Re Cambronero; Cambronero v Palma
[2019] VSC 838
•19 December 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S ECI 2018 00837
IN THE MATTER of the will and estate of RAIMUNDO GOMEZ CAMBRONERO, deceased
- and -
IN THE MATTER of an application pursuant to Order 54 of the Supreme Court (General Civil Procedure) Rules 2015, r 6.03 of the Supreme Court (Administration and Probate) Rules 2004, and s 34 of the Administration and Probate Act 1958 and s 48 of the Trustee Act 1958
| IVAN GOMEZ CAMBRONERO | Plaintiff |
| - and - | |
| ELIZABETH PALMA (as executor of the will of RAIMUNDO GOMEZ CAMBRONERO, deceased) | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 19 December 2019 |
CASE MAY BE CITED AS: | Re Cambronero; Cambronero v Palma |
MEDIUM NEUTRAL CITATION: | [2019] VSC 838 |
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PRACTICE AND PROCEDURE — Summary dismissal of proceeding — Where parties signed terms of settlement — Terms provided for the alternative relief sought by plaintiff — Where administration of estate substantially complete — Civil Procedure Act 2010 (Vic) s 7.
COSTS — Plaintiff seeks personal costs order against executor — Defendant seeks costs against plaintiff — Where proceeding not adjudicated on the merits — Whether conduct of the parties was reasonable — Asta Developments (Aust) Pty Ltd v Amasya Enterprises Pty Ltd [2016] VSCA 186; Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr M Black | Willerby’s Solicitors |
| For the Defendant | Mr NJ McOmish | BSA Legal |
HER HONOUR:
Introduction
Raimundo Gomez Cambronero died on 12 September 2016. He was survived by the plaintiff and the defendant, who are his adult children. The plaintiff and his children live in Germany. The defendant lives in Australia.
Probate of the deceased’s will dated 6 November 2012 (‘the Australian will’) was granted to the defendant on 18 November 2016.
The Australian will bequeathed 50 per cent of his estate to the defendant, 25 per cent to the plaintiff and 25 per cent to be held on trust for the plaintiff’s ‘natural or IVF children’. The net value of the deceased’s estate was approximately $643,715. The greater part of the estate has been distributed, with the share for the plaintiff’s children held in trust.
The deceased also made an informal Spanish will dated 9 May 2016 (‘the Spanish will’). The principal difference between the Australian will and the Spanish will is that, pursuant to the Spanish will, 50 per cent of the deceased’s estate was bequeathed to the plaintiff, rather than being split between him and his children. Until recently, the parties proceeded on the basis that the Spanish will governed the deceased’s assets in Europe and the Australian will governed his assets in Australia.
Background
Shortly after the deceased’s death, the plaintiff made it known to the defendant that he wished to be appointed as trustee of the testamentary trust created by the Australian will in favour of his children. This was because the plaintiff considered that he was better placed than the defendant to act in the children’s best interests. To that end, the parties entered into discussions and reached an in principle agreement under which the plaintiff would become trustee in exchange for, inter alia, indemnities in favour of the defendant and her solicitor. That agreement was recorded in draft deeds dated 8 May 2017, which were never executed. On 14 July 2017, the plaintiff sent an email to the defendant in which he refused to accept the indemnities, having previously raised concerns over fees charged to the estate.
The plaintiff first raised his concern regarding the state of the inventory and costs of administration of the estate by emails dated 9 July and 11 July 2017. In particular, the plaintiff was concerned with the reasonableness of legal costs charged to the estate and demanded that the defendant provide him with a full administration account.
On 4 August 2017, the defendant’s solicitors, Lewis Counsel, wrote to the plaintiff advising that the defendant would distribute the estate in accordance with the terms of the Australian will. That letter requested that the plaintiff provide details of bank accounts into which his distribution should be deposited, as well as evidence in relation to paternity of his ‘natural or IVF children’.
On 10 August 2017, the defendant provided the plaintiff with an administration account for the estate. The defendant also repeated her request for details of a bank account into which a distribution in favour of the plaintiff ought to be paid.
On 17 August 2017, the defendant made an interim distribution from the estate of $168,610 in favour of the defendant. Those funds were paid into a separate bank account set up by the defendant on the plaintiff’s behalf, pending nomination of an account into which funds were to be deposited. A distribution of $337,220 was also made to the defendant, and funds totalling $168,610 were placed into a term deposit on behalf of the plaintiff’s children.
On 28 September 2017, the defendant made a further interim distribution of $16,303.24 into the bank account set up on behalf of the plaintiff. A distribution of $32,606.49 was made to the defendant, and $16,303.24 placed into trust on behalf of the plaintiff’s children.
By letter dated 26 October 2017, the plaintiff’s solicitors, Dunstan & Raftis, set out what the plaintiff considered to be material inaccuracies in the accounts provided on 10 August 2017. On 30 November 2017, Lewis Counsel responded to Dunstan & Raftis, enclosing an amended estate account. That letter repeated the requests for the plaintiff’s bank account details and proof of paternity in relation to his natural or IVF children.
By email dated 5 December 2017, Dunstan & Raftis provided a notarised German birth certificate for the plaintiff’s son. Lewis Counsel responded to that email by letter dated 12 December 2017, which requested original proof of paternity in English. The letter also requested a written authority signed by the defendant confirming the account into which distributions made in his favour ought to be transferred.
Lewis Counsel’s 12 December letter reopened the prospect of the transfer of trusteeship of the testamentary trust to the plaintiff in exchange for an amended indemnity. By responsive letter dated 7 February 2018, Dunstan & Raftis rejected the amended indemnity and proposed further amendments. No agreement was reached between the parties.
On 30 January 2018, an amended set of accounts was provided to the plaintiff. The plaintiff again considered that those accounts contained omissions or inaccuracies.
On 1 March 2018, Lewis Counsel notified Dunstan & Raftis by email that the conduct of the defendant’s legal affairs had been transferred to BSA Legal.
By originating motion and summons filed 14 August 2018, the plaintiff sought orders that the defendant be removed as the executor and trustee of the estate, and that the plaintiff or some other person be appointed administrator. Alternatively, the plaintiff sought orders, pursuant to r 6.03 of the Supreme Court (Administration and Probate) Rules 2014, that that the defendant make, file and serve a true and just account of her administration of the deceased’s estate. The plaintiff also sought an order that the defendant pay the costs of the proceeding, without a right of indemnity from the deceased’s estate.
Procedural history
On 14 September 2018, procedural orders were made for the filing of affidavits and the plaintiff’s application was referred to mediation.
The mediation took place on 15 February 2019 and the parties executed terms of settlement. Subsequently, the parties agreed to place the terms before the Court. In summary, the terms of settlement provided that:
(a) the parties would jointly appoint a qualified person to provide an opinion in relation to the validity of the Spanish will;
(b) the defendant was to make payment of $160,000 to the plaintiff’s solicitors by way of partial distribution from the deceased’s estate; and
(c) the defendant was to provide to the plaintiff’s solicitors an updated statement of accounts and several categories of supporting documentation.
The defendant complied with the terms of settlement as follows:
(a) on 19 February 2019, BSA Legal transferred funds from its trust account to the plaintiff as a further distribution from the estate;
(b) on 1 March 2019, BSA Legal provided a further amended administration account, supporting documentation and an affidavit verifying the same to Dunstan & Raftis;
(c) on 16 May 2019, an advice of Professor Phillip Hamilton, an expert in Spanish estate law, was obtained.
Professor Hamilton’s opinion was that the Spanish will was not valid under Spanish or Victorian law. He considered that, under the rules of conflicts of laws, the applicable law was Victorian law, being the place where the Spanish will was made. He observed that the deceased’s signature had not been witnessed by two witnesses, as required by s 7(1)(c) of the Wills Act 1997, but acknowledged that a Victorian Court is empowered to dispense with this and any other requirements and declare that the Spanish will was valid.[1] Professor Hamilton also noted that the Spanish will was a copy of the original will, and identified a separate issue as to whether the revocation clause in the Spanish will revoked the Australian will. On 30 May 2019, Professor Hamilton viewed the original will and was provided with further information concerning the deceased’s domicile. He affirmed his original views in a supplementary opinion.
[1]See Wills Act 1997 (Vic) s 9.
On 7 March 2019, Dunstan & Raftis advised that there was a deficiency in the explanations and supporting documents in the amended accounts provided on 1 March 2019. Further supporting documents were provided on behalf of the defendant on 20 March 2019. A letter from Dunstan & Raftis to BSA Legal dated 21 March 2019 raised several further questions relating to the amended administration accounts. The plaintiff’s questions were answered by way of response letter dated 3 April 2019. No further correspondence passed between the parties with respect to the administration accounts.
On 17 May 2019, the plaintiff did not appear in Court.
By letter dated 30 May 2019, the plaintiff’s solicitor foreshadowed an application to seek revocation of the grant of probate of the Australian will on the basis that the Spanish will contained the deceased’s true testamentary intention.
On 14 June 2019, the plaintiff did not appear in Court.
On 20 June 2019, the plaintiff’s solicitor filed an affidavit explaining that the plaintiff was now seeking to revoke the grant of probate of the Australian will. On the same date, the defendant’s solicitors served a summons on the plaintiff’s solicitors seeking, inter alia, dismissal of the proceeding.
Defendant’s summons for dismissal of the proceeding
The defendant’s summons for dismissal of the proceeding was filed on 21 June 2019. As well as seeking dismissal of the proceeding, the defendant sought that the plaintiff pay the defendant’s costs of the summons, to be taxed in default of agreement, and the plaintiff bear his own costs of the summons.
Submissions
The defendant
The defendant submitted that the proceeding ought to be dismissed as it had substantially settled, she had complied with the terms of settlement, the administration of the estate was substantially complete, and she acted properly and in the best interests of the beneficiaries at all times.
In respect of the plaintiff’s complaints, she submitted that they mainly related to costs, being the defendant’s administration costs prior to the commencement of the proceeding of $36,347.19, the defendant’s costs for the removal proceeding of $35,539.00, and the reimbursement by the defendant of airfares of $10,057.71. Other complaints raised by the plaintiff which were not related directly to costs were the issue of paternity, the provision of documents, the withholding of funds, the Spanish will and delay. The defendant submitted that none of those issues justify the continuation of the proceeding.
The plaintiff
The plaintiff opposed the dismissal application on the basis that the issue of the defendant’s fitness to act as executor and trustee remained outstanding, and that several other outstanding issues justified the continuation of the proceeding. Those issues were: (a) the appropriateness of legal costs charged for the administration of the estate, both prior to the commencement of this proceeding and for the proceeding itself; (b) the appropriateness of the defendant’s reimbursement to herself of airfares of $10,057.71 from the estate; (c) the appropriateness and the cost of requests by the defendant in relation to proof of paternity of the plaintiff’s children; (d) the failure of the defendant to provide accurate accounts and documents; and (e) the withholding of estate funds by the defendant.
As stated, at the same time as the dismissal application was filed, the plaintiff foreshadowed that an application would be made to revoke the grant of probate of the Australian will and propound the informal Spanish will. It was not clear whether the plaintiff considered that this was a reason for continuing the proceeding or not.
Consideration — dismissal
The plaintiff’s proceeding sought the removal of the defendant as the executor and trustee of the estate or, alternatively, the delivery of estate accounts and documents. The terms of settlement provided for the second of those alternatives. The defendant has since complied with those terms and, since early April 2019, the plaintiff has not made any further challenge to the accuracy of the administration accounts.
As of June 2019, the administration of the deceased’s estate had effectively been finalised. Distributions of the entitlements of the defendant and the plaintiff under the Australian will occurred on 17 August and 28 September 2017. Funds distributed to the plaintiff were placed into an Australian bank account opened on his behalf, and were not transferred to him until after mediation, on 19 February 2019. The delay in the transfer of funds was a result of the plaintiff’s own failure to nominate a receiving account and to authorise transfer. As at 17 June 2019, the only funds retained by the defendant were the $175,975.06 held on trust for the benefit of the plaintiff’s children in accordance with the terms of the Australian will.
The plaintiff’s reliance on the claim for the removal of the defendant as executor and trustee of the estate, in order to justify the continuation of the proceeding, is misconceived. It is not appropriate to continue the proceeding on that basis when the administration of the estate has been finalised. The plaintiff’s remaining issues do not relate to any relief sought in the proceeding, save for the costs of the proceeding. The conclusion that the proceeding should be dismissed is supported by the plaintiff’s foreshadowed application to revoke the grant of probate and seek to propound the informal Spanish will. If that application were made, this proceeding must be dismissed.
Ordinary judicial practice includes case management or supervision of proceedings. Case management principles are embodied in the Civil Procedure Act 2010 (‘the Act’). For the purpose of facilitating the overarching purpose set out in s 7(1) of the Act, s 9 requires that a proceeding be managed having regard to, inter alia, such matters as the efficient conduct of the Court’s business and the efficient use of judicial and administrative resources of the Court. To continue the proceeding on the basis submitted by the plaintiff would not be consistent with the overarching purpose of the Act to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[2]
[2]Civil Procedure Act 2010 (Vic) s 7.
The defendant should not be placed in the position of having the proceeding remain on foot at the behest of the plaintiff. It is implicit in the overarching purpose that proceedings are not ambulatory in the manner that the plaintiff now proposes, taking in whatever issues he now seeks to raise following the proceeding being resolved by terms of settlement. Litigation is stressful enough for parties and possibly more so when that litigation concerns disputes between siblings. The plaintiff’s position in seeking to prolong the proceeding when the administration of the estate is substantially complete disregards the overarching purpose of the Act and his obligations under the Act.
Accordingly, the proceeding must be dismissed.
Costs orders sought by the parties
The plaintiff
If the proceeding is dismissed, the plaintiff submitted that it should be disposed of on the following basis:
(a) that the defendant reimburse to the estate the sum deducted by her in relation to airfares;
(b) that the costs of the administration of the estate be fixed in an amount determined by the Court, with any balance over and above that amount to be paid by the defendant without right of indemnity from the estate;
(c) that the defendant personally pay the costs of this proceeding without right of indemnity from the estate, or that the costs of this proceeding be fixed, with any balance over and above that amount to be paid by the defendant without right of indemnity from the estate; and
(d) that the balance of any estate funds be transferred to the plaintiff’s solicitors to be held on trust pending further order of the Court in relation to the validity of the Spanish will.
The defendant
The defendant submitted that, because the plaintiff was aware of the informal Spanish will from the outset, an application to propound the Spanish will ought to have been made instead of the removal application. This means that this proceeding was unnecessary and, accordingly, the plaintiff should bear the costs of the proceeding. The defendant seeks orders that the plaintiff bear his own costs and that he pay the defendant’s costs of and incidental to the proceeding, on an indemnity basis.
Costs principles
Costs are at the discretion of the Court, unless otherwise provided by an Act or the Rules.[3] 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.[4] The relevant ‘event’ is success in the action or on particular issues.[5] The unsuccessful party bears the liability for the costs of the unsuccessful litigation.[6] The central principle is to make an order that is fair and just between the parties in the circumstance of each case.[7]
Costs of executors and trustees
[3]Supreme Court Act 1986 (Vic) s 24(1).
[4]Oshlack v Richmond River Council (1998) 193 CLR 72, 97 [67] (McHugh J).
[5]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, [77] (McMillan J).
[6]Oshlack v Richmond River Council (n 4), 97 [67] (McHugh J).
[7]Earnshaw v Loy (No 2)[1959] VR 252, 253 (Sholl J). See also GE Dal Pont, Law of Costs (LexisNexis Butterworths, 4th ed, 2018) 158–9 [6.15].
An executor or 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.[8] 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 should be borne by the trustee personally.[9] 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.[10]
Costs where proceeding not determined by contest
[8]GE Dal Pont, Equity and Trusts in Australia (Lawbook Co, 7th ed, 2019) 682–3 [23-135], citing Turner v Hancock (1882) 20 Ch D 303, 305 (Jessel MR); Re Beddoe [1893] 1 Ch 547, 558 (Lindley LJ); Nolan v Collie (2003) 7 VR 287, 303–10 [44]–[57] (Ormiston JA).
[9]Ibid, 685–6, citing Re O’Donoghue [1998] 1 NZLR 116, 122 (Hammond J); Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566, 606 (Finkelstein J).
[10]Ibid 306.
Where a proceeding is not resolved by a contested hearing on the merits, the Court is deprived of the factor that usually determines whether or how it will make a costs order. In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin Lai Qin, McHugh J stated:
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. … In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. …
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. …
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.[11]
[11](1997) 186 CLR 622, 624–5 (citations omitted).
The costs principles where the Court is deprived of a hearing on the merits were also considered in Asta Developments (Aust) v Amasya Enterprises:
In Australian Securities Commission v Aust-Home Investments Ltd, Hill J summarised the following principles concerning the exercise of a court’s discretion to order costs where the parties to a proceeding no longer wish to continue:
(1)Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order.
(2)It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. …
(3)In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them.
(4)In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation.
(5)Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted.[12]
[12] Asta Developments (Aust) Pty Ltd v Amasya Enterprises Pty Ltd [2016] VSCA 186, [25] (Whelan and Ferguson JJA) (citations omitted) (‘Asta Developments’). See also Ex parte Lai Qin (1997) 186 CLR 622, 624–5 (McHugh J); Seng Hpa v Walker [2017] VSC 320, [77]–[81] (McMillan J).
In view of Asta Developments, it is rarely appropriate for a court to engage in a hypothetical trial or attempt to determine the merits of the proceeding for itself, although it may determine whether the parties have acted reasonably in the litigation.
Consideration — costs
The parties disagree as to which party ought properly bear the burden of costs of the administration of the estate and the costs of this proceeding.
Administration costs
The originating motion filed by the plaintiff on 14 August 2018 does not seek any relief with respect to the costs of the administration of the estate. At present, no application has been made by the plaintiff in respect of those costs, which would displace the defendant’s right of indemnity. In the absence of such an application, the reasonableness and burden of the costs of the administration of the deceased’s estate do not fall for determination.
Costs of the proceeding
The plaintiff maintains that the proceeding was necessary to compel the defendant to provide accurate accounts, documents and records in relation to the estate, which had not otherwise been forthcoming.
The background to the proceeding establishes that the plaintiff engaged with the defendant on a number of issues concerning the estate, such as his desire to be the trustee of the testamentary trusts for his children, paternity of his children and the estate administration account. The defendant responded to the plaintiff promptly and reasonably. She provided the plaintiff with an administration account on 10 August 2017, and amended accounts on 30 November 2018 and 30 January 2018. Distributions of the entitlements of the plaintiff and the defendant were first made on 17 August 2017 but could not be transferred to the plaintiff as a result of his own failure to nominate a receiving account.
After the commencement of the proceeding in August 2018, affidavits were filed by both parties. The proceeding settled at mediation and the terms of settlement were executed by them. The defendant has complied with those terms. Further distributions of the entitlements of the plaintiff and the defendant were made on 18 February 2019, effectively finalising the administration of the estate. Thereafter, the only funds held by the defendant were the funds for the plaintiff’s children to be held in accordance with the Australian will.
After the terms of settlement were signed, the defendant responded to two further queries regarding the administration accounts in March 2019, made by the plaintiff’s solicitors. Since then, no further correspondence passed between the respective solicitors and the plaintiff has not made any further challenge to the accuracy of the administration accounts.
The plaintiff now wishes to make an application for revocation of the grant of probate. This was foreshadowed in May 2019, well after the terms of settlement had been finalised. The plaintiff thereafter failed to appear in Court on 17 May and 14 June 2019. At the hearing on 21 June 2019, the plaintiff, who was represented by counsel, opposed the application for dismissal.
The plaintiff has been aware of the existence of the Spanish will from the outset, and has not until now sought to challenge the validity of the deceased’s Australian will. Given that the plaintiff intends to make an application to revoke the grant of probate of the Australian will, this proceeding was unnecessary. There are obvious difficulties in making such an application at this stage of the administration of the estate, which has been administered according to the terms of the Australian will. Given the present status of the administration, the plaintiff’s position pressing his application that the defendant ought be removed as executor, is not reasonable.
Although the proceeding was not resolved by a contested hearing on the merits, the Court is satisfied that the defendant acted reasonably in responding to the plaintiff’s claims, both before and after the proceeding commenced. In such circumstances, the defendant is entitled to be paid her costs of the proceeding.
As stated, the usual rule in respect of an executor and trustee is that he or she is entitled as of right to be indemnified for reasonable costs from the estate, absent the stated recognised exceptions. An order that costs be paid out of the estate necessarily affects the interests of the beneficiaries of the estate. In this regard, it is pertinent to note the following remarks of Jones J in Underwood v Underwood:
Every step taken in pursuit of, or in resistance to, a claim diminishes the value of the estate and leads to uncertainty as to the level of entitlement. A rash claim by one applicant can sometimes spark a defensive response by other applicants... over zealous responses by the executors or their legal representatives can seriously consume estate funds in ways not apparent to the applicants. Consequently, for every action and reaction in a proceeding of this kind some part of the costs is borne by the estate and its value is thereby diminished ....[13]
[13][2009] QSC 107, [33].
There are no longer any assets in the estate, from which the defendant might be indemnified, as the administration of the estate has been finalised. In the circumstances, the plaintiff should bear the burden of payment of those costs.
Orders
The Court will make the following orders:
(a) the plaintiff pay the defendant’s costs of and incidental to the proceeding on the trustee basis, to be taxed in default of agreement; and
(b) the plaintiff bear his own costs of and incidental to the proceeding.
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