Re Estate of Vaughan; Dunn v Dunn-Vaughan (No 2)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY AND PROBATE LIST

S ECI 2019 05556

IN THE MATTER of the Estate of HENRY GERAINT MADOC VAUGHAN, deceased

JAMES MARTIN DUNN	Plaintiff
v
SIMON MATTHEW DUNN-VAUGHAN (as Administrator of the estate of Henry Geraint Madoc Vaughan, as Trustee of the Trust established in the Will of the late Henry Geraint Madoc Vaughan and in his personal capacity)	Defendant

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JUDGE:	O’Meara J
WHERE HELD:	Melbourne
DATE OF HEARING:	20 February 2024
DATE OF JUDGMENT:	26 March 2024
CASE MAY BE CITED AS:	Re Estate of Vaughan; Dunn v Dunn-Vaughan (No 2)
MEDIUM NEUTRAL CITATION:	[2024] VSC 128

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INTEREST – Claim for interest calculated by reference to penalty interest rates – Whether ‘good cause’ shown – Discretion with respect to applicable interest rate – Supreme Court Act 1986 (Vic), s 60(1) – Cargill Australia v Viterra Malt (No 30) (2022) 67 VR 1 and Viterra Malt Pty Ltd v Cargill Australia Ltd [2023] VSCA 157 considered.

COSTS – ‘General’ or ‘usual’ order that costs follow the event – Whether issues based order should be made – Whether issues discrete and/or significant – Whether disqualifying, special or exceptional circumstances – Cretazzo v Lombardi (1975) 13 SASR 4, State of Victoria v The Master Builders’ Association of Victoria (Unreported, Tadgell, Ormiston and Eames JJ, 15 December 1994), McFadzean & Ors v Construction, Forestry, Mining and Energy Union (2007) 20 VR 250, Spotless Group Limited v Premier Building and Consulting Pty Ltd [2008] VSCA 115, Chen v Chan [2009] VSCA 233, Northern Territory v Sangare (2019) 265 CLR 164 and Paragreen v Lim Group Holdings Pty Ltd (No 2) [2020] VSCA 97 discussed.

WILLS AND ESTATES – Trustee and administrator removed – Nature of disputes in the proceeding over time – Whether trustee and administrator and/or plaintiff should not be indemnified out of the assets of the estate in respect of the costs of certain issues – Degree of overlap in evidence – Whether costs shown to have been improperly incurred – Re Buckton [1907] 2 Ch 406, Sons of Gwalia Ltd v Margaretic (2016) 232 ALR 119, Nolan v Collie (2003) 7 VR 287, Di Benedetto v Kilton Grange Pty Ltd [2017] VSCA 119, Vanta Pty Ltd v Mantovani [2023] VSCA 74 discussed.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	NJ Baum	Hicks Oakley Chessell Williams
For the Defendant	CH Sparke KC	ADB Lawyers

HIS HONOUR:

A. Introduction

On 31 January 2024, I delivered reasons for decision in respect of the issues at trial (‘Primary reasons’)[1] and adjourned in order to allow the parties to consider residual issues and propose final orders.
[1]Re Estate of Vaughan; Dunn v Dunn-Vaughan [2024] VSC 7 (‘Primary reasons’).

It will be apparent from the Primary reasons that there were broadly four issues at trial –

(a) an overarching issue concerning the relationships between the plaintiff, defendant and deceased, as well as the credibility and reliability of several witnesses, particularly the plaintiff and defendant (who are brothers);

(b) the ‘intellectual property claim’, by which the plaintiff claimed that the defendant, as trustee and administrator, had wasted those assets and should pay damages;

(c) the ‘Llwynfryn claim’, by which, via several routes, the plaintiff claimed to be entitled to purchase ‘Llwynfryn’ at a value assessed as at the ‘vesting day’ in late 2019, alternatively that he was entitled to equitable compensation or damages; and

(d) the ‘removal claim’, by which the plaintiff contended that defendant should be removed as trustee and administrator as a consequence of the above issues as well as by reference to some other more minor matters.

Some of the more minor contentions were trimmed back by the plaintiff, formally or in emphasis, prior to or in the course of the trial.

In the Primary reasons –

(a) the reasoning in respect of (a) above favoured the plaintiff considerably more than the defendant, such that the plaintiff might be said to have succeeded on that issue;

(b) the plaintiff succeeded in respect of (b) and (d); and

(c) the plaintiff failed in respect of (c).

It should be noted that the reasoning in respect of (a) –

(a) was informed by the whole of the evidence;[2] and

(b) directly or indirectly bore upon the determination of the other issues in dispute.

[2]Primary reasons, [78].

That said, the following considerations were particularly important in the determination of the removal claim –

(a) the defendant’s attitude towards and treatment of the plaintiff (which, to some extent, included the defendant’s ‘mischievous’ conduct in respect of ‘Llwynfryn’);

(b) the defendant’s actions and inactions in respect of the intellectual property, which had led to its destruction; and

(c) the state of the finances of the estate and the defendant’s preparation of inventories of assets and liabilities (the latter of which included his consideration of and evidence relating to the ‘Kensley’ valuation of ‘Llwynfryn’ in mid-2019).

In light of the above, it was ultimately not necessary to determine several of the more minor issues presented in respect of the removal claim.

In that context, orders of a substantive kind were made on 5 February 2024. Among other things –

(a) the defendant was removed as trustee and administrator of the estate with the will annexed and an independent trustee and administrator was appointed;

(b) in respect of the intellectual property claim, the defendant was ordered to pay the new administrator damages in the sum of $300,000; and

(c) the matter was adjourned in order to allow the parties to prepare submissions directed to the residual issues.

Broadly, the residual issues are –

(a) interest;

(b) costs; and

(c) whether any and if so what indemnity ought be ordered out of the assets of the estate of the deceased.

Each party filed and served detailed written submissions as well as proposed forms of orders. Oral argument took place on 20 February 2024.

B. Interest

Argument

As I have noted, the defendant was ordered to pay damages in the sum of $300,000.

By reference to s 60(1) of the Supreme Court Act 1986 (Vic) (‘SC Act’), the plaintiff claims damages in the nature of interest in the sum of $119,344.26. Section 60(1) provides as follows –

(1)The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.[3]

[3]Emphases added.

There was no issue about –

(a) the applicability of s 60(1); or

(b) the mathematics of the sum claimed.

The defendant sought to show ‘good cause … to the contrary’ and otherwise relied upon the Court’s discretion to determine the rate at which interest is to be awarded.[4]
[4]Cf., Cargill Australia v Viterra Malt (No 30) (2022) 67 VR 1 [13]-[16] (‘Cargill (No 30)’).

In that regard, the defendant sought to identify and rely upon factors going to both the showing of ‘good cause’ and an exercise of the discretion. In that connection, it was broadly submitted that –

(a) having regard to the ‘sheer length of time’ since the proceeding was issued, and what was described as a ‘low interest rate environment’, applying penalty interest rates was ‘unfair’, ‘disproportionate’ and ‘punitively high’;

(b) the defendant has not had ‘any advantage out of the funds ordered to be paid’, or the administration of the estate, and, it was said, had tried to move the administration of the estate ‘forward’ by ‘cleaning out the factory at an early stage’ and ‘attempting to sell the property [‘Llwynfryn’]’;

(c) the defendant had been ‘ready for trial in 2021’ and, unlike the plaintiff, had not ‘unduly delayed’ the administration of the estate or the conduct of the proceedings; and

(d) the sum of $60,000 should be ordered instead – which sum senior counsel for the defendant identified as having been arrived at by ‘simply halving the amount … sought by the plaintiff’.[5]

[5]Transcript of hearing on 20 February 2024 (‘T’) 35.

Senior counsel for the defendant acknowledged that her submissions did not attach ‘neatly to a particular form of analysis’ or rest in ‘a careful mathematical calculation’.[6]
[6]Ibid.

Authority

In argument, counsel for the plaintiff referred to Cargill Australia v Viterra Malt (No 30) (Cargill (No 30))[7] in which Elliott J surveyed the terms of s 60(1) together with relevant authorities and principles and observed, relevantly, that –
[7]Cargill (No 30) (n 4).

(a) section 60(1) has the beneficial purpose of compensating a plaintiff ‘for being kept out of its money’ and is also intended to encourage the early resolution of disputes;[8]
[8]Cargill (No 30) (n 4) [6]-[7].

(b) it is clear from the language of s 60(1) that a plaintiff is entitled to interest calculated by reference to the section unless the defendant can show ‘good cause’ to the contrary;[9]
[9]Ibid [8].

(c) the onus is on the defendant to show ‘good cause’ according to the justice of the case – which does not require the defendant to adduce evidence;[10]
[10]Ibid.

(d) the ‘good cause’ exception serves to protect the defendant against injustice;[11]
[11]Ibid [10].

(e) delay on the part of the plaintiff may be relevant to injustice, and therefore to whether ‘good cause’ is shown;[12]
[12]Ibid [11].

(f) the words ‘as [the court] thinks fit’ in s 60(1) confer upon the court a discretion to determine the rate at which interest is to be awarded;[13]
[13]Ibid [13].

(g) the exercise of such a discretion is not limited to cases in which ‘good cause’ is shown;[14]
[14]Ibid.

(h) any more appropriate rate of interest must be determined judicially based on the facts and circumstances of the case so as to achieve justice between the parties;[15]
[15]Ibid.

(i) in exercising the discretion, the practice in Victoria has been to treat the statutory penalty rate as a ‘starting point’ or ‘benchmark’;[16]
[16]Cargill (No 30) (n 4) [15].

(j) the statutory rate is fixed from time to time by the Attorney General;[17]

(k) where the defendant contends that a lower rate is warranted, it must present evidence as to what the lower rate should be and why that rate is more appropriate;[18] and

(l) the mere fact that the statutory penalty rate is higher than the ‘market rate’ is insufficient to require that a lower rate should be adopted.[19]

[17]Ibid [17].

[18]Ibid [16].

[19]Ibid [39]-[40].

In Cargill (No 30), damages owing to Cargill Australia had been assessed in the sum of $168,900,000.00 and it sought an award of interest pursuant to s 60(1) of the SC Act and the applicable penalty interest rates. In response, among other things, the defendant parties emphasised the compensatory purpose of interest and led evidence directed to alternative interest rates. Both parties sought to point to specific periods of delay which, it was respectively said, were the fault of the other.

His Honour noted the ‘combative manner in which the litigation was conducted’ and did not accept that Cargill Australia was ‘solely or even largely responsible’ for the delays claimed. His Honour was also not satisfied that the statutory rate should be departed from (and, indeed, was positively satisfied that it was appropriate).

His Honour concluded the substance of his reasoning as follows –

50.This approach could not give rise to any injustice to the Viterra Parties. Not only has Cargill Australia been deprived of the judgment sum, but the Viterra Parties have had the use of a very significant sum of money (actually paid by Cargill to them) for a substantial period of time. There was no evidence to suggest that the Viterra Parties have not had the ability to use these funds to their commercial advantage for the seven-plus years in question.

His Honour ordered that damages in the nature of interest be awarded to Cargill Australia in the sum of $124,229,320.20.

I should note that his Honour’s determination was considered by the Court of Appeal in Viterra Malt Pty Ltd v Cargill Australia Ltd (‘Viterra Malt’).[20]
[20][2023] VSCA 157.

There was no challenge to his Honour’s determination that good cause had not been shown.[21] The challenge was directed to his Honour’s exercise of discretion in respect of the rate of interest. Among other things, the applicant contended that his Honour had awarded the penalty interest rate for an ‘impermissibly punitive purpose’.[22]
[21]Ibid [1250].
[22]Ibid [1259].

In that context, the Court of Appeal confirmed that the power to award interest has both a ‘compensatory purpose’ and a ‘discouragement purpose’; the latter being to ‘discourage defendants from delaying the proceedings or from refusing to settle’.[23]
[23]Ibid [1270].

The Court of Appeal considered his Honour to have considered ‘all of the relevant facts and circumstances, including the nature of the case’ and rejected the applicant’s contentions that his Honour had failed to take into account a relevant consideration and had taken into account an irrelevant consideration. While leave to appeal was granted, the particular ground of appeal was rejected.[24]
[24]Ibid [1271]-[1274].

Consideration

In the present instance, while the defendant submitted that penalty interest rates were ‘punitively high’ in the context of what was described as being a ‘low interest rate environment’ –

(a) as I have noted, the penalty interest rate is fixed from time to time by the Attorney General;

(b) the practice in Victoria has been to treat that rate as a ‘starting point’ or ‘benchmark’;

(c) authorities have long confirmed that simply comparing commercial rates with the penalty interest rates applicable from time to time does not ordinarily justify a departure from the statutory rate;

(d) it is not clear to what interest rates senior counsel for the defendant was referring when submitting that the period of the litigation had occurred in a ‘low interest rate environment’;

(e) in that regard, no evidence was led concerning such an ‘environment’ and I am highly doubtful that it would be proper to take judicial notice of any such allegedly general state of affairs; and

(f) in the present application, unlike in Cargill (No 30), no evidence was pointed to with a view to establishing that there were other and more applicable interest rates at any particular time or times.

As to ‘advantage out of the funds’, it may be accepted that, unlike in Cargill (No 30), the plaintiff has had no such presently discernible advantage. That said –

(a) the present case was not of the kind considered in Cargill (No 30) where, as I have noted, the plaintiff had given significant funds to the use of the defendant;

(b) it was not said (and it is not the case) that s 60(1) does not apply to a loss of the present kind;

(c) in any event, it will be evident from the Primary reasons that to the extent that it might have been broadly insinuated by the plaintiff that the defendant could have in some way benefitted financially from his administration of the estate, the condition of the evidence concerning the estate’s finances did not allow any such finding to be made – however, that was by no means a good point for the defendant;[25]

(d) in any event, the actions and inactions of the defendant caused loss to the estate from about 14 February 2020 when the intellectual property was destroyed; and

(e) that is the date from which the plaintiff calculated his claim for interest.

[25]Primary reasons, [657]-[660].

More broadly, of course, the defendant submitted that he had endeavoured to move the administration of the estate ‘forward’. However, it will be evident from the Primary reasons that significant aspects of that general endeavour did not amount to compliance with –

(a) the terms of the Will;

(b) the plain terms of the agreement made in December 2019; and/or

(c) the defendant’s duties as trustee and administrator.

Further, I do not accept that the plaintiff’s taking issue with such actions and proposed actions of the defendant amounted to the unjustified obstruction of perfectly proper activities of the defendant as trustee and administrator. It will be evident from the Primary reasons that, generally speaking, my view is to the contrary.

The defendant’s other major contention concerned delay ‘at the foot of the plaintiff, and not at the foot of the defendant’.[26]
[26]T37.

In substance, the defendant submitted that the plaintiff had caused ‘lengthy’ and ‘undue’ delays in bringing the case to trial as a consequence of which it was unfair to calculate interest by reference to the whole of the period relied upon by the plaintiff, namely 14 February 2020 to 5 February 2024.

In written submissions,[27] the defendant referred particularly to –
[27]Defendant’s outline of submissions on costs and interest, [57](d).

(a) amendments made to the plaintiff’s pleadings in March 2021, November 2021 and June 2023;

(b) the issuing by the plaintiff of interlocutory applications, which, it was said, ‘required affidavits and lengthy written submissions’;[28] and

(c) ‘delays in Court scheduling’, especially in what was described as being the ‘Covid period’.

[28]In written submissions, the defendant referred to a summons in April 2020 by which the plaintiff had sought to restrain him from auctioning ‘Llwynfryn’ which, it was said, was ‘unsuccessful’, but was also ‘an example of what had to be dealt with’: Defendant’s outline of submissions on costs and interest, [46](b).

In addition, it was asserted that the defendant had been ‘ready for trial in 2021’.[29]
[29]Defendant’s outline of submissions on costs and interest, [57](d)(iii).

In oral submissions, senior counsel for the defendant acknowledged that the plaintiff’s pleading amendments in November 2021 and June 2023 had not caused or contributed to any significant delay.[30]
[30]T38.

As to the amendments made in March 2021, however, senior counsel submitted that ‘whether they were large or small, they required a defence from my client’ and ‘there’s a delay there’.[31]
[31]T37-38.

As to interlocutory applications, senior counsel relied upon a summons issued by the plaintiff in February 2022 by which, among other things, he had sought leave to occupy ‘Llwynfryn’ in order to maintain the property and stock. Senior counsel described that summons as having delayed the proceeding by four months.[32]
[32]T46.

Finally, as to the ‘question of COVID’, senior counsel submitted as follows –

I can’t point to a particular step that did or did not delay – sorry that was delayed due to the effect of COVID, save that the period between the trial date being fixed and the actual trial date was approximately a year. Now that’s a long period of time. It was mid 2022 when the court was coming off the back of the COVID lockdowns. It’s not a matter upon which any of us can definitely say that there was a particular period of time that was definitely caused by the general delays that were caused by COVID.
I simply make the general submission that that is a very long period of time for the parties to wait between the time at which they get their trial date, mid 2022 to ultimately a trial date in May of 2023 which is just shy of a year later. And that when Your Honour is considering the question of interest – this is really the tail end of that, that is not a delay that was caused by my client. I don’t say that it was caused by the plaintiff either, but it is a matter when you’re exercising your discretion about the way in which the proceeding was run overall, I’d be inviting you to take that into account in reducing the question of interest that my client has to pay.[33]

[33]T46-47.

For his part, counsel for the plaintiff emphasised several matters, including the fact that several documents of importance emerged for the first time at various points immediately prior to and during the trial.

Regrettably, the submissions to which I have referred require me to address the history of the matter in a little further detail.

The Primary reasons describe the circumstances in which the plaintiff came to commence the proceeding by originating motion filed on 5 December 2019. That step was precipitated by the defendant’s indication that the options provided in the Will should and would be able to be exercised following bids made at a form of ‘auction’ of ‘Llwynfryn’. On no view did the indicated course comply with the terms of the Will, and it was not sought to be defended at trial.[34]
[34]Cf., Primary reasons, [458]-[469].

The originating motion sought, among other things, the removal of the defendant as administrator and an offer to the plaintiff of an option to purchase ‘Llwynfryn’. The originating motion was accompanied by a summons which sought to restrain the defendant from putting ‘Llwynfryn’ up for ‘auction’.

As explained in the Primary reasons, that summons was resolved by orders made by Nichols J on 17 December 2019. Those orders included an order that the defendant pay the plaintiff’s costs fixed in a certain sum.

In April 2020, the plaintiff issued a further summons seeking that the defendant be restrained from auctioning ‘Llwynfryn’. That summons was returned before JR Keith on 8 May 2020. Among other things, orders were made requiring the parties to file pleadings and to exchange lists of documents. Costs were reserved.

In the course of argument in respect of the present issues, counsel mutually acknowledged that the summons of April 2020 had fallen away owing to the restrictions placed upon the conduct of public auctions during that period of the pandemic.[35]
[35]T8-9.

The plaintiff filed and served a statement of claim dated 22 May 2020. Among other things, the pleading included allegations concerning ‘Llwynfryn’, the events leading up to the orders made on 17 December 2019, the subsequent retention of Mr McLean, certain chattels and fixtures, the ‘intellectual property’ and a loan said to have been proffered by the plaintiff. The pleading sought that the defendant be removed as administrator, but also sought relief in respect of losses claimed to arise from the disposal of the intellectual property and the chattels and fixtures as well as the alleged failure to take up the offer of a loan.

The defendant subsequently filed a defence and the plaintiff replied. By that time, it seems that the plaintiff was self-represented and during the period that followed he had some periods of representation as well as periods of representing himself.

On 25 June 2020, the plaintiff sought and obtained leave to issue and serve a subpoena on Mr Bent, who had auctioned the contents of the factory and disposed of the intellectual property and other items. Costs were reserved.

By October 2020, the plaintiff was seeking that Mr Bent comply with the subpoena. On 16 October 2020, orders were made requiring the parties to exchange lists of documents and the plaintiff’s summons was adjourned. Costs were reserved.

The defendant made discovery in January 2021. As was noted in argument, his affidavit of documents disclosed the existence of the Kensley valuation conducted in mid 2019. That report, and its significance, is discussed in some detail in the Primary reasons.[36]
[36]See, in particular, Primary reasons, [663]-[671].

In March 2021, the plaintiff issued a summons seeking certain further discovery by the defendant, as well as leave to file and serve an amended statement of claim.

The summons was returned before JR Keith on 19 March 2021. Among other things, the plaintiff was granted leave to file and serve an amended statement of claim and to file and serve any expert report. The costs of the plaintiff’s summons were ordered to be in the proceeding and the summons was otherwise dismissed.

The plaintiff’s amended statement of claim was filed on 21 March 2021. A significant alteration concerned the addition of several paragraphs directed to the Kensley valuation which, I have noted, had only been disclosed by the defendant in January.

There were also some further allegations added to the pre-existing claims of loss, particularly in respect of the costs of the auction of the factory contents, an offer said to have been made by the plaintiff in respect of the factory contents, the ‘wind turbine’ and the ‘Data Eclipse’ computer.

Shortly thereafter, the plaintiff served the first of the expert reports of Mr Jones directed to assessing the value of the destroyed intellectual property.

On 28 May 2021, the defendant sought and obtained leave to serve the first report of Mr Firth, which was responding to the earlier report of Mr Jones. The proceeding was referred to judicial mediation. Costs were reserved.

On 11 August 2021, the plaintiff sought and obtained leave to serve another report of Mr Jones, and the proceeding was again referred to judicial mediation with costs reserved.

On 16 November 2021, the matter was returned before JR Keith and was dealt with on the papers. The orders record that the defendant had informed the Court that a special referee might need to be appointed in order to determine questions relating to the value of the intellectual property. The plaintiff was granted leave to further amend his statement of claim in order to include a claim for statutory interest. The proceeding was adjourned to directions on 26 November 2021 and costs were reserved.

As I have earlier noted, the plaintiff’s further amended statement of claim was filed on 24 November 2021 and, consistently with the order granting leave, the only amendment made was to claim statutory interest.

At directions on 26 November 2021, among other things, JR Keith ordered that –

(a) the defendant and plaintiff each be granted leave to serve a further expert report;

(b) any application by the plaintiff for orders concerning inspection of the estate property be made by summons;

(c) subject to the plaintiff filing a notice of trial within 6 weeks prior to trial, the proceeding be listed for hearing on 23 May 2023 on an estimate of 5 to 7 days; and

(d) costs be reserved.

The defendant and plaintiff subsequently served further reports of Mr Firth and Mr Jones respectively and, on 1 February 2022, the plaintiff filed a summons seeking, among other things, that he be granted leave to occupy ‘Llwynfryn’ in order to maintain the property and stock.

On 11 February 2022, JR Keith ordered a timetable for affidavits and written submissions, seemingly in respect of the summons, as well as ordering that the proceeding be listed for trial ‘on a date to be fixed, not before 26 April 2022’. From ‘Other Matters’, it seems that the Judicial Registrar was mindful that the proceeding had earlier been listed for trial to commence on 23 May 2023. Costs were reserved.

The plaintiff’s summons came to be determined by McMillan J on the papers. On 17 June 2022, her Honour dismissed the plaintiff’s summons[37] and, on 18 July 2022, ordered that the plaintiff pay the defendant’s standard costs of the summons, including any reserved costs.
[37]Cf., Re Vaughan; Dunn v Dunn-Vaughan [2022] VSC 337.

On 1 September 2022, JR Keith made very detailed pre-trial orders in respect of steps such as an e-court book, combined folder of authorities, witness outlines and written outlines of submissions. Costs were reserved.

Various steps in that timetable were adjusted by orders made by JR Engelfield on 24 March 2023. Costs were reserved. By that point, both parties were represented by counsel.

On 19 May 2023, the proceeding was listed for final directions before JR Keith. The plaintiff had applied by summons to adjourn the trial and also applied for orders in respect of a subpoena to be issued to the Bank of Melbourne. The applications were adjourned to the judge hearing the trial. Costs were reserved.

The applications came before me on 23 May 2023. Many orders came to be made wholly or largely by consent. Among other things, in substance it was ordered that –

(a) the trial date of 23 May 2023 be vacated and the proceeding be re-listed for trial to commence on 26 July 2023;

(b) the defendant serve a supplementary affidavit of documents;

(c) the defendant file and serve an affidavit relating to the finances of the estate;

(d) the plaintiff have leave to serve a subpoena upon the Bank of Melbourne;

(e) the plaintiff and defendant each file and serve, in effect, a further round of pleadings;

(f) the defendant be granted leave to rely on a further report of Mr Firth and the plaintiff have leave to file and serve a responding report of Mr Jones;

(g) the plaintiff have leave to file and serve further valuation evidence in respect of the value of ‘Llwynfryn’;

(h) the defendant file and serve a document proposed by him to be provided to the Attorney-General concerning the interpretation of the Will;

(i) the parties file and serve any revised witness outlines;

(j) the parties file and serve outlines of submissions and a list of authorities; and

(k) costs be reserved.

The parties subsequently attended to most if not all of the steps ordered, including –

(a) the round of further pleadings by which, among other things, the plaintiff expanded upon his claim in respect of ‘Llwynfryn’ in order to claim relief in the nature of specific performance, alternatively equitable compensation or damages; and

(b) the solicitors for the defendant wrote to the Attorney-General by letter dated 11 July 2023, in the course of which reference was made to ‘an issue about the construction of a will containing clauses which might arguably be charitable’.[38]

[38]I should note that later in the letter the defendant’s solicitors confirmed that the plaintiff had taken the view that the clauses in the Will seeking to establish a charitable trust fail and that senior counsel for the defendant had formed essentially the same view. The letter attached several documents, including a written advice of senior counsel in which it was noted that the parties had long conducted themselves as if the trust had vested and, accordingly, the ‘purpose’ trust might ‘now be at an end in any event’.

The proceeding came before me again on 18 July 2023 and further orders were made, including about the defendant’s discovery and to alter the date for compliance with various earlier orders. Costs were reserved.

On the first day of trial, 26 July 2023, partly with reference to the letter which had been sent to the Attorney-General, the defendant applied for leave to withdraw certain admissions made in his response to the plaintiff’s further claims document. That application was refused for reasons given ex tempore.

Finally, as was emphasised by counsel for the plaintiff, various documents of significance came to light immediately prior to or during the trial, particularly –

(a) an email from the defendant to Mr McLean dated 6 January 2020 which attached the letter from Homes & Acreage discussed in the Primary reasons;[39]

(b) an email from Mr McLean to senior counsel for the defendant summarising the contents of Mr McLean’s file; and

(c) Mr McLean’s ‘field notes’.[40]

[39]See, in particular, Primary reasons, [524]-[534] and [573]-[577].

[40]Primary reasons, [556]-[558] and [586]-[595].

All of those documents related to the plaintiff’s claim in respect of ‘Llwynfryn’.

Counsel for the plaintiff also referred to the defendant’s ‘prevarication’ in respect of the ‘vesting issue’ that culminated in the defendant’s unsuccessful application to withdraw admissions made on the first day of trial.[41]
[41]Plaintiff’s submissions on interest and costs, [29].

In the circumstances described –

(a) the plaintiff’s summons in April 2020 seeking to prevent a threatened auction of ‘Llwynfryn’ was displaced by the effects of the pandemic, but that does not seem to have resulted in anything much in the way of undue delay, as on 8 May 2020, appropriate interlocutory steps were ordered and costs were reserved;

(b) later in 2020, among other things, the parties filed and served pleadings, discovery was ordered and the defendant served his affidavit of documents (in January 2021);

(c) the defendant’s affidavit of documents revealed, for the first time, the existence of the Kensley valuation; however, the adequacy of the defendant’s discovery seems thereafter to have been in issue in other respects;

(d) in March 2021, the plaintiff was granted leave to amend his pleading and, in significant part, the subsequent amendments related to the recently discovered Kensley valuation and otherwise sought to augment the claims brought in respect of losses to the estate;

(e) through the balance of 2021 both parties seem to have attended to the assembly of expert reports directed to the valuation of the intellectual property;

(f) on 26 November 2021 the proceeding was ordered to be listed for trial to commence on 23 May 2023. In that regard –

(i) at that point, the parties were evidently still seeking (and were given) leave to file further expert reports relating to the valuation of the intellectual property;

(ii) no order indicates that the proceeding had been listed for trial in 2021, or at any earlier time;

(iii) in that connection, the orders made on 26 November 2021 do not refer to or vacate any earlier listed trial date; and

(iv) even if there had been an earlier listed trial date, to that point it is not evident that any detailed pre-trial orders had been sought or made;

(g) in February 2022, the plaintiff filed the summons directed to gaining access to ‘Llwynfryn’ which was later determined by McMillan J and in respect of which the plaintiff bore an adverse costs order;

(h) it is not apparent that the relief sought by the plaintiff in that summons should have prevented the parties from preparing for the listed trial date;

(i) it is also not apparent that either party was pressing for the making of detailed pre-trial orders until that in fact occurred later in 2022;

(j) even when that did occur, there was subsequent slippage in compliance with the ordered timetable and significant parts of it had to be adjusted more than once;

(k) further, both parties co-operated in a round of further and more detailed pre-trial pleadings that, as I have noted, were not now relied upon by the defendant as having given rise to any undue delay;

(l) in the midst of all of those events, there seem to have remained issues relating to the adequacy of the defendant’s discovery as well as his proposal to notify the Attorney-General about the matters earlier described;

(m) in that context, the trial date of 23 May 2023 was vacated, further discovery was ordered as well as the completion of further pre-trial steps; and

(n) even when the trial did commence, on 26 July 2023, the defendant sought unsuccessfully to withdraw admissions made and, immediately prior to or in the course of the trial, disclosed a sequence of relevant documents that had not earlier been discovered or otherwise disclosed.

In light of the above –

(a) it is not apparent that the pandemic had much of an effect upon the progress or ‘scheduling’ of the proceeding – the proceeding seems to have been regularly listed and matters determined, when required, and I do not accept that the passage of time between the listing of the matter for trial (by JR Keith in November 2021) and the appointed trial date (in May 2023; or the later trial date of 26 July 2023) was either ‘undue’ or properly a circumstance to be laid at the feet of the plaintiff (or the Court);

(b) indeed, in at least one way the pandemic might be thought to have caused less delay rather than more, as the summons of April 2020 fell away and the parties got on with appropriate interlocutory steps;

(c) the pleading amendments effected by the plaintiff in March 2021 were not extensive and related in part to the recently discovered Kensley valuation;

(d) in that regard, the defendant did not identify any precise period of delay associated with those amendments and the chronology of events to which I have referred do not suggest there were any significant consequential delays;

(e) as indicated above, I do not accept that the plaintiff’s summons in February 2022 led to ‘four months of delay’ caused only by the plaintiff;

(f) I also do not accept that the defendant was ‘ready for trial in 2021’; and

(g) more broadly, while the issues between the parties seem to have been in a highly antagonistic state of flux over a significant period of time up to and including the trial, it is not apparent that the plaintiff alone contributed to that state of affairs or to any general delays that might be thought to have arisen as a consequence of it.

Finally, as I have noted, other than to say that the interest ordered should be $60,000, which was frankly acknowledged to be half the amount calculated by the plaintiff –

(a) the defendant led no evidence concerning any other more appropriate interest rate; and

(b) it was unclear how it could be that the sum of $60,000 would be appropriate even if the delays said by the defendant to have been caused by the plaintiff were to be accepted.

In the circumstances, I am not satisfied that the defendant has shown ‘good cause’ or that the discretion of the Court should be exercised to apply an interest rate other than the statutory rate.

In my view, damages in the nature of interest assessed in the sum proposed by the plaintiff is appropriate having regard to the whole of the circumstances, as well as the twin purposes of such an award.

An order will be made that the defendant pay to the estate damages in the nature of interest assessed in the sum of $119,344.26.

C. Costs

Argument

The plaintiff –

(a) relies upon the ‘usual rule’ that costs follow the event;[42] and

(b) seeks an order for his costs of the proceeding on the standard basis.

[42]Chen v Chan [2009] VSCA 233 (‘Chen’), [10].

In respect of the issue of costs, the defendant filed written submissions of some detail and complexity referring to a great number of events and claims made prior to and at trial. In part, those submissions invited the more detailed examination of pre-trial and other events outlined above (as well as below).

In substance, the defendant submitted that, in respect of certain aspects of the proceeding, the plaintiff should be deprived of his costs and, in turn, the defendant should get his costs. In that regard, the defendant broadly relied upon –

(a) ‘a series of discrete issues’ on which it was said that the plaintiff had been ‘wholly unsuccessful’ (particularly the ‘Llwynfryn’ claim, but also the claims made in respect of intellectual property at ‘Llwynfryn’ as well as the ‘Data Eclipse computer’);[43]

(b) claims which it was said that the plaintiff had not pressed (particularly, the claims of losses in respect of chattels, fixtures and the offer of a loan);[44] and

(c) delay and other ‘disproportionate’ conduct by the plaintiff said to have unduly inflated costs.[45]

[43]Defendant’s outline of submissions on costs and interest, [14] & [19].

[44]Ibid [34].

[45]Ibid [44]-[48].

That said, it was not in issue that the plaintiff should have his standard costs against the defendant in respect of ‘a large part of the litigation’; particularly, the removal of the defendant as administrator and the wasting of the intellectual property.[46]
[46]Ibid [7].

The defendant also claimed an indemnity from the estate in respect of certain issues; which I will address separately below.

In oral argument, among other things, senior counsel for the defendant submitted that –

(a) the submissions in respect of delay were also put as going to the question of costs;[47]
[47]T37.

(b) the claims for loss in respect of chattels and fixtures should never have been pursued and ‘there will have been work done to respond to all of these things’;[48]
[48]T42. See also, T44.

(c) it was not possible to apportion a percentage in respect of points that were not pressed at trial;[49]
[49]T45-46.

(d) the ‘biggest issue’ was the ‘win loss ratio’ which, ‘broadly speaking’, was ‘about 60/40’;[50]
[50]T49.

(e) the issues on which the plaintiff succeeded were ‘quite separate’ to the issues on which the plaintiff lost, such that there had been ‘almost two trials running within the one trial’;[51]
[51]T49.

(f) even if the defendant had stood down as administrator at an early stage, the plaintiff would have pressed on anyway because he ‘was intent to purchase this property on his own terms’;[52]
[52]T50-51.

(g) the only area of ‘overlap’ between the removal claim and ‘Llwynfryn’ claim was the Kensley valuation;[53]
[53]T51. See also, T52 & 54.

(h) in respect of the ‘really separate issues’, it was said that ‘the plaintiff brought them, the plaintiff lost them, the plaintiff should pay the costs of them’;[54]

(i) the findings made concerning the defendant’s attitude towards his brother were ‘really’ based in the evidence relating to the factory;[55] and

(j) there was ‘no indication at all’ that the earlier production by the defendant of the Homes & Acreage letter or Mr McLean’s field notes ‘would’ve made any difference’.[56]

[54]T51.

[55]T53-54.

[56]T56-57.

It might be said that parts of the above submissions were marked by an adherence to notions rejected, or at least not embraced, in the course of the Primary reasons.

For his part, counsel for the plaintiff submitted, relevantly, that –

(a) the plaintiff’s claim in respect of ‘Llwynfryn’ should not cause the Court to depart from the ‘usual rule’; owing to overlap between that part of the case and the removal application, as well as the defendant’s delays in disclosing documents;[57]
[57]T13-16.

(b) the defendant’s conduct in relation to ‘Llwynfryn’ was central to the finding made concerning the defendant’s attitude towards his brother;[58]
[58]T16-17.

(c) the Court should not make costs orders in a form which would be liable to give rise to ongoing litigation in the Costs Court;[59]
[59]T17.

(d) for ‘most of the proceeding’, it was an application to remove the administrator, and the correspondence and conduct of the parties relating to ‘Llwynfryn’ was ‘squarely relevant to that question’;[60]
[60]T21-22.

(e) as administrator, the blame attaching to any ‘overblowing’ of issues, particularly the ‘Llwynfryn’ claim, should fall more squarely at the feet of the defendant;[61]
[61]T22.

(f) it had been in the interests of justice for the plaintiff to serve the further claims document in June 2023 that had articulated what he said should happen with ‘Llwynfryn’;[62]
[62]T23.

(g) the defendant had not made a clear offer to stand down and co-operate in the appointment of an independent administrator;[63]

(h) various ‘chattel-type claims’ had been pressed in respect of the removal application, not abandoned, and the plaintiff had made ‘an appropriate decision not to pursue any losses to the estate arising from the disposal of those items’ in circumstances where the cost of leading evidence relating to the value of those items would very likely have exceeded their value to the claim;[64] and

(i) less than 10%, or perhaps 10%, of the costs of the trial are attributable to the ‘Llwynfryn’ claim on which the defendant succeeded.[65]

[63]T28-29.

[64]T29-30. See also, T69.

[65]T70.

Authority

In the course of submissions, both parties referred to and relied upon the costs principles summarised by the Court of Appeal in Chen v Chan (‘Chen’).[66] In particular, Maxwell P, Redlich JA and T Forrest AJA stated –
[66]Chen (n 42).

(1)The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.
(2)The Rules of Court permit significant flexibility in determining questions of costs. In particular, the Court is entitled to examine the realities of the case and will attempt to do ‘substantial justice’ as between the parties on matters of costs.
(3)Where there is a multiplicity of issues and mixed success has been enjoyed by the parties, a Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount.
(4) A Court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interests of justice.
(5)Where a Court determines to make an order apportioning costs, then it does so primarily as ‘a matter of impression and evaluation,’ rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter.
…[67]

(citations omitted)

[67]Chen (n 42) [10].

Their Honours cited various authorities in support of particular parts of the above, including earlier Court of Appeal decisions in McFadzean & Ors v Construction, Forestry, Mining and Energy Union (‘McFadzean’)[68] and Spotless Group Limited v Premier Building and Consulting Pty Ltd (‘Spotless’).[69]
[68](2007) 20 VR 250 (‘McFadzean’).
[69][2008] VSCA 115 (‘Spotless’).

In McFadzean, Warren CJ, Nettle and Redlich JJA –

(a) referred with approval to the following summary stated in Pricom Pty Ltd v Sgarioto (‘Pricom’)[70] in respect of the position when a party has been partially successful at trial –
[70]Unreported, Eames J, 10 April 1995.

As a general rule costs should follow the event, and a successful party should obtain all of the costs of the action even although it failed to establish some of the alternative heads of its claim: Ritter v Godfrey [1920] 2 KB 47. However, in the exercise of its discretion the court may decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim, or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748, per Toohey J at 48,136.[71]

(b) confirmed that a superior court may treat ‘heads of controversy’ as units of litigation;[72] and

(c) approved of the trial judge’s synthesis of various factors in order to produce an award that was ‘fair and just in all of the circumstances’ and which ‘avoided the need for an expensive and complex taxation of costs’.[73]

[71]McFadzean (n 68) [152] (citations omitted).

[72]McFadzean (n 68) [152] (citations omitted).

[73]Ibid.

Similarly, in Spotless, Redlich JA, with whom Dodds-Streeton JA agreed, confirmed that ‘[a] plaintiff who is successful on one of a number of pleaded causes of action would ordinarily be entitled to costs’ and referred to both McFadzean and Pricom. His Honour thereafter stated –

14In certain cases it is apposite for a trial judge to apportion costs having regard to the multiplicity of parties, actions, issues and the mixed success enjoyed by the plaintiffs. Under r 63.04, the judge may award costs in relation to particular questions or parts of the proceeding. The rules of court are wide enough to permit an apportionment of costs according to issues or causes of action, which enable a court to look at the realities of the case and attempt to do substantial justice.
15Thus a pragmatic approach may be taken in cases where no party is wholly successful and there are clearly practical difficulties in awarding costs on an issue by issue basis. In exercising its discretion as to costs the court is entitled to take into account the failure of a party on certain ‘issues’. ‘Issue’ is not used in the technical pleading sense, but refers to any disputed question of fact of law. In Reading Entertainment Australia Pty Ltd v Whitehorse Property Group Pty Ltd this Court observed:
In cases where neither party is wholly successful there are clearly practical difficulties in awarding costs on an issue by issue basis which would involve making separate costs orders. His Honour took a pragmatic approach, which has much to commend it, of apportioning the costs between the parties.[74]

(citations omitted)

[74]Spotless (n 69), [14]-[15].

Earlier, in State of Victoria v The Master Builders’ Association of Victoria (‘Master Builders’),[75] Tadgell, Ormiston and Eames JJ, in separate reasons, had directly or indirectly referred to even earlier reasoning of Jacobs J in Cretazzo v Lombardi (‘Cretazzo’).[76] In that instance, Jacobs J had agreed with the reasoning of Bray CJ (in which Zelling J also agreed), but added further as follows –

I would wish to sound a note of cautious disapproval of applications, which are being made with increasing frequency, to apportion costs according only to the success or failure of one party or the other on the various issues of fact or law, which arise in the course of a trial.
…
But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.[77]

[75]Unreported, Tadgell, Ormiston and Eames JJ, 15 December 1994 (‘Master Builders’’).

[76](1975) 13 SASR 4.

[77]Ibid 16.

In Master Builders’, the reasoning of Jacobs J in Cretazzo might be said to have been endorsed by Eames J, as well as cited and relied upon to some extent by Tadgell J. Ormiston J, however, might be thought to have signalled a degree of caution. In that regard, his Honour stated –

In this era of high costs of litigation, I would not agree with some general propositions cited to the Court, that it is undesirable to allocate costs according to the issues upon which the parties have succeeded, for, regrettably, there are many cases in which issues are raised which unduly extend the time and expense of litigation.[78]

[78]Master Builders’ (n 75) 6-7.

In more recent times, in GT Corporation Pty Ltd v Amare Safety Pty Ltd,[79] Robson J conducted a very thorough review of relevant authorities, including several which directly or indirectly conveyed no more than a cautious approval of the reasoning of Jacobs J in Cretazzo.
[79][2008] VSC 296.

Notwithstanding the above –

(a) in Northern Territory v Sangare, the High Court emphasised and therefore reinforced the ‘important’ and ‘guiding principle’ that the successful party (there, the defendant) is generally entitled to an order for costs;[80] and
[80](2019) 265 CLR 164, [24]-[25]. See, subsequently, Diakou v Rouse [2019] VSCA 199, [48]-[49].

(b) in Paragreen v Lim Group Holdings Pty Ltd (No 2), the Court of Appeal cited Pricom, McFadzean and Chen and stated –

The well-established general rule is that, ordinarily, costs should follow the event. Accordingly, in the usual course, a successful party should recover its costs even in a case in which it has not succeeded on all of its heads of claim or arguments. On the other hand, it is recognised that where multiple issues have been agitated, and the successful party has only enjoyed mixed success in respect of some of them, a court may, in an appropriate case, adopt a pragmatic approach by which it awards the successful party a proportion of its costs, but not the full amount.[81]

[81][2020] VSCA 97, [5]. See also, Thurin v Krongold Constructions Pty Ltd (No 2) [2022] VSCA 252, [12].

The principles stated in Chen make no direct reference to Cretazzo, Master Builders’ or GT Corporation, however the considerations there under consideration are undoubtedly reflected, to some extent, in the language of the principle first stated.

That said, both the other authorities to which I have referred, and the principles stated in Chen, might be taken to reflect a fundamental importance in maintaining the ‘usual’ or ‘general’ rule that costs follow the event, whilst at the same time acknowledging that when success at trial is ‘mixed’ it can be just and appropriate to order that the costs of discrete issues[82] not be recoverable by, or even be ordered against, the successful party.
[82]Cf., Master Builders’ (n 75) 5, per Tadgell J.

In the end, however, the costs order or orders that should properly be made in any particular case must be in the discretion of the Court,[83] guided by the principles referred to in Chen and the other authorities to which I have referred.[84]
[83]Supreme Court Act 1986 (Vic), s 24(1).
[84]See also, in related contexts, Kheirs Financial Services Pty Ltd v Aussie Home Loans Pty Ltd (2010) 31 VR 46, [13]-[15] and Millsave Holdings Pty Ltd v Connective Group Pty Ltd (No 2) [2024] VSCA 28, [12].

Consideration

It will be evident that, to a considerable extent, the defendant’s arguments involved detailed reference to the history of the proceeding together with the assertion that issues based orders should be made because the ‘Llwynfryn’ claim, in particular, was ‘quite separate’. For his part, the plaintiff could simply point to the fact that in the Primary reasons I had concluded that the plaintiff had succeeded, particularly in the intellectual property and removal claims.[85]
[85]Primary reasons, [675].

The history of the proceeding is plainly of some importance. In that regard, as I have noted, the proceedings were precipitated by the defendant’s proposal to conduct a form of ‘auction’ of ‘Llwynfryn’ that was not in accordance with the terms of the Will. The principal relief sought was that the defendant be removed as administrator, although the plaintiff did also seek orders in respect of the option relating to ‘Llwynfryn’. It follows that, from the beginning, the issues of removal and ‘Llwynfryn’ might be thought to have been somewhat intertwined.

Appropriately, the proceeding was later ordered to proceed by pleadings. In that connection, the plaintiff’s statement of claim dated 22 May 2020 advanced allegations in respect of –

(a) the terms of the Will;

(b) the defendant’s proposal that an ‘auction’ be held in respect of ‘Llwynfryn’ and the subsequent commencement by the plaintiff of proceedings and, in due course, the agreement between the parties by which the application made by summons was resolved;

(c) Mr McLean’s allegedly ‘defective’ valuation of ‘Llwynfryn’, the subsequent valuation by Ms Cox and the alleged failure of the defendant to obtain a valuation of ‘Llwynfryn’ for the purposes of the Will;

(d) the ‘chattels’ held at ‘Llwynfryn’;

(e) System Dynamics and the fittings and chattels at the factory;

(f) the intellectual property at the factory as well as at ‘Llwynfryn’; and

(g) the plaintiff’s offer of a loan to pay out the debts of the estate.

In that context, the plaintiff claimed losses in respect of the chattels, fittings, intellectual property and alleged offer of a loan.

It will be evident that the general structure of the plaintiff’s statement of claim amounted to a broad complaint that almost everything which the defendant had done as trustee and administrator supported the conclusion that he should be removed. Of course, the plaintiff also contended, in respect of some of those actions, that the estate had suffered losses. In a real sense, however, the principal relief sought and therefore the apparent heartland of the case lay in the broad contention that the defendant’s various actions and inactions meant that he should be removed as trustee and administrator and that contention was intertwined with many other allegations sought to be advanced, including in respect of ‘Llwynfryn’.

At that point, the defendant had not yet disclosed the existence of the Kensley valuation, and that did not come to be disclosed for more than six further months when, in January 2021, the defendant made discovery.

In light of the general structure of the plaintiff’s earlier pleaded complaints, it is unsurprising that, in March 2021, the plaintiff amended to include allegations relating to the Kensley valuation as well as such further alleged losses arising from the defendant’s administration of the estate as must have by then become apparent. In particular, the plaintiff added allegations in respect of –

(a) the auction of the factory contents;

(b) an offer by the plaintiff to ‘pay out’ the amounts owing under the factory lease;

(c) the ‘wind turbine’ at the factory;

(d) the ‘Data Eclipse’ computer; and

(e) a mobile crane said to have been at the factory.

All of those additional allegations were, in effect, relied upon as further particulars in support of the broad contention that the defendant should be removed as administrator and some of them were also relied upon as giving rise to losses to the estate.

In that context –

(a) the additional allegations concerning the Kensley valuation could not have been made much earlier, and were allegations of substance that contributed significantly to the ultimate conclusion that the defendant should be removed as trustee and administrator; and

(b) I otherwise accept the implicit submission of the plaintiff that, in the scheme of things, the allegations introduced in March 2021 concerning additional factory contents and the like were relatively minor additions in support of overall contentions made from the outset.

At that point, the plaintiff had not made any claim for specific performance alternatively equitable compensation or damages in respect of the defendant’s actions and inactions related to ‘Llwynfryn’, and that position remained the same after the minor amendment effected in November 2021 by which the plaintiff merely added a claim for statutory interest.

As I have earlier noted, by the time of the listed trial date in May 2023, both parties were plainly examining the precise manner in which their various positions would be advanced at trial.

In the further claims document served in June 2023, the plaintiff embroidered some of his existing contentions in order to articulate them in greater detail, but also trimmed back his claims of loss in respect of the chattels, fixtures and loan.

In the particular circumstances of this case, in which the plaintiff had multiple claims directed to common relief, particularly in respect of the removal of the defendant as trustee and administrator, I accept that so focusing the claim could be said to be in accordance with the plaintiff’s obligations under the Civil Procedure Act 2010 (Vic); with the consequence that I do not attribute much weight to it in determining the overall question of costs.

Further, I do not accept that such claims should never have been brought. In the scheme of things, all of those claims[86] were relatively minor, and it will also be apparent from the Primary reasons that the defendant, as trustee and administrator, had directly or indirectly caused the contents of the factory to be disposed of or destroyed. It seems to me to have been perfectly reasonable and appropriate for the plaintiff to pursue his allegations in respect of the contents of the factory, including the chattels and fixtures and, ultimately, to confine them to the principal allegation that the defendant ought be removed.
[86]Including those relating to the chattels at ‘Llwynfryn’ and the alleged offer of a loan.

The plaintiff’s further claims document, however, did expand his claims in respect of ‘Llwynfryn’, particularly in respect of the terms of the agreement and the relief sought in the nature of specific performance or equitable compensation or damages.

Notwithstanding his expanded claims, the plaintiff’s primary contention remained to the effect that, for a range of reasons, the defendant should be removed as trustee and administrator.[87] Some of those reasons included the incurring of losses to the estate.
[87]The plaintiff’s further claims document dated 6 June 2023 sought relief in stated paragraphs A to W (inclusive). Paragraphs A to G (inclusive) were directed to the removal of the defendant as administrator and related issues.

For his part, albeit that on 23 May 2023 the defendant evidently had in mind that he would be writing to the Attorney-General in respect of the interpretation of the Will,[88] that did not occur until after the defendant had pleaded to the plaintiff’s further claims document. By that pleading, as between the parties, the interpretation issue was essentially non-existent; as the defendant had effectively admitted that the trust vested ‘on either 6 November 2019 or 17 December 2019’.[89] As I have earlier noted, however, when the trial commenced in July 2023 the defendant sought to withdraw that admission, unsuccessfully.
[88]Order 17 made on 23 May 2023.
[89]Defendant’s reply to plaintiff’s further claims document dated 14 June 2023, [20](a).

On top of all of the above, as I have noted, the position of the defendant in respect of discovery and documents more generally continued to be controversial, and that position subsisted prior to and throughout the trial.

It will be evident that, in submissions, senior counsel for the defendant sought to contend that the defendant’s drip feeding of documents made no difference. In many cases, including the present, whether or not conduct of that kind ultimately might be said to have made a difference is difficult to tell. However –

(a) I have grave doubts that any of it amounted to compliance by the defendant with his obligations under the Civil Procedure Act;

(b) the drip feeding of documents undoubtedly contributed significantly to the unusually suspicious and antagonistic atmosphere at trial; and

(c) such conduct was plainly undesirable in this or any other litigation and, whether it made a difference to the ultimate outcome or not, should not be thought to be condoned or encouraged.

In those circumstances, the most significant of the various contentions presently advanced by the defendant was to the effect that the plaintiff’s claims concerning ‘Llwynfryn’ (particularly, the terms of the agreement, whether or not it had been performed and whether the plaintiff would have accepted an offer of the option) were ‘quite separate’ and had been lost. In that regard, as I have noted, the defendant apportioned 40% of the costs of the trial to the ‘Llwynfryn’ claim as well as the other issues identified and relied upon in argument.

Notwithstanding the above, it should be evident from the Primary reasons that the biggest issue in the case was really the overarching issue relating to the credit and reliability of the plaintiff and defendant respectively as well as what to make of the relationships between them (and the deceased). In a very real sense, that issue was directly or indirectly relevant to the determination of all of the other issues in the case.

The assessment of that issue took up a very significant part of the Primary reasons prior to the determination of the intellectual property claim, the ‘Llwynfryn’ claim and then the removal claim. To a significant extent, that assessment was informed by –

(a) a large part if not the whole of the written communications and dealings between the parties, including those relating to the Will, the agreement, ‘Llwynfryn’ and the chattels; and

(b) the manner in which the plaintiff and defendant respectively gave their evidence (which also included references to the Will, the agreement, ‘Llwynfryn’ and, to a much lesser extent, the chattels).

That issue, of course, arose very largely from the manner in which the plaintiff’s claim had been pleaded from the outset – in which the various actions of the defendant as administrator were essentially advanced as particulars of the general allegation that he should be removed and, behind that, a sub-set of those particulars gave rise to distinct claims of loss. In that sense, as I have earlier noted, those various actions – including those relating to ‘Llwynfryn’ – were, to a significant extent, intertwined with the broad and primary claim seeking removal.

Although the trial might be said to have been run by reference to the more detailed form of the pleadings exchanged immediately prior to trial, that round of pleadings did not alter the structure of the claim outlined above. Indeed, if anything, that structure was confirmed by the plaintiff’s trimming back of various allegations arrayed in support of the primary contention that the defendant should be removed.

In light of the above, whilst the pre-trial round of pleadings might be said to have expanded the complaints made by the plaintiff concerning ‘Llwynfryn’, and to have included claims for relief that had not earlier been advanced, I do not accept that the ‘Llwynfryn’ issue was ‘wholly’ or ‘quite’ separate to the rest of the litigation. In a very real sense –

(a) that issue had always been advanced as a particular of the general claim that the defendant should be removed as trustee and administrator and the only difference after the pre-trial round of pleadings (about which there was ultimately no present complaint of consequential delay) was that some further allegations were made about implied terms and the like and, in particular, further relief was sought; and

(b) contrary to the present submissions of the defendant, the defendant’s conduct in relation to most of the disputed issues between the parties, including ‘Llwynfryn’, broadly contributed to the ultimate determination that he should be removed, albeit that the further claims by the plaintiff in respect of implied terms and specific relief in the nature of specific performance or damages failed.

In addition to the above –

(a) I have already rejected the defendant’s submission that the interlocutory stages of the proceeding were marked by delays which must be taken to fall at the feet of the plaintiff;

(b) similarly, while the defendant complained about matters such as the volume of correspondence and repetition caused by the manner in which the plaintiff pursued his case over time, I do not regard the actions of the defendant to have been much different;

(c) in that regard, in a very real sense and over a long period of time, both parties fought with each other incessantly and, often enough, by adopting obtuse positions;

(d) in that connection, while both parties might be said to have borne some measure of culpability for the manner in which they corresponded and otherwise went about the dispute, the culpability of the defendant, who has been continuously represented and has acted as the trustee and administrator of the estate, must be the greater;

(e) none of the further contentions relied upon by the defendant in argument on the present issue (such as, the chattels, fixtures, loan offer, wind turbine or Data Eclipse computer) are anything like sufficiently distinct or significant enough in order to attract separate treatment for the purposes of costs; and

(f) I do not accept that, in the letter to which I was referred, the defendant made any kind of clear or bona fide offer to stand aside as administrator prior to the determination of that issue at trial.[90]

[90]In that regard, I accept the plaintiff’s submissions in respect of the AMS letter dated 6 July 2023. Cf., T27-29.

In the circumstances, whilst the plaintiff did not succeed in every aspect of what he ultimately contended at trial –

(a) his primary claim from the beginning was accepted – namely, the claim that the defendant be removed as trustee and administrator;

(b) the plaintiff also succeeded in the overwhelming majority of the claims he advanced at trial (ie, credit and reliability, relationships between the parties, intellectual property and removal);

(c) a good part of the evidence led in respect of the claims which it was unnecessary to decide, as well as those which the plaintiff lost, ended up being of some contextual relevance to the determination of the issues on which he did succeed (particularly in respect of credit and reliability and the relationships between the parties as well as removal);

(d) consequently, in my view, it cannot be accepted that the ‘Llwynfryn’ issue was ‘wholly’, ‘really’ or ‘quite’ separate from those on which the plaintiff did succeed;

(e) in that regard, I do not consider there to be any or sufficient disqualifying, special or exceptional circumstances such that the ‘general’ or ‘usual’ rule ought not apply; and

(f) in that connection, the ‘general’ or ‘usual’ rule exists for significant reasons of policy and the Court of Appeal has repeatedly confirmed that the ‘general’ or ‘usual’ rule provides that such an order may be made even if a plaintiff does not succeed in all aspects of his or her claim.

It follows, in my view, that –

(a) it is a case in which it remains fair and just that the ‘general’ or ‘usual’ rule applies; and

(b) consequently, subject to what is said below concerning the claim for an indemnity out of the assets of the estate, in my view the plaintiff should have his standard costs of the proceeding.[91]

D. Indemnity

[91]Save, of course, for the costs specifically ordered against him by McMillan J on 18 July 2022.

Argument

As earlier noted, the written submissions of the defendant claim an indemnity from the estate on the ‘trustee basis’ in respect of what was described as being the costs of –

(a) ‘liaising with the Attorney-General’s office, obtaining advice about those issues and the like’;[92]

(b) ‘contested evidence and argument around the construction of the 17 December 2019 orders, the parties’ rights and the veracity of the first McLean valuation’;[93] and

(c) ‘insofar as the defendant, as trustee, has been successful in defeating the plaintiff’s claims [in respect of ‘Llwynfryn’] and in achieving a result which objectively informs the administration of the estate’.[94]

[92]Defendant’s outline of submissions on costs and interest, [28].

[93]Ibid [30].

[94]Ibid [33].

Shortly prior to oral argument, the defendant provided minutes that addressed the claim for indemnity in the following rather complicated sequence of proposed orders –

3.The [d]efendant be entitled to pay and retain from the estate of the [d]eceased, the costs of and associated with his application in relation to the construction of the Will of the [d]eceased, and the effect of the 17 December 2019 [o]rders upon that construction, on an indemnity basis, to be assessed in default of agreement.

4. The [p]laintiff pay:
(a)the [d]efendant’s costs of and incidental to the plaintiff’s summons dated 1 February 2022, as reserved by Justice McMillan on 17 June 2022;[95]
[95]Her Honour, in fact, ordered that the plaintiff pay such costs by order made on 18 July 2022.
(b)the [d]efendant’s costs of and incidental to the plaintiff’s summons dated 22 April 2020;
(c)40% of the [d]efendant’s costs of the hearing of the trial of the proceeding (excluding the argument on the first day of trial in relation [to] the withdrawal of an admission);
(d)the [d]efendant’s costs of preparation for trial and interlocutory steps including but not limited to pleadings, discovery, witness statements, expert reports, those parts of the evidence and any other matters of and associated with the construction of the 17 December 2019 [o]rders and their effect on the [W]ill, Mr McLan’s [sic: Mr McLean’s] valuation, the value of Balnarring [ie, ‘Llwynfryn’], the Data General computer, [i]ntellectual property at Balnarring, the wind turbine;
(e)the whole of the [d]efendant’s costs of preparation for the trial and interlocutory steps (as referred to in part (c) of this [o]rder and the costs ‘thrown away’ of the amendment to the [s]tatement of [c]laim on 21 March 2021) of and associated with issues raised by the plaintiff relating to the chattels located at Balnarring, the chattels and fixtures at the [f]actory, the defendant’s alleged failure to accept the plaintiff’s offer of finance, including reserved costs (not otherwise delay [sic: dealt] with herein), on the standard basis, to be assessed in default of agreement.

5. …

6.

(a)Insofar as he is ordered to pay costs personally under [o]rder 5 hereof, the defendant is not entitled to his costs of the proceeding out of the estate of the deceased.
(b)Insofar as the defendant has incurred costs which fall under [o]rders 4(a) to (e) hereof, insofar as they are not paid by the plaintiff, he is entitled to his costs on an indemnity basis from the estate of the deceased.

Notwithstanding the above, in the course of oral address, senior counsel for the defendant acknowledged that ‘generally, an administrator who’s removed is not going to get their costs of the removal application’.[96] Further, senior counsel described the defendant’s claim for costs from the estate as falling into ‘two categories’, particularly –
[96]T58.

(a) ‘costs associated with the determination of how the [W]ill ought be administered’, which was said to include –

… on a technical basis [later explained as including the matters addressed in the letter belatedly sent to the Attorney-General concerning whether there was a charitable trust] and also on the basis of the necessary evidence of Mr Leung, the analysis of what the impact is of the December 2019 orders on the will … and then what’s the consequence of that in terms of Mr McLean’s valuation and … whether that was a proper valuation.

…

All of that is an attempt to get the property [‘Llwynfryn’] sold in ways that do not benefit himself [the defendant] and only seek to move the estate forward.[97]

(b) ‘the costs [incurred] in successfully defending [the] attack on him’ in respect of the sale of ‘Llwynfryn’.[98]

[97]T58 & 61. See also, T63-64.

[98]T61.

It will be apparent that –

(a) the two stated categories might be said to overlap, at least in respect of the relevant effect of the Will, the December 2019 orders and the agreement made between the parties as well as whether Mr McLean’s valuation was ‘proper’; and

(b) the stated categories are, in any event, considerably more confined than the relevant terms of the defendant’s proposed minutes of orders.

The written submissions of the plaintiff were exchanged with those of the defendant and were therefore not directly responsive to them. In any event, in his written submissions, the plaintiff contended that the defendant had failed to obtain judicial advice and had otherwise ‘prevaricated’ in respect of the question whether the trust had vested. In that regard, the plaintiff submitted that the defendant’s conduct of the issue was ‘inconsistent with his obligations as administrator and trustee’ which, it was said, stood as a further reason for applying the ‘general’ or ‘usual’ rule that costs follow the event.

That said, the plaintiff’s proposed form of order included, and therefore sought, the following order –

5.The defendant is not entitled to his costs of the proceeding out of the estate of the deceased.[99]

[99]Plaintiff’s proposed form of order dated 20 February 2024.

In oral submissions, counsel for the plaintiff addressed the indemnity issue by reference to the defendant’s proposed form of orders. In that regard, counsel submitted as follows –

In our submission the defendant administrator would not ordinarily get their costs of an application in which they were removed as administrator. It was said by Justice McMillan in a decision, Re Koroneos [2021] VSC 734, that an application for removal does not fall within the rubric of estate litigation in the true sense. It’s inter-parties litigation. The defendant appears to say that the defendant had – I think in the submission it said placed before the court certain construction issues in the orders it said made an application in relation to the construction of the will.
In our submission no such application was made and the defendant did not place those issues before the court. In fact, what the defendant did was abandon them and the costs in relation to those issues were wasted because the defendant refusing to admit those issues for a number of years. In particular, the plaintiff pleaded in his first statement of claim in May 2020 that the trust had vested no later than 17 December 2019 and the defendant’s response to that was not to admit it. Not to deny it, not to admit it, just to – a non-admission which he maintained all the way through until June of 2023 when in response to the further claims document he then admitted that the trust had in fact vested at that point.
So a number of years of litigation had been wasted with that issue being left open, only for it to be admitted on the eve of trial and in our submission, it had to have been admitted because the way the defendant conducted himself after 17 December 2019 was that he was trying to follow what he needed to do when the trust vested. So we say that admission was inevitable. It ought to have been made on the earliest occasion and led to unnecessary complexity and costs.
That included, after that admission had been made, correspondence being sent to the Attorney-General’s office saying there is this open issue. The [plaintiff] was not consulted in relation to this. The plaintiff was not consulted in relation to the form of that and [it] ought not to have been sent. It risked the Attorney-General taking the view that the Attorney-General ought intervene in a proceeding in which this was no longer an issue.
So in our submission we say none of that conduct is the conduct of – proper conduct of an administrator, for which an administrator ought be entitled to an indemnity. In relation to the question of the effect of the 17 December 2019 orders, that was obviously an issue at trial in a proceeding brought to the court’s attention by the plaintiff. We’ve made our submissions in writing as to why because of the defendant’s failure to disclose critical documents that issue could and should have been dealt with much sooner. We say the defendant ought not get his costs of that issue from the estate.[100]

[100]T19-20.

Later, in reply to the submissions of senior counsel for the defendant, counsel for the plaintiff submitted that –

(a) until the pre-trial round of pleadings was completed, it was not clear how it was that the parties said that the orders, the agreement and the Will had or had not been complied with;[101]
[101]T66-67.

(b) in that regard, to that point there had been no mention of the ‘charitable trust issues’ in the pleadings;[102]

[102]T67.

(c) if the defendant is right, and he acted properly as administrator in defending the issues relating to construction or administration of the estate, then both parties, including the plaintiff, should have their costs of that issue out of the estate on an indemnity basis;[103]
[103]T67-68.

(d) in respect of the defendant’s claim in respect of ‘Llwynfryn’ –

… this goes back to the overall success and failure point because much of the evidence … and of the issues raised, was all squarely relevant to the removal application and that’s an application on which the defendant lost and which the defendant accepts that defendants who are removed, ordinarily don’t get their costs. So dividing Balnarring [‘Llwynfryn’] up into a separate issue and saying he should get his costs of defending that claim, on that basis, is artificial.[104]

(e) the only witnesses who gave evidence solely in relation to relief relating to ‘Llwynfryn’ were Mr Baxter, Mr Leung and Mr McLean which, it was said, occupied ‘perhaps a day of the trial in total’ and so ‘less than 10 per cent or 10 per cent of the costs of the trial are attributable to an issue on which the defendant says he succeeded’.[105]

[104]T68.

[105]T70.

In a final response to the latter submission, senior counsel for the defendant took issue with the suggested percentage and referred to ‘the evidence of the plaintiff and the defendant themselves’ as well as to ‘correspondence, … their witness statements and cross-examination about their ability to purchase the property’.[106]
[106]T72-73.

Authority

I do not intend to be in any way critical of counsel, but much of the above was advanced with little in the way of reference to principle or authority. That said, the defendant referred to rule 63.26 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) and, one way or another, both parties referred to the categories of dispute described by Kekewich J in Re Buckton.[107]
[107][1907] 2 Ch 406. The defendant’s written submissions on costs and interest referred to a few further cases which have considered the categories referred to in Re Buckton: see, Defendant’s outline of submissions on costs and interest, [8].

Those categories were discussed and explained by Finkelstein J in Sons of Gwalia Ltd v Margaretic (‘Sons of Gwalia’).[108] In particular, his Honour referred to a ‘trust dispute’, which embraces both the first and second of the categories discussed by Kekewich J, as well as a ‘beneficiaries dispute’, which embraces the third.[109] In that connection, his Honour stated –

[8]The second kind of dispute is a trust dispute in which the application is made by someone other than the trustee (usually a beneficiary) but raises the same kind of issue as in the first class and would have justified an application by the trustees. Here the same rule in relation to costs applies because, as in the first class, the application is for the benefit of the estate.
[9]The third class identified by Kekewich J (which Lightman J refers to as a “beneficiaries dispute”) is where a beneficiary brings a hostile claim against the trustees (for example as to the propriety of any action taken or omitted to be taken) or another beneficiary. As between the parties the costs in this kind of case are treated in the same way as in ordinary litigation, that is, they follow the event. However, if the trustees properly (albeit not necessarily successfully) defend the claim for the benefit of the estate they will be entitled to their costs out of the estate to the extent they are not recovered from the other party.[110]

[108](2006) 232 ALR 119, [5]-[10] (‘Sons of Gwalia’). In that regard, his Honour also referred to the categories as described and discussed by Lightman J in Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220 at 1223.

[109]His Honour also referred to a fourth but presently irrelevant category, namely a ‘third-party dispute’: Sons of Gwalia (n 108) [10].

[110]Sons of Gwalia (n 108) [8]-[9].

It will be evident that, in respect of a ‘beneficiaries dispute’, and perhaps more generally, there can be an issue in respect to whether costs might be recovered by the trustee out of the estate if, for example, a claim is not brought or defended ‘properly … for the benefit of the estate’.

That issue can, of course, intersect with the question whether the trustee obtained or should have obtained judicial advice prior to initiating or defending the action.[111]
[111]Cf., Re Beddoe [1893] 1 Ch 547. See also, Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, [71]-[72], Hopkins v Edwards [2020] VSC 456 (‘Hopkins’) and Application by Eastwood Retirement Pty Ltd [2022] VSC 568.

Nonetheless, it has long been the position that if, for example, a trustee breaches the trust or wrongly refuses to perform it or to resign in order that another might perform it, and thereby causes a removal action to be brought, he or she should pay the costs personally and without recourse to the assets of the estate.[112] It is no doubt for those reasons that there was presently no issue that the defendant should pay the costs of the proceeding relating to his removal and the intellectual property claim.
[112]Cf., Palairet v Carew (1863) 32 Beav. 564; 55 ER 222 and Price v Loaden (1856) 21 Beav. 506; 52 ER 955.

Similarly, in Miller v Cameron,[113] where a trustee wrongly failed to resign and thereby provoked legal proceedings which ought to have been avoided, albeit that there had been no other misconduct in the management of the trust estate, Latham CJ stated –

… as a rule, a trustee is allowed his costs out of the trust estate if his conduct has been honest, even though it may have been mistaken. In the ordinary case a trustee brings or contests legal proceedings on behalf of the trust and not on his own behalf. He is often a necessary party to proceedings where he ought to be present even though he may do no more than submit to the judgment of the Court. In such a case the trustee receives his costs. The position is admittedly different in a case of misconduct. In this case there has, however, been no misconduct in the management of the trust estate.
In this case the trustee was asked to resign his office by every person interested in the execution of the trust. In my opinion his refusal to resign in all the circumstances of the case has resulted in legal proceedings which ought to have been avoided. The defendant would have acted wisely and properly in resigning as soon as he was asked. In defending this action and in prosecuting this appeal the defendant has been representing and supporting his own interests and not those of the trust estate. He has failed to show that his interests coincide with the interests of the trust estate. In such a case I consider it quite proper that he should pay the plaintiff’s costs of the action and of the appeal to this Court.[114]

[113](1936) 54 CLR 572 (‘Miller’).

[114]Miller (n 113) 578-579.

It follows that in circumstances of the kind broadly outlined, a question can arise whether the trustee incurred particular costs, expenses or liabilities ‘properly’.

That question was considered by the Court of Appeal in both Nolan v Collie (‘Nolan’)[115] and Di Benedetto v Kilton Grange Pty Ltd (‘Di Benedetto’).[116]
[115](2003) 7 VR 287 (‘Nolan’).
[116][2017] VSCA 119 (‘Di Benedetto’).

In Nolan, Ormiston JA, with whom Batt and Vincent JJA agreed, confirmed that –

(a) the question is whether the costs, expenses or liabilities have been properly incurred, or, more particularly, not shown to have been improperly incurred;

(b) the question is answered by reference to the circumstances and, in particular, the duty which the trustee was obliged to comply with or the power which the trustee was intending to exercise;

(c) in that regard, it may be shown that the particular act of a trustee was outside the relevant power, done in bad faith or exercised with an absence of the care and diligence that a person of ordinary prudence should exercise;

(d) great care must be taken with broad suggestions of ‘negligence’ or ‘unreasonableness’; and

(e) in a particular case, the degree of ‘want of prudence’ may not be such as to deprive the trustee of the right to look to the estate to satisfy the liability, particularly if all that is shown is a ‘mere error of judgment’.[117]

[117]Nolan (n 115) [51]-[57].

In Di Benedetto, the trial judge had disallowed a claim by a trustee for indemnity for legal costs and liabilities out of the estate in respect of a Beddoe application. In that instance, the trustee had an interest in the outcome of the application, the defendant had succeeded and the trial judge had observed that the proceeding was ‘adversarial’.

Allowing the appeal in part, Ferguson JA (as her Honour then was), McLeish JA and Cameron AJA stated –

63The general rule is that a trustee is justified in seeking advice and directions from the Court, and will be indemnified out of the trust fund for his or her costs incurred in doing so. However, being an instance of the trustee’s wider right of indemnity against the trust estate in respect of costs, expenses and liabilities, the right of indemnity is confined to those legal costs that are ‘properly’ incurred. This shorthand articulation of the test is open to the criticism that it merely expresses a conclusion and supplies no governing criterion, but it is supported by authority of long standing and was not questioned in the present matter.
64The right of indemnity belongs to the trustee subject to circumstances being present which suffice to deny the right. As such, the position is more accurately stated as being that the trustee is entitled to indemnity for costs, expenses and liabilities which are not shown to have been improperly incurred. Instances where that test has been met include where the trustee has acted beyond power, in bad faith or without the care and diligence of a person of ordinary prudence. Similarly, a trustee is not indemnified where a liability is incurred as a result of conduct on the part of the trustee in breach of his or her duty to execute the trust with reasonable diligence and care. On the other hand, a mere error of judgment may not suffice to show improper conduct. The standard of care is that ‘which might be expected of a trustee as objectively but not over-zealously enforced’. What is ‘proper’ or ‘improper’ for this purpose is to be answered by reference to the duty with which the trustee was required to comply or the power the trustee was intending to exercise.
65 Where a trustee commences a proceeding for his or her personal benefit, the rule that costs ordinarily follow the event applies, and if the action fails the onus lies on the trustee to show that the costs of the proceeding were not improperly incurred. For example, the conduct of the proceeding, albeit that it concerns a personal benefit of the trustee, may have been an incident of the proper administration of the trust.
66 The questions whether the proceeding was adversarial in nature or whether the trustee’s personal interests were at stake are therefore not determinative of the matter of costs. In either case, the court must also consider whether the costs incurred by the trustee were properly incurred.[118]
(citations omitted)

[118]Di Benedetto (n 116) [63]-[66].

I should add that consistently with the above, in Re Buckingham,[119] McMillan J referred to costs and expenses incurred in litigation and stated –

Where a trustee fails in litigation, his or her costs may be allowed out of the estate. Where a trustee succeeds, his or her costs would ordinarily be allowed out of the estate. As the same time, any ‘indemnity must be given effect to 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’.[120]

[119](2016) 51 VR 453.

[120]Ibid [34].

Many presently relevant authorities, including the above, were very carefully surveyed and summarised by Lyons J (as his Honour then was) in Hopkins v Edwards.[121] In that connection, his Honour stated the following relevant principles –
[121]Hopkins (n 111).

(1)the trustee is entitled to indemnity for costs, expenses and liabilities which are not shown to have been improperly incurred;
(2)this right of indemnity belongs to the trustee subject to circumstances being present which suffice to deny the right;
(3)the question of whether a cost, expense or liability was not improperly incurred depends on the duty upon, or power in, the trustee which resulted in incurring the cost;
(4)in the case of the costs of litigation or liabilities incurred in litigation, the relevant duty is likely to be whether in incurring the cost or liability the trustee failed to exercise the care and diligence that a person of ordinary prudence would exercise;
(5)even in proceedings involving a trustee which are adversarial in nature or where the trustee’s personal interests are at stake, the court must consider whether the costs incurred by the trustee were not improperly incurred in the sense set out in (3) and (4) above; and
(6)a Court must be cautious before concluding such costs, expenses or liabilities were improperly incurred as to deprive a trustee of his or her right of indemnity.[122]

[122]Hopkins (n 111) [234].

I should perhaps add that his Honour confirmed that, in the context of legal costs, the stated principles were consistent with r 63.26 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic).[123]
[123]Ibid [235].

For completeness, I should note that the present issue was revisited by the Court of Appeal in Vanta v Mantovani (‘Vanta’).[124] In that instance, the applicants succeeded ‘totally’ on appeal. However –
[124][2023] VSCA 74 (‘Vanta’).

(a) the conduct of Vanta, as trustee, had been ‘unsatisfactory’;

(b) the relief sought by the respondent, who was a beneficiary, had been ‘misguided’ owing to the ‘unsatisfactory’ conduct of Vanta; and

(c) until the last moment, the applicants had maintained ‘two completely untenable positions’.

In that context, there was no order for costs made against either party in respect of the underlying proceeding. In respect of the costs of the appeal, albeit that Kyrou JA, Sifris JA and J Forrest AJA accepted that if the applicants had sought judicial advice, then the proceeding and appeal would not have occurred, it was determined that there should also be no order for the costs of the application for leave to appeal and appeal.

The remaining issue was whether any part of the costs of the parties should be paid out of the trust fund and, in that connection, their Honours referred with evident approval to the reasoning of Finkelstein J in Sons of Gwalia, part of which I have earlier extracted. In that connection, their Honours stated –

30It is not possible to fit the current proceeding into any one category of the three/four identified by Finkelstein J. Whilst John’s proceeding was adversarial, it was still intimately bound up with questions about the proper administration of the Trust and the refusal of Vanta as trustee to cooperate or to seek the advice or direction of the Court. His commencement of the proceeding drew the attention of the Court to the conduct of the Trust and ultimately resulted in the applicants agreeing to seek directions from the Court as to the future administration of the Trust. In those circumstances, we consider that John’s costs of both the trial, the application for leave to appeal and the appeal should be paid out of the Trust fund. The rationale is simple: without John’s intervention, important questions concerning the proper administration of the Trust would not have received judicial consideration. Further, having secured a judgment in his favour, it was not unreasonable for him to defend the appeal, notwithstanding the ultimate result.[125]

[125]Vanta (n 123) [30].

As their Honours thereafter observed, the question whether the applicants should have their costs of the proceeding out of the trust fund was ‘difficult’. In that connection, their Honours stated –

32In the usual course of events, Vanta as trustee would be entitled to an indemnity from the assets of the Trust. As noted by the Court of Appeal in Di Benedetto v Kilton Grange Pty Ltd, ‘the position is more accurately stated as being that the trustee is entitled to indemnity for costs, expenses and liabilities which are not shown to have been improperly incurred’.
…
34 On balance — and after considerable thought, and notwithstanding their bellicose approach to John’s claim — we think that the applicants’ costs of the trial should be paid out of the Trust fund. This is appropriate given that ultimately their defence of the proceeding was validated notwithstanding that their conduct precluded them from obtaining an order for costs against John. It is also relevant that the applicants did not seek to disturb costs orders in favour of John that were made by the judge prior to 24 June 2022, which her Honour held should not be paid out of the Trust fund.
35For the same reasons, the applicants’ costs of the application for leave to appeal and the appeal should be paid out of the Trust fund.[126]
(citations omitted)

[126]Ibid [32], [34]-[35].

It may presently be noted that –

(a) the issues in Vanta were ‘bound up with questions about the proper administration of the Trust and the refusal of Vanta as trustee to cooperate or to seek the advice or direction of the Court’;

(b) notwithstanding the adversarial nature of the proceedings, the ‘bellicose’ approach adopted by the trustees and the fact that the trustees did not seek judicial advice ‘at the outset’, all relevant parties, including the trustees, were given their costs out of the trust fund; and

(c) it follows that, in that instance, it was not shown that the costs concerned had been incurred ‘improperly’.

Consideration

In the circumstances, the present issue is whether the two overlapping categories of costs identified by senior counsel for the defendant in the course of oral argument are shown to have been improperly incurred.[127]
[127]In that regard, I put to one side the wider claims that might theoretically have been said to arise from the defendant’s proposed form of order, particularly proposed orders 4(a) to (e) and 6(b). That document was produced on the morning of argument and at the request of the Court. It also contained errors. It is safer, in the circumstances, to approach the present issue by reference to the categories identified and addressed orally.

I have earlier referred to the manner in which the proceeding developed after its commencement in December 2019. In that regard, the plaintiff primarily sought that the defendant be removed and replaced as trustee and administrator. However, he also sought that ‘Llwynfryn’ be valued and the option offered to him pursuant to the terms of the trust created by the Will.

In that sense, as I have earlier noted, from the beginning the proceeding might be said to have raised intertwined issues of removal and administration of the trust (including, by inference, whether the charitable purposes of the trust failed as well as whether the trust had vested such that any such option could be offered).

That said, the position after settlement of the summons in December 2019 became very considerably more complicated. In particular, it became debateable what terms thereafter controlled the conduct of the administrator: the terms of the Will, the terms recorded in ‘Other Matters’ in the orders made on 17 December 2019 or other and if so what terms? That debate ultimately came to be resolved at trial.

In that connection, the plaintiff’s statement of claim dated 22 May 2020 addressed, among other things, the terms of the Will as well as the steps taken by both parties in respect of a sale or purchase of ‘Llwynfryn’ in the period November 2019 to March 2020, including the issue and later settlement of the plaintiff’s summons in December 2019.

In that context, the plaintiff alleged, among other things, that –

(a) the defendant had appointed 17 December 2019 as the ‘vesting date’;

(b) the valuation obtained by Mr McLean was ‘defective’ such that it did not constitute a sworn valuation for the purposes of the terms of the Will; and

(c) the defendant was not entitled to dispose of ‘Llwynfryn’ until he complies with the terms of the Will.

The plaintiff made various further allegations in respect of, broadly speaking, the alleged wasting of chattels at ‘Llwynfryn’, chattels and fixtures at the factory and the intellectual property as well as alleged failure of the defendant to accept the plaintiff’s offer of a loan.

It follows that –

(a) the various allegations in the pleading were not all of the same character;

(b) although there were some claims of loss, there was no claim for loss to the estate, or the plaintiff, as a consequence of any the allegations made in respect of ‘Llwynfryn’; and

(c) the ‘Llwynfryn’ allegations together with the allegations of wasting and the like were variously relied upon as going to the plea that the defendant be removed as trustee and administrator.

In that sense, the plaintiff’s pleading might be thought to have presented a ‘beneficiaries dispute’, and it certainly did so, at least in part. However, within that lurked a significant ‘trust dispute’ concerning, at least, the vesting of the trust, the construction and operation of the terms of the Will and/or agreement relating to ‘Llwynfryn’ and whether and to what extent those terms had been performed.

For his part, in his defence, the defendant relevantly –

(a) did not admit that he had appointed 17 December 2019 as the ‘vesting date’;

(b) denied that the McLean valuation was defective and, indeed, asserted that it was ‘irrelevant’; and

(c) denied that he was not entitled to dispose of ‘Llwynfryn’ and asserted that he was ‘authorized and required to dispose of [‘Llwynfryn’] in the terms set out in the “Other Matters” of the [o]rders made on 17 December 2019’.

It might be said that the defendant’s defence was not terribly informative as to the precise issues required to be determined in respect of ‘Llwynfryn’. Nonetheless, it was tolerably clear that the defendant disputed any contention that he had relevantly breached the Will or the terms set out in ‘Other Matters’ in the orders of 17 December 2019.

I have earlier referred to the plaintiff’s amended pleadings in March and November 2021. Nothing in those documents, or the defendant’s defences to them, might be said to have materially altered any aspect of the above; and that remained the position until the further round of pre-trial pleadings in June 2023.

In that connection, it is evident from the orders made on 23 May 2023 that the defendant then had in mind that an issue as to the charitable nature of the trust might be said to arise and, consequently, that it might be necessary to notify the Attorney-General.[128]
[128]See, in particular, order 17 made on 23 May 2023.

That, of course, did not occur until 11 July 2023 and, in the meantime, the pre-trial round of pleadings had taken place and the defendant had admitted that he had appointed the vesting day of the trust on ‘either 6 November 2019 or 17 December 2019’.

Notwithstanding the above, as I have earlier noted, the plaintiff’s ‘further claims document’ had articulated a considerable deal of detail in respect of the various claims made. In respect of ‘Llwynfryn’, in particular, the plaintiff sought additional and specific relief to the effect that –

(a) by the conduct of the defendant, the trust had vested in November 2019, alternatively December 2019;

(b) the value of ‘Llwynfryn’ should be determined as at November 2019, December 2019 ‘or a reasonable time thereafter’;

(c) the defendant had declined the offer of an option to himself under the trust in the Will;

(d) the plaintiff should be offered the option under the trust in the Will; and

(e) the defendant should be ordered to pay equitable compensation or, presumably, damages.

The defendant took issue with much of the above in his response; much of which amounted to advancing his own narrative concerning relevant events. That said, as I have noted, the defendant did admit the vesting of the trust, which he then unsuccessfully sought to withdraw on the first day of trial.

It will be plain, of course, that the pre-trial round of pleadings expanded the field of dispute in respect of ‘Llwynfryn’. In particular, the relief claimed was more specific and expanded to include, in effect, a claim for specific performance, alternatively equitable compensation or damages. That said, the plaintiff continued to seek that the defendant be removed and replaced as trustee and administrator, and his allegations in respect of ‘Llwynfryn’ (and other issues) continued to be advanced in respect of that issue.

It follows that, much like the position at the outset, the plaintiff’s allegations in respect of removal were advanced by reference to a sequence of issues, including ‘Llwynfryn’.

Further, in respect of ‘Llwynfryn’, there continued to be a dispute concerning the terms of the Will, and the agreement, and whether and to what extent the defendant had complied with any and if so what of those terms. The field of dispute in respect of those questions was expanded, but their character remained as described.

It follows that while in argument the defendant presently emphasised the issues of construction and whether and at what point the parties were in respect of the terms of the Will and/or agreement and, by contrast, the plaintiff emphasised the relevance of the allegations made in respect of ‘Llwynfryn’ to the removal application, neither is a wholly complete and therefore accurate characterisation of the nature of the present dispute.

In that regard, it is very much the case that the issues at trial relating to ‘Llwynfryn’ embraced a significant ‘trust dispute’ that, in the end, was among other things relevant to a broader ‘beneficiaries dispute’.

Further, whilst the argument of the plaintiff tended to emphasise the fact that significant parts of the evidence and findings made at trial concerning the attitude of the defendant to his brother were relevant to both his ultimate removal and the issues relating to ‘Llwynfryn’; in the circumstances that is not terribly surprising, as it is quite possible for documentary evidence, in particular, to have more than one part as well as more than one character. Nonetheless, it does not seem to me to follow that the associated costs were necessarily improperly incurred.

In light of the above, I conclude that –

(a) from commencement, the proceeding was in the character of a ‘beneficiaries dispute’ by which the defendant was sought to be removed and replaced, but it also contained the seeds of a ‘trust dispute’ relating to ‘Llwynfryn’;

(b) that became a little more apparent in the round of pleadings exchanged in mid 2020, although those documents did not do much to elucidate the issues;

(c) some degree of greater elucidation was undertaken in the round of pleadings immediately prior to trial, in which the allegations and relief sought in respect of ‘Llwynfryn’ were expanded, but the hybrid character of the issues within that dispute remained; and

(d) even after that, the defendant plainly remained somewhat uncertain about the vesting and charitable trust issue, and corresponded with the Attorney-General, although that did not lead to anything of substance.

I do not mean to be in any way disrespectful in observing that not much of that to which I have referred can be described as having been elegant, either as a matter of pleadings or practice.

In particular, the application made to the Attorney-General sits uncomfortably with the admission which preceded it. However, it does not necessarily follow that the costs in relation to that step were ‘improperly incurred’. In the present instance, I would accept that it was a matter that senior counsel for the defendant considered to require notification and I could not say, objectively, that it was improper of her to have so advised.

In any event, it seems clear enough that, from the outset, a significant part of the allegations made in relation to ‘Llwynfryn’ were directed to the proper administration of the trust and those issues subsisted (and grew) all the way to trial, albeit that there were overlapping issues of personal interest relating to the defendant that became much more apparent immediately prior to trial when the issues involved in the dispute were better elucidated and the claims for relief expanded.

In that sense, in the language of the Court of Appeal in Vanta, albeit that the proceedings were acutely ‘adversarial’, and the personal interests of the defendant were also at stake, significant issues in the proceeding relating to ‘Llwynfryn’ were ‘intimately bound up with questions about the proper administration of the [t]rust’.

In that regard, it might be that it should not always be thought that costs might be able to be retrievable out of the assets of an estate if there is a ‘trust dispute’ within a ‘beneficiaries dispute’, as questions of degree can arise. However, in the present instance the ‘trust dispute’ was of a significant dimension and was ultimately very much at the heart of the argument at trial relating to ‘Llwynfryn’.

In the circumstances described, I am not satisfied that the overlapping categories of costs incurred and sought from the estate in respect the dispute relating to ‘Llwynfryn’ were improperly incurred.[129] To be clear, that comprises the costs of and associated with –

(a) the defendant’s application to the Attorney-General in relation to the construction of the Will and the effect of the 17 December 2019 orders; and

(b) the various issues at trial in relation to the claim made by the plaintiff in respect of ‘Llwynfryn’, particularly the construction of the relevant terms of the Will, the terms of the agreement and the extent to which the steps required to be taken have been taken, including in respect of the value of ‘Llwynfryn’, and remain to be taken.

[129]Notwithstanding the regularly obtuse stances and degrees of ‘culpability’ of both parties, to which I have earlier referred.

All of that seems to me to comprise the relevant ‘trust dispute’ and, as a consequence of the principles to which I have earlier referred, as in Vanta, it would ordinarily be that both parties would be entitled to have their costs of that dispute out of the estate.

Subject to the below, it follows from what I have said that both the defendant and the plaintiff should have an indemnity out of the estate in respect of their costs of the ‘trust dispute’.

In that regard, of course, I have already indicated that subject to the determination of the current issue, the defendant should personally pay the plaintiff’s standard costs of the proceeding, and part of those costs will relate to the ‘trust dispute’.

It seems to me that very considerable potential for further disputation would be apt to arise if –

(a) the defendant were simply ordered personally to pay the plaintiff’s standard costs of the proceeding;

(b) the defendant were to have an indemnity out of the estate in respect of his costs of the ‘trust dispute’;

(c) to the extent that the plaintiff recovers his standard costs of the ‘trust dispute’ from the defendant, the defendant were also to have an indemnity out of the estate in respect of those costs; and

(d) to the extent that there were any difference between the standard costs of the plaintiff in respect of the ‘trust dispute’ and an indemnity for those costs, the plaintiff should have that difference out of the estate.

Such a course obviously has the potential to give rise to further dispute, including in the Cost Court, and to contribute significantly to ongoing complexity and expense in the administration of the estate; all of which, in the present case, is highly undesirable.[130]
[130]Cf., McFadzean (n 68) [157]-[159].

In the circumstances, it seems to me to be considerably better if I were to approach the present issue by determining the extent to which the overall costs of the proceeding might be said to have been attributable directly or indirectly to the costs of the ‘trust dispute’ concerning ‘Llwynfryn’. It is, of course, not possible to be precise; however, the alternative strikes me as likely to be far worse.

In that connection, I have already noted that –

(a) the plaintiff sought to suggest that the issues relating to relevant parts of the ‘Llwynfryn’ claim would comprise no more than 10 percent of the trial;

(b) the defendant challenged that apportionment by reference to, among other things, the relevance of the evidence of the plaintiff and defendant (correctly, in my view);

(c) for his part, the defendant sought to suggest that the many different issues which he pursued in argument, including in respect of ‘Llwynfryn’, were properly to be reflected in an apportionment of 40% against the plaintiff in respect of the costs of the trial; and

(d) that said, the defendant eschewed any apportionment in respect of pre-trial steps and preparation.

In the present instance, I do not accept that experience together with the events of a long and hotly contested trial which carried with it the need to review thousands of pages of correspondence and other documents relating to the dispute do not furnish an impression sufficient to allow an appropriate apportionment to be made in respect of the overall costs of preparation and interlocutory steps as well as the trial.

In the present instance, an appropriate apportionment of the costs of preparation, interlocutory steps and the trial in respect of the issues which I have identified as the ‘trust dispute’ would be 25% of the total.

It follows from the above that -

(a) the parties may each have 25% of their costs as an indemnity out of the assets of the estate (which is intended to align with my broad assessment of the proportion of the overall costs of each party that are likely to have been incurred in connection with the ‘trust dispute’);

(b) the defendant will otherwise be ordered personally to pay 75% of the standard costs of the plaintiff, including reserved costs (although not the costs and reserved costs the subject of order by McMillan J in July 2022), to be assessed by the Costs Court in default of agreement.

E. Conclusion

The parties agreed that the costs of a further hearing should be avoided, if possible, and that is plainly desirable if it can be achieved. These reasons will be published without any need for the parties to attend a further hearing and will be accompanied by orders giving effect to the above so as finally to bring the proceeding to completion.

[2024] VSC 128

26 March 2024