Re Anthony; Rogan v Rogan

[2017] VSC 668

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY & PROBATE LIST

S CI 2017 02097

IN THE MATTER of the will and estate of JOAN MARIE ANTHONY (deceased)

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IN THE MATTER of an application pursuant to order 54 of the Supreme Court (General Civil Procedure) Rules 2015, rule 6.03 Supreme Court (Administration and Probate) Rules 2014 and section 28 of the Administration and Probate Act 1958

PETER GEORGE ROGAN	Plaintiff
v
ANTHONY JOHN ROGAN (who is sued as executor of the estate of the deceased)	Defendant

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JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF RULING:	2 November 2017
CASE MAY BE CITED AS:	Re Anthony; Rogan v Rogan
MEDIUM NEUTRAL CITATION:	[2017] VSC 668

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COSTS — Where plaintiff sought information about deceased’s estate and administration account from defendant — Where defendant refused to provide the information sought — Where defendant failed to comply fully with orders of the Court — Whether defendant acted reasonably — Whether plaintiff acted reasonably in requesting the information.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr J Smith	Tress Cox Lawyers
For the Defendant	Mr S McNab	Portfolio Law

HER HONOUR:

Introduction

1. Joan Marie Anthony died on 4 March 2015 (‘the deceased’).  Probate of her will dated 27 November 2012 was granted to the defendant on 8 July 2016.  The plaintiff and the defendant are beneficiaries of the estate of the deceased.

1. Approximately eighteen months prior to her death, the deceased was a party to the settlement of a dispute concerning the deceased estate of Kathleen Rogan.  Pursuant to the settlement, the deceased was entitled to a payment of approximately $816,000. 

1. Between May and November 2016, the plaintiff made requests for information and an accounting from the defendant as the executor of the deceased’s estate.  In January 2017, the plaintiff inspected documents, including an undated trust document, whereby the deceased appeared to instruct payment of a substantial sum to the defendant and her attorneys under power, Janice and Vicki Rogan. 

1. During January and February 2017, the plaintiff wrote to the defendant’s solicitor on three occasions seeking information concerning the undated document.  On 22 February 2017, the defendant’s solicitor informed the plaintiff’s solicitor that he had been instructed not to provide any further information to the plaintiff.

1. By letter dated 31 March 2017, the plaintiff’s solicitor sought specific information concerning the undated document including ‘all documents related to the attached document and the payment of the deceased’s share of Kathleen’s estate’.  The defendant’s solicitor informed the plaintiff’s solicitors that a response would be made by 19 May 2017, however, no response was ever received by the plaintiff’s solicitor.

Plaintiff’s application

1. By originating motion filed 1 June 2017, the plaintiff sought an administration account for the deceased’s estate and an affidavit by the defendant addressing matters set out in the letter dated 31 March 2017. 

1. Pursuant to orders made by consent on 22 June 2017 and 17 August 2017, the defendant filed certain affidavits.  The affidavits that were required under the orders made 17 August 2017 failed to address all points. 

1. On 1 September 2017, the plaintiff obtained further orders extending the time for the filing of an affidavit by the defendant addressing the outstanding matters.  The defendant has now complied with the orders made 1 September 2017 and the only outstanding issue is the costs of the proceeding. 

1. In respect of the costs:

(a)   the plaintiff seeks an order that the defendant personally pay to the plaintiff the plaintiff’s costs of and incidental to the proceeding, including reserved costs, on an indemnity basis without a right of indemnity from the estate; and

(b)   the defendant seeks an order that the plaintiff bear his own costs and the defendant’s costs be paid out of the estate on the standard basis.

Applicable principles

1. Costs are at the discretion of the Court, unless as otherwise provided by an Act or the Rules.[1]  The prima facie position in respect of costs in litigation is for standard costs to be ordered by the Court, with the Court having the discretion to award costs other than on the standard basis.  The usual order as to costs is that costs follow the event and a successful party is entitled to an award of costs in its favour.[2]  The relevant ‘event’ is success in the action or on particular issues.[3]  The unsuccessful party bears the liability for the costs of the unsuccessful litigation.[4]  The central principle is to make an order that is fair and just between the parties in the circumstance of each case.[5]

   [1]Supreme Court Act 1986 (Vic), s 24.

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

   [3]Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin(1997) 186 CLR 622, 624–5 (McHugh J); Seng Hpa v Walker [2017] VSC 320 (8 June 2017) [77]-[81].

   [4]Oshlack v Richmond River Council (1998) 193 CLR 72, 97 (McHugh J).

   [5]Earnshaw v Loy (No 2)[1959] VR 252, 253; see G E Dal Pont, Law on Costs (Lexis Nexis, 3^rd ed, 2013) [6.15].

1. Pursuant to s 36(2) of the Trustee Act 1958, a trustee may reimburse himself or herself, or pay or discharge out of the trust premises all expenses incurred in or about the execution of the trusts or powers.  A trustee is 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 that demonstrates want of prudence or diligence.[6]  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.[7]

   [6]Nolan v Collie (2003) 7 VR 287, 303–10 (Ormiston JA); Dimos v Skaftouros (2004) 9 VR 584, 617 (Dodds-Streeton AJA) as cited in National Trustees Executors & Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268, 279 (Williams J).

   [7]Re O’Donogue [1998] 1 NZLR 116, 121 (Hammond J); Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq)(2001) 188 ALR 566, 606; Nolan v Collie (2003) 7 VR 287, 308-9.

1. The power to order costs is usually exercised after a hearing on the merits.  Success in a proceeding or on particular issues is the factor that controls the exercise of the discretion in most cases.  A successful party is prima facie entitled to a costs order.

1. Where a proceeding is undetermined and has not been resolved by contest before a Court in a hearing on the merits, the court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.  The Court has discretion to make costs orders either where a defendant has consented to a grant of final relief or if there is consensus as to the outcome of the proceedings.  In certain circumstances, a costs order can be made if it can be determined that one or other party would almost certainly have succeeded in the proceeding, or if one or other party has acted unreasonably in pursuing or defending the proceeding.[8]

   [8]Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, 624 (McHugh J); Seng Hpa v Walker [2017] VSC 320 (8 June 2017) [77]-[81].

1. A special costs order will only be made where the proceeding exhibits a special or unusual feature or special circumstances.  Each proceeding must be considered on its own facts to ascertain whether those facts support the making of a special order for costs.

1. The authorities concerning the principles to be applied when a court, in the proper exercise of its discretion, may depart from the making the usual order for costs on a standard basis are well known and conveniently set out in cases such as Colgate-Palmolive Co v Cussons Pty Ltd,[9] Ugly Tribe Co Pty Ltd v Sikola[10] and Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3).[11]  The categories of circumstances that warrant a special costs order are not closed, however, the cases set out examples of circumstances where a special costs order has been made.

   [9]            Colgate-Palmolive Co v Cussons Pty Ltd(1993) 46 FCR 225.

   [10]Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (14 June 2001).

   [11]Sunland Waterfront (BVI) Ltd v Prudential Investments Pty Ltd (No 3)[2012] VSC 399 (14 September 2012).

Consideration

1. The Court has long recognised that an executor owes a duty to account to the persons who are to take under a testator’s will. This duty exists both at common law, and is enshrined in statute. Essential to this duty is the requirement that an executor keep proper account and records. These records should be unambiguous, clear and distinct so as to provide accurate information to the beneficiaries sufficient to inform them as to the state of the administration.[12] To this end, receipts, vouchers or other documentation should support each transaction.[13]

   [12]Hill v Roberts (Unreported, Supreme Court of Victoria, Ashley J, 27 October 1995) 32-3; Yates v Halliday [2006] NSWSC 1346 (7 December 2006) [58].

   [13]Supreme Court (Administration and Probate) Rules 2014, r 6.03: The probate rules in Victoria reflect this requirement and empower the Court to require a personal representation to file a true and just account, verified by affidavit, of the administration of the estate.

1. The correspondence between the parties prior to the issue of the proceeding establishes that the plaintiff made numerous attempts to obtain information related to the administration of the estate in circumstances where there were questionable elements surrounding an undated document and its execution by the deceased during her lifetime. This document appeared to transfer a substantial sum of money from a recent settlement in the estate of Kathleen Rogan.  The plaintiff was also involved in that settlement and expected that those funds would  be reflected in the assets of the estate of the deceased.  In those circumstances, it was reasonable for the plaintiff to query why the settlement sum did not form part of the estate of the deceased and request such information as to its whereabouts.  These requests were not a fishing expedition.  The defendant and his solicitors failed to provide an adequate response to the requests despite the fact that the defendant was obliged to provide this information to the plaintiff.  

1. I reject the defendant’s submission that his failure to comply with the requests for information was due to a lack of knowledge and involvement in the deceased’s affairs throughout her lifetime.  It is well established that an executor owes a number of legal and fiduciary duties to beneficiaries of the estate.  Simply claiming lack of knowledge does not absolve these duties.  An executor is obliged to act prudently and properly in the management of the estate as a whole and is generally assessed to the standard of an ‘ordinary prudent businessperson.’[14]

   [14]Austin v Austin (1906) 3 CLR 516, 525 (Griffith CJ) citing Speight v Gaunt (1883) 9 App Cas 1 (Lord Blackburn).

1. There were many instances where the plaintiff’s reasonable requests for information went unanswered or where deadlines were not adhered to by the defendant. In particular, the failure of the defendant to provide an adequate or reasonable explanation as to why the documents, that have now been produced by order of the Court, could not have been produced prior to the commencement of the proceeding. A considerable amount of time and money would have been saved had the defendant complied with these requests when they were first made, in line with his obligations as executor of the estate of the deceased. 

1. The defendant contended that he has endeavoured to answer the queries of the plaintiff and has responded to inquiries related to assets that do not form part of the estate.  The correspondence between the parties does not support this contention.  On the contrary, it suggests a failure by the defendant and his solicitors to respond adequately to the requests for information over a period of time.  The affidavits that the defendant was required to make pursuant to the orders made 17 August 2017 failed to address all of the points.  The defendant’s conduct exacerbated the time and costs expended in the proceeding. 

1. The plaintiff was unable to determine whether or not those undisclosed assets were part of the estate of the deceased without the information requested by the plaintiff. The duty to account carries with it an entitlement of the beneficiaries to view the records and supporting evidence in order to monitor the proper administration of the estate. An executor should provide these documents willingly rather than reluctantly as observed by Lloyd AJ in Yates v Halliday:

It is not a sufficient answer to simply invite the plaintiffs or their representatives to sort through two boxes of documents to determine whether the estate was properly administered.  It was Mr Halliday’s duty as executor and trustee to keep and produce when requested appropriate records demonstrating how the estate was administered.[15]

[15]          [2006] NSWSC 1346 (7 December 2006) [52].

1. In respect of a special costs order, the authorities emphasise the need for special circumstances to justify personal liability on an indemnity basis for  costs.  Specifically, the failure to provide accounts when requested may make the executor liable to pay the costs of proceedings instituted by the beneficiary to obtain the accounts.[16]  The plaintiff would not have incurred costs to the extent he has, had the defendant complied with his obligations as the executor of the estate. The defendant has shown a want of prudence and diligence and an absence of care and diligence that justifies a special costs order against him with no indemnity for those costs from the estate of the deceased.  These unreasonably incurred costs should not be borne by the estate of the deceased.  This conclusion is reinforced by the fact that the defendant has failed to provide an adequate or reasonable explanation as to why the information was not provided prior to the commencement of the proceeding.  Overall, the proceeding has been wasteful of the resources of both the Court and the parties.

   [16]Re Skinner [1904] 1 Ch 289.

1. The Court will make the following orders:

(a)   the defendant personally pay the costs of the plaintiff of and incidental to the proceeding, including reserved costs, on an indemnity basis without a right of indemnity from the estate of the deceased; and

(b)   the defendant bear his own costs of and incidental to the proceeding without a right of indemnity from the estate of the deceased.

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