proportionate to incur costs, and to require the defendants to incur costs, to establish only whether the defendants were entitled to the funds as continuations of or successors to the entities named in the will.
[84]Judgment, [125]-[126].
The remarks of McMillan J in Evans v Marks (No 2) are apposite:[85]
The question of whether the costs of the application for advice were properly incurred in the administration of the estate cannot be answered affirmatively in light of a conclusion that the application was unnecessary and unjustified … Accepting there has been no allegation of bad faith, malice, dishonesty or acting in want of power, nevertheless, in this case, the Court cannot condone as ‘proper’ an application for judicial advice that was wholly unnecessary and productive of significant costs for a large number of parties.
[85][2023] VSC 158, [56].
Accordingly, I will order that the plaintiff bear its own costs without recourse to the estate.
An order that the defendants’ costs be paid out of the estate is, in effect, an order that the defendants bear their own costs. Such an order is not appropriate in this case. I will order that the plaintiff bear the costs of the defendants. I consider that the conduct of the plaintiff as a whole throughout the proceeding — bringing an application that was unnecessary in circumstances where the legal position and facts were clear, and which was characterised by delay and an apparent disregard for keeping costs proportionate to the issue in dispute — provides a proper basis for the Court to exercise its discretion to order that the plaintiff pay the costs of the defendants on an indemnity basis.
SCHEDULE OF PARTIES
| S ECI 2022 04099 | |
| BETWEEN: | |
| PERPETUAL TRUSTEE COMPANY LIMITED (IN ITS DECEASED) | Plaintiff |
| - v - | |
| THE BAYS HEALTHCARE GROUP INCORPORATED | First Defendant |
| ANDREW KERR CARE LIMITED (ACN 166 027 658) | Second Defendant |
0
13
0