Richardson v Johnson
[2018] VSC 85
•8 March 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
COSTS COURT
&
TRUSTS, EQUITY AND PROBATE LIST
S CI 2015 03300
S CI 2017 00377
IN THE MATTER of Section 3.4.38 of the Legal Profession Act 2004 (Vic)
BETWEEN
| RHONDA RICHARDSON AND OTHERS (according to the attached schedule) | Plaintiffs |
| v | |
| PETER W JOHNSON | Defendant |
- and -
IN THE MATTER of an application under Section 34 of the Administration and Probate Act 1958 (Vic)
BETWEEN
| RHONDA RICHARDSON AND OTHERS (according to the attached schedule) | Plaintiffs |
| v | |
| KERRY OLSEN (as Legal Personal Representative of the Estate of the late DOROTHY IRENE EDWARDS) | Second Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 24 October 2017 |
DATE OF JUDGMENT: | 8 March 2018 |
CASE MAY BE CITED AS: | Richardson & ors v Johnson & ors |
MEDIUM NEUTRAL CITATION: | [2018] VSC 85 |
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WILLS AND ESTATES – Application by beneficiaries under s 34 of the Administration and Probate Act 1958 (Vic) for removal of executors – Failure of executors to respond to beneficiaries’ requests for information concerning the administration of estate – Whether executors are required to account to beneficiaries in relation to administration of estate, including where hostility exists between executors and beneficiaries – Czapp v Cassar and Caldwell [2015] VSC 111, referred to – Denby v Power & Anor [2016] VSC 535, referred to – Re Anthony; Rogan v Rogan [2017] VSC 668, referred to – Letterstedt v Broers (1884) 9 App Case 371, referred to – Solicitor’s fees covered costs incurred from administration of the estate in addition to his time and expenses in dealing with beneficiaries’ complaints against him to the Legal Services Commissioner and in defending summons for taxation of costs – Whether executors improperly incurred costs by agreeing to the charging of excessive solicitors’ fees for the estate’s administration, with effect of eroding estate’s funds – Executors breached duty to beneficiaries – Executors removed.
COSTS – Application by beneficiaries for taxation with respect to bills rendered to deceased estate by solicitor for the estate – Whether beneficiaries have standing – Whether beneficiaries are out of time to bring proceedings – Whether beneficiaries meet definition of a ‘third party payer’ under s 3.4.2A of the Legal Profession Act 2004 (Vic) - Hamilton v Russell Kennedy Pty Ltd (a firm) (‘Hamilton’) [2012] VSC 176, referred to - Amos v Ian K Fry & Company [2010] QCA 131, referred to – Legal Services Commissioner v Wright [2010] QCA 321, referred to – Legal Profession Act 2004 (Vic), s 3.4.2A and 3.4.38(6) – Beneficiaries had no standing to issue proceeding – Whether proceeding brought out of time – Whether extension of time would be allowed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Buchanan | Callea Pearce |
| For the Defendant | Mr B Gillies | Peter W Johnson |
HER HONOUR:
There are two proceedings before me, each concerning an underlying dispute with respect to the administration of a deceased estate. The first in time, issued on 26 June 2015, is a summons for taxation with respect to bills rendered to the estate of Mrs Dorothy Irene Edwards (‘estate’) by Mr Peter Johnson, the solicitor for the estate. The second proceeding was issued on 6 February 2017, seeking the removal of the executors of the estate pursuant to s 34 of the Administration and Probate Act 1958 (Vic) (‘Act’).
The plaintiffs in both proceedings are siblings, and are four of the six beneficiaries of the estate. Another sibling and beneficiary, Mrs Lorraine Olsen, who died in March 2017, was, along with her husband, Mr Kerry Olsen, an executor of the estate. Another sibling and beneficiary, Ms Janice Spry, has played no part in these proceedings.
If it were not for the disputation between the parties concerning the administration of the estate, the administration of the estate would have been a relatively simple affair. The estate was constituted of the deceased’s home in Yarraville (‘Yarraville property’), and some cash at bank, with a total value of approximately $750,000. Mrs Edwards’ will provided that, after leaving a separate legacy of $7,000 to Mrs Olsen, the balance of the estate be divided equally between her six children. As such, one would not ordinarily expect the estate to incur approximately $75,000 in legal costs, and generate two Supreme Court proceedings, given that no challenge was made to the will of the deceased, nor were any claims made against the estate.
The proceedings not only arise out of the same facts and circumstances, but also, the outcome of the second proceeding, being the proceeding to remove the executors (‘probate proceeding’), may well have a practical impact upon the outcome of the first proceeding (‘taxation proceeding’). The matters for determination by me in the taxation proceeding are the following questions:[1]
[1]Orders made by McMillan J on 26 May 2017.
(a) whether the plaintiffs have standing in the taxation proceeding;
(b) whether the plaintiffs are out of time to bring the taxation proceeding; and
(c) if the application is out of time, whether or not it is just and fair for the application to be dealt with out of time in accordance with s 3.4.38(6) of the Legal Profession Act 2004 (Vic) (‘LPA’).
If I were to grant the relief sought by the plaintiffs in the probate proceeding, that is, that the surviving executor, Mr Olsen, be replaced by the second and thirdnamed plaintiffs, the question of standing falls away, as there can be no doubt that an executor of an estate has standing to tax the costs of the solicitor for the estate. Further, a substantial criticism directed at the executors is that they have permitted, without apparent protest, the solicitor for the estate, Mr Johnson, to charge legal fees for, and recover from the funds of the estate, costs and expenses incurred not directly related to the administration of the estate, but representing his time and expenses in dealing with complaints made by the plaintiffs against him to the office of the Legal Services Commissioner (‘Legal Services Commissioner’), and in defending the taxation proceeding, thus diminishing the funds available for distribution amongst the beneficiaries. Accordingly, if Mr Olsen, who is said to have acquiesced in Mr Johnson’s conduct, was removed as the executor of the estate a new executor or executors could take action to recoup those funds from Mr Johnson, if indeed he was not entitled to charge those costs to the estate.
Whether a new executor would or should take such action is another matter. The funds in the estate have been exhausted. While in the past some queries have arisen with respect to whether all of the funds in the estate had been accounted for, it now appears that the only outstanding issue is the legal fees paid by the estate to Mr Johnson. Even if these are excessive, there can be no doubt that Mr Johnson was entitled to charge reasonable fees for the administration of the estate and the conveyance of the Yarraville property, including at least some amount for dealing with enquiries from beneficiaries. Even if Mr Johnson’s fees were reduced by, say, two-thirds, given there are five living beneficiaries of the estate, the financial return to each beneficiary would be quite modest, perhaps $10,000 at most, and could only be recoverable after a taxation of costs and/or some other recovery action against Mr Johnson. Such an outcome could be considered to be barely proportionate to the cost and effort expended by the parties to date, let alone what might be spent in the future.
Prior to turning to the issues in the proceedings, I shall in the following paragraphs provide a brief outline of the factual background to the dispute.
Mrs Edwards died on 3 February 2013. Probate of her will dated 2 April 1985 was granted to the executors on 3 April 2013. Mr Edwards first contacted Mr Johnson in April 2013 seeking reimbursement of some expenses associated with his mother’s funeral and interment, which were paid to him. He deposed, in an affidavit sworn on 16 July 2015 in the taxation proceeding, that in or around June 2013 he tried to obtain information from Mrs Olsen concerning the sale of his mother’s home and the disposition of her personal belongings. He said that owing to Mrs Olsen’s refusal to provide any information, a dispute arose between Mrs Olsen on the one hand, and him and the other plaintiffs on the other hand.
Mr Edwards engaged solicitors to act on behalf of the plaintiffs in August 2013, after Mr Johnson refused to speak to him when he attended his office. His solicitors, Tehan George & Co (‘Tehan George’) wrote to Mr Johnson on a number of occasions in late 2013 and early 2014, receiving no response. On 19 March 2014, Tehan George made a complaint to the Legal Services Commissioner against Mr Johnson on behalf of Mr Edwards. On 3 May 2014, Mr Johnson responded to the Legal Services Commissioner, as follows (omitting formal parts):
The position with this matter is that there is a great deal of animosity between one of the Executors and the beneficiary represented by Tehan George & Co. They are siblings and intensely dislike one another.
My clients have not encouraged me to respond to the correspondence from Tehan George & Co.
In any event the Estate is ready to distribute. However due to certain matters raised within the family and apparently emanating the person represented by Tehan George & Co my clients require a release to be signed by all beneficiaries before distributing the Estate.
The documents have been prepared and I will send same to all of the residuary beneficiaries during the course of next week. I will send you a copy of the letter and document I send to Tehan, George & Co.
I will keep you advised in relation to these matters.
The plaintiffs refused to sign the Deed of Release, in May 2014 or at any other time. Following further correspondence between Mr Johnson and the Legal Services Commissioner’s office, Mr Johnson provided the plaintiffs with a trust account statement for the estate on or about 15 September 2014.
On 19 September 2014, Tehan George wrote to the Legal Services Commissioner, stating as follows:
We note that we have no way of knowing how much legal work was undertaken in the administration of this estate but note his legal costs appear to total $36,500.
We have sought instructions from our client as to whether or not he wishes to question those costs.
On 26 September 2014, Tehan George wrote to Mr Johnson, copying in the Legal Services Commissioner, stating, in summary, as follows:
(a) his clients were not satisfied with the trust account statement provided on 15 September 2014, and request that a statement of income and expenditure for the estate be provided;
(b) Tehan George acts on behalf of all of the plaintiffs, not just Mr Edwards;
(c) his clients required answers concerning:
(i) whether a sworn valuation was obtained for the Yarraville property;
(ii) the sale price of the Yarraville property; and
(iii) what happened to the goods in the Yarraville property;
(d) the plaintiffs would not sign any release or indemnity and were considering their options with respect to action against the executors and ‘perhaps your firm’; and
(e) the plaintiffs required an itemised account for the $36,000 of costs charged by Mr Johnson to the estate.
On 13 October 2014, Mr Johnson sent to Tehan George a cheque for $109,000 as a partial distribution to Mr Edwards. Mr Johnson did not otherwise respond to the queries raised in Tehan George’s letter of 26 September 2014.
Despite follow‑up letters being sent by Tehan George to Mr Johnson on 21 October 2014 and 12 November 2014, Mr Johnson did not respond to the queries raised in Tehan George’s letter of 26 September 2014.
On 23 February 2015, the Legal Services Commissioner wrote to Tehan George, as follows:
Your complaint concerns a lack of communication from the practitioner – in his role as a solicitor acting for the executors of the Estate of Dorothy Irene Edwards – regarding the administration of the Estate. You also complain that the costs charged by the practitioner totalling $36,826.52 as detailed in his Trust Account Statement dated 15 September 2014 are excessive.
As you are already aware, the matters you complain of are matters that I do not have the power to investigate. Your complaint was handled for some by Mr Pakula of this office, with a view to informally resolving it. However, as a resolution between the parties could not be reached, I must now dismiss the complaint under section 4.2.10(1)(e) of the Act.
I repeat that the reasons for my decision are as follows:
1.The issues raised in your complaint relate [to] the actions of the executors, rather than the practitioner acting in his capacity as a lawyer. The solicitor for an Estate can only provide information to the beneficiaries if given permission by the executors. If an executor is not handling the Estate in a timely and appropriate manner this is a matter that needs to be referred to the Supreme Court in its role of supervising the conduct of executors and trustees.
2.As a beneficiary, you do have the right to dispute the practitioner’s legal costs under the Act; however, as the disputed costs exceed $25,000, this office is unable to deal with this part of your complaint as a civil dispute. You may wish to raise your dispute as to costs with the Costs Court, which is a division of the Supreme Court, as it can deal with costs disputes where the costs exceed $25,000.[2]
Although I am dismissing your complaint, I confirm that I will be suggesting to the practitioner that he encourage his clients (the executors) to communicate regularly with the beneficiaries, as is best practice for an executor.
[2]The executors dispute the accuracy of the statement in paragraph numbered 2 of this letter.
In late March 2015, the plaintiffs engaged their current solicitors, Callea Pearce, to provide advice regarding the legal costs charged by Mr Johnson to the estate. Once the necessary formalities were finalised to enable Callea Pearce to act, on 23 April 2015 Callea Pearce wrote to Mr Johnson seeking, among other things, copies of itemised bills, and, citing an apparent discrepancy in the trust account statement of $6,172.32, a copy of the sale file for the Yarraville property. No response was received to this letter (which also foreshadowed the issue of a summons for taxation in this Court), or a follow up letter sent on 22 May 2015. The taxation proceeding was issued on 26 June 2015.
In the taxation proceeding, the plaintiffs sought to tax the bills rendered to the estate as referred to in the trust account statement provided by Mr Johnson, and
any other bill of costs dated and served by the respondent in the matters of the estate (sic) Dorothy Irene Edwards, Deceased or the sale of 89 Severn Street Yarraville and leave to file out of time.
On 10 August 2015, Mr Johnson wrote to Callea Pearce enclosing invoices rendered by him to the estate up until 31 October 2013. On the following day, Callea Pearce wrote to Mr Johnson, requesting that:
(a) Mr Johnson confirm that copies of all invoices rendered by him to the estate had been provided;
(b) Mr Johnson account for the sum of $24,681.69;
(c) Mr Johnson provide details of all payments made to him by the estate; and
(d) Mr Johnson provide a current trust account statement for the estate.
On 18 August 2015, Gourlay JR made the following orders:
Any affidavit the Respondent seeks to rely upon in relation to the question of standing and whether the proceeding is out of time, including all invoices rendered and details of any payments made and from what source, be filed and served by 1 September 2015.
On 22 October 2015, Mr Johnson filed and served an affidavit in the taxation proceeding. He deposed, in summary, as follows:
(a) none of the plaintiffs have ever been a client of his firm, and none of them are ‘third party payers’;
(b) he had located a further bill dated 6 March 2014;
(c) his clients were the executors of the estate who ‘have been and remain satisfied with the works performed and costs charged’;
(d) each of the accounts rendered by him to the estate had been paid from the estate’s trust account, as instructed by the executors;
(e) he is under no obligation to provide itemised bills to the plaintiffs;
(f) the discrepancy of $6,172.32 identified by the plaintiffs represented the adjustments made at the settlement of the sale of the Yarraville property; and
(g) he deposed as follows:
… I say that not only is there no good reason for the application to be made, there is no standing for the application to be made and the application is an abuse of process.
On or about 20 November 2015, consent orders were made in the taxation proceeding adjourning the taxation proceeding for approximately twelve months, to 15 November 2016. The reason for such a lengthy adjournment is not evident from the file, but it was said from the bar table that the adjournment was agreed to facilitate settlement discussions between the parties. The matter was further adjourned to 13 December 2016 and, subsequently, 7 February 2017. On 3 March 2017, McMillan J ordered that the taxation proceeding be listed for hearing with the probate proceeding, which had been issued on 6 February 2017.
Notwithstanding the lengthy adjournment of the taxation proceeding, the parties continued to correspond during the course of late 2015 and throughout 2016. On 2 December 2015, Callea Pearce wrote to Mr Johnson, in summary, as follows:
(a) the plaintiffs were concerned that the executors had not acted in accordance with their duties: in particular, a ‘substantial’ amount of estate funds remained unaccounted for, and the legal costs were excessive;
(b) the plaintiffs were unable to account for $21,024.19;
(c) the plaintiffs requested that the executors provide a full account of the estate in accordance with the form prescribed by this Court, along with:
(iv)a statement of assets and liabilities of the estate;
(v) a trust account statement for the estate;
(vi)itemised bills for all legal costs incurred by the estate; and
(vii) any costs agreement and disclosure statement signed by the executors; and
(d) the plaintiffs put the executors on notice that, failing provision of the above information, the plaintiffs would make an application to the Court to compel provision of these documents.
On 21 December 2015, Callea Pearce wrote to the Registrar of Probates enclosing a copy of their letter to Mr Johnson dated 2 December 2015, and noting that they had not received a response. This letter referred to the plaintiffs’ concerns that the estate had not been administered correctly and/or in the best interests of the beneficiaries, and requested that the Court require the executors to provide to the Court an inventory of the estate and an account of the estate.
On 8 March 2016, the Registrar of Probates wrote to the executors requiring the executors file ‘a true and just account, verified by affidavit, of the administration of the estate of the deceased.’ This letter may not have come to the attention of the executors or Mr Johnson until on or after 28 April 2016. The executors did not comply with this request, and there was no further correspondence between the parties (save for the making of consent orders adjourning the taxation proceeding) until the plaintiffs issued the probate proceeding on 6 February 2017.
The application for the removal of the executors in the probate proceeding was supported by an affidavit sworn by Mr Edwards on 1 December 2016. Mr Edwards deposed, in summary, as follows:
(a) he deposed to the history of dealings between the plaintiffs’ solicitors, Mr Johnson, and the Legal Services Commissioner since 2013;
(b) he deposed to the amount of the legal fees charged by Mr Johnson to the estate, being $46,216.92, up to and including a bill issued on 6 March 2014;
(c) the only major assets of the estate were the Yarraville property and a bank account. He was not aware of any circumstances that would justify the legal fees incurred by the estate, which he believed to be ‘grossly excessive and unwarranted’;
(d) he deposed:
in failing to question and limit the legal fees of the Estate, I believe that the executors have failed in their duties as executors;
(e) he had not received any further distribution from the estate, two years after the initial distribution was made;
(f) approximately $21,024.19 of the estate remains unaccounted for, despite requests being made for an accounting from Mr Johnson;
(g) the executors had failed to file an administration account, despite requests to do so from the solicitors for the plaintiffs and the Registrar of Probate; and
(h) he deposed as follows:
Rhonda, Beryl, Raelene and I have attempted to obtain information from the executors regarding the Estate of my late mother, however we have been unable to obtain any information regarding the Estate from the executors.
I believe the executors have failed in their duties by not acting in the best interests of the beneficiaries and have failed to distribute the Estate in full in a [sic] timely manner.
I believe the executors have failed in their duties and have caused the Estate to be diminished by allowing excessive and unwarranted legal costs.
The executors have failed in their duties by not complying with the direction of the Registrar of Probates and did not file an administration account as requested.
I wish to be appointed as the executor of the Estate to ensure that the Estate is distributed in a timely manner and that the Estate is administered in the best interests of the beneficiaries.
Following orders made by McMillan J on 15 March 2017, Mr Olsen[3] swore an affidavit annexing an administration account dated 24 May 2017. The administration account shows that the estate has paid legal fees of $75,069.04, and its funds have now been exhausted. In her affidavit sworn on 13 September 2017, the secondnamed plaintiff, Ms Beryl Johnson, noted that the administration account makes no reference to payment of a bill rendered to the estate on 10 August 2015.
[3]Mrs Olsen having died on 8 March 2017.
The following additional affidavits were sworn in the lead up to the hearing of the applications on 23 October 2017:
(a) an affidavit sworn by Mr Olsen on 13 October 2017 in the taxation proceeding;
(b) an affidavit sworn by Mr Johnson on 16 October 2017 in the taxation proceeding; and
(c) an affidavit sworn by Mr Johnson on 20 October 2017 in the probate proceeding.
In his affidavit, Mr Olsen deposed as to the reasons why he believed that he and his late wife were appointed as executors. He deposed further as follows:
I am capable of making decisions in relation to estate matters even though I am physically disabled and unable to attend the hearing.
In his affidavit of 16 October 2017, Mr Johnson deposed, in summary, as follows:
(a) the estate was managed by the executors in a ‘proper and timely manner’;
(b) the executors had refrained from securing an order for executors’ commission;
(c) the estate was substantially distributed in October 2014, save for an amount retained on the instructions of the executor on account of anticipated costs and disbursements, as it was expected that there would be ongoing disputes with the beneficiaries;
(d) since the estate funds were exhausted in March 2017, Mr Olsen has been responsible for the ongoing legal costs;
(e) the complaints made by the plaintiffs to the Legal Services Commissioner and the issue by the plaintiffs of the taxation proceeding added to the costs of the administration of the estate;
(f) he deposed as to the contents of a letter he wrote to the solicitors for the plaintiffs in August 2015, challenging the standing of the plaintiffs to bring the taxation proceeding;
(g) he deposed as follows:
I believe the costs in this matter were reasonable in the circumstances. Taking into account the work involved included responding to complaints made by the beneficiaries and the litigation involved. There are no funds left in the estate to pay costs and Kerry Olsen will be paying the cost out [of] his own funds.
The executors at no time objected to the costs or made any complaints about same and accepted the costs as reasonable;
and
(h) in February 2017, Mrs Olsen expressed her concerns to him about the adverse effect that the management of the estate and the conduct of the plaintiffs was having on her physical and psychological health. She died the following month.
On 20 October 2017, Mr Johnson swore a further affidavit in response to the allegations made by Mr Edwards in his affidavit sworn on 1 December 2016 in the probate proceeding. In his affidavit, Mr Johnson deposed that Mrs Olsen had told him Mr Edwards was causing trouble for her, and she did not want Mr Johnson to communicate with him or respond to him. He deposed:
I disagree that the executors have failed in their duty to administer the estate correctly. I believe at all times they had administered the estate directly but were harassed by John Edwards of whom Lorraine Olsen was in fear of.
Mr Johnson deposed as to what transpired when the Yarraville property was sold. He deposed again that he was instructed not to respond to the correspondence from Tehan George. He deposed further as to his dealings with the Legal Services Commissioner and Tehan George, and the partial distribution of the estate in October 2014.
He deposed as follows:
… I agree that no further distribution has been made … quite simply because all the remaining funds in the Estate have been expended dealing with the Applications to the Costs Court and the further issues arising out of John Edward’s campaign.
Mr Johnson disagreed that the sum of $24,681.69 remained unaccounted for. He deposed that the estate funds were expended in legal fees and dealing with the complaints to the Legal Services Commissioner, along with the ongoing interventions by Mr Edwards. He attributed the delay in the filing of the administration account in 2017 to Mrs Olsen’s ill‑health and subsequent death.
Finally, Mr Johnson deposed as follows:
… the executors were in fear of the Plaintiffs as there was an intense and mutual dislike of each other, unfortunately, which hindered the administration of the estate.
There are no further moneys left in the Estate. So, appointing John Edwards as the executor of the Estate to distribute the Estate would be futile.
On the morning of the hearing of the applications on 24 October 2017, Mr Johnson produced a number of bills rendered by him to the estate pursuant to a Notice to Produce filed in the probate proceeding dated 14 September 2017. These documents included invoices rendered since March 2014 (the date of the latest bill served upon the plaintiffs by Mr Johnson in August 2015), including invoices rendered on 26 March 2015, 31 October 2015, 20 October 2015, 16 December 2016, 17 February 2017, and 31 March 2017. These documents also included fee slips rendered by counsel for appearances on 18 August 2015 and 3 March 2017, the former of which must have been for a hearing in the taxation proceeding, and the latter for a hearing in the probate proceeding.
Notwithstanding the disputation evidenced by the correspondence above, and the issue of these two proceedings, there are no factual disputes between the parties of any great significance. Rather, the dispute concerns the respective rights and obligations of the parties, and, in particular, the appropriateness of the conduct of the executors and Mr Johnson in their dealings with the plaintiffs and the use of the funds of the estate, and the entitlement of the plaintiffs to question and challenge the conduct and decisions of the executors and Mr Johnson. Taking the probate proceeding first, the following issues arise:
(a) whether the executors were required to account to the plaintiffs (being four out of the six beneficiaries of the estate) and otherwise keep the plaintiffs informed generally concerning the administration of the estate;
(b) whether the executors were in breach of their duties as executors in agreeing to or acquiescing in the charging of excessive fees by Mr Johnson for the administration of the estate (if they are in fact excessive), and, in particular, allowing Mr Johnson to charge the estate for the costs and disbursements incurred by him in responding to the complaints made against him by the plaintiffs to the Legal Services Commissioner, and in defending the taxation proceeding; and
(c) if the executors are found to have misconducted themselves, what consequences flow from that?
Counsel for the plaintiffs submitted that Mr Olsen ought to be removed as executor and replaced by Mr Edwards and Ms Johnson on the basis that:
(a) he has failed to properly account to the beneficiaries;
(b) he has failed to preserve the assets of the estate; and
(c) he is either unwilling or unable to perform his duties as executor, in particular, the tasks necessary to remedy the past defaults of the executors.
Counsel for the plaintiffs was particularly critical of the executors’ conduct in allowing Mr Johnson to charge the estate some $75,069.04 in legal costs and disbursements (including barrister’s fees), nearly half of which was charged after the Yarraville property was sold and a partial distribution made to the beneficiaries. Counsel submitted that not only has Mr Olsen failed to take any steps to query or recover these charges, he has also supported Mr Johnson’s position in the taxation proceeding. Counsel submitted that the use of estate funds to fund Mr Johnson’s dealings with the Legal Services Commissioner and his defence of the taxation proceeding amounted to a misapplication of trust funds. Further, it is not clear from the evidence whether these costs were paid on the instructions of or with the authorisation of the executors.
Counsel for Mr Olsen submitted that there was nothing unusual about the fees that have been charged, given the complaints made to and communications with the Legal Services Commissioner, and the issue of the taxation proceeding. There has been no relevant delay in the administration of the estate: the estate was ready for distribution in September 2014. Any further delay and costs was as a result of the ‘vexatious and misconceived’ complaints and threats of Mr Edwards. Counsel for Mr Olsen submitted:
The Application should be dismissed. The Estate has been fully distributed. There is nothing left in the Estate. It would be fruitless to allow [Mr Edwards] to pursue his vendetta against Mr Johnson.
Counsel for Mr Olsen also criticised the plaintiffs for seeking information through solicitors, rather than dealing directly with the executors. He noted that Ms Richardson (the firstnamed plaintiff) had deposed that Mrs Olsen told her of the sale price of the Yarraville property, and other information concerning the affairs of the estate would have been available from the Court probate file.
Finally, counsel for Mr Olsen submitted that there was no breach of duty on the executor’s part in paying for the time spent by Mr Johnson in dealing with the plaintiffs’ complaints to the Legal Services Commissioner. Mr Johnson was acting upon the instructions of the executors, and was entitled to be indemnified by the estate. There is no evidence to suggest that the fees charged by Mr Johnson were excessive for the amount of work done by him.
In my view, the executors have acted unreasonably, discourteously, and indeed, as it has turned out, imprudently in failing to respond to the queries of the plaintiffs and their legal representatives concerning the administration of the estate. The administration of the estate was, or at least should have been, a simple affair, such that the exercise of responding to the plaintiffs’ queries should have been equally straightforward. It is apparent from the evidence that the executors’ reluctance to respond to the beneficiaries’ queries was at least partly motivated by what was perceived to be interfering and threatening conduct on the part of Mr Edwards. It is not necessary or possible to assess the veracity of any claims of threatening conduct here, save to say that any concerns in that regard should have been ameliorated by Mr Edwards’ engagement of solicitors to act on his behalf in or around August 2013, such that all correspondence could be conducted responsibly and at arm’s length. Further, while Mr Johnson explained to the Legal Services Commissioner that his failure to respond to Tehan George was as a result of the executors’ instructions, no such explanation was afforded to Tehan George in response to their enquiries at the time.
Further, the approach of the executors to the enquiries made by Tehan George, and later, Callea Pearce on behalf of the plaintiffs is inconsistent with the authorities concerning the obligations of executors. In Czapp v Cassar and Caldwell (‘Czapp’),[4] Hargrave J observed that the ‘executors owed a fiduciary duty to account to the [beneficiaries] about the estate.’
[4][2015] VSC 111, [39].
Section 34(1) of the Act provides as follows:
(1) Notwithstanding anything contained in any Act where an executor or administrator to whom probate or administration has been granted whether before or after the commencement of this Act or where an administrator who has been appointed under this section or any corresponding previous enactment—
(a) remains out of Victoria for more than two years;
(b)desires to be discharged from his office of executor or administrator; or
(c)after such grant or appointment refuses or is unfit to act in such office or is incapable of acting therein—
the Court upon application in accordance with the Rules of Court may order the discharge or removal of such an executor or administrator and also if the Court thinks fit the appointment of some proper person or trustee company as administrator in place of the executor or administrator so discharged or removed upon such terms and conditions as the Court thinks fit; and may make all necessary orders for vesting the estate in the new administrator and as to accounts and such order as to costs as the Court thinks fit.
The principles governing the exercise of the Court’s discretion to remove an executor pursuant to s 34(1)(c) of the Act are conveniently summarised and discussed by McMillan J in Denby v Power & Anor.[5] Her Honour referred to the decision of Ashley J in Monty Financial Services Ltd and Anor v Delmo[6] to the effect that ‘unfitness’ for the purpose of s 34(1)(c) of the Act could include misconduct or neglect of duty in the administration of an estate such as:[7]
… matters such as unwarranted delay in the administration of the estate, failure to communicate with beneficiaries, failure to account, and unreasonable delay in paying beneficiaries their entitlement … I find it impossible to accept that serious dereliction of duty as an executor does not make that person unfit to hold the office. It cannot matter whether the dereliction is born of intent, of carelessness, or incompetence. In each case the actual or potential deleterious effect upon the estate and the beneficiaries is the same.
[5][2016] VSC 535, [21]-[33].
[6][1996] 1 VR 65.
[7]Ibid 73.
The reasoning of Ashley J was endorsed by the Court of Appeal in Dimos v Skaftouros,[8] where the Court rejected the contention that ‘unfitness’ within the meaning of s 34(1)(c) of the Act was limited to cases of disqualification by reason of bankruptcy, conviction for felony, or related circumstances, and accepted that ‘unfitness’ could arise by reason of breach or neglect of duty. Relevantly for the purpose of the current application, Dodds‑Streeton AJA made the following observations:[9]
Mandie J found that whether or not all of the inquiries or matters were reasonable, the failure to reply at all fell short of the standards to be expected of an executor and solicitor. He had earlier held that ‘an executor, like a trustee, should provide a prompt and proper response to reasonable inquiries and requests for information. … Even onerous, unreasonable or antagonistic inquiries or requests should, at least in the first instance, receive some appropriate response or acknowledgement.’ His Honour’s statement of an executor’s obligations accords with relevant authority and principles. The appellant’s challenge to it must fail.
[8](2004) 9 VR 584. See also Fysh v Cook [2000] VSCA 150, [20].
[9]Ibid [61].
Further, her Honour found that an executor is not entitled to shift responsibility for any shortfalls in their conduct to a solicitor or other agent engaged to act on their behalf, stating:[10]
In Hoxha v Hoxha, Jenkinson J recognised that an executor is responsible for the inaction or conduct of a solicitor acting under instructions and authority and should, where necessary, supervise the latter effectively or engage other competent solicitors.[11]
[10]Ibid [160].
[11]Unreported, 22 September 1975 at 2.
Accordingly, an executor is not permitted, at least in the first instance, to refuse to respond to a beneficiary’s queries merely on the basis that those queries (or the beneficiary’s conduct generally) is perceived by the executor to be ‘vexatious or misconceived’. Further, an executor cannot hide behind the conduct or advice of their solicitors. In any event, in the current case, the views of the executors and Mr Johnson seem to be in complete accord.
In the recent decision of Re Anthony; Rogan v Rogan,[12] McMillan J made the following observations when considering whether an executor ought to bear the liability for costs of an application by a beneficiary to compel the executor to produce documents concerning the administration of an estate (omitting citations):[13]
[12][2017] VSC 668.
[13]Ibid [16]–[22].
The Court has long recognised that an executor owes a duty to account to the persons who are to take under a testator’s will. This duty exists both at common law, and is enshrined in statute. Essential to this duty is the requirement that an executor keep proper account and records. These records should be unambiguous, clear and distinct so as to provide accurate information to the beneficiaries sufficient to inform them as to the state of the administration. To this end, receipts, vouchers or other documentation should support each transaction.
The correspondence between the parties prior to the issue of the proceeding establishes that the plaintiff made numerous attempts to obtain information related to the administration of the estate in circumstances where there were questionable elements surrounding an undated document and its execution by the deceased during her lifetime. This document appeared to transfer a substantial sum of money from a recent settlement in the estate of Kathleen Rogan. The plaintiff was also involved in that settlement and expected that those funds would be reflected in the assets of the estate of the deceased. In those circumstances, it was reasonable for the plaintiff to query why the settlement sum did not form part of the estate of the deceased and request such information as to its whereabouts. These requests were not a fishing expedition. The defendant and his solicitors failed to provide an adequate response to the requests despite the fact that the defendant was obliged to provide this information to the plaintiff.
I reject the defendant’s submission that his failure to comply with the requests for information was due to a lack of knowledge and involvement in the deceased’s affairs throughout her lifetime. It is well established that an executor owes a number of legal and fiduciary duties to beneficiaries of the estate. Simply claiming lack of knowledge does not absolve these duties. An executor is obliged to act prudently and properly in the management of the estate as a whole and is generally assessed to the standard of an ‘ordinary prudent businessperson.’
There were many instances where the plaintiff’s reasonable requests for information went unanswered or where deadlines were not adhered to by the defendant. In particular, the failure of the defendant to provide an adequate or reasonable explanation as to why the documents, that have now been produced by order of the Court, could not have been produced prior to the commencement of the proceeding. A considerable amount of time and money would have been saved had the defendant complied with these requests when they were first made, in line with his obligations as executor of the estate of the deceased.
The defendant contended that he has endeavoured to answer the queries of the plaintiff and has responded to inquiries related to assets that do not form part of the estate. The correspondence between the parties does not support this contention. On the contrary, it suggests a failure by the defendant and his solicitors to respond adequately to the requests for information over a period of time. The affidavits that the defendant was required to make pursuant to the orders made 17 August 2017 failed to address all of the points. The defendant’s conduct exacerbated the time and costs expended in the proceeding.
The plaintiff was unable to determine whether or not those undisclosed assets were part of the estate of the deceased without the information requested by the plaintiff. The duty to account carries with it an entitlement of the beneficiaries to view the records and supporting evidence in order to monitor the proper administration of the estate. An executor should provide these documents willingly rather than reluctantly as observed by Lloyd AJ in Yates v Halliday:
It is not a sufficient answer to simply invite the plaintiffs or their representatives to sort through two boxes of documents to determine whether the estate was properly administered. It was Mr Halliday’s duty as executor and trustee to keep and produce when requested appropriate records demonstrating how the estate was administered.
In respect of a special costs order, the authorities emphasise the need for special circumstances to justify personal liability on an indemnity basis for costs. Specifically, the failure to provide accounts when requested may make the executor liable to pay the costs of proceedings instituted by the beneficiary to obtain the accounts. The plaintiff would not have incurred costs to the extent he has, had the defendant complied with his obligations as the executor of the estate. The defendant has shown a want of prudence and diligence and an absence of care and diligence that justifies a special costs order against him with no indemnity for those costs from the estate of the deceased. These unreasonably incurred costs should not be borne by the estate of the deceased. This conclusion is reinforced by the fact that the defendant has failed to provide an adequate or reasonable explanation as to why the information was not provided prior to the commencement of the proceeding. Overall, the proceeding has been wasteful of the resources of both the Court and the parties.
The above extract of her Honour’s reasons, while not specifically dealing with the question of whether an executor should be removed from office, illustrates the dim view that the Court may take of the conduct of an uncooperative executor, and the potential consequences of an executor failing to act diligently and responsibly.
As for the question of Mr Johnson’s costs, while it is not possible to ascertain, or even hazard a guess as to whether Mr Johnson’s costs of the administration of the estate and the sale of the Yarraville property are reasonable, I have considerable doubt as to whether it was appropriate for Mr Johnson to charge the estate for work done by him to respond to complaints made against him personally, or for work done to defend himself against proceedings brought against him personally, being the taxation proceeding. That such work was charged for was admitted by Mr Johnson in his evidence and in the submissions made on his behalf. More importantly for the determination of this application, the executors’ agreement with or acquiescence to the charging of those costs, which eroded the funds in the estate to the extent that they were exhausted, to the detriment of the beneficiaries, raises real question marks over their fitness to remain as executors.[14] After all, executors are required to ‘exercise the same care as an ordinary, prudent person of business would exercise in the conduct of that business were it his or her own’.[15]
[14]Notwithstanding the death of Mrs Olsen in March 2017, I refer to the executors in the plural, as the probate proceeding was issued prior to her death, and the plaintiffs’ complaints concern both executors. However, given what has transpired, the position of Mr Olsen as the remaining executor will be considered separately
[15]Czapp, [25], referring to Breen v Williams (1996) 186 CLR 71, 137 and Nolan v Collie (2003) 7 VR 287, [51]-[53].
By allowing the funds of the estate to be eroded in this way, the executors showed an almost cavalier disregard for the legitimate interests of the beneficiaries. The complaints made to the Legal Services Commissioner were triggered by the failure of Mr Johnson, according to the evidence on the instructions of the executors, to respond to the queries raised by Tehan George on behalf of the plaintiffs. The taxation proceeding was only issued after the Legal Services Commissioner declined to act, and after the plaintiffs afforded Mr Johnson a further opportunity to provide further information about the administration of the estate. However ill‑founded those queries and challenges might be (and I am not prepared to find that they were), they at least deserved the courtesy of a response. Further, given that Mr Johnson was acting on instructions, it may well have been reasonable for him to seek an indemnity for his costs from the executors: whether those costs should have been visited upon the beneficiaries is another matter.
The evidence, including the correspondence sent by Mr Johnson, indicates that the conduct of the executors, or at least Mrs Olsen, was at least partly motivated by her antagonism towards and fear of her brother, Mr Edwards. However, while that may explain the conduct, it does not excuse it. As noted above, the executors of an estate owe a fiduciary duty to the beneficiaries of an estate. It is also established law that the executors of an estate are obliged to account to the beneficiaries in respect of the administration of an estate.[16]
[16]Ibid, [39].
These duties are entrusted to the executors by the deceased, and are imposed upon them by the law. An executor is not relieved of those duties, or of the consequences of failing to perform those duties, by the fact that they hold animosity towards the beneficiaries, or any one of them. The fact that the executors might subjectively think that a beneficiary’s conduct is unreasonable does not relieve them of the obligation to carry out their duties, or respond to reasonable requests. An executor ought not let their personal prejudices cloud their judgment as to how to properly administer the affairs of an estate. Their privileges (including their right of indemnity from the assets of an estate) bring with them responsibilities. In the current case, it is quite possible that the complaint to the Legal Services Commissioner and the issue of the taxation proceeding would not have occurred had the executors instructed Mr Johnson to respond to the plaintiffs’ queries in a timely fashion.
Also of relevance to the current application is the statement of Lord Blackburn in Letterstedt v Broers:[17]
It is quite true that friction or hostility between trustees and the immediate possessor of the trust estate is not of itself a reason for the removal of the trustees. But where the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is certainly not to be disregarded.
[17](1884) 9 App Case 371, 385-389.
Here, the rather limited evidence suggests that the relevant hostility was between Mrs Olsen and the plaintiffs, in particular, Mr Edwards, and there is no evidence that this hostility is shared by Mr Olsen. However, given that Mr Olsen has continued to defend the probate proceeding, and is presumably funding Mr Johnson’s defence of the taxation proceeding, he is maintaining an adversarial position in these proceedings. Further, he is no doubt loyal to his late wife’s position, and may well share her view, as reported to Mr Johnson, that the conduct of the plaintiffs had significantly contributed to her health problems. While I cannot make any positive finding that Mr Olsen’s likely conduct as executor would be coloured by his personal views, it seems to me that there is a real, and not fanciful risk that it would be.
As noted above, counsel for the executors submitted that the application in the probate proceeding should be dismissed, given that there is nothing left in the estate. This submission has its attractions, given the initial size and current position of the estate, the resources expended by the parties to date, and the relatively limited financial return to the beneficiaries of any further action. However, as noted by the Court of Appeal in Dimos v Skaftouros & Ors,[18] in determining whether an executor of an estate ought to be removed, it is not determinative of the matter that the administration of the estate is at or close to the end. In any event, the fact that there are currently no funds in the estate is not determinative of the application. The taxation proceeding is currently extant (subject to my determination of the referred questions in the taxation proceeding), and there may well be at least arguable causes of action against the executors and/or Mr Johnson which might be pursued by a new executor. Accordingly, it is not correct to say that the appointment of fresh executors would be futile.
[18](2004) 9 VR 584, at [167].
As stated by Dixon J in Miller v Cameron,[19] the paramount consideration in determining whether to remove an executor is the welfare of the beneficiaries. In the current case, there is a prima facie argument that part of the assets of the estate have been wasted in engaging in disputes with the plaintiffs, a course of action in which both the executors and their solicitor appear to have concurred. The evidence and the submissions advanced on behalf of both Mr Olsen and Mr Johnson suggest that no action will be taken to rectify this issue, or even to evaluate whether such action would be available, and would be a commercially sound exercise to undertake. Accordingly, the grounds for the replacement of Mr Olsen as the executor of the estate have been established.
[19](1936) 54 CLR 572, 580-1.
Accordingly, given that I have determined that Mr Olsen be removed as executor, the question which remains to be considered is who should be appointed in his place. Ideally, in circumstances such as these, where there is underlying animosity between family members, there would be a potential benefit of having an experienced and impartial mind brought to bear on the outstanding disputes, and the costs and benefits of pursuing further action. However, I appreciate the costs involved in engaging someone with the appropriate qualifications and experience, and, having regard to the fact that the plaintiffs constitute four out of the five living beneficiaries, I will accede to the plaintiffs’ application that Mr Edwards and Ms Johnson be appointed as executors of the estate.
Turning now to the taxation proceeding, in summary, my conclusions in relation to the referred questions are as follows:
(a) the plaintiffs did not have standing to issue the taxation proceeding in their capacity as beneficiaries of the estate. However, given the outcome of the probate proceeding, it would be open to the new executors to apply to be substituted for the plaintiffs in the taxation proceeding pursuant to r 9.06 of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’);
(b) the plaintiffs were out of time when they issued the taxation proceeding. However, it would be open for the plaintiffs to apply to amend the summons to include the bills which came to their attention after the issue of the taxation proceeding, which would bring them within time when and if a final bill is issued to the estate by Mr Johnson; and
(c) in any event, even if the plaintiffs are out of time, and continue to be so, then I would grant an extension of time pursuant to s 3.4.38(6) of the LPA.
In relation to (a) above, the plaintiffs submitted that they were ‘third party payers’ within the meaning of the LPA. Section 3.4.2A of the LPA provides as follows:
(1) For the purposes of this Part –
(a)a person is a third party payer, in relation to a client of a law practice, if the person is not the client and –
(i)is under a legal obligation to pay all or any part of the legal costs for legal services provided to the client; or
(ii)being under that obligation, has already paid all or a part of those legal costs; and
(b)a third party payer is an associated third party payer if the legal obligation referred to in paragraph (a) is owed to the law practice, whether or not it is also owed to the client or another person; and
(c)a third party payer is a non-associated third party payer if the legal obligation referred to in paragraph (a) is owed to the client or another person but not the law practice.
(2)The legal obligation referred to in subsection (1) can arise by or under contract or legislation or otherwise.
(3)A law practice that retains another law practice on behalf of a client is not on that account a third party payer in relation to that client.
The plaintiffs submitted that, as beneficiaries of the estate, the plaintiffs had an entitlement to four-sixths of the residue of the funds in Mr Johnson’s trust account. As such, they had a proprietary interest in those funds. In his written outline of submissions, counsel for the plaintiffs submitted as follows (omitting citations):
The plaintiffs’ funds were paid to Mr Johnson. This was done by way of transfer from Mr Johnson’s trust account into his general account. This transfer could only be done pursuant to a legal obligation. Accordingly, the payment of the legal costs was, by the plaintiffs, and under a legal obligation. The plaintiffs therefore meet the definition of third party payer contained in s 3.4.2A(1)(a)(ii) of the LPA and have standing to bring this proceeding.
Further, on any view, the plaintiffs have effectively paid the legal costs. To suggest that by a technicality, they do not meet the criteria of having a ‘legal obligation’ would be an interpretation that could not have been intended. This is particularly so when the jurisdiction of the Costs Court is to be exercised with as little formality and technicality as the Supreme Court Act and Rules permit.
In his written outline of submissions in the taxation proceeding, counsel for Mr Johnson submitted that the plaintiffs appear to have issued the taxation proceeding in reliance upon a mistaken view of the law set out in the letter of the Legal Services Commissioner dated 23 February 2015, extracted at paragraph 15 above. The plaintiffs are not, and never had been, clients of Mr Johnson, and are not third party payers as defined by s 3.4.2A of the LPA, because they are not persons under a legal obligation to pay all or any part of the costs charged by Mr Johnson to the estate.
Mr Johnson relied upon the decision of Emerton J in Hamilton v Russell Kennedy Pty Ltd (a firm) (‘Hamilton’),[20] where her Honour said:[21]
I do not consider that the appellant’s interest in his mother’s estate (or in the outcome of proceedings involving his mother’s estate) as a beneficiary under her will or by reason of some amorphous obligation to protect her estate is sufficient to make him a ‘client’ for the purposes of s 3.4.32 of the Legal Profession Act.
[20][2012] VSC 176.
[21]Ibid [44].
In Hamilton, Emerton J was considering the question of whether the beneficiary had standing to seek to set aside a costs agreement, rather than seek a review of costs under s 3.4.38 of the LPA, and did not directly consider the question of whether a beneficiary of an estate might be a third party payer under s 3.4.2A of the LPA, thus enabling them to seek a review of the legal costs charged to an estate by its solicitor. However, counsel for Mr Johnson also relied upon a decision of the Queensland Court of Appeal in Amos v Ian K Fry & Company (‘Amos’),[22] where White JA said:[23]
The respondent solicitor, were he minded to do so, could not recover his costs incurred in work for the estate from the beneficiary. The decision in Equuscorp supports that conclusion.
[22][2010] QCA 131.
[23]Ibid [46].
In Legal Services Commissioner v Wright,[24] White JA cast some doubt upon the correctness, or at least the breadth, of his statement in Amos, stating:[25]
The extent to which Amos might suggest that a person liable to pay any part of a solicitor’s costs out of a fund by virtue of an order of the court was not legally liable to pay costs must be regarded as incorrect, although noting that in Amos the applicant was seeking to have the whole of the bill assessed, not that part for which he was legally liable. (emphasis added)
[24][2010] QCA 321.
[25]Ibid [7].
However, the statement of White JA above does not detract from the position that one cannot be a third party payer under s 3.4.2A of the LPA in the absence of any legal obligation on the part of that third party to pay the legal costs in question.
There is clearly no contract between the plaintiffs and Mr Johnson, and, while Mr Johnson may be able to compel payment of his bills by the executors, he has no legal entitlement to seek payment from the beneficiaries of the estate, or indeed any automatic entitlement to payment from the funds of the estate held in his trust account. While as a practical matter he has been transferring his costs from the funds held in his trust account, he has no legal entitlement to do so absent any authorisation from or agreement with the executors to do so. Accordingly, any proprietary interest of the plaintiffs in the funds in Mr Johnson’s trust account does not translate to a legal obligation on the part of the beneficiaries to pay Mr Johnson’s legal costs.
Counsel for the plaintiffs relied upon s 36(2) of the Trustee Act 1958 (Vic) and the terms of Mrs Edwards’ will to support his contention that the plaintiffs had a legal obligation to pay Mr Johnston’s costs, such that they have standing to challenge those costs under s 3.4.38 of the LPA. These submissions lack merit. Section 36(2) of the Trustee Act 1958 (Vic) merely confirms the right of a trustee to indemnity from the assets of a trust for any expenses incurred by the trustee in the performance of their duties. Further, a review of Mrs Edwards’ will does not disclose any obligation of the nature contended for by the plaintiffs. They have no legal obligation to either the executors or Mr Johnson in respect of Mr Johnson’s legal costs. Accordingly, the plaintiffs had no standing to issue the taxation proceeding by reason of them being third party payers within the meaning of s 3.4.2A of the LPA.
The absence of any standing on the part of the plaintiffs has contributed to the other procedural hurdle they face in the taxation proceeding, being the question of whether, when they issued the taxation proceeding in June 2015, they were out of time, in that the last bill expressly referred to in the summons for taxation had been issued some twenty months prior to that time. At that time, the plaintiffs did not have copies of the bills in question. The summons was drawn on the basis of the trust account statement provided by Mr Johnson in September 2014. It was only after the issue of the taxation proceeding that additional bills rendered by Mr Johnson to the estate came to the attention of the plaintiffs, after orders were made by Gourlay JR on 18 August 2015. Indeed, some bills issued in 2017 only came to the attention of the plaintiffs on the morning of the hearing.
The plaintiffs relied upon the decision of Garde J in Collection Point v Cornwalls Lawyers Pty Ltd (‘Collection Point’),[26] which provides that, if a summons for taxation is issued within twelve months of a final bill being rendered or paid, then any interim bills can be taxed alongside the final bill (being the bill issued on 31 March 2017), regardless of when they were issued. Given that the summons included a ‘catch all’ phrase intended to cover all bills rendered to the estate, and the later disclosure of other bills which were within time, no extension of time is required to tax all of the bills issued by Mr Johnson.
[26][2012] VSC 492.
Counsel for the plaintiffs submitted that:
(a) the evidence of Mr Edwards and Ms Richardson concerning the events leading up to the issue of the taxation proceeding ought be accepted. In particular, Mr Edwards had been seeking information and accounts for the estate since September 2013;
(b) upon receipt of the trust account statement in September 2014 disclosing the existence and quantum of the bills, Tehan George was instructed to seek further information about the legal costs, but no response was received;
(c) once the complaint to the Legal Services Commissioner was formally resolved in February 2015, the plaintiffs moved reasonably expeditiously to issue the summons for taxation; and
(d) there is no evidence of any prejudice to Mr Johnson which would be caused by an extension of time. In particular, the bills have been paid, so Mr Johnson is not being kept out of funds.
Counsel for Mr Johnson submitted that the rule in Collection Point[27] does not apply in the current case, because there is no evidence that there has been a final bill rendered to the estate, and, given the plaintiffs have no standing, the proceeding is an abuse of process. The plaintiffs cannot rely upon the catch all phrase ‘any other bill’, because ‘if taxing a bill of costs is to have some meaning, there should be some dispute to start with, not a general catch all to simply ask for all bills and then determine whether they should be taxed.’
[27][2012] VSC 492.
Further, the plaintiffs should not be permitted to amend their summons to include the later bills: rule 36.01(1) of the Rules is not to be utilised to correct a defect or error in a proceeding, or to change the cause of action.
I agree that, in the absence of any evidence of whether the bill issued on 31 March 2017 was the final bill to be rendered to the estate, the decision in Collection Point[28] does not assist the plaintiffs, at least unless and until a final bill is rendered to the estate. However, given the orders I propose to make concerning the appointment of new executors to the estate, one would anticipate that a final bill would be rendered in the not too distant future. Given what has transpired to date, one can safely anticipate that the new executors will terminate Mr Johnson’s retainer as the solicitor for the estate, thus triggering the issue of a final bill. Subject to the new executors applying for and obtaining leave to amend the summons for taxation to include the later bills and any final bill, the question of any extension of time will not arise, by reason of the rule in Collection Point.[29] However, if for some reason no further bill is issued by Mr Johnson, the bill issued on 31 March 2017 will be the final bill, and, provided that any application to amend is heard and determined by 31 March 2018, that bill would be within time, and the earlier bills taxable as interim bills.
[28][2012] VSC 492.
[29]Ibid.
There is a real risk that, in the current circumstances, an extension of time may be required to tax the bill of 31 March 2017 if that turns out to be the final bill rendered to the estate. Accordingly, in order to prevent the need for a further hearing on this question, I will deal with the plaintiffs’ application for an extension of time, both retrospectively and prospectively, in the following paragraphs.
Section 3.4.38(6) of the LPA provides that the Court may extend time beyond the 12 month period for review of a bill has expired if it determines ‘after having regard to the delay and the reasons for the delay, that it is just and fair for the application to be dealt with after the 12 month period’. The legal principles governing applications such as these are well settled, as set out by Emerton J in Tomasevic v Norwicki Carbone (‘Tomasevic’),[30] being:
· The length of the delay, attached to which is the nature and degree of prejudice to the lawyer in allowing time to be enlarged, compared to the prejudice to the client in denying the application to extend time;
· The reasons for the delay, specifically whether it is properly explicable;
· Whether the client was aware of the right to seek costs assessment – which now in any case comes with costs disclosure obligations – and in this context, whether or not the client was represented is a relevant consideration;
· Whether there is evidence suggesting that the bill might be excessive;
· Whether the client has paid the bill without demur; and
· The lawyer’s reasons for opposing the enlargement, it being important that, as an office of the court, the lawyer is seen to act honestly, ethically and with proper motives, not merely to prevent the assessment of a bill taking place.
[30][2015] VSC 302, [11].
The plaintiffs submitted that it would be just and fair to allow taxation of the bills because of the difficulties the plaintiffs faced in obtaining information from Mr Johnson, their ultimately unsuccessful attempt to resolve matters through their complaint to the Legal Services Commissioner, and the lack of any prejudice to Mr Johnson by reason of the delay.
Counsel for Mr Johnson submitted that no real explanation has been provided for the delay in issuing the taxation proceeding, given that the plaintiffs had legal advice from an early stage of the dispute. Further, Mr Johnson’s clients, the executors, have paid the bills without complaint.
Of course, if the plaintiffs have no standing to review the costs, granting an extension of time would be futile. However, given the orders I will make concerning the appointment of new executors to administer the estate, the question remains alive, particularly if no further bill is issued by Mr Johnson, and an extension of time is required to tax the bill of 31 March 2017, and thus the previous interim bills.
In some respects, the submissions advanced on behalf of Mr Johnson are somewhat contradictory, in that they criticise the plaintiffs for their delay in bringing a proceeding which he asserts, and I agree, they had no standing to bring. Arguably, on this analysis, the period of delay is not the period from October 2013 to June 2015, but rather should extend to the date I make orders appointing new executors.
However, to the extent that it is necessary to do so, I would grant an extension of time to the plaintiffs to tax the bills rendered by Mr Johnson to the estate. I do so having regard to the fact that the LPA contains important consumer protection provisions, and is beneficial legislation.[31] The uncontested evidence is that the plaintiffs only became aware of the existence of the bills and their quantum in September 2014, only nine months before the issue of the taxation proceeding, and were not provided with copies of the bills until 22 October 2015, Mr Johnson having been ordered by the Costs Court to produce the bills two months prior to that date. As noted above, the complete set of bills was only provided on 24 October 2017.
[31]Collection Point, [90].
Further, by reason of them not being the clients of Mr Johnson, the plaintiff did not have the benefit of the disclosure provisions of the LPA, which would have alerted them to the relevant time limits. Of course, Mr Johnson was not obliged to comply with the disclosure requirements of the LPA vis-à-vis the plaintiffs, and his position concerning the standing of the plaintiffs has been vindicated (which may have some adverse costs consequences for the plaintiffs), but it does not necessarily follow that the discretion to extend time should not be exercised in favour of the plaintiffs. Having regard to the principles enumerated by Emerton J in Tomasevic,[32] there is a reasonable explanation for any delay, particularly given the difficulties faced by the plaintiffs in obtaining information concerning Mr Johnson’s costs, there are at least some question marks about the quantum of Mr Johnson’s costs in the context of the size and complexity of the estate, and there is no evidence of any specific prejudice to Mr Johnson.
[32][2015] VSC 302.
I shall hear further from counsel on the form of orders to give effect to these reasons and the question of costs. I expect a further hearing will be required to progress the matters in accordance with these reasons.
SCHEDULE OF PARTIES
S CI 2015 03300
RHONDA RICHARDSON Firstnamed Plaintiff BERYL JOHNSON Secondnamed Plaintiff JOHN EDWARDS Thirdnamed Plaintiff RAELENE JOHNSON Fourthnamed Plaintiff - and - PETER W JOHNSON Defendant S CI 2017 00377
RHONDA RICHARDSON Firstnamed Plaintiff BERYL JOHNSON Secondnamed Plaintiff JOHN EDWARDS Thirdnamed Plaintiff RAELENE JOHNSON Fourthnamed Plaintiff - and - LORRAINE JOY OLSEN (as Legal Personal Representative of the Estate of DOROTHY IRENE EDWARDS)Firstnamed DefendantKERRY OLSEN (as Legal Representative of the Estate of DOROTHY IRENE EDWARDS) Secondnamed Defendant
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