Re Caruso (No 2)
[2022] VSC 318
•10 June 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2021 04625
| IN THE MATTER of an application under Order 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 | |
| IN THE MATTER of the intestate estate of MARIO CARUSO, deceased | |
| NATALIE TALIA (in her capacity as administrator ad litem of the estate of MARIO CARUSO deceased, pursuant to order of the Honourable Justice McMillan made 28/07/2021) | Plaintiff |
| v | |
| CATHERINE ANNE WHITTY & ORS (according to the attached schedule) | Defendants |
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JUDGE: | Gorton J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 18 May 2022 (Written submissions received on 26, 27 and 30 May 2022) |
DATE OF RULING: | 10 June 2022 |
CASE MAY BE CITED AS: | Re Caruso (No 2) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 318 (First Revision 14 June 2022) |
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COSTS – Intestacy – Judicial advice – Whether costs recoverable out of the estate – Whether costs should be taxed on the standard basis or indemnity basis – Position of effective contradictor – Where the amount of the taxed costs may exceed the value of the estate.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P Pascoe | Hicks Oakley Chessel Williams Pty Ltd |
| For the First Defendant | Mr S Pitt | Mills Oakley |
| For the Second to Fourth Defendants | Mr R Wells | Mazzeo Lawyers |
HIS HONOUR:
A. Background
Catherine Whitty, the first defendant, and her husband, Mario Caruso, were registered as joint proprietors of a property in Fitzroy that was their matrimonial home (the ‘Fitzroy property’). Mr Caruso died intestate owing money to his siblings, the second to fourth defendants. Ms Whitty is the next of kin.
Ms Whitty applied for a general grant of letters of administration of Mr Caruso’s estate. It became apparent that Mr Caruso’s siblings, the second to fourth defendants, contended that Ms Whitty and Mr Caruso held the Fitzroy property in equity as tenants in common, rather than as joint tenants. If this was right, then there was an increased prospect that Mr Caruso’s estate would have sufficient funds to meet its liability to them. In view of the conflicts of interest, the Court appointed the plaintiff an administrator ad litem of Mr Caruso’s estate for the purpose of commencing this proceeding on behalf of the estate in order to obtain an answer from the Court essentially as to whether or not Ms Whitty and Mr Caruso held the Fitzroy property as joint tenants or as tenants in common. I determined that the Fitzroy property was held by Ms Whitty and Mr Caruso as tenants in common.[1]
[1]Re Caruso [2022] VSC 242.
Both the plaintiff and Mr Caruso’s siblings were separately represented, and both presented detailed argument in support of the same conclusion. The arguments that they put overlapped and there was some duplication. Ms Whitty was in a sense in the position of a ‘contradictor’, in that she was contradicting the position that was being put by both the administrator ad litem and Mr Caruso’s siblings.
The parties were in essential agreement as to how, in light of my reasons for judgment, the various questions should be answered. However, they were not able to agree on the question of costs.
B. The plaintiff’s costs
Ms Whitty accepted that the estate ought to pay the plaintiff’s costs, but contended that those costs ought be taxed, in default of agreement, on the standard basis. Mr Caruso’s siblings accepted that the plaintiff’s costs should be paid by the estate on the indemnity basis.
The plaintiff was appointed by the Court to represent the estate for the purpose of bringing this proceeding and obtaining the answers that it has. Having accepted that appointment, the plaintiff ought not to be denied the costs of so acting; certainly, here, where her contentions were accepted. Accordingly, and notwithstanding the duplication in work, I consider that the plaintiff’s costs ought to be paid out of the estate to be taxed in default of agreement on the indemnity basis. This is in accordance with the usual practice that applies when the Court appoints an administrator for the purpose of bringing an application to resolve an issue.[2]
[2]See, eg, Supreme Court (General Civil Procedure) Rules 2015, r 63.26; Re Martin (No 2) [2019] VSC 646 (McMillan J); Australian Incentive Plan Pty Ltd v Attorney-General for Victoria (No 2) (2012) 44 VR 661, 692 [3] (Nettle JA), 694 [14] (Davies AJA).
Ms Whitty has asserted that, in accordance with an agreement reached at or about the time of her appointment, the plaintiff’s costs have in fact been met, at least in part, by the second defendant. The plaintiff says that this is not correct. If, or to the extent that, the second defendant has paid costs to the plaintiff that would otherwise have been recoverable by the plaintiff from the estate, the second defendant should be reimbursed those costs.
I have not overlooked the fact that Ms Whitty opposed the appointment of an administrator ad litem on the basis that it would add to the costs of the proceeding. She has been proven correct in that respect. Nonetheless, in circumstances where the Court did appoint the plaintiff to administer the estate for the purpose of bringing this proceeding, in my view the plaintiff’s costs ought to be recoverable out of the estate and ought to be taxed on the indemnity basis.
C. Ms Whitty’s Costs
Ms Whitty sought an order that the estate pay her costs to be taxed in default of agreement on the standard basis. Mr Caruso’s siblings contended that no order for costs in her favour should be made, because she was unsuccessful in her arguments, and because as the next of kin entitled to the residuary of the estate, it is not necessary to order the estate to pay her costs.
It matters because the parties’ combined costs may exceed the value of the estate, even with its half-interest in the Fitzroy property. If that is the case, and there is a costs order in Ms Whitty’s favour, then the parties will rank as equal creditors of the estate and each receive the same proportion of their costs, whatever that may be. If there is not a costs order in favour of Ms Whitty, and the costs of the other parties exceed the amount recoverable, Ms Whitty will receive nothing towards her costs out of the estate. Or, if there is not a costs order in favour of Ms Whitty, and the costs of the other parties do not exceed the amount recoverable, the other parties will receive all of their costs out of the estate, and the most that Ms Whitty could recover out of the estate would be whatever is left. Accordingly, if no order in favour of Ms Whitty is made, the effect is to prioritise the costs of the other parties over her costs.
The proceeding was in substance an application for judicial advice for the purpose of the proper administration of the estate. I accept Ms Whitty’s submission that she acted as the effective contradictor in the application. The default position was that she was the registered joint tenant, and any conclusion to the contrary had to be established by evidence and argument. Although her contentions were not ultimately accepted, they were properly arguable, and, in my view, in circumstances where the administrator ad litem presented a case that was contrary to her interests, it was proper of her to present the argument that she did. If she did not present the argument that she did, or was not able for some reason adequately to do so, there is every prospect that the Court would have had to appoint a contradictor, in which case the contradictor’s costs would, without argument, have been paid out of the estate. For these reasons, in my view it is just and fair that there be an order that Ms Whitty’s costs, too, be paid out of the estate on the standard basis.
D. Mr Caruso’s siblings
Mr Caruso’s siblings were the entities that identified the argument that the Fitzroy property was held by Mr Caruso as a tenant in common notwithstanding that he was registered as a joint tenant. Ms Whitty disputed that this was so. This issue between them led to the need for the proceeding. Mr Caruso’s siblings were defendants and would be affected by the outcome, and were entitled, in my view, to appear and to present arguments in the proceeding. Their contentions were successful. In my view it is just that there be an order that their costs also be paid out of the estate on the standard basis.
E. Mr Caruso’s siblings request for liberty to apply
Mr Caruso’s siblings proposed that there be ‘liberty to apply’ in the event that the assets of the estate were insufficient to satisfy payment in full of the costs orders in favour of them and the plaintiff. Mr Caruso’s siblings anticipated applying, if need be, to vary the order in their favour so that they could obtain from Ms Whitty directly any shortfall in the costs payable from the estate. I see little to commend this approach. It leaves the parties uncertain and could lead to increased costs in the future. But more significantly, I do not, for the reasons set out in Part C above, particularly that Ms Whitty was in the position of an effective contradictor in a judicial advice proceeding, consider that the prospects of that argument succeeding are sufficient to leave the matter uncertain now or alive for further cost and argument in the future.
F. Disposition
On further reflection, it seems clear that the plaintiff in this application is seeking declarations, rather than answers to questions as such. There is no order of the Court that frames any questions and provides for them being answered. Accordingly, I will frame my order in terms of declarations rather than as answers to questions.
Also, it seems to me that paragraph 1 of the below order is sufficient to carry with it the consequence that Ms Whitty does not receive the Fitzroy property pursuant to the right of survivorship, and that no further orders are needed to make that clear. In case I am wrong about this, I will reserve to the parties liberty to apply.
I will not include the sentence in my earlier ruling where I said that the estate was entitled (but not compelled) to use the proceeds of any sale to repay the estate’s debt to Mr Caruso’s siblings. I accept the position put by the second to fourth defendants, and agreed to by Ms Whitty, that it is not necessary and that its inclusion might lead persons to think that the estate had no legal liability to repay the debt.
I will make the following orders.
1. I declare that the joint tenancy between the Mr Mario Caruso (the ‘deceased’) and Ms Catherine Anne Whitty in respect of the property known as 68 Nicholson Street, Fitzroy and being the whole of the land described in Certificate of Title Volume 9503 Folio 123 (the ‘Fitzroy property’) was, or has been, severed so that the estate of the deceased and Ms Whitty is each entitled to an equal undivided share as tenants in common.
2. I declare that, upon appointment, a right of sale will vest in the deceased estate’s legal personal representative entitling it to compel a sale of the Fitzroy property. The estate is entitled to receive such part of the proceeds of sale as is appropriate for a tenant in common in equal parts with Ms Whitty.
3. The plaintiff’s costs be paid out of the estate of the deceased to be taxed in default of agreement on the indemnity basis.
3. The first defendant’s costs be paid out of the estate of the deceased to be taxed in default of agreement on the standard basis.
4. The second to fourth defendants’ costs be paid out of the estate of the deceased to be taxed in default of agreement on the standard basis.
5. There be liberty to apply.
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SCHEDULE OF PARTIES
S ECI 2021 04625
| NATALIE TALIA (in her capacity as administrator ad litem of the estate of Mario Caruso deceased, pursuant to order of the Honourable Justice McMillan made 28/07/2021) | Plaintiff |
| -and- | |
| CATHERINE ANNE WHITTY | First defendant |
| GIOVANNI CARUSO | Second defendant |
| NICK CARUSO | Third defendant |
| CARMEN CARUSO | Fourth defendant |
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