Re Mason; Scott v Petsas
[2017] VSC 687
•14 November 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY & PROBATE LIST
S CI 2017 03168
IN THE MATTER of the will and estate of ANTHONY IVAN MASON, deceased
-and-
IN THE MATTER of s 34 of the Administration and Probate Act 1958
BETWEEN:
| AMANDA SCOTT and DEBORAH SCOTT | Plaintiffs |
| and | |
| JOHN PETSAS (as executor of the will and estate of Anthony Ivan Mason, deceased) | Defendant |
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JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 8 September 2017 |
DATE OF RULING: | 14 November 2017 |
CASE MAY BE CITED AS: | Re Mason; Scott & Anor v Petsas |
MEDIUM NEUTRAL CITATION: | [2017] VSC 687 |
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COSTS—Estate litigation—Defendant named executor in deceased’s will—Plaintiffs beneficiaries under the will—Plaintiffs sought orders removing defendant as executor of the estate—No grant of probate—Proceeding misconceived—Whether plaintiffs entitled to costs out of the estate—Supreme Court Act 1986, s 24.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr I H Percy | Robinson Gill |
| For the Defendant | Mr R R Boaden | Natoli Howell |
HER HONOUR:
Background
Anthony Mason died on 26 April 2017, aged 76 years (‘the deceased’). He did not marry and had no children. He is survived by, inter alia:
(a) his long term partner, Noel Alexander, born 9 May 1932 and now incapacitated;
(b) his two sisters, Marion Scott and Angela Jepson;
(c) his two nieces, Amanda Scott and Deborah Scott, (‘the plaintiffs’); and
(d) his two friends, the defendant, John Petsas, and Rose Di Flumeri.
The deceased left a will dated 13 February 2017 and a codicil dated 11 April 2017. By his will, the deceased named the defendant as his executor, with Rose Di Flumeri as his alternate executor. The deceased bequeathed, inter alia, his valuable pottery collection to his sisters and the defendant in equal shares, his bone china collection to his sisters in equal shares and left a life interest in the residue of his estate to his partner. Upon the death of his partner, the residue of his estate, apart from a small legacy to a friend, was left to his two sisters as to 25 per cent, to his nephew and three nieces as to 5 per cent each (two of whom are the plaintiffs), 45 per cent to a cancer charity and 10 per cent to a charity that deals with Alzheimer’s disease.
Plaintiffs’ allegations of conflict
The plaintiffs are two of the deceased’s nieces. They claimed the defendant was in a position of actual or potential conflict of interest and that he ought not prove the deceased’s will. Their claims of actual or potential conflict of interest arose from certain transactions by the deceased during his lifetime where they allege that the defendant received certain benefits from the deceased.
These transactions arose out of transfers by a discretionary trust controlled by the deceased. The deceased and his partner were the two primary beneficiaries under the discretionary trust. In late 2016, the trust transferred two residential units to Rose Di Flumeri. Although the transfer was expressed as being made by way of gift, it was supported by a consideration of $660 000 paid on 31 January 2017 by the defendant. The market value of the two units was considerably more than $660 000 and the transaction was by way of a large gift to Rose Di Flumeri. In addition, the plaintiffs say there was documentation that implied the deceased had lent three sums amounting to $150 000 to the defendant.
The plaintiffs’ solicitors asserted that the defendant had a potential or actual conflict of interest in a letter dated 19 June 2017 to the solicitors then acting for the defendant, and that he should step aside from seeking appointment as executor in favour of an independent executor and trustee.
By letter dated 30 June 2017, the defendant’s solicitor responded, inter alia, as follows:
An application for probate has not been lodged and my client undertakes not to take further steps in connection with the application.
Notwithstanding that [the defendant] does not accept that he is conflicted, … he is agreeable to your proposal that he renounce his appointment as executor and trustee and the appointment of a professional in his place. Suzanne Jones … would be a very suitable candidate.
In the same letter, the defendant’s solicitor included a list of expenses that the defendant had personally paid on behalf of the estate amounting to $24 058.62.[1]
[1]This figure was subsequently increased by the defendant to $24 146.
By letter dated 14 July 2017, the plaintiffs’ solicitors suggested, as an alternative to Ms Jones, that Suzanne Lyttleton be appointed as the independent administrator and stated further:
In order to avoid duplication of legal costs, our clients ask that you prepare the necessary application to the Court to appoint Suzanne Lyttleton in place of [the defendant]. Please confirm within 7 days of the date of this letter that you agree to do so.
On 27 July 2017, the defendant’s solicitor responded, consenting to the appointment of Ms Lyttleton and also stated that ‘I will advise you when the application to the Court is ready for filing’.
On 3 August 2017, a telephone conversation took place between the respective solicitors. The defendant’s solicitor had realised that any application for the appointment of Ms Lyttleton as administrator was not one that could or should be made by the defendant and he informed the plaintiffs’ solicitor of as much. The defendant submits there may have been some miscommunication between the solicitors on this occasion, but there is no direct record of the telephone conversation. There is, however, a letter that followed the conversation dated 3 August 2017 in which the plaintiffs’ solicitors said:
We understand that for reasons that have not yet been disclosed, your client has reneged on his agreement to relinquish his executorship of the estate. In the circumstances, we have instructions to file an application for his removal immediately …
The defendant says he received this letter on 4 August 2017 and he replied to it immediately. The defendant contends that the contents of the plaintiff’s solicitors’ letter was not what was said or, certainly, was not the message that the defendant’s solicitor had intended to communicate to the plaintiff’s solicitor, as evidenced by his reply:
I now refer to your letter dated the 3rd of August 2017 (received this morning) the contents of which DOES NOT represent our telephone conversation yesterday afternoon. Never did I say to you that [the defendant] has reneged on his agreement to relinquish his executorship of the estate; rather I told you that after considering the matter further I am now of the view that it would be more appropriate for you to prepare the application to the Court to have an independent solicitor appointed in place of [the defendant] to avoid this firm becoming conflicted. I will retain the estate file and will prepare it for handover as well as comply with the orders of the Court and do whatever I can to assist the new executor appointed. [The defendant] remains agreeable to standing down as executor. Please direct future correspondence to Mr. David Natoli of Natoli Howell Lawyers in Reservoir who acts for [the defendant]. … Please however keep me advised of the progress of your clients’ application.
Plaintiffs’ application
Notwithstanding this letter, by originating motion filed 9 August 2017 and summons filed 10 August 2017, the plaintiffs sought an order, pursuant to s 34 of the Administration and Probate Act 1958 (‘the Act’), that the defendant be ‘discharged or removed as executor of the will of the deceased.’ Alternatively, the plaintiffs sought any such further or other orders as the Court considers appropriate.
After the proceeding was issued, the plaintiffs’ solicitors wrote to the new solicitors acting for the defendant on 29 August 2017 stating, inter alia, as follows:
We refer to your telephone conversation with the writer last week in relation to the above matter.
In that conversation, you questioned our clients’ decision to commence proceedings and suggested that a Renunciation of Probate form was appropriate in the circumstances.
In our view, it was necessary to commence proceedings in circumstances where we have received conflicting instructions from you and your client’s previous solicitors in relation to [the defendant’s] renunciation of his appointment as executor.
In addition, given the circumstances set out in our affidavit dated 9 August 2017, our client is of the view that your client could not truthfully say that he has not in any way intermeddled in the estate or affairs of the deceased (as provided in the last paragraph of the standard form of renunciation).
By return email the same day, the defendant’s solicitors informed the plaintiffs’ solicitors that they were waiting on advice from their counsel and upon receipt of that advice, they would contact the plaintiffs’ solicitors.
On 4 September 2017, the plaintiffs’ solicitors then served a proposed amended summons on the defendant’s solicitors in which the plaintiffs sought orders that the defendant be passed over as the executor of the deceased’s will and Suzanne Lyttleton ‘be appointed as administrator in place of’ the defendant.
Consideration
Plaintiffs’ application to remove the defendant
Prior to the plaintiffs’ allegations of conflict of interest against the defendant, the defendant had intended to accept his appointment as executor and prove the deceased’s will. He had placed the necessary advertisement in order to effect this intention, however, once the plaintiffs made their conflict allegations against him, he took no further steps towards accepting his appointment. Although the defendant did not agree with the plaintiffs’ conflict allegations, he nevertheless agreed not to prove the will and did not apply for a grant of probate. As the defendant did not proceed with an application for a grant of probate of the deceased’s will, he has not been appointed the executor of the estate of the deceased.
An application for removal of an executor pursuant to s 34 of the Act is predicated on a grant of probate or letters of administration having been made. As the defendant is not an executor to whom probate has been granted, the plaintiffs’ application to ‘discharge or remove’ the defendant as executor of the estate of the deceased was doomed to fail.
Plaintiffs’ amended summons
By their amended summons, the plaintiffs seek that the defendant be passed over as the executor of the estate of the deceased, that Ms Lyttleton be appointed administrator of the estate of the deceased and seek further orders ‘necessary … for vesting the estate in’ Ms Lyttleton as administrator.
These proposed orders are misconceived in circumstances where the defendant had agreed that he would not make an application for a grant of probate of the deceased’s will. In those circumstances, there was no requirement for an order passing over the defendant. Further, the defendant had already agreed that Ms Lyttleton was an appropriate person to be the administrator of the estate of the deceased. It is misconceived to seek such an appointment in this proceeding. In the circumstances of this factual scenario, the usual procedure for the appointment of an administrator with the will annexed must be by way of originating motion by the proposed administrator to the Registrar of Probates with the relevant affidavits, searches and advertisement in support of the application. It is not by way of summons to the Judge in charge of the Trusts, Equity and Probate List. Upon the appointment of the administrator with the will annexed, the assets of the estate would then vest in that person.
Plaintiffs’ remaining proposed orders
At the hearing on 8 September 2017, counsel for the plaintiffs provided proposed orders that went beyond the proposed amended summons. Nevertheless, these proposed further orders ought be considered so that all issues raised by the plaintiffs are determined.
An order was sought that the defendant forthwith deliver to the proposed administrator the original will and codicil of the deceased and all documents in his possession, custody or power relating to the estate of the deceased. The defendant does not oppose this order but says it is unnecessary for the following reasons:
(a) by letter dated 4 August 2017 and before this proceeding was issued, the defendant informed the plaintiffs’ solicitors that he was willing to hand over the estate file; and
(b) in a letter dated 14 July 2017 and again before this proceeding was issued, the plaintiffs’ solicitors sought copies of insurance documents and access to the deceased’s home and, by letter dated 27 July 2017, these documents were provided, including an inventory of the house contents and their values.
This order is also misconceived as it assumes that an administrator has been appointed to the estate and it is unnecessary in view of the reasons relied upon by the defendant.
The plaintiffs’ proposed orders also seek that the defendant be entitled to reimbursement of reasonable expenses paid by him in connection with the estate of the deceased upon proof thereof to the reasonable satisfaction of the administrator, with such expenses to be paid from the estate. An attachment to the letter dated 30 June 2017 from the solicitors for the defendant itemises the estate expenses paid by the defendant from his own funds amounting to $24 058.62. These items include expenses related to the deceased’s funeral, utilities and other liabilities of the estate. The defendant has provided these details to the plaintiffs’ solicitors on two occasions.
In the ordinary course of the administration of an estate, the defendant would be entitled to reimbursement for any estate expenses paid by him from his own funds, upon proof of payment.[2] It is unnecessary to make this order, however, as the plaintiffs proposed the order and the defendant consents to it.
[2]Trustee Act 1958, s 36(2).
The plaintiffs’ proposed orders also provide for the defendant to be indemnified for his costs from the estate of the deceased for a fixed sum of $5 000 related to expenses of and incidental to the proceeding. The defendant consents to this order.
Costs orders sought by the plaintiffs
The plaintiffs’ proposed orders seek that the plaintiffs be indemnified for their costs of and incidental to the proceeding out of the estate.
At the hearing on 8 September 2017, counsel for the plaintiffs estimated the quantum of these costs to be in the vicinity of $10 000 to $15 000. This does not accord with the quantum referred to in the letter from the plaintiffs’ solicitors dated 29 August 2017 where the defendant’s solicitors were informed that the quantum of their costs exceeded $15 000 plus counsel’s fees, with no quantum provided for counsel’s fees. Since the date of this letter, further costs and fees would have been incurred with the filing of an amended summons and a supporting affidavit, as well as an appearance on 8 September 2017.
In the same letter, the plaintiffs’ solicitor sought that the defendant put forward a proposal for the costs and stated that if agreement could not be reached, the plaintiffs would seek indemnity costs against the defendant. The plaintiffs’ solicitors also advised that:
Our clients’ costs have been increased by the conduct of your client, in initially agreeing to prepare the application for his removal and then declining to do so. This has resulted in the need for extensive correspondence between us and your client’s former solicitor in relation to the matter, and now you, which could have been avoided.
Counsel for the plaintiffs also produced a letter dated 6 September 2017 from the solicitors for the attorneys of the deceased’s partner that stated the attorneys had been provided with the affidavit of the plaintiffs’ solicitor sworn 9 August 2017 in support of the application to remove the defendant as the executor of the estate. The letter does not state that the attorneys have read the later affidavit sworn 5 September 2017 by the plaintiffs’ solicitor. In the letter, the attorneys’ solicitor stated:
Our clients fully support this application and strenuously oppose [the defendant] assuming any role in the administration of [the deceased’s] estate, particularly noting that the executor will be a long term trustee for funds held to the benefit of [the deceased’s partner].
Plaintiffs’ submissions regarding costs
Counsel for the plaintiffs accepted that their application was misconceived. Notwithstanding this, the plaintiffs submit their costs ought be paid out of the estate because the work completed up to the making of their application and initiation of the proceeding was necessary for the defendant to step aside in favour of Ms Lyttleton.
The plaintiffs also submit the proceeding would not have been necessary had the defendant done what he originally said he would do, and it was reasonable to infer in the circumstances that the issue would not have been resolved absent the proceeding being issued by the plaintiffs.
They also submit their affidavit in support of the application provides strong grounds as to why the defendant should have declined to act as the executor from the outset, which would have avoided the current proceedings, relying on the statement made in Re Kataryna; Kataryna v Petalas that ‘ordinarily, [he] would renounce [his] executorship as a matter of course.’[3]
Relevant principles
[3]Re Kataryna; Kataryna v Petalas [2017] VSC 466 (14 August 2017) [14] (McMillan J) (‘Re Kataryna’).
Costs are at the discretion of the Court, unless as otherwise provided by an Act or the Rules.[4] The prima facie position in respect of costs in litigation is for standard costs to be ordered by the court, with the court having the discretion to award costs other than on the standard basis. The usual order as to costs is that costs follow the event and a successful party is entitled to an award of costs in its favour.[5] The relevant ‘event’ is success in the action or on particular issues.[6] The unsuccessful party bears the liability for the costs of the unsuccessful litigation.[7] The central principle is to make an order that is fair and just between the parties in the circumstance of each case.[8]
Position of other beneficiaries
[4]Supreme Court Act 1986, s 24.
[5]Oshlack v Richmond River Council (1998) 193 CLR 72, 97 (McHugh J).
[6]Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin(1997) 186 CLR 622, 624–5 (McHugh J); Seng Hpa v Walker [2017] VSC 320 (8 June 2017) [77]–[81] (McMillan J).
[7]Oshlack v Richmond River Council (1998) 193 CLR 72, 97 (McHugh J).
[8]Earnshaw v Loy (No 2)[1959] VR 252, 253 (Sholl J). See also G E Dal Pont, Law on Costs (Lexis Nexis, 3rd ed, 2013) 148–9.
As stated, the plaintiffs have a minority interest in the residue of the estate of the deceased. They receive ten per cent of the residue of the estate, subject to the life interest of the deceased’s partner. The attitude of the other residuary beneficiaries of the estate to their costs being paid out of the estate is not known nor is it known whether they are even aware of the proceeding.
In written submissions, the plaintiffs state that ‘all of the beneficiaries either support or do not oppose the plaintiffs’ application.’ Even if this is the case, it is not known whether those beneficiaries have been made aware that the defendant had agreed to step down as executor prior to the commencement of the proceeding and that the application was misconceived.
The consent provided by the attorneys for the deceased’s partner is uninformed. There is no mention that the defendant had agreed he would not be the executor before he proceeding was issued and the attorneys have no information as to the quantum of the plaintiffs’ costs. At the date of the letter from the attorneys, the plaintiffs were aware that the application to remove the defendant was misconceived, yet the letter does not indicate whether the attorneys are similarly aware. Given these factors, it is difficult to be satisfied that all of the beneficiaries accept the plaintiffs’ application that they be indemnified for their costs from the estate of the deceased.
In circumstances where the plaintiffs accept that the proceeding is misconceived and the beneficiaries of the estate have not been adequately informed of that fact, and the prima facie unreasonable quantum of costs claimed by the plaintiffs, the Court’s discretion as to costs would miscarry if costs were ordered in favour of the plaintiffs.
Plaintiffs’ allegations of conflict of interest
The plaintiffs submit that their affidavit in support of the removal of the defendant as executor of the estate provides strong evidence as to why the defendant should have declined to act as the executor from the outset, and thereby avoid the necessity for the proceeding.
This submission is rejected. The plaintiffs first advised the defendant of the allegations of conflict by letter dated 19 June 2017. The defendant’s solicitors responded by letter dated 30 June 2017. Within this response, the defendant agreed to step down as executor, even though he did not accept that he was in a position of conflict. As the defendant relinquished his position as executor when allegations were first made by the plaintiffs, it is unnecessary for the Court to determine any issue of conflict.
In support of their position, the plaintiffs rely on the statement made in Re Kataryna that ‘ordinarily, [he] would renounce [his] executorship as a matter of course.’[9] Re Kataryna concerned allegations against the competence of the named executor in light of allegations of misappropriation by her of substantial funds from the deceased’s bank accounts in the 12 months preceding his death. The named executor refused to renounce her executorship unless she was guaranteed certain ‘protections’ that were deemed to be unreasonable in the circumstances and justified the plaintiff’s decision to commence the proceeding.[10] The named defendant was also decidedly evasive and failed to communicate with the plaintiff on various occasions, despite the numerous attempts by the plaintiff to resolve the issues prior to the commencement of the proceeding.[11]
[9]Re Kataryna [2017] VSC 466 (14 August 2017) [14].
[10]Ibid.
[11]Ibid [15].
Reliance on the statement in Re Kataryna is not apt given the substantially different factual context in this case where the defendant agreed to renounce his executorship unconditionally at the earliest stage and communicated extensively with the plaintiffs in an attempt to resolve the relevant misunderstanding.
Evidentiary errors and inconsistencies
At the hearing, counsel for the plaintiff submitted that all of the steps that were taken by the plaintiffs were necessary and had the defendant been properly advised, he would have stepped aside at the outset.
In considering this submission, it is necessary to refer to the evidence surrounding the telephone conversation between the respective solicitors that is said to have occurred on 3 August 2017. It is accepted that there is no direct record of this telephone conversation. However, the letter from the plaintiffs’ solicitors dated 3 August 2017 states, inter alia, that:
… your client has reneged on his agreement to relinquish his executorship of the Estate … We have instructions to file an application for his removal immediately…
By letter dated 4 August 2017, the defendant’s solicitor attempts to clarify that this was not the meaning or intended meaning of that telephone conversation, but rather:
I told you that after considering the matter further I am now of the view that it would be more appropriate for you to prepare the application to the Court to have an independent solicitor appointed in place of the [defendant] to avoid this firm becoming conflicted….the [defendant] remains agreeable to standing down as executor.’
The letter of 4 August 2017 is sufficiently clear and unambiguous as to its meaning. It is a reasonably contemporaneous record of the telephone conversation by the defendant’s solicitor and it seeks to clarify the intended meaning of the conversation that occurred on the previous day.
Despite this letter, it remains unclear as to the plaintiffs’ reasons for commencing the proceeding only three days later on 9 August 2017. From this point onwards, the plaintiffs appear to be working under the misguided, and somewhat unfortunate, assumption that the defendant refused to resign as executor of the estate. This is despite the fact that the correspondence and actions of the defendant were to the contrary: he did not proceed with an application for a grant of probate; he took no further steps towards assuming the role of executor; and his solicitors recommended an alternative candidate for the role of administrator of the estate.
I am satisfied that these factors do not evidence behaviour of a person who refuses to relinquish his position as executor of the estate.
At the hearing, counsel for the plaintiff submitted that there was no immediate agreement for the defendant to step aside and that the first real indication of him being prepared to do that was in a letter from his former solicitors on 27 July, bearing in mind the matter had been raised in June.
This submission is rejected. The letter dated 30 June 2017 from the defendant’s solicitors was to the effect that no application for probate had been made. In this letter, the defendant does not concede he is conflicted but he does specifically agree to renounce his position as executor and even suggests a replacement. As stated, these words are not those of an unwilling person.
Counsel also submitted that ‘nothing happened’ after the defendant solicitor’s stated they would make an application to the Court. Counsel did not, however, refer to the telephone conversation between the respective parties as outlined above or the correspondence that ensued after that conversation. All of these events transpired in less than a week and it is, therefore, incorrect to state that ‘nothing happened’ in the sense submitted by counsel.
Counsel also submitted that it was not until the letter dated 4 August 2017 that the defendant agreed to step down. Viewing the relevant documents collectively, rather than in isolation, this is incorrect. The correspondence prior to the letter dated 4 August 2017 provide many examples of the defendant’s intention to renounce his position.
The practicality of appointing a new executor was brought into question on 4 August 2017 when the defendant’s solicitors stated that the more appropriate way was for the plaintiffs to make the application so as to avoid any potential conflict for the solicitors. This is not a concession that the defendant never agreed to step down until that time, as contended by the plaintiffs. Instead, it appears that the plaintiffs adopted this interpretation of the events in an attempt to justify their conduct in issuing the proceeding, despite the fact that the defendant agreed to step aside at a much earlier stage.
Further, the errors in the letter dated 29 August 2017 reinforce the misconceptions held by the plaintiffs. The first error is that the issue of renunciation of probate was not mentioned by the plaintiffs’ solicitors until this letter. It was first raised by the defendant’s new solicitors in the conversation referred to in the first paragraph of this letter. The second error concerns the allegation that the defendant ‘intermeddled’ in the estate in some manner. Intermeddling is the use of estate assets in some way as though the person was duly authorised to do so.[12] The defendant has simply used his own funds to pay for estate debts in the region of $25 000. In any event, even if the defendant had intermeddled, it is not necessary for him to formally renounce. If an executor does not apply for a grant of representation, the beneficiaries of an estate may procure the appointment of an independent person to take out a grant of representation so that an estate can be administered in accordance with a will or under the intestacy provisions. The third error is where the plaintiffs’ solicitors state that the plaintiffs were justified in issuing the proceeding due to ‘conflicting instructions’ between the defendant’s former and current solicitors in relation to the defendant’s renunciation of his position as executor. This is incorrect as the defendant agreed to step down from that role at an early stage, well before the commencement of the proceeding.
Determination of plaintiffs’ costs
[12]See generally Griffin v Coe [2012] NSWSC 412 (14 September 2012).
In determining the question of costs, the Court must consider the conduct of the parties prior to the commencement of the proceeding. This includes an assessment as to whether the plaintiffs had reasonable grounds to commence the proceeding.[13] It is apparent from the correspondence referred to above that the plaintiffs were operating under the misguided assumption that the defendant was not relinquishing the position of executor, despite clear evidence to the contrary. By issuing the proceeding, the plaintiffs have caused the defendant to be engaged in litigation that was unnecessary and sought orders that could never have been made, either in the initial summons or their proposed amended summons.
[13]Dal Pont, above n 8, 285.
Despite this, the plaintiffs persisted in issuing and continuing the proceeding and now seek indemnity from the estate for their costs of an unknown quantum that will diminish the assets of the estate. They do so in circumstances where the other beneficiaries of the estate are not aware of the true state of the proceeding. Even though the assets of the estate are sizable, costs of a misconceived and unsuccessful proceeding ought not be paid out of estate assets. The plaintiffs have been unsuccessful in the proceeding and they now accept that their proceeding was misconceived.
For these reasons, I am satisfied that the justice of the case requires the plaintiffs to bear their own costs.
Accordingly, I order that the plaintiffs’ costs of and incidental to the proceeding be borne by them without indemnity from the estate of the deceased.
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