Rigby v Tiernan
[2016] VSC 352
•24 June 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S CI 2015 02163
| LORELEI ADELE RIGBY | Plaintiff |
| v | |
| MICHAEL J TIERNAN (in his capacity as administrator of the estate of LAWRENCE VALENTINE RIGBY) | Defendant |
---
JUDGE: | McMillan J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 August 2015 |
DATE OF JUDGMENT: | 24 June 2016 |
CASE MAY BE CITED AS: | Rigby v Tiernan |
MEDIUM NEUTRAL CITATION: | [2016] VSC 352 |
---
COSTS – Where plaintiff beneficiary sought information and documents from defendant administrator of estate – Documents provided or inspected before and after proceeding issued – Trial on issue of costs only – Where plaintiff seeks costs be paid personally by the administrator – Where defendant seeks costs against the plaintiff – National Trustees Executors & Agency Company of Australasia Ltd v Barns (1941) 64 CLR 268 – Nolan v Collie (2003) 7 VR 287 – Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 – Trustee Act 1958, s 36(2) – Supreme Court (General Civil Procedure) Rules 2015, r 63.26
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J O’Bryan | Rennick & Gaynor |
| For the Defendant | Mr S R Horgan QC Mr C Möller | Best Hooper |
HER HONOUR:
Background
Lawrence Valentine Rigby deceased died in 1976. By his will dated 9 November 1970, he left a life interest in his estate to his widow and, upon her death, the residue of his estate to his two children, the plaintiff and Deirdre Rigby, in equal shares.
Probate of the deceased’s will was granted to his widow on 24 October 1977. Upon her death on 10 April 1998, the plaintiff became executor of her father’s estate, pursuant to s 17 of the Administration and Probate Act 1958. The plaintiff and her sister are the only residuary beneficiaries of the estate, and each have an absolute and fixed interest in the estate.
In April 2003, the plaintiff’s sister commenced proceedings for the removal of the plaintiff as the executor of the estate of the deceased. On 5 June 2003, Mr Robert Davey was appointed administrator of the estate. On 9 December 2011, Mr Davey was discharged as administrator of the estate and Mr Michael Tiernan (‘the defendant’) was appointed administrator of the deceased’s estate. Both Mr Davey and the defendant are solicitors.
The estate contained land in the eastern suburbs of Melbourne, some of which was compulsorily acquired by various urban land authorities. An issue in the administration of the estate was Mr Davey’s handling of a compulsory acquisition of estate land by Southern Eastern Integrated Transport Authority (‘SEITA’). At the time of Mr Davey’s appointment as administrator, the land had just become the subject of a compulsory acquisition by SEITA. The plaintiff’s company, North-Side Pastoral Pty Ltd (‘North-Side’), was leasing and overholding on the land. Mr Davey did not serve notice on North-Side to terminate the overholding thereby increasing the entitlement of North-Side to compensation paid to the estate. The SEITA claim was ultimately settled between the estate and North-Side as part of a commercial arbitration on 8 April 2009 (‘the SEITA settlement’).
The estate subsequently sued Mr Davey for his failure to request a timely advance of compensation from SEITA (‘the Davey negligence claim’). That claim was also ultimately settled by the estate.
Plaintiff’s application
By originating motion filed 4 May 2015, the plaintiff sought orders that the defendant provide or cause to be provided to the plaintiff certain documents and information as described in the following categories:
(a) paragraphs 6(a)-(f) — documents relating to the Davey negligence claim with the estate;
(b) paragraphs 6(g)-(j) — documents relating to the retainers and tax invoices of the administrator;
(c) paragraphs 6(k)-(m) — retainers and tax invoices of Best Hooper, solicitors for the estate;
(d) paragraph 7 — documents relating to the settlement of the SEITA claim; and
(e) paragraph 8 — the 2014 tax return for the estate.
The plaintiff deposed that she sought the documents and information for the purposes of her taxation obligations. She had obtained her own tax advice and the documents and information were required to enable her to account for the receipt of her share of the estate funds, as to the income and capital components, in her tax return in accordance with that advice.
The defendant did not accept that the plaintiff required the documents and information for that stated purpose, contending that the estate tax returns showed her how the estate funds were accounted to her and her sister. The defendant says the plaintiff should account for the funds paid to her on the same accounting basis in her own tax return and, if she had any queries, she should speak to the estate’s accountants.
The application was supported by affidavits of Ms Selena Clark, solicitor for the plaintiff, sworn 4 May 2015 and 31 July 2015 respectively, setting out the reasons for the plaintiff’s requests and how and when the defendant complied with the plaintiff’s requests for the documents and information.
On 22 May 2015 the first directions hearing was adjourned by consent to 19 June 2015. By letter dated 12 June 2015 to Rennick & Gaynor, the solicitors for the plaintiff, Best Hooper asserted that they has provided every document capable of being within the categories sought by the plaintiff in her originating motion. Best Hooper also wrote a further letter dated 18 June 2015 to Rennick & Gaynor.
On the adjourned directions date on 19 June 2015, the proceeding was further adjourned to 17 July 2015.
By 16 July 2015, the plaintiff had reviewed or inspected the documents provided by the defendant and was satisfied that the defendant had provided the documents or allowed inspection so that no further relief was sought in relation to the production or inspection of the trust documents.
On 17 July 2015, the defendant filed an affidavit of Mr Matthew Francke sworn 16 June 2015 (‘the Francke affidavit’) with exhibits comprising 1,325 pages. Mr Francke deposed that the affidavit was in response to the plaintiff’s claim set out in her originating motion and he then summarised the history of the estate and its administration. In written submissions, the defendant described the administration of the estate as having a long and difficult history, which informed his approach to the plaintiff’s requests for the trust documents.
With the plaintiff being satisfied by 16 July 2015 that the defendant had provided the documents or allowed inspection, the remaining issue in dispute was the costs of the proceeding.
By consent orders made on 16 July 2015, further orders were made for the filing of written submissions and the proceeding was listed for hearing on 17 August 2015.
The costs of the parties
At the hearing, the defendant estimated his costs at more than $70,000. The plaintiff did not provide an estimate for her costs.
The plaintiff seeks that the defendant personally pay the plaintiff’s costs of the proceeding on an indemnity basis, alternatively on a standard basis, and that the defendant bear his own costs personally, without recoupment from the estate.
The reasons for the plaintiff seeking these orders is that if the defendant is ordered to pay the plaintiff’s costs and if he is entitled to his own costs from the estate, the net effect would be that the plaintiff, as the beneficiary of one half of the residue of the estate, would be paying one half of the defendant’s costs and half of her own costs in circumstances where she has been successful in her claim.
The defendant opposes the plaintiff’s application and seeks orders that her application be dismissed, that the plaintiff pay the defendant’s costs, to be deducted from her share of the estate only. This order envisages that the plaintiff would bear her own costs of the proceeding.
The documents requested by the plaintiff
Paragraph 6 - documents relating to the Davey negligence claim
This group of documents relate to the settlement of the Davey negligence claim. The claim was originally commenced by the plaintiff but was ultimately taken over by the defendant as the administrator when he replaced Mr Davey.
The documents requested by the plaintiff in relation to the Davey negligence claim fall into six categories:
(a) the terms of settlement of the Davey negligence claim;
(b) the tax invoices of Best Hooper as the solicitor for the defendant for its work dealing with the claim;
(c) the tax invoices of the defendant for his work in dealing with the claim;
(d) the tax invoices of Mr Davey or Aitken Partners for his or its work done on the claim while Mr Davey was administrator;
(e) the estate’s estimate of the apportionment of the settlement sum; and
(f) any other documents relevant to the settlement that may assist the plaintiff in understanding the breakup of the settlement.
Paragraph 6(a) - the terms of settlement
In her originating motion, the plaintiff sought the terms of settlement in respect of the Davey negligence claim. The defendant’s settlement offer of the Davey negligence claim included amounts for costs and interest. The defendant settled the claim on 7 December 2012 for $100,000 and Best Hooper informed Rennick & Gaynor of this by letter dated 29 January 2013.
On 1 February 2013, Rennick & Gaynor requested the terms of settlement from Best Hooper. By letter dated 5 February 2013, Rennick & Gaynor clarified that the requested terms were for the ‘Estate dispute with Aitkens and Robert Davey’. Rennick & Gaynor made further requests of Best Hooper by letters dated 3 April 2013, 1 April 2014 and 12 May 2014.
By letter dated 12 May 2014, Best Hooper refused to provide the terms of settlement giving the following explanation:
The settlement sum was an ‘all in’ figure and was not apportioned for costs and interest.
Based on the information you have presently provided to us our client does not believe it is in the interests of the beneficiaries to provide your client with a copy of the terms of settlement. If your client provides further or more detailed reasons as to why she requires a copy of the terms of settlement, our client is happy to reconsider same.
By letter dated 1 July 2014, Rennick & Gaynor provided further reasons why the requested information was sought by the plaintiff, including that it was required for the plaintiff’s taxation purposes and that the beneficiaries were entitled to a copy of the terms of settlement.
Rennick & Gaynor made further requests of Best Hooper by letters dated 13 October 2014, 26 November 2014, 9 January 2015 and 16 January 2015. In the letter dated 9 January, Rennick & Gaynor advised Best Hooper that the plaintiff had given instructions to issue proceedings seeking orders for the production of the documents previously requested in correspondence between them.
On 12 June 2015, after the proceeding had been issued, the defendant provided the terms of settlement to the plaintiff.
Paragraph 6(b) - the tax invoices of Best Hooper
In her originating motion, the plaintiff sought Best Hooper’s tax invoices in dealing with the Davey negligence claim without redaction, redacted copies having previously been provided by Best Hooper.
The plaintiff’s first request for Best Hooper’s tax invoices was in a letter by Rennick & Gaynor dated 1 February 2013 to Best Hooper. Rennick & Gaynor made three further requests of Best Hooper for this information in its letters dated 3 April 2013, 1 April 2014 and 12 May 2014.
By letter dated 12 May 2014, Best Hooper provided a redacted copy of Best Hooper’s tax invoice to Rennick & Gaynor and said further:
As to your request for a copy of our tax invoice in this matter, a copy of the tax invoice is enclosed in a redacted form. You have stated that the tax invoice is required for taxation purposes, however we do not understand why your client would be entitled to any deduction in relation to same. Please explain the basis of your client’s assertion. The invoice has been redacted so as to avoid the disclosure of privileged and confidential information.
By letters dated 13 October 2014 and 26 November 2014, Rennick & Gaynor made two further requests of Best Hooper for the information.
On 12 June 2015, Best Hooper provided copies of the tax invoices without redaction to Rennick & Gaynor.
The defendant says that the tax invoices provided on 12 May 2014 were redacted because of confidential entries concerning disputes between the plaintiff and the defendant and the defendant was entitled to take this approach in the proper exercise of his discretion.
Paragraph 6(c) - the tax invoices of the defendant
In her originating motion, the plaintiff sought the defendant’s tax invoices in dealing with the Davey negligence claim without redaction, redacted copies having previously been provided by Best Hooper.
On 1 February 2013, Rennick & Gaynor first requested a copy of tax invoices of the defendant in dealing with the ‘claim against the Trustee’. In a letter dated 5 February 2013, it clarified that the tax invoices were for the ‘Estate dispute with Aitkens and Robert Davey’. Rennick & Gaynor also requested any other invoices ‘current in the course of that dispute’, including tax invoices from the defendant ‘for the time spent by him in dealing with the claim’.
After Rennick & Gaynor made further requests in letters dated 3 April 2013, 1 April 2014 and 12 May 2014, Best Hooper provided redacted copies of the defendant’s tax invoices on 12 May 2014.
By letters dated 13 October 2014 and 26 November 2014, Rennick & Gaynor requested Best Hooper to provide unredacted copies of these invoices.
On 12 June 2015, Best Hooper provided the unredacted tax invoices to Rennick & Gaynor.
In a letter dated 18 June 2015, Best Hooper informed Rennick & Gaynor that all reasonable information in relation to the tax invoices had been provided as follows:
6(c) All the tax invoices have been provided. Your request that Mr Tiernan review the tax invoices would require him to perform work that he is not required to, so as to produce information that is not the subject of the proceeding and has not been the subject of any previous request. Further, you make that request in circumstances when you seek, by the costs orders sought in the proceeding, to deprive him of the costs he would incur in complying with it.
By letter dated 16 July 2015, Best Hooper informed Rennick & Gaynor that the defendant has not separately broken down fees charged relating to the Davey negligence claim and that no documents existed in relation to this request.
The defendant says that prior to the issue of the proceeding, all of the defendant’s tax invoices were provided with appropriate redactions made in respect of confidential entries concerning disputes between the plaintiff and the defendant was entitled take this approach in the proper exercise of his discretion.
Paragraph 6(d) - the tax invoices of Mr Davey or Aitken Partners
The plaintiff requested the tax invoices of Mr Davey or Aitken Partners in relation to the file named ‘Administration of Dispute’ for the corresponding period in which Mr Davey dealt with the dispute.
On 24 August 2012, Rennick & Gaynor requested a copy of invoices for Mr Davey’s services prior to 30 January 2004. Rennick & Gaynor made three further requests on 1 July 2014, 13 October 2014 and 26 November 2014 for invoices of Mr Davey or Aitken Partners relating to the file named ‘Administration of Estate’ for the corresponding period in which Mr Davey dealt with the dispute relating to the claim for negligence.
By letter dated 12 June 2015, Best Hooper addressed the issue as follows:
We are not sure what you mean by ‘during the conduct of the Davey Claim’ as the Davey claim was made in 2013. Mr Davey’s invoice in taxable form relating to the whole ‘Administration of Estate’ file is attached (2003 to 2011). We note, for the sake of completeness, that your client had been provided with this invoice previously. You will recall that, at the mediation of the cost dispute with Aitken Partners, detailed submissions were tabled on her behalf, critiquing the invoice. Preparation of those submissions would not have been possible unless the invoice had been provided. We also note that, apart from the taxable invoice, Mr Davey rendered accounts directly to the beneficiaries during his period as administrator of the estate.
By letter dated 16 June 2015, Rennick & Gaynor responded and explained the request to Best Hooper in further detail:
We confirm that we have already been provided with Mr Davey’s invoice in taxable form. Our request relates to Mr Davey's time spent and the corresponding costs associated with dealing with this claim. We were seeking clarification as to whether a separate file was in fact opened by Mr Davey for dealing with this dispute. It would appear not and that you are unable to ascertain from the files obtained from Aitken Partners, the time spent by Mr Davey dealing with this claim. Please confirm.
In a letter dated 18 June 2015, Best Hooper provided further information to Rennick & Gaynor as follows:
The administrator does not have any invoices from Mr Davey or Aitken Partners relating to Mr Davey’s defence of the Estate’s claim against him. We do not know, from the material we received from Aitken Partners whether he opened a separate file for dealing with the issue. Accordingly, we are not able to ascertain what time he spent in dealing with the claim. Of course, given your client’s declared purpose in seeking the documents, that information would only be relevant if that time was charged to the Estate. However, it appears from the invoices that it was not.
The defendant says the plaintiff has never explained why he would have Mr Davey’s invoices when Mr Davey was no longer the administrator of the estate and was in conflict with the estate in the Davey negligence claim. He further relied on the fact that the plaintiff had been provided with Aitken Partners’ invoices and its bills in taxable form.
Paragraph 6(e) - an estimate of the apportionment of the settlement sum paid in the settlement and the basis for the estimate
By letter dated 3 April 2013, Rennick & Gaynor requested from Best Hooper a detailed break up of the settlement sum in the Davey negligence claim.
On 12 May 2014, this request was refused by Best Hooper, with the following explanation given:
The settlement sum was an “all-in” figure and was not apportioned for costs and interest.
By letters dated 13 October 2014 and 26 November 2014, Rennick & Gaynor made two further requests for the information. On 12 June 2015, Best Hooper repeated that the settlement was an ‘all-in’ figure.
By letter dated 18 June 2015 to Rennick & Gaynor, Best Hooper referred to the Francke affidavit served the previous day and said:
We note that there is a break down of the settlement by LPLC letter dated 4 December 2012 (“MDF 14, page 23 of 49”)
The LPLC letter referred to by Best Hooper contains the settlement offer for the claim of $100,000 that was ultimately accepted. The $100,000 was broken down into amounts that included $9,550.85 for interest for two years and $10,000 for costs.
The plaintiff says this was the first time that she became aware of the breakdown of the settlement sum and that the LPLC letter was not provided in response to the previous requests by Rennick & Gaynor and is not the document sought by the requests or the originating motion, but it is a relevant document in terms of her requests and the relief sought in her originating motion.
The defendant says the LPLC letter is a pre-settlement document that provides a breakdown of an offer and accepts that it is not the document sought by the plaintiff. He says there is no document that records a breakdown of the settlement itself. He also says that because the plaintiff originally formulated the Davey negligence claim, she knew the capital amount of the claim and that the balance of the sum was either interest or costs.
In response, the plaintiff said that she did not know at all times what made up the settlement sum. She had made some suggestions about how the claim should be put, including that a lower sum of $80,000 should not be accepted. As it turned out, the settlement sum was higher than $80,000 but it cannot be said that she knew at all times how the settlement sum was made up and she did not know about the LPLC letter until June 2015.
The defendant also says that the documents sought by the plaintiff were not provided because of ongoing issues between the parties, including that the plaintiff sought to make a claim for her costs for work done on the Davey negligence claim.
The plaintiff denies this and says that, at best, there was a discussion about whether the plaintiff would be entitled to costs, with a request from Best Hooper for an indication of the work done by her and the amount of her costs. Ultimately, the discussion ended because the plaintiff’s sister would not agree to the plaintiff being paid any costs so the plaintiff made no claim at all. There was, therefore, no reason for the defendant to claim any confidentiality in the documents and certainly not at the time the plaintiff issued this proceeding.
Paragraph 6(f) - other documents relevant to the settlement of the Davey negligence claim that may assist in understanding the breakup of the settlement
By letter dated 1 July 2014, Rennick & Gaynor requested that Best Hooper provide any other documents relevant to the settlement of the Davey negligence claim that may assist in understanding the breakup of the settlement. Rennick & Gaynor made further requests of Best Hooper on 13 October 2014 and 26 November 2014. The plaintiff says these documents were provided on 17 June 2015 with the filing of the Francke affidavit. The defendant says that no documents in this category exist.
Paragraph 6(g)-(j) - documents relating to the retainers and tax invoices of the administrator
On 22 May 2012, Rennick & Gaynor requested copies of the retainer of the defendant as administrator of the estate and any tax invoices rendered by him to the estate.
On 18 June 2012, Best Hooper informed Rennick & Gaynor that the defendant was appointed as administrator of the estate by the Court, not by retainer and that he had already forwarded to the plaintiff a copy of his invoice to the estate dated 12 April 2012.
On 3 July 2012, Rennick & Gaynor requested the disclosure statement and costs agreement of the defendant to the estate as follows:
We are aware of the appointment of Mr Tiernan by the Court. However, our review of s 3.4.9 of the Legal Profession Act 2004 requires disclosure to a client regardless of the manner in which he was appointed. As s 1.2.1 defines “client” to include “a person to whom or for whom legal services are provided”, we are of the view that Mr Tiernan is required to provide a disclosure statement and costs agreement to the Estate, regardless of a change in its legal representative, has knowledge of the full terms of the contract between it and Mr Tiernan.
…
If Mr Tiernan does not agree with our view, we are content to put the issue to Professional Standards for a ruling.
On 11 July 2012, Best Hooper noted that the defendant was acting as trustee and not in the capacity of legal adviser and that his services as trustee were not regulated by the Legal Profession Act 2004. It further advised that the defendant’s hourly rates were disclosed to the Court prior to his appointment and there was no separate contract between the defendant and the estate and none was required.
By letter dated 30 July 2012, Rennick & Gaynor asked the following:
… if matters are as you suggest:
1. How is it that Michael Tiernan Pty Ltd submits tax invoices for Mr Tiernan’s services?
2. Does Mr Tiernan hold professional indemnity insurance for the performance of his services as an administrator?
By letter dated 30 August 2012, Best Hooper responded:
We have previously stated that a costs agreement is not required because our client has been appointed by the Court, based on the hourly rates disclosed to the Court, prior to his appointment.
Notwithstanding the above, if it gives your client comfort, our client is prepared to enter into a separate cost agreement with the beneficiaries, but will only do so if your client agrees not to use this agreement as a basis for disputing costs incurred and charged prior to execution of same. Will your client agree to these terms?
On 13 October 2014, Rennick & Gaynor repeated its requests for this information with further reasons that Michael Tiernan Pty Ltd was issuing tax invoices to the estate, that a retainer should have been in place for the provision of legal services to the estate by the company and that the service provided by the defendant and the company were ongoing.
On 12 June 2015, Best Hooper reiterated that there was no retainer of the defendant as administrator of the estate. It provided invoices for the work undertaken by the administrator from June 2012 to August 2014 and a tax invoice dated 15 August 2014 for the defendant’s work as administrator of the estate undertaken for the period May 2013 to August 2014 and stated that the itemisation of the work is set out in the invoices.
By letter dated 16 June 2015, Rennick & Gaynor sought further clarification from Best Hooper as follows:
Michael Tiernan was personally appointed by the Court. The invoices rendered to Best Hooper were from Michael Tiernan Pty Ltd trading as Tiernan Mediation. We would like to know the terms on which Michael Tiernan Pty Ltd was retained and the scope of that retainer. We acknowledge receipt of the tax invoice. We acknowledge receipt of Michael Tiernan Pty Ltd tax invoices for this period albeit without itemisation. We query whether Michael Tiernan has in fact rendered any tax invoices personally.
By letter dated 18 June 2015, Best Hooper responded:
All tax invoices have been issued by Mr Tiernan’s service company. The services have been provided by Mr Tiernan personally in accordance with his appointment by the Court. There was no retainer between him and the service company.
The defendant says as he was appointed administrator by the Court, there is no retainer and the plaintiff was informed of this as early as 18 June 2012. Of the remaining documents sought by the plaintiff in this category, the defendant says the documents were provided to the plaintiff under paragraph 6(c) of the originating motion before the proceeding was issued.
The plaintiff says that her requests under this category are more general and extensive than the request under paragraph 6(c) which relates specifically to work done on the Davey negligence claim. She says that while there may be some duplication, her requests under this category are not answered by simply referring back to the documents provided in response to paragraph 6(c). The plaintiff says that she only received the relevant documents on 12 June 2015, after she issued the proceeding.
Paragraphs (k)-(m) - requests for the retainers and tax invoices of Best Hooper, solicitors for the defendant as administrator of the estate
By letter dated 22 May 2012, Rennick & Gaynor sought copies of the retainer of Best Hooper.
By letter dated 18 June 2012, Best Hooper refused to provide these documents stating that its ‘retainer and fees are matters for the trustee, not for your clients’.
By letter dated 3 July 2012, Rennick & Gaynor responded as follows:
With respect, any contract requiring the spending of monies forming part of the trust fund of the Estate are trust documents to which our client is entitled access. We refer you to Re Fairbairn, Deceased [1967] VR 633 in support of this proposition. We see your response as being uncooperative, provocative and unnecessary. The only comfort presently gained from your response is that a disclosure statement and costs agreement exists so at least this is not in issue.
Rennick & Gaynor repeated its requests again by letter dated 13 October 2014.
On 12 June 2015, Best Hooper provided the documents, save for two tax invoices numbered 136197 and 136198, which were provided on 16 July 2015, with the following explanation given by the defendants:
You have now made a request for particular invoices referred to in a Statement of Receipts and Payments provided to you as part of Mr Francke’s affidavit sworn 16 June 2015. In fact, each of those invoices was disclosed in a Statement of Receipts and Payments provided to you by letter dated 21 November 2014 (see MDF 19 at 219) except invoices 13697 and 13698 which were dated 4 February 2015. Copies of all the additional requested invoices are now enclosed.
Rennick & Gaynor also requested an itemisation of the work undertaken by Best Hooper included in the invoices since the commencement of each retainer on 13 October 2014. On 18 June 2015, Best Hooper refused, giving the following explanation:
The Best Hooper invoices are lump sum invoices that are not in taxable form. The time records are not required to be disclosed. Whilst the Legal Practices Act 1996 (s 115(1)(f)) allowed a beneficiary of a trust to apply for an assessment of a bill of costs, the Legal Profession Act 2004 contains no such provision and your client is not entitled to apply for an assessment or to seek to review the Estate’s legal costs. Your client is neither ‘the client’ nor a ‘third party payer’ within the meaning of Division 7 of Part 3.4 of the later Act. This is a matter for the Administrator of the Estate – it is not a matter for your client. This issue was discussed with your Mr Minogue at the outset of the conduct of the Aitken Partners cost dispute.
The defendant says that the Best Hooper retainers were provided following resolution of the last estate dispute, and the remaining documents, including the tax invoices, were provided pursuant to the request made in sub-paragraph 6(b) of the originating motion. Best Hooper says that the itemisation of its work is set out in the tax invoices.
The plaintiff says Best Hooper’s response to the request demonstrates that there is no itemisation of the work done by it to the defendant. She also says that Best Hooper’s responses fails to address her request as she is seeking documents in the hands of the defendant and his legal costs are relevant to the administration of the estate.
Paragraph 7 - documents relating to the settlement of the SEITA claim
The estate settled the SEITA claim on 8 April 2009. The plaintiff had the breakdown of the settlement sum of $12.8 million into market value, costs and expenses, solatium and interest. Rennick & Gaynor sought the documents relating to the settlement to enable her to calculate the interest component of the settlement, as opposed to the capital component of the settlement, for the purposes of her tax return.
In a letter to Best Hooper dated 26 November 2014, Rennick & Gaynor gave detailed reasons for wanting the requested documents and a detailed assessment of the interest calculation for the purposes of the division of capital and income for the purposes of the plaintiff completing her tax return. The letter requesting the information suggested that Mr Davey had been unclear on the calculation of interest on this payment:
…the Estate was required to deal with the tax consequences of the settlement of the claim as either a dissected or undissected payment. Our preliminary view is that compensation can be dissected. As it was Mr Davey’s responsibility to maintain the records necessary to support the income tax position of the Estate, hopefully the relevant files of Aitken Partners (now in your possession) will provide certainty on this calculation. Accordingly, we request that you review the files of Aitken Partners to confirm the quantum of interest.
If you are unable to determine the quantum of interest with certainty after a perusal of the relevant files, we should be able to calculate it but to do so we will require from you the dates of the occurrence of relevant events, details of which will be provided on request.
Rennick & Gaynor made two further requests of Best Hooper by letters dated 7 January 2015 and 9 January 2015. In the letter dated 7 January 2015, Rennick & Gaynor stated:
We refer to our letter to you of 26 November 2014, noting we have not received a response.
Our client's accountant has now completed the 2009 tax return on the advice received from our client, which includes the 900,000 as interest income as part of a dissection of the monies received from SEITA. Accordingly, we request your prompt response to our letter.
In the letter dated 9 January 2015, Rennick & Gaynor noted the plaintiff’s multiple requests of Best Hooper for documents and advised that they had been instructed to issue proceedings to seek the production of the documents.
By letter dated 14 January 2015 to Rennick & Gaynor, Best Hooper responded by requesting that the plaintiff’s accountant correspond directly with the estate’s accountant on this issue:
We note your advice that your client is only now filing returns for the 2008-2009 financial year. You assert that your client has received advice that part of the settlement proceeds received during the 2008-2009 financial year is income and ought to have been recorded as such in the Estate’s return. This has been put as a bald assertion. You have not provided us with copies of any documents or advices in relation to same.
We have previously suggested that the questions raised in your correspondence may be misguided and it may be preferable for your client’s accountant to communicate directly with the estate’s accountant. You did not accept that proposal and have not identified your client’s accountant.
In the circumstances, we are unable to progress your queries until the estate’s accountant returns from leave on 29 January 2015.
On 12 June 2015, Best Hooper provided the plaintiff with copies of the estate’s tax returns and noted:
All returns have been prepared on the basis that the SEITA settlement proceeds are capital in nature.
Best Hooper reiterated this position in a letter of 18 June 2015 to Rennick & Gaynor, who responded in a letter of the same day as follows:
We have still not been provided with the requested information as set out in our letter of 26 November 2014. Regardless, our client will accept that all documents within this category have been provided and nothing further is required on the condition that your firm gives an undertaking it will provide Aitken Partners’ complete SEITA file to our office within 7 days of us notifying your firm that our client is require[d] to produce this documentation to the ATO.
Best Hooper ultimately agreed to the plaintiff’s request on 16 July 2015, but noted that it believed it was a novel request:
You have been aware of the breakdown of the SEITA settlement since 8 April 2009… you have otherwise been told that there are no trust records which contain a breakdown of the SEITA settlement. By your letter of 18 June 2015 you asked for an undertaking that the previous trustee’s SEITA file (or his solicitor’s SEITA file) be produced if requested at some future time. For obvious reasons an undertaking was refused. You now seek by your letter of 15 July 2015 that the trustee produce the SEITA file. We are happy to make reasonable arrangements for you to inspect the file. We note that this was not a document or class of documents sought in the originating motion.
The defendant says that Rennick & Gaynor confirmed the settlement breakdown for the SEITA claim in its letter sent to the solicitors for the former administrator on 13 April 2009, but incorrectly dated 16 March 2009. The settlement breakdown between capital interest and costs is shown in the letter and is therefore known to the plaintiff.
The defendant also says that he provided all of the estate’s tax returns to the plaintiff and that all of the returns were prepared on the basis that the SEITA settlement proceeds were capital in nature and that the documents pertaining to the tax treatment of the SEITA settlement fall within the documents provided to the plaintiff.
The plaintiff does not dispute that she had the breakdown of the SEITA settlement sum. Nor does she dispute that her detailed reasons for seeking the requested documents were provided in a letter from Rennick & Gaynor dated 26 November 2014 and thereafter that these reasons went beyond the breakdown provided by the defendant. The response from Best Hooper that she should speak to the estate’s accountant was not responsive to her request. The plaintiff continued to seek the requested information from Best Hooper. Ultimately, after the proceeding was issued, the plaintiff was able to inspect the file to obtain the information needed to enable her to determine the correlation between income and capital with the computation of the settlement sum.
Paragraph 8 - the 2014 tax return of the estate
On 7 January 2015, Rennick & Gaynor requested the estate tax return for the 2014 financial year. By letter dated 14 January 2015, Best Hooper noted that the accountant for the estate was away and the tax return had not yet been prepared. After a follow up request from the plaintiff on 27 April 2015, the estate provided the 2014 tax return by email on 15 May 2015.
The plaintiff’s submissions
The plaintiff submits that the information and documents sought by the plaintiff are documents relating to trust property or documents that relate to the administration of the trust. The plaintiff relies on her right as a beneficiary with an absolute and fixed interest in the estate to be provided documents and information from the trustee in relation to the estate and its administration.
The plaintiff submits that the obligation of the defendant to provide the information and documents was clear, referring to Fast v Rockman:
The other principle of relevance in this appeal is the right of beneficiaries of a trust to seek from the trustee accurate information as to the state of the trust. That principle has been stated in the following terms:
If a beneficiary requests it, a trustee is in general obliged to provide documents and information to the beneficiary, at his cost, in relation to the trust property and to provide an accounting in respect of the administration of it.[1]
[1][2015] VSCA 61 (15 April 2015) [44] (Warren CJ, Santamaria JA and Ginnane AJA) citing Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 431(Mahoney JA), cf Re Fairbairn [1967] VR 633, 638.
The plaintiff submits that the defendant should have provided the information and documents sought by the plaintiff and the limits to the right of a beneficiary to disclosure of information and documents in relation to the trusts referred to by Mahoney JA in Hartigan Nominees[2] are not applicable in the context of this proceeding. There is nothing confidential in what the plaintiff has sought and the defendant has not said what it is that is confidential. This would have been a simple task in relation to the redacted invoices. The plaintiff referred to the defendant’s reliance on the decision of Rouse v IOOF Australia Trustees Limited[3] and noted the different factual circumstances of that case to this case, with Rouse concerning an investment in a managed investment scheme for tree plantation run as a commercial enterprise whereas the plaintiff in this proceeding has an absolute fixed interest in the estate.
[2](1992) 29 NSWLR 405.
[3](1999) 73 SASR 484.
The plaintiff submits that although the defendant ultimately provided the information and documents to her before the trial date, the long history of requests for the information and documents went as far back as March 2012. This period of time was unreasonable given the obligation of the defendant to provide the requested information and documents and that they were only provided after the proceeding was issued. The plaintiff submits that the defendant should have provided an assurance to her that the information and documents would be provided as soon as the proceeding was served in May 2015. It was only after the plaintiff completed her review of the documents provided by the defendant in July 2015 that it became clear to the plaintiff that there was no need for a trial on the substantive issues.
The plaintiff submits that the Francke affidavit comprising such a large quantity of exhibits was unnecessary, burdensome, excessive and provided little that was responsive to the plaintiff’s application, thereby being a prima facie breach by the defendant of his overriding obligations under the Civil Procedure Act 2010.[4]
[4]Yara Australia v Oswal (2013) 41 VR 302, 314 [40].
The plaintiff submits that the defendant has increased the costs of the proceeding by being represented throughout by two counsel. Given the nature of the issues involved in the proceeding, it was not reasonable to retain two counsel.[5]
[5]Ibid 313 [36].
The plaintiff also referred to the defendant’s unreasonableness in not seeking judicial advice before defending the plaintiff’s application, pursuant to the principles set out in Re Beddoe.[6] In Macedonian Church v Eminence Petar, the High Court pointed out that a trustee’s application for judicial advice about whether to sue or defend proceedings is directed to the both protection of the trustee and to the purpose of protecting the interests of the trust.[7] Where a defendant did not seek judicial advice, he or she should not recoup costs from the trust. The plaintiff conceded that such an application is a discretionary matter, referring to the decision of the Court of Appeal in Wales v Wales.[8]
[6][1893] 1 Ch 547 (Bowen LJ).
[7](2008) 237 CLR 66, 94 [72], [74]
[8] [2014] VSCA 101 (27 May 2014) [86] (Ashley JA with whom Almond AJA agreed).
The plaintiff submits that if the Court is not satisfied that the defendant should be completely denied his indemnity from the estate, then the Court can provide a partial indemnity as occurred in Wales v Wales.[9]
[9]Ibid [91].
The plaintiff also sought the defendant pay her costs of the proceeding personally and, during oral submissions, sought that those costs be assessed on an indemnity basis, although readily conceding that this would require a finding that the defendant had misconducted himself in the context of the proceeding. The plaintiff submits there is some material to suggest this but did not press the submission.
The defendant’s submissions
The defendant contends this is not a case where the normal rule that a trustee should have his costs out of the estate should be displaced. He is the administrator of the estate appointed pursuant to an order of the Court and has conducted himself properly and reasonably in his administration of the estate.
He submits that with the defendant’s obligation to provide documents relating to trust property or to the administration of the estate having been fulfilled, his costs should be borne by the estate. He maintains that all documents that fell within this category were provided to the plaintiff within a reasonable period as evidenced by the correspondence between the defendant and the plaintiff between the proceeding being issued and the ultimate provision of documents. The defendant has not been ‘unreasonable’ or defended the proceeding and it cannot be said that he has misconducted himself in this task.[10]
[10]J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 7th ed, 2006) 571–572 [2109].
Generally, a beneficiary has a right to inspect or to be provided with all relevant documents. The foundation of the right is generally recognised as being based either on a proprietary right or on the fiduciary duty of a trustee to keep the beneficiary informed and to render accounts.[11]
[11]O’Rourke v Darbishire [1920] AC 58, 626; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405, 421–422 (Kirby P, dissenting), 442–445 (Sheller JA).
The general rule is subject to certain exceptions. The best known exception is that trustees are not bound to disclose to a beneficiary the reasons for exercising their discretionary powers nor any documents that might have influenced the exercise of such powers.[12] There may be other circumstances that give rise to an exception to the general rule that trust documents should be produced to a beneficiary for inspection.[13] In this proceeding, the defendant exercised his discretion and refused to provide certain documents that fell within those exceptions, namely, documents that may have influenced a trustee’s exercise of his or her discretionary powers; documents that were not in the interest of the beneficiaries or the proper administration of the estate and confidential documents.
[12]In re Londonderry’s Settlement [1965] Ch 918; Hartigan Nominees Pty Ltd v Rydge (1992) 29 NSWLR 405.
[13]Rouse v IOOF Australia Trustees Limited (1999) 73 SASR 484 [97]–[102] (Doyle CJ with whom Perry and Martin JJ agreed); Re Fairbairn [1967] VR 633, 635, 638–9 (Gillard J).
The defendant does not accept that he should have sought judicial advice as it would have been detailed in its preparation, required additional expense and have been a significant overlap with this proceeding. He contends that if such an application had been issued, the defendant would have been entitled to costs from the estate,[14] an outcome the plaintiff opposes.
[14]Re Pasminco Ltd (No 2) (2004) 49 ACSR 470 [36].
The defendant submits that the Francke affidavit was necessary as a result of the plaintiff’s conduct in the proceeding. This was because the plaintiff failed to narrow the issues in dispute and made allegations of misconduct requiring the production of a broad range of material. Further, the defendant submits that it was important to set out matters of background in respect of the plaintiff’s approach to the administration of the estate and for the Court to know what was really occurring, submitting that the plaintiff’s asserted basis for her requests, being about her tax obligations, was ‘nonsense’. The plaintiff’s requests require a consideration of the plaintiff’s past claims made against the estate and it is only taking into account the history of the past claims that the Court can determine whether there has been misconduct or unreasonable conduct on the part of the defendant.
As to the retention of two counsel in the proceeding, the defendant submits that he was justified in retaining two counsel for two reasons: first, because of the allegations of misconduct made against him; and secondly, counsels’ familiarity with the background of the estate with senior counsel having acted for the estate for several years and junior counsel having acted for more than a year.
Applicable principles
The power of the Court to order costs under s 24 of the Supreme Court Act 1986 is exercised subject to and in accordance with Order 63 of Supreme Court (General Civil Procedure) Rules 2015.[15]
[15]Supreme Court (General Civil Procedure) Rules 2015, r 63.02
As well, r 63.26 of the Rules provides as follows:
Unless the Court otherwise orders, a party who sues or is sued as trustee or mortgagee shall be entitled to the costs of the proceeding out of the fund held by the trustee or out of the mortgaged property in so far as the costs are not paid by any other person.
Section 36(2) of the Trustee Act 1958 provides that:
A trustee may reimburse himself or pay or discharge out of the trust premises all expenses incurred in or about the execution of the trusts or powers.
Trustees are ordinarily entitled to costs out of the estate in litigation relating to the administration of the trust estate, unless they have been guilty of misconduct.[16] In respect of their costs, trustees are entitled as of right to indemnity out of the trust for expenses properly incurred, that is, all costs except to the extent that they are of an unreasonable amount or have been unreasonably incurred. The concept of proper expenditure excludes conduct demonstrating want of prudence or diligence. [17]
[16]Turner v Hancock (1882) 20 Ch D 303; J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (LexisNexis Butterworths, 7th ed, 2006) 591 [2136].
[17]Dal Pont, Equity and Trusts in Australia (Lawbook Co, 5th ed, 2011) 689, 679 citing Turner v Hancock (1882) 20 Ch D 303, 305; Re Beddoe [1893] 1 Ch 547, 558; Nolan v Collie (2003) 7 VR 287, 303–10 (Ormiston JA); Dimos v Skaftouros [2004] VSCA 141 (20 August 2004). Dodds-Streeton AJA referred to National Trustees Executors & Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268.
Expenses and liabilities that are improperly incurred, such as acting beyond power, in bad faith or exercised power ‘with an absence of care and diligence that a person or ordinary prudence should exercise’ are not caught by the right of indemnity and shall be borne by the trustee personally.[18] Both English and Australian authorities have affirmed that, in cases of doubt, the trust estate should bear the trustee’s costs.[19] Ormiston JA approved the approach of Bowen LJ in Re Beddoe to a limited extent, where his Honour expanded upon the meaning of ‘properly’. Bowen LJ stated that the term ‘properly’ means that a trustee should not be personally liable for ‘mere errors in judgment’ and that ‘mere bona fides is not the test’.[20] Ormiston JA added that ‘what is “proper” and “improper” must be answered by reference to the circumstances and in particular by reference to the duty with which a trustee was obliged to comply or the power which a trustee is intending to exercise’.[21]
[18]G E Dal Pont, ‘Equity and Trusts in Australia’ (Lawbook Co, 5th ed, 2011) 679–80 [23.135] citing Re O’Donogue [1998] 1 NZLR 116, 121; Fitzwood Pty Ltd v Unique Goal Pty Ltd (in liq) (2001) 188 ALR 566, 606; Nolan v Collie (2003) 7 VR 287.
[19]Re Beddoe [1893] 1 Ch 547, 558; Nolan v Collie (2003) 7 VR 287, 304.
[20]Re Beddoe [1893] 1 Ch 547, 562.
[21]Nolan v Collie (2003) 7 VR 287, 306–7.
The onus to prove that a trustee should not be indemnified rests with the party seeking to deny the right of indemnity to demonstrate that costs have been improperly incurred.[22]
[22]Ibid 306.
Where a proceeding is undetermined and will not be resolved by contest before the Court, the Court has discretion to make costs orders either where a defendant has consented to a grant of final relief or if there is consensus as to the outcome of the proceedings. In certain circumstances, a costs order can be made if it can be determined that one or other party would certainly have succeeded in the proceedings, or if one or other party has acted unreasonably in pursuing or defending the proceedings. The applicable law is stated by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin:
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council ; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans.
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission Fed C of A, 10 February 1989, unreported, where his Honour ordered the respondent to pay 80% of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. [23]
[23](1997) 186 CLR 622, 624-625 (citations omitted).
Further, the Court must also take into consideration the guiding principles identified in the Civil Procedure Act 2010 in respect of civil proceedings generally. In particular, the overriding purpose of the Act and the rules of Court to facilitate the just, efficient, timely and cost effective resolution of the real issues in dispute and a party’s duty to assist the court to further the overriding purpose. [24]
[24]Civil Procedure Act 2010, s 7, Pt. 2.3.
Consideration
Burden of costs orders in estate proceedings
Where costs of the proceeding are to be paid out of the estate, the issue arises as to whether those costs should be borne by the undistributed residue of the estate or by the portion of the estate referable to any dispute whereby the costs have arisen, which in this proceeding refers to the plaintiff’s interest in the estate.
Where a trustee fails in litigation, his or her costs may be allowed out of the estate and where a trustee succeeds, his or her costs would ordinarily be allowed out of the estate. At the same time, any ‘indemnity must be given effect to in such a way as to make the burden fall upon the beneficiaries equitably having regard to the circumstances under which the costs, charges and expenses were incurred’.[25]
[25]National Trustees Executors and Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268, 279 (Williams J with whom Rich ACJ agreed).
The plaintiff’s sister is the only other person with an interest in the residue of the estate. She is not involved and is not a party to the proceeding. In those circumstances, it would be inequitable for any of the costs of this proceeding to be paid out of her share of the estate. This means that if any costs are ordered to be paid from the estate, those costs should be paid only from the plaintiff’s share of the estate.
Indemnity or standard costs
In respect of the plaintiff’s application for her costs of the proceeding to be assessed on an indemnity basis, her counsel’s concession that the application was not hard pressed was correctly made in circumstances where it became unnecessary for a trial on any of the substantive issues in the proceeding.
Costs where parties do not wish to pursue proceeding save as to costs
There is consensus in this proceeding in that no one wishes to pursue it, save for costs. Where there has not been a hearing on the merits, a court may be deprived of the factors that usually determine whether or not a costs order will be made, however, there are cases where a court may be able to reach a conclusion that a costs order should be made, for example, in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin referred to above are apposite: where one of the parties has acted unreasonably or where one party would certainly have succeeded in the proceeding if it had proceeded to trial.
I consider this to be an appropriate case for the court to make orders for costs notwithstanding there has not been a hearing of the substantive issues. This is because after the proceeding was issued, the plaintiff reviewed or inspected the documents and information provided to her as a consequence of the proceeding and was satisfied that all the documents produced or inspected meant that no further relief on the substantive issues was sought. This result was, on balance, a successful outcome for the plaintiff.
Further, if no order for costs were made, the plaintiff’s costs would either be paid by her personally or out of her share of the estate and the defendant would be paid his costs out of the plaintiff’s share of the estate with the usual indemnity for a trustee’s costs. The defendant has estimated his costs at more than $70,000 which is a substantial amount considering that ultimately all documents were produced or inspected. Assuming the plaintiff’s costs to be a similar amount, if no orders for costs were made, the result would be that the plaintiff would pay more than $140,000 for a proceeding that has been a successful outcome for her.
The defendant’s costs
The defendant is a solicitor and he has retained solicitors to act on his behalf in the administration of this estate. The defendant has been the administrator of the estate since his appointment in December 2011 and Best Hooper has been retained by the defendant since March 2012. Both have a familiarity with the issues in the estate. Legal practitioners acting in the administration of estates and trusts are regularly faced with requests from beneficiaries for trust documents and are familiar with the legal principles to be applied. In the context of the plaintiff’s requests, the defendant was required to consider the requests and the explanations given for them and determine whether or not the documents should be produced to the plaintiff, giving reasons if he considered the request should be denied.
Having considered the plaintiff’s requests in the context of making a decision as to any costs order that ought be made, the requests and the explanations for them were clear and the categories of the documents sought were readily ascertainable. When any documents were not produced or made available for inspection, the plaintiff pressed for them providing further explanation and made genuine steps to facilitate the determination of the issues in dispute. She provided the defendant with ample time to consider her requests and explanations and respond. In some cases, the defendant took a lengthy time to respond but did eventually respond, giving reasons for his responses. The plaintiff’s explanation for her requests was that she had obtained her own tax advice in respect of her personal tax obligations and was entitled to act on that advice. The defendant’s dismissal of the plaintiff’s reasons for seeking the documents as ‘nonsense’ is not a reasonable justification for withholding the documents. The defendant’s resistance to the production of the requested documents or inspection of them at a much earlier time was difficult to understand in the circumstances where, after the proceeding was issued, he provided or allowed inspection of them to the plaintiff.
By this time, substantial costs had been incurred. Some of the plaintiff’s requests were made as early as 2012, but the bulk of them were made in 2013 and 2014, with the last made in 2015. The fact that the proceeding was issued brought about a final and successful resolution of the substantive issues for the plaintiff. The defendant’s views as to the production of documents or inspection during the years prior to the proceeding being issued compared with his views afterwards demonstrated that the defendant could have achieved a final resolution much earlier, thereby avoiding substantial costs being incurred. In the end, the provision of the documents or their inspection occurred before any substantive hearing of the issues in the proceeding.
In my view, the delay by the defendant in producing the documents or allowing inspection of them until after the proceeding was issued was unreasonable and the defendant should have resolved the substantive issues in a much shorter timeframe. It is difficult to state what that shorter timeframe might have been with any precision but a consideration of the correspondence between the parties for the various categories of documents suggests that a reasonable timeframe would have been at least half the time actually taken, if not less, and the need for the plaintiff’s proceeding would also have been negated. This would mean that much of the correspondence between the respective solicitors would have been avoided.
The question of whether it was unreasonable for the defendant not to have sought judicial advice in terms of whether he is entitled to an indemnity for his costs from the estate was pressed by the plaintiff only faintly, recognising that it is a discretionary matter for the Court. As stated by Ashley JA in Wales v Wales, a failure to seek advice is not fatal to a trustee’s indemnity for costs but there is a question of perspective.[26] Considering the outcome of this proceeding and applying the rationale used by Ashley JA in Wales v Wales, a credible analysis would be that had the defendant sought judicial advice in 2014, he would have been advised to accede to the plaintiff’s requests and it would be likely that he would be indemnified for his costs of the advice application and the substantive issues would have been resolved much earlier.
[26]Wales & Ors v Wales & Ors [2014] VSCA 101 (27 May 2014) [72].
Whether judicial advice was sought or this proceeding issued, it remained necessary for the Court to determine a proceeding, which necessarily involves the expenditure of costs. Accordingly, I consider it to be reasonable for the defendant’s costs to include the directions and the costs hearing in this proceeding.
In relation to the Francke affidavit, the plaintiff relies on the comments made by the Court of Appeal in Yara Australia v Oswal as follows:
The Act is designed to protect litigants from incurring excessive costs, but it is also designed to protect against the inappropriate use of the courts as a public resource. Overly voluminous application material strains the administrative resources of the Court and the time of judges themselves. Where a large volume of material is provided to a court that is unnecessary and excessive, there will be a prima facie case that the overriding obligation has been breached. The court was provided with six application folders, comprising submissions, affidavit material, transcript and authorities running to over 2700 pages. Two folders pertained to the Mr Oswal application and four folders related to the application of Mrs Oswal. The affidavit material from the parties’ solicitors contained a variety of largely extraneous materials, included old statements of claim, swathes of email correspondence, materials from related proceedings in Western Australia, and transcripts from related hearings in the Supreme Court of Victoria. Much of this material was either peripheral to the application or entirely unnecessary.[27]
[27]Ibid [40].
The Francke affidavit is 8 pages with exhibits comprising 1,325 pages. Mr Francke described his affidavit as a response to the plaintiff’s originating motion, based on his examination of the estate’s files and records. He described the history of the estate and its administration, commencing from the death of the deceased in 1976, the appointment of administrators in 1994 and 1995 for the deceased’s widow during her lifetime and onwards, including the following:
(a) the proceeding issued by the plaintiff’s sister in 2003 seeking the removal of the plaintiff as the executor of the estate, exhibiting an affidavit of 58 pages filed in support of the application;
(b) the appointment of Mr Davey as administrator of the deceased’s estate in 2003 and a description of the eight matters conducted by him between 2003 until late 2011 when he was the administrator of the estate;
(c) the removal of Mr Davey and the appointment of the defendant as the administrator, exhibiting two affidavits which when combined comprise 242 pages;
(d) descriptions of the various matters that the defendant has conducted since his appointment, including the claim for compensation relating to the compulsory acquisition of part of the estate land (‘the DSE claim’) and a claim by Northside for a portion of the proceeds of the DSE claim (‘the DSE arbitration’). The exhibits to the DSE claim comprise 194 pages and the exhibits to the DSE arbitration comprise 250 pages;
(e) a description of the Davey negligence claim, with an exhibit comprising 49 pages;
(f) the disputes concerning Mr Davey’s fees, with an exhibit comprising 176 pages;
(g) the 2014 tax return comprising 10 pages;
(h) a bundle of correspondence between Aitken Partners, Best Hooper and Rennick & Gaynor relating to documents, including 5 letters in the period 21 May to 12 June 2015, with the exhibited bundle comprising 288 pages; and
(i) two bundles of invoices and receipts for the estate for the periods 5 July 2001 to 9 March 2012 and 15 March 2012 to 31 May 2015 comprising 42 pages.
Having considered the Francke affidavit, much of the information contained in the exhibits did not relate to the issues in the proceeding in a meaningful or necessary way. It appeared that they were provided by way of background to the previously resolved disputes that had occurred and were said by the defendant to have been necessary to give context to the substantive issues in this proceeding. In my view, it was unnecessary for the Court to have this amount of detail in respect of several past claims made against the estate, as well as the history of those claims and the plaintiff’s approach to the administration of the estate in the context of an application by a beneficiary for the production of certain trust documents. It was also unnecessary because the Francke affidavit was filed and served after the requested documents were either produced or inspected by the plaintiff. I consider that the Francke affidavit was excessive and not responsive to many of the substantive issues and the costs of it should be excluded in the orders made for the costs of the proceeding.
In relation to the defendant’s retention of two counsel, in particular, senior counsel, the authorities show a wide variety of circumstances as warranting the engagement of senior counsel. These authorities do not establish formulae and are used as guides indicating the approaches taken by the courts. A common circumstance to consider is the weight of the case which may make the division of labour between counsel desirable; another is the need for the special skills and experience that ought be found with senior counsel.[28] In Yara Australia v Oswal , the Court of Appeal stated:
In order to comply with the particular overarching obligation in s 24, the legal practitioners — solicitors and counsel — who act for or on behalf of a party or who are asked to so act, must always give careful consideration to the level and the extent of the representation that is necessary for a party in a proceeding. Even where a party provides informed instructions to their legal practitioners that they wish particular counsel to be briefed, the legal practitioners who act on their behalf have an overriding duty to consider whether, having regard to the matters set out in s 24 and any other relevant circumstances, the engagement of particular counsel will contravene the Act. There will be proceedings in which the complexity or importance of the issues and the amount in dispute will not justify the engagement of counsel of particular seniority or will not justify the engagement of more than one counsel.[29]
[28] Oldaker v Currington [1987] VR 712, 716-717; Stanley v Phillips (1966) 115 CLR 470.
[29](2013) 41 VR 302, 313 [36].
As stated, the defendant’s justification for retaining two counsel was twofold. The first was because the plaintiff made allegations of misconduct against the defendant. It must be accepted that allegations of misconduct are of a serious nature. In this proceeding, I consider that is would be more accurate to describe the allegations against the defendant as allegations of unreasonable conduct. However, where the proceeding did not proceed on the substantive issues, the conduct issues were not so complicated as to warrant the retention of senior counsel. The second justification was because both counsel were familiar with the background to the estate. The background to the estate as set out in the Francke affidavit does not assist as the determination of the substantive issues required the application of known legal principles as to the rights of a beneficiary to trust documents. As stated, the application of these principles is a usual incidence for practitioners involved in the administration of estates and trusts. The defendant retained Best Hooper to act on his behalf and, in the usual course, the solicitors should have resolved the issues. If they could not, they could retain counsel but the issues are not so complicated as to warrant the retention of two counsel. It is unreasonable in the circumstances to expect the costs of senior counsel to be borne by the estate.
Conclusions as to the defendant’s costs
The costs of the Francke affidavit and the costs of senior counsel are excluded from the defendant’s costs of the proceeding that are to be paid from the plaintiff’s share of the estate. Further, his costs that are to be paid out of the estate are reduced by 50 per cent to reflect the unreasonable delay in resolving the substantive issues. Accordingly, the defendant is to be indemnified for 50 per cent of the balance of his costs out of the plaintiff’s share of the estate and otherwise he is to pay his costs personally.
The plaintiff’s costs
The plaintiff seeks that her costs should be paid by the defendant personally, and not from the estate, alternatively, if the Court is not satisfied that the defendant should be completely denied his indemnity from the estate, the plaintiff seeks that he should be provided a partial indemnity only for the costs.
The plaintiff’s solicitors identified the categories of documents that she sought with clarity and provided proper explanations for doing so, namely, that she required the documents and information for the purposes of acting on tax advice that she had received. The defendant’s dismissal of the basis for the information and documents as ‘nonsense’ was not reasonable in the circumstances.
After the proceeding was issued, any objections by the defendant to the production or inspection of the requested documents taken in the correspondence between the parties was no longer an issue and the defendant did not defend the proceeding. It was only after the proceeding was issued that the plaintiff could be satisfied that the defendant had provided the documents or allowed inspection so that no further relief was sought in relation to the production of or inspection of trust documents.
Having considered the plaintiff’s requests for information and documents over the years prior to the issue of the proceeding, her reasons for seeking them and the correspondence between the respective solicitors in relation to the categories of documents sought, I am satisfied that it was reasonable for the plaintiff to commence the proceeding. Although the proceeding did not go to trial, the fact that the plaintiff is now satisfied that the defendant has provided the documents or allowed inspection so that no further relief was sought in relation to the production or inspection of trust documents, means that she is entitled to an order for her costs of the proceeding.
Defendant’s indemnity for the payment of the plaintiff’s costs
I accept that the defendant ultimately did assist in the resolution of the proceeding by either producing the documents or allowing for their inspection after the proceeding was issued. However, considering the legal principles to be applied to the production of the categories of documents, the defendant’s unreasonable delay in not producing them or making them available and the quantum of costs that have been incurred by both parties in the proceeding, the defendant should not be entitled to a complete indemnity from the estate to pay the plaintiff’s costs. Applying the same analysis as for the payment of the defendant’s costs, I consider it to be reasonable that his indemnity for the payment of the plaintiff’s costs from the plaintiff’s share of the estate be limited to 50 per cent.
Orders
I will make the following orders:
(a) The defendant’s costs of the proceeding do not include the costs of the affidavit of Matthew Francke sworn 16 July 2015 and the fees of senior counsel;
(b) The defendant be indemnified out of the plaintiff’s share of the estate as to 50 per cent of his costs of the proceeding and otherwise he pay his own costs;
(c) The defendant pay the costs of the plaintiff of the proceeding and be indemnified as to 50 per cent out of the plaintiff’s share of the estate;
(d) The costs of the plaintiff and the defendant be taxed on the standard basis in default of agreement; and
(e) Otherwise the proceeding be dismissed.
5
11
0