Re Kataryna; Kataryna v Petalas

[2017] VSC 466

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

TRUSTS, EQUITY & PROBATE LIST

S CI 2017 02167

IN THE MATTER of the will and estate of RAYMOND KATARYNA, deceased

BETWEEN:

SLOWKO KATARYNA	Plaintiff
v
REBECCA JANE PETALAS	Defendant

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JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF RULING:	14 August 2017
CASE MAY BE CITED AS:	Re Kataryna; Kataryna v Petalas
MEDIUM NEUTRAL CITATION:	[2017] VSC 466

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COSTS—Estate litigation—Application to remove executor and appoint independent administrator—Where executor did not respond to correspondence for several months—Where substituted service ordered—Where executor ultimately agreed to removal—Whether indemnity costs should be ordered against executor—Whether executor should have indemnity for costs from the estate—Supreme Court Act 1986, s 24(1)—Supreme Court (General Civil Procedure) Rules, Order 63— Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr A P Richardson	Lanham Lawyers
For the Defendant	Mr T G Moloney	Ms D J Andritsos

HER HONOUR:

Background

1. Raymond Kataryna died on 10 November 2016.  His will dated 29 June 2010 named the defendant as the executor of his estate.  The deceased left his estate equally between the plaintiff, the defendant and Zanik Kataryna.  The plaintiff and Zanik Kataryna are the brothers of the deceased.  The defendant claims to be the partner of the deceased.

1. On 29 September 2016, the plaintiff was appointed by VCAT to act as the administrator and limited guardian of the deceased.  In his role as administrator, the plaintiff discovered a large number of unusual transactions on the deceased’s Westpac bank accounts and online cash withdrawals from his credit card account that occurred when the deceased was cognitively impaired and hospitalised.  In an affidavit sworn 2 June 2017, the plaintiff deposed to his reasons for suspecting that the cash withdrawals were made by the defendant without the authority of the deceased.

1. By letter dated 2 December 2016, the plaintiff’s solicitors wrote to the solicitor for the defendant requesting the defendant’s agreement to renounce her position as executor, failing which the plaintiff would issue a proceeding seeking the defendant’s removal and claim costs of the application on an indemnity basis.

1. By letter dated 6 February 2017 to the solicitor for the defendant, the plaintiff’s solicitors agreed to an independent solicitor being appointed to administer the estate and sought the defendant’s consent to such an appointment.  The response from the defendant’s solicitor was that the defendant ‘is prepared to renounce her executorship if protections are in place’ and advised that her ‘retainer ends at the completion of this letter unless I am instructed further and am assured my costs will be paid from the estate’.  This response was reiterated again in correspondence from the solicitor on 8 March 2017.

1. The plaintiff has had no further contact from the defendant or her solicitor despite further correspondence by email directed to the defendant advising that unless she consented to the appointment of an independent administrator, proceedings would be issued seeking orders for an independent executor and indemnity costs.

Plaintiff’s proceeding

1. On 5 June 2017, the plaintiff commenced this proceeding seeking orders that the defendant be passed over as the executor of the will and estate of the deceased and that letters of administration with the will dated 28 June 2010 annexed be granted to the plaintiff.

1. On 23 June 2017, orders were made for substituted service of the proceeding on the defendant.  Subsequently substituted service was effected in accordance with the orders.

1. On 28 July 2017, the defendant appeared on the return date of the application.  This was the first communication by the defendant since March 2017.  On the return date, the defendant was represented by counsel.  Agreement was reached between the parties for the appointment of an independent administrator to administer the estate.  The parties, however, were unable to agree on the costs of the proceeding and the Court requested short written submissions on costs.

Orders for costs sought by the parties

1. The plaintiff seeks orders that the defendant pay the plaintiff’s costs of and incidental to the proceeding, including any reserved costs, on an indemnity basis and without being indemnified for those costs out of the estate and the defendant bear her own costs of and incidental to the proceeding personally and without being indemnified for those costs out of the estate.

1. The defendant seeks an order that there be no orders for costs of the proceeding, alternatively, the defendant pay the costs associated with the application for substituted service.

Applicable principles

1. The Court’s jurisdiction in relation to costs is conferred by s 24(1) of the Supreme Court Act 1986. The Court’s general discretion in relation to costs must be exercised judicially and in accordance with Order 63 of the Supreme Court (General Civil Procedure) Rules 2015.[1]  The prima facie position in respect of costs litigation is for standard costs to be ordered by the Court.  The usual order as to costs is that costs follow the event and a successful party is entitled to an award of costs in its favour.[2]

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

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

1. The Court’s discretionary power also allows the Court to makes an award for costs other than on the standard basis.  The Court’s discretion to depart from the usual order for costs will only be exercised where a proceeding exhibits a special or unusual feature or special circumstances.[3]  The types of circumstances that may warrant a special costs order are not closed.[4]  Each proceeding must be considered on its own facts to ascertain whether those facts support the making of a special order for costs.

   [3]Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (14 June 2001); Lutar v Carley [2017] VSC 366 (23 June 2017) [21].

   [4]Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (14 June 2001) [8] (Harper J).

Consideration

1. Before the plaintiff issued the proceeding, his solicitor informed the defendant’s solicitor of his serious concerns about the defendant’s competency to administer the estate, based on the alleged misappropriation by the defendant of the deceased’s funds in the period before his death when he was incapacitated.  Although the defendant denied these allegations, she did not provide any basis for her denials or justify her stance to remain as executor of the estate.  The plaintiff provided the defendant with a significant amount of time to respond to his concerns.  In this regard, there is no substance in the defendant’s submission that the plaintiff attempted to shame and bully her into submitting to the appointment of an independent administrator by filing his affidavit in support of his application.

1. This proceeding was provoked by the defendant’s competence as the executor of the estate in light of her conduct concerning the deceased’s bank accounts over the twelve months preceding his death.  The plaintiff’s allegations of misappropriation of the deceased’s funds and the defendant’s failure to respond in any meaningful manner to them place the defendant in a position of conflict in administering the estate.  Ordinarily, she would renounce her executorship as a matter of course.  The fact that she did not, or would only do so if guaranteed certain ‘protections’, was unreasonable and justified the plaintiff’s decision to commence this proceeding.

1. The defendant was well aware of the plaintiff’s position and his wish to have the estate administered in a timely manner.  Before March 2017, the plaintiff suggested on numerous occasions to the defendant’s solicitor that, unless the defendant consented to his proposal, he would issue this proceeding.  After the defendant ceased to retain her solicitor, she made no effort to notify the plaintiff’s solicitors of her address or contact details.  This caused the plaintiff to seek orders for substituted service on her.  The defendant then failed to communicate with the plaintiff or his solicitors until the hearing date, when agreement was finally reached for the appointment of an independent administrator.  The defendant has been the cause of the proceeding being issued and caused delay in the administration of the estate.  In those circumstances, the defendant’s submission that there should be no order for costs of the proceeding is without merit.

1. For these reasons, the defendant should pay the plaintiff’s costs of the proceeding without indemnity from the estate of the deceased.

Orders

1. Accordingly, the following orders will be made:

(a)   the defendant pay the plaintiff’s costs of and incidental to the proceeding, including any reserved costs, on an indemnity basis and without being indemnified for those costs out of the estate; and

(b)   the defendant bear her own costs of and incidental to the proceeding personally and without being indemnified for those costs out of the estate.