Re Aitken; Maier v Hearne
[2020] VSC 432
•15 July 2020
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2019 04342
IN THE MATTER of an application pursuant to rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 for determination of questions arising in the administration of the estate
-and-
IN THE MATTER of the Will and Estate of MAVIS VIOLET AITKEN, deceased
| MARK ALBERT MAIER (as administrator of the estate of MAVIS VIOLET AITKEN, deceased) | Plaintiff |
| v | |
| CATHERINE MELISSA HEARNE | First Defendant |
| v | |
| NICHOLAS GIASOUMI (as trustee of the bankrupt estate of PATRICIA AITKEN-WELSH) | Second Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 15 July 2020 |
CASE MAY BE CITED AS: | Re Aitken; Maier v Hearne |
MEDIUM NEUTRAL CITATION: | [2020] VSC 432 |
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WILLS AND ESTATES — Application to bar claims against the estate — Claims currently vested in trustee in bankruptcy — Trustee does not intend to pursue claims — Claims not instituted by bankrupt personally — Administration and Probate Act 1958 (Vic) s 30; Bankruptcy Act 1966 (Cth) s 58(1)(b).
COSTS — Costs of applications contemplated by terms of settlement — Whether costs claimed reasonable and proportionate to the issues in dispute — Civil Procedure Act 2010 s 24.
COSTS — Costs of investigation into alleged claims against the estate — Whether properly treated as costs of administration of estate — Whether costs claimed reasonable and proportionate.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms U Stanisich | McNab, McNab and Starke |
| For the First Defendant | Ms C McOmish | Weir & Strempel Pty Ltd |
| For the Second Defendant | Ms G Grigoriou | MGA Lawyers |
HER HONOUR:
By originating motion filed 23 September 2019, the plaintiff seeks certain orders and directions arising in the administration of the estate of the deceased pursuant to Order 54 of the Supreme Court (General Civil Procedure) Rules 2015.
Background
Mavis Violet Aitken died on 4 April 2017. She was survived by her two daughters, Patricia Susanne Aitken-Welsh (‘Ms Aitken-Welsh’) and Robyn Ann Browne (‘Ms Browne’). There is a lengthy history of acrimony between Ms Aitken-Welsh and other members of the deceased’s family. This has continued following the deceased’s death.
The deceased left three wills, dated 20 November 2012 (‘the final will’), 15 June 2007 (‘the penultimate will’) and 5 March 2003. The deceased’s final will appoints Ms Aitken-Welsh and Ms Browne as executors and trustees of the estate. The penultimate will appoints the deceased’s granddaughter, Ms Catherine Melissa Hearne (‘the first defendant’), as executor and trustee of the estate.
Disputes emerged among the family members as to the validity of the final will and the fitness of Ms Aitken-Welsh to be an executor of the deceased’s estate. Ms Aitken-Welsh’s fitness to act as executor was questioned on the basis of her bankruptcy and prior criminal convictions.
On 15 December 2014, Ms Aitken-Welsh was declared bankrupt following a debtor’s petition. On 30 November 2017, the Official Trustee transferred the office of trustee in bankruptcy of Ms Aitken Welsh’s estate to Mr Nicholas Giasoumi (‘the second defendant’). Ms Aitken Welsh was discharged from bankruptcy by operation of law on 16 December 2017. Pursuant to s 58(1)(b) of the Bankruptcy Act 1966 (Cth), her interest in the deceased’s estate remains vested in the second defendant as trustee.[1] As Ms Aitken-Welsh’s debts have not yet been paid, there has been no annulment of the bankruptcy and her property remains vested with the second defendant.
[1]Section 58(1)(b) of the Bankruptcy Act 1966 provides that ‘after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.’
On 19 April 2018, Ms Aitken-Welsh made an application for letters of administration of the estate of the deceased with the final will annexed.[2] Caveats opposing the application were lodged by Ms Browne on 6 March 2018, the first defendant on 24 April 2018 and the second defendant on 22 October 2018.
[2]Proceeding S PRB 2018 06280.
On 25 May 2018, the first defendant made an application for a grant of probate of the penultimate will.[3]
[3]Proceeding S PRB 2018 08574.
On 10 October 2018, the majority of the interested sui juris parties to the deceased’s estate, with the exception of Ms Aitken-Welsh, convened a mediation and reached a settlement in relation to the further administration of the estate (‘the settlement’). The second defendant, as trustee of Ms Aitken-Welsh’s bankrupt estate, was a signatory to the settlement. The settlement was contingent upon the making of an application to have Ms Aitken-Welsh passed over as executor, and the approval of the Court to the settlement on behalf of a minor beneficiary. Insofar as is relevant for present purposes, the terms of settlement provide:
1. The Terms of Settlement are subject to and conditional on:
a.The Court making an order that Patricia be passed over as an executor of the Last Will;
b.The written consent of Elisabeth and her signature to these Terms of Settlement within 14 days, or Court approval insofar as her interests are concerned; and
c.Court approval insofar as the interests of Benjamin are concerned.
2.Robyn will renounce executorship of the Last Will and will file and serve a supporting affidavit supporting the application to be made pursuant to Paragraph 3 hereof.
3.The Trustee will, after the expiration of 14 days, lodge a caveat against Patricia’s application for probate, file Grounds of Objection, make submissions to the Court that Patricia is not a fit and proper person to take out a grant of probate, nominate an independent administrator agreed between himself, Catherine, and Robyn (the Passing Over Application).
4.Sarah will file and serve a consent to the Passing Over Application and the appointment of an independent administrator.
5.Upon a grant of representation being made, the parties agree that the estate of the deceased will be administered and distributed in accordance with the attached Schedule (the Administration and Distribution).
SCHEDULE
THE ADMINISTRATION AND DISTRIBUTION
1. The legal personal representative of the estate of the Deceased will:
a. Collect the assets of the estate of Deceased;
b.Pay the debts and liabilities of the estate, including but not limited to administration costs and the cost of a monument;
c.Pay the costs of the parties up to and including mediation (being Catherine’s costs of $72,000.00, Robyn’s costs of $37,000.00, and the Trustee’s costs of $45,000.00)
d.Pay the reasonable future costs of the parties incurred in the Passing Over Application and obtaining a grant of representation;
e. Distribute the balance of the estate as follows:
i. 12% to each of Elisabeth, Sarah, and Benjamin;
ii. 24.5% to each of Robyn and the Trustee; and
iii. 15% to Catherine.
On 23 November 2018, the second defendant filed an application for orders passing over Ms Aitken-Welsh as executor of the final will of the deceased in proceeding S PRB 2018 06280. The second defendant nominated the plaintiff, a solicitor, as alternative administrator of the deceased’s estate.
Also on 23 November 2018, Ms Aitken-Welsh filed a further application for letters of administration of the estate of the deceased with the penultimate will annexed.[4] No further documents have been filed in that proceeding.
[4]Proceeding S PRB 2018 19573.
On 11 December 2018, the plaintiff made an application for letters of administration of the estate of the deceased with the final will annexed, as an independent person to administer the estate.[5]
[5]Proceeding S PRB 2018 20789.
On 12 December 2018, pursuant to the terms of settlement, the first defendant filed a summons seeking approval of the settlement on behalf of the minor beneficiary. That summons was filed in proceeding S PRB 2018 08574, being her application for a grant of probate of the penultimate will.
On 20 December 2018, the Court made the following orders in proceeding S PRB 2018 06280:[6]
[6]Re Aitken [2018] VSC 817.
(a) that Ms Aitken-Welsh be passed over as executor of the final will of the deceased;
(b) that Ms Aitken-Welsh’s application for letters of administration be dismissed;
(c) that Ms Aitken-Welsh bear her own costs of and incidental to the proceeding without indemnity from the estate; and
(d) that the first and second defendant’s costs of and incidental to the proceeding be retained from the deceased’s estate.
The same day, 20 December 2018, the Court made the following orders in proceeding S PRB 2018 20789:
(a) that letters of administration with the final will annexed of the deceased’s estate be granted to the plaintiff;
(b) that leave be granted to the plaintiff to apply to the Court for further advice in the event that difficulties were encountered in administering the deceased’s estate;
(c) that the plaintiff’s costs of and incidental to the proceeding be paid or retained out of the estate on an indemnity basis; and
(d) that the plaintiff be authorised to charge professional fees in accordance with the Practitioners Remuneration Order for non-litigious work and the relevant Court scale for litigious work.
On 31 January 2019, the Court approved the settlement reached by the parties in proceeding S PRB 2018 08574. The following orders were made, inter alia:
(a) that the costs of the first defendant of and incidental to the application for approval and to proceeding S PRB 2018 06280 be fixed at $72,000 and paid from the estate of the deceased;
(b) that the costs of Ms Browne of and incidental to the application for approval be fixed at $37,000 and paid out of the estate;
(c) that the costs of the second defendant of and incidental to the application for approval be fixed at $45,000 and paid out of the deceased’s estate; and
(d) that the proceeding be otherwise dismissed.
The plaintiff sought the Court’s assistance in approving the costs of his administration of the estate from 20 December 2018 to 23 September 2019. Ms Aitken-Welsh requested that the plaintiff provide an itemised bill of those costs. On 15 November 2019, the Court made orders that the plaintiff be entitled to recover his costs from the estate without providing an itemised bill.
The estate currently holds funds of approximately $868,000 that the plaintiff says is ready for distribution in accordance with the settlement.
Plaintiff’s application
The plaintiff now seeks the following orders and directions in relation to the administration of the estate:
(a) an order that any claims by Ms Aitken-Welsh and/or the second defendant, other than the entitlement of the second defendant (in his representative capacity) or Ms Aitken-Welsh to share in the residuary estate, be for all purposes barred;
(b) an order that the plaintiff be authorised to distribute or deal with the estate without regard to the claims referred to in paragraph (a), save for the entitlement of the second defendant in his representative capacity or Ms Aitken-Welsh to share in the residuary estate;
(c) alternatively to (a) and (b), directions as to the steps that the plaintiff in his representative capacity is required to take in relation to the claims referred to in paragraph (a) prior to distribution of the estate;
(d) directions as to whether orders 4, 5 and 6 of the order of the Court made on 31 January 2019 in proceeding S PRB 2018 08574 (that is, 15(a),(b) and (c) above) fix the costs of the parties to the settlement dated 10 October 2018:
(i) for the purposes of paragraph 1(c) of the schedule to the terms of settlement only; or
(ii) for the purposes of both paragraphs 1(c) and 1(d) of the schedule to the terms of settlement; and
(iii) if the order fixes the parties’ costs only for the purpose of paragraph 1(c) of the schedule, whether the further costs claimed pursuant to paragraph 1(d) of the schedule are approved by the Court; and
(e) an order that the costs of the estate in relation to the claims referred to in paragraph (a), including the costs of this application, be:
(i) borne by Ms Aitken-Welsh personally with an indemnity by the plaintiff out of the estate for any amounts which cannot be recovered from Ms Aitken-Welsh; or
(ii) paid out of the second defendant’s share of the estate; or
(iii) treated as an expense of the administration of the estate and therefore paid out of the estate before calculation of the residuary estate.
Ms Aitken-Welsh was not a party to the proceeding by reason of her bankruptcy. Any entitlement to her estate is presently vested in the second defendant.
Ms Aitken-Welsh’s potential claims against the estate — paragraphs 1 to 3 of the originating motion
The plaintiff seeks orders that any potential claims against the deceased’s estate by Ms Aitken-Welsh personally, or by the second defendant as her trustee in bankruptcy, be barred for all purposes and that he be entitled to administer the estate accordingly. Ms Aitken-Welsh’s entitlement to a portion of the residue of the estate is expressly carved out from the order sought.
Since January 2019, Ms Aitken-Welsh has forwarded more than 300 emails to the plaintiff, laying claim to the assets of the estate and alleging that the estate has claims against State Trustees Ltd, the Office of the Public Advocate, the first defendant and her husband.
By email dated 25 March 2019, the plaintiff wrote to Ms Aitken-Welsh in an effort to establish a clear understanding of the claims she purported to have against the estate. The plaintiff stated that he understood her claims as a creditor of the estate were as follows:
(a) $1,390,000 arising from Ms Aitken-Welsh’s alleged ownership of the deceased’s property at 37 Somerville Street, Doncaster;
(b) $250,000 allegedly arising from a bank cheque payable to Ms Aitken-Welsh by the deceased prior to her death;
(c) up to $2,500,000 in cash contained in bank accounts of the deceased, allegedly signed over by the deceased to Ms Aitken-Welsh; and
(d) an investment in the amount of $125,000 allegedly taken from the estate of DW Aitken, the deceased’s husband, which Ms Aitken-Welsh says was signed over to her by the deceased.
Between 25 March 2019 and 1 April 2019, Ms Aitken-Welsh sent a further 28 emails to the plaintiff, in response to his email of 25 March 2019. The plaintiff deposed that, notwithstanding a number of requests made to Ms Aitken-Welsh that she provide evidence or particulars of her claims against the estate, she did not provide any satisfactory material to substantiate her claims.
The second defendant has conducted his own investigations into the claims. His view is that any claims allegedly held by, or on behalf of, Ms Aitken-Welsh are ‘speculative at best’. The second defendant has indicated that he will not pursue any claims against the deceased’s estate.
Plaintiff’s s 30 notice
On 1 April 2019, the plaintiff served notice pursuant to s 30 of the Administration and Probate Act 1958 (‘the Act’) on the second defendant and Ms Aitken-Welsh requiring that any claim intended to be brought against the estate ought be commenced within three months. At the expiry of that three-month period, any such claims would be barred.
The second defendant responded to the plaintiff’s notice indicating that he did not intend to commence any claims against the estate on behalf of Ms Aitken-Welsh. Ms Aitken-Welsh responded to the plaintiff’s notice in several emails, indicating that she maintained the various claims and allegations against the deceased’s estate. Ms Aitken-Welsh has not issued any proceeding.[7]
Plaintiff’s submissions
[7]Ms Aitken-Welsh has at various times approached the Court to file proceedings, however, no proceedings have been accepted by the Prothonotary as the material did not comply with the Supreme Court (General Civil Procedure) Rules 2015.
The plaintiff submits that the claims purported to be possessed by Ms Aitken-Welsh are choses in action against the estate, which vest in the second defendant until such time as Ms Aitken-Welsh’s bankruptcy is annulled. Those claims will revert to Ms Aitken-Welsh in the event that the second defendant does not need to call on them for the purposes of the bankruptcy. Pursuant to s 58(1)(b) of the Bankruptcy Act 1966 (Cth), any chose in action held by Ms Aitken-Welsh vested in the trustee on 15 December 2014, being the date upon which she was declared bankrupt. The plaintiff submitted that, if the claims are not pursued by the second defendant, he will likely be paid out of the estate, which would enable full payment to Ms Aitken-Welsh’s creditors. Any surplus would then pass to Ms Aitken-Welsh upon the annulment of the bankruptcy alongside her claims against the estate.
The plaintiff is concerned that, were he to distribute the estate without regard to Ms Aitken-Welsh’s alleged claims, she may sue him personally once the bankruptcy is annulled. He therefore seeks the Court’s direction that any such claims be barred prior to distributing any estate funds. The plaintiff’s concerns are compounded by the facts that Ms Aitken-Welsh’s potential claims exceed the value of the estate, she was not a signatory to the settlement, the settlement provides that any estate liabilities be paid before distribution, and the complexity that arises should the claims revert back to Ms Aitken-Welsh.
The plaintiff submits that the time period under the s 30 notice has expired. The alleged claims arose in 2012 and have not been pursued. The second defendant, in whom any claim is presently vested, does not wish to pursue any claims against the deceased’s estate and does not consider any of the foreshadowed claims to be valid. The second defendant and Ms Aitken-Welsh have been given plenty of time to substantiate any claims made against the estate. The plaintiff submits that there is insufficient information for him to accept any obligations to account to the second defendant, as trustee of the bankrupt estate of Ms Aitken-Welsh, in regard to any claim against the estate.
Defendants’ submissions
No submissions were filed by either defendant on this issue.
Applicable principles and legislation
Section 30 of the Act entitles a personal representative who has notice of a claim to be made against the estate to serve upon a potential claimant a notice requiring that person within three months to take all actions proper to enforce or establish the claim and duly prosecute it.
Specifically, the procedure whereby executors or administrators may serve notice upon a claimant is as follows:
(1)A personal representative, having notice, whether under the provisions of section thirty-three of the Trustee Act 1958 or otherwise, that any claim has been or may be made against the estate of which he is the personal representative, may serve upon any person making or possibly entitled to make such claim a notice requiring such person to take within a period of three months from the date of receiving such notice all proceedings proper to enforce or to establish such claim and to duly prosecute the same.
(2)After the expiration of the said period of three months such personal representative may apply to the Court for an order to some such effect as hereinafter in this section mentioned.
(3)Upon the hearing of such application the Court, if not satisfied that such proceedings as aforesaid have been taken and are being duly prosecuted, may—
(a) order that the said period be extended; or
(b)order that the claim of any person so served with notice of the application be for all purposes barred; or
(c)make any further or other order enabling the estate to be distributed or dealt with without regard to the claim; and
(d)in any case impose such conditions and give such directions including a direction as to the payment of the costs of or incidental to the application as to the Court seems just.
Upon the expiration of the three-month period, the personal representative may make an application to the Court to have those contemplated proceedings barred. If the Court is satisfied that steps have been taken and the proceedings are being duly prosecuted, it may order that the three-month period be extended. Alternatively, the Court may order that any claim of any person so served with the notice of the application be barred and make any further or other orders enabling the estate to be distributed or dealt with without regard to the claim.[8]
[8]See, eg, Re Barber deceased [1924] VLR 123 (Cussen ACJ), where an extension of time was granted; Re DeBruin [2019] VSC 813, [8]–[9] (McMillan J).
Section 33 of the Trustee Act 1958, referred to in s 30 of the Act, provides a parallel mechanism whereby a personal representative may publish an advertisement requiring any person with a claim against an estate to send particulars of that claim within the time fixed in the notice. A personal representative is entitled to serve a s 30 notice upon a person whether having notice of their claim under s 33 of the Trustee Act 1958 or otherwise.
A claim against the estate includes not only a claim by a creditor but also a claim by the deceased’s next of kin or a legatee.[9] In Re Keating,[10] a case which considered the similarly termed s 30A of the Act, the Court followed the decision in Re Walker, where it was held that the provisions ‘should be treated as applicable to persons claiming to be legatees, as well as to those who claim to be creditors or next-of-kin’.[11]
Consideration
[9]See, eg, Newton v Sherry (1876) 1 CPD 246 in relation to a next of kin; Re Walker (1943) 43 SR (NSW) 305 in relation to a legatee.
[10][2015] VSC 371 (McMillan J).
[11](1943) 43 SR (NSW) 305, 307 (Nicholas CJ), quoted in Re Keating [2015] VSC 371, [15].
There is no evidence before the Court that either Ms Aitken-Welsh or the second defendant has any reasonable basis for a claim to be brought against the estate. This conclusion is supported by the reluctance of the second defendant to commence any proceeding in relation to Ms Aitken-Welsh’s alleged claims, as well as the plaintiff’s own investigations.
The administration of the estate and the distribution of the entitlements of the beneficiaries have been substantially delayed as a result of the conduct of Ms Aitken-Welsh. She has been given notice pursuant to s 30 of the Act, and has not initiated any proceeding within the three-month time frame.
In the circumstances, it is appropriate that orders be made that any and all claims by the second defendant in his representative capacity as trustee of Ms Aitken-Welsh’s bankrupt estate, or by Ms Aitken-Welsh personally, other than her entitlement under the will of the deceased, be barred for all purposes and that the estate be distributed.
Costs arising from the settlement and the Court’s orders dated 31 January 2019 — paragraph 4 of the originating motion
The plaintiff seeks directions in relation to the costs of the parties incurred following the settlement dated 10 October 2018. As observed, the settlement agreement expressly provided that the estate pay the costs of the parties up to and including mediation, in fixed amounts, and any reasonable future costs incurred in the passing over application and obtaining a grant of representation.
On 31 January 2019, the Court approved the settlement on the papers. Orders were made allowing the costs of the named parties, fixed in the amounts specified in the settlement agreements and totalling $154,000, to be paid from the estate of the deceased. Those orders fixed the costs only up to and including the mediation, that is, only for the purposes of paragraph 1(c) of the schedule to the terms of settlement.
The defendants submit that the parties never contemplated that they should bear the costs following the settlement without recourse to the estate. They submit that their further costs after the settlement should be allowed, including the costs of the passing over application, obtaining a grant of representation, and approval of the settlement, as contemplated by paragraph 1(d) of the schedule to the terms of settlement.
Costs claimed by the defendants and Ms Browne
The plaintiff gave notice of this proceeding to all beneficiaries, including the deceased’s daughter, Ms Browne. Ms Browne’s position is that if the first defendant’s costs are paid out of the estate, she also seeks payment of her costs.
The costs claimed by the defendants and Ms Browne are detailed in various tax invoices, however it is not clear whether those costs are assessed by reference to the Court scale, pursuant to a costs agreement, or otherwise. The total costs claimed amounts to $81,734.10 inclusive of GST.
First defendant’s claims
On 26 July 2019, the first defendant’s solicitor claimed further costs totalling $34,109.95 for the period 11 October 2018 to 25 June 2019. Those costs are apportioned as follows:
(a) $4,290.90 for the ‘probate account’ described as ‘our interim professional costs and charges on account of acting on [the first defendant’s] behalf in relation to the estate of Mavis Violet Aitken – Application for Probate by [the plaintiff] in proceedings S PRB 2018 20789’;
(b) $19,009.75 for the application for approval of the settlement described as ‘our interim professional costs and charges on account of acting on [the first defendant’s] behalf in relation to the estate of Mavis Violet Aitken – Application for Compromise; and
(c) $10,809.30 for further fees described as ‘such further and other reasonable costs for the [first defendant] in relation to the estate of Mavis Violet Aitken from the date of mediation’.
The costs position is presented differently in a costs statement exhibited to the affidavit of the first defendant’s solicitor, Mr Christopher Strempel. Mr Strempel’s costs statement details costs totalling $30,180.15. Those costs were apportioned as follows:
(a) $11,189.75 in respect of the approval of compromise, comprising professional fees of $4,809.75 plus counsel’s fees of $6,380;
(b) $14,990.80 in respect of the passing over application, comprising professional fees of $7,070.80 plus counsel’s fees of $7,920;
(c) $2,722.50 in professional fees in respect of the plaintiff’s application for a grant of representation; and
(d) $1,277.10 in disbursements.
Second defendant’s claims
By letter dated 14 October 2019, the second defendant’s solicitor attached two invoices which detailed costs totalling $54,808.20 incurred since mediation. The costs claimed are:
(a) $38,675.20 for the period 11 October 2018 to 21 December 2018; and
(b) $16,133.00 for the period 7 January 2019 to 14 October 2019.
In his affidavit filed in this proceeding, the second defendant attributed the first invoice to work incurred in bringing the passing over application and obtaining the grant of representation, that is, costs claimed under paragraph 4 of the originating motion. The second invoice was attributed to Ms Aitken-Welsh’s appeal from the passing over judgment and investigation into her alleged claims against the estate, claimed under paragraph 5 of the originating motion. The latter costs will be addressed further in the following section.
Ms Browne’s claims
By letter to the plaintiff dated 1 October 2019, Ms Browne’s solicitors claimed further costs at $12,878.75.[12] The costs claimed are:
(a) $11,384.75 for the period 17 October 2018 to 13 February 2019; and
(b) $1,494.00 for the period 14 February 2019 to 30 September 2019.
[12]In his affidavit sworn 15 October 2019, the plaintiff recorded the costs claimed by Ms Browne as $12,223.81, there is an inconsistency between that figure and those contained in the 1 October 2019 letter.
As stated, she seeks those costs from the estate only if the first defendant’s costs are paid out of the estate.
Consideration
Paragraph 1(d) of the schedule to the terms of settlement provides for the plaintiff to pay the parties’ reasonable future costs ‘incurred in the Passing Over Application and obtaining a grant of representation’. This is consistent with the orders made on 20 December 2018 in the passing over application, which provided that the costs of the first defendant and second defendant of and incidental to the proceeding be paid or retained out of the estate of the deceased. Paragraph 1(d) does not specifically refer to costs associated with the application for approval of the settlement. It is consistent with the fact that the parties otherwise intended post-mediation costs would come from the estate, and that the approval of compromise was a necessary component of obtaining a grant of representation, that such costs are also recoverable pursuant to the settlement.
The prima facie position in respect of costs in litigation is for standard costs to be ordered by the Court. Costs assessed on the standard basis include all costs reasonably incurred and of reasonable amount, according to the relevant Court scale.[13] The defendants seek indemnity for their costs as set out in the various tax invoices. Ms Browne also seeks indemnity costs as set out in her invoices, but only if the first defendant’s costs are paid out of the estate. Costs assessed on an indemnity basis means all costs shall be allowed except insofar as they are of an unreasonable amount or have been unreasonably incurred. A special costs order will only be made where the proceeding exhibits a special or unusual feature or special circumstances. Each proceeding must be considered on its own facts and, specifically, whether those facts support the making of a special order for costs.
[13] Supreme Court (General Civil Procedure) Rules 2015, r 63.30.
Practitioners and litigants must also have regard to s 24 of the Civil Procedure Act 2010, which imposes an overarching obligation on parties and legal practitioners to ‘use reasonable endeavours to ensure that legal costs and other costs incurred in connection with the civil proceeding are reasonable and proportionate to the complexity or importance of the issues in dispute and the amount in dispute’. This is consistent with the overarching purpose of the Act to ‘facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute’.[14]
[14]Civil Procedure Act 2010 (Vic) 7(1).
Prima facie, the quantum of costs claimed at $81,734.10 appears on the high side and may not be reasonable and proportionate to the issues in dispute. This is particularly so having regard to the settlement and the costs of $154,000 already paid out of the deceased’s estate for costs up to and including the mediation.
The first defendant’s ‘costs statement’ exhibited to Mr Strempel’s affidavit does little to justify the reasonableness of the costs claimed. The statement lists various tasks attributable to each of the passing over application, obtaining the grant, and approval of the settlement, as well as counsel’s fees. Those costs are not directly referable to the invoices provided to the plaintiff on 26 July 2019, nor have any other invoices been provided by the first defendant. There is also an inconsistency between the amounts claimed in the invoices sent by the first defendant’s solicitor to the plaintiff on 26 July 2019 and those set out in the costs statement. No explanation was given for that inconsistency. Further, neither the affidavit nor the tax invoices disclose whether costs are calculated pursuant to the Practitioners’ Remuneration Order or the relevant Court scale for litigious work, or on any other basis.
The invoices provided by the second defendant and Ms Browne also do not adequately categorise the costs relating to each of the passing over application, obtaining the grant of probate or the approval of the settlement. Neither do the invoices provided to the plaintiff, or the covering letters to those invoices, disclose the basis upon which the second defendant’s or Ms Browne’s costs were calculated.
For the purposes of assessing the reasonable and proportionate amount of the costs claimed, the defendants are to provide details of the costs in accordance with the three categories outlined above, and set out the basis for the quantum of the costs claimed. When that information is filed, the Court will consider it for the purposes of the further directions to be provided to the plaintiff pursuant to paragraph 4 of the originating motion.
Costs associated with investigating Ms Aitken-Welsh’s alleged claims against the estate — paragraph 5 of the originating motion
The plaintiff also seeks an order as to the costs of the estate in relation to the claims asserted by Ms Aitken-Welsh against the estate. The plaintiff seeks directions as to whether the costs of the investigation and this application be:
(a) borne by Ms Aitken-Welsh personally with an indemnity out of the estate to the plaintiff for any amounts which cannot be recovered from Ms Aitken-Welsh; or
(b) paid out of the second defendant’s share of the estate; or
(c) treated as an expense of the administration of the deceased’s estate, and therefore paid out of the estate before calculation of the residuary estate.
Plaintiff’s costs
Pursuant to the orders made on 20 December 2018 granting letters of administration with the final will annexed to the plaintiff, the plaintiff was authorised to charge professional fees in accordance with the Practitioners’ Remuneration Order for non-litigious work and the relevant Court scale for litigious work.
The plaintiff retained Castra Legal Costing (‘Castra’) to provide an assessment of his costs in administering the estate, calculated pursuant to the Practitioners’ Remuneration Order. The plaintiff instructed Castra to make an assessment of the costs of the administration of the estate as a whole and then to apportion those costs between the claims made by Ms Aitken-Welsh and all other matters undertaken for the estate.
Castra assessed the plaintiff’s professional costs for the period 20 December 2018 to 23 September 2019 in an amount of $49,385.27 excluding disbursements. The matters relating to the general administration of the estate totalled $24,126.19 and the matters relating to the claims alleged by Ms Aitken-Welsh against the estate totalled $25,259.08. Disbursements total $1,298.91, inclusive of GST. In total, the plaintiff’s costs and disbursements amount to $50,684.18, inclusive of GST.
The plaintiff does not make any submissions in respect of whether his costs ought to be borne by the estate generally, or by Ms Aitken-Welsh personally, or be retained from the second defendant’s share prior to distribution.
First defendant’s position
The first defendant indicated that, although there were no costs incurred by her in relation to investigating the alleged claims of Ms Aitken-Welsh, the plaintiff’s costs should not be borne by the estate. The first defendant submits that those costs ought to be retained from Ms Aitken-Welsh’s share of the estate, because:
(a) unlike the other costs issues raised in this proceeding, the terms of settlement do not contemplate that the estate should be responsible for these costs;
(b) it is not in the interests of the first defendant, or any other beneficiary of the estate, for Ms Aitken-Welsh’s bankruptcy to be annulled as her claims will revert to her personally, which may result in her seeking to pursue them;
(c) if the investigation costs are paid from the estate generally, the other beneficiaries to the estate will have suffered financially in order to pay out Ms Aitken-Welsh’s creditors; and
(d) the deceased’s estate is not yet fully administered. The second defendant therefore cannot claim in an interest in the deceased’s estate on behalf of Ms Aitken-Welsh’s bankrupt estate. All that is presently vested in the second defendant is a right to due administration, and expected fruits of that chose in action.
Second defendant’s position
The second defendant also seeks costs in relation to investigations into potential claims by Ms Aitken-Welsh in the amount of $16,133.
The second defendant submits that the amounts incurred in investigating claims against the estate should be paid from the estate generally. The second defendant makes that submission on the basis, inter alia, that:
(a) the creditors of Ms Aitken-Welsh’s estate should not be unfairly burdened with these costs;
(b) pursuant to the terms of settlement, it was agreed that the costs of administering the estate should be paid from the estate generally. At no stage was it envisaged that any costs relating to Ms Aitken-Welsh’s conduct should be retained from the second defendant’s share of the estate and effectively borne by her creditors;
(c) it is inequitable and unfair to suggest that the independent ‘white knight’ who assisted in effecting the terms of settlement, which has advantaged all of the beneficiaries, should have to meet the additional costs occasioned by Ms Aitken-Welsh, when her behaviour was well known to all parties to the settlement;
(d) the second defendant and Ms Aitken-Welsh are distinct entities. The second defendant should not and cannot be held responsible for the conduct of Ms Aitken-Welsh any more than the first defendant or Ms Browne;
(e) dealing with Ms Aitken-Welsh’s conduct should not come as a surprise to the parties, and should be considered a cost in administering the deceased’s estate. Therefore, the plaintiff’s costs, including those dealing with the potential claims, should be borne by the estate generally.
Consideration
The plaintiff’s costs associated with the investigation of Ms Aitken-Welsh’s potential claims against the estate were not specifically provided for in either the terms of settlement nor the Court’s subsequent orders.
The investigation of potential liabilities, including claims against the estate, is a normal incident of any administration of a deceased estate.[15] Prima facie, a personal representative is entitled to indemnification of such costs from the estate insofar as they have been reasonably incurred. However, any indemnity ‘must be given effect in such a way as to make the burden fall upon the beneficiaries equitably having regard to the circumstances under which the costs, charges and expenses were incurred’.[16]
[15]GE Dal Pont and KF Mackie, Law of Succession (LexisNexis Butterworths, 2nd ed, 2017) 418 [12.11].
[16] National Trustees Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268, 279 (Williams J).
The plaintiff’s costs associated with investigation of Ms Aitken-Welsh’s alleged claims are quantified at approximately $25,239. That quantum is a direct result of Ms Aitken-Welsh’s approach to asserting her many claims, including sending hundreds of emails to the plaintiff. The remaining beneficiaries to the estate should not bear the burden of the costs associated with investigating Ms Aitken-Welsh’s alleged claims. These costs ought properly be paid out of the second defendant’s share of the estate, which is held on behalf of Ms Aitken-Welsh.
The fact that Ms Aitken-Welsh’s entitlement to a portion of the estate vests in the second defendant does not alter this conclusion. The second defendant has indicated that approximately $200,000 is required to pay Ms Aitken-Welsh’s creditors in full, though no proofs of debt have been provided by him in this proceeding and it is not clear whether they have been adjudicated upon. According to a revised estate account presented in the second defendant’s submissions, the second defendant expects a distribution from the estate in the amount of approximately $224,549.21. A deduction of $25,259.08 from that sum suggests that Ms Aitken-Welsh, rather than her creditors, will bear the burden of the Court’s order.
The second defendant’s costs associated with investigating potential claims are quantified at $16,133.00. As with the second defendant’s other post-mediation costs, it is not clear whether those costs are assessed pursuant to the Practitioners’ Remuneration Order or on some other basis. The second defendant also deposed that a portion of the $16,133 was attributed to Ms Aitken-Welsh’s appeal from the passing over judgment, rather than investigation of her potential claims against the estate. For the purposes of assessing the reasonable and proportionate amount of the costs investigation claimed, the second defendant is to provide details of the costs of the investigation, and set out the basis for the quantum of the costs claimed. When that information is filed, the Court will consider it for the purposes of the further directions to be provided pursuant to paragraph 5 of the originating motion.
Costs of the proceeding
The first defendant seeks costs of $9,620 in relation to this application, to which she is a necessary party. The second defendant seeks costs of $16,680 in relation to this application, and submits that the costs of this proceeding should be paid from the estate generally.
In view of the need for further information to be filed for the purposes of paragraphs 4 and 5 of the originating motion, these costs will be reserved.
Orders
The Court orders that:
(a) Pursuant to s 30(3)(b) of the Administration and Probate Act 1958, the second defendant and Ms Patricia Aitken-Welsh be for all purposes barred from bringing claims against the estate.
(b) Pursuant to s 30(3)(c) of the Administration and Probate Act 1958, the plaintiff be authorised to distribute the estate without regard to the claims referred to in paragraph (a) of this order, with the exception of the second defendant’s entitlement to a share in the residue of the estate pursuant to the terms of settlement dated 10 October 2018.
(c) The costs of the plaintiff in relation to the administration of the estate in the amount of $24,126.19 plus disbursements of $1,298.91, inclusive of GST, be paid from the estate of the deceased.
(d) The costs of the plaintiff in the amount of $25,259.08 for the investigation of alleged claims by Ms Aitken-Welsh against the estate of the deceased be deducted from the share of the estate payable to the second defendant.
(e) The first defendant, the second defendant and Ms Robyn Ann Browne forward to the Court further details of their costs in relation to the plaintiff’s application for a grant of administration in proceeding S PRB 2018 20789, of the second defendant’s passing over application in proceeding S PRB 2018 06280, and of the first defendant’s application for approval of compromise in proceeding S PRB 2018 08574 by 7 August 2020.
(f) The second defendant forward to the Court further details in relation to his costs associated with investigation of alleged claims against the estate by 7 August 2020.
(g) Costs reserved.
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