Schetzer v Trathen
[2007] VSC 161
•24 May 2007
p
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 6162 of 2005
IN THE MATTER of Part IV of the Administration and Probate Act 1958
and IN THE MATTER of the Will and Estate of PATRICIA RAIE SCHETZER
| DEBORAH ANN SCHETZER (a publicly represented person who brings this proceeding by her Administrator, State Trustees Limited, ACN 064 593 148) | Plaintiff |
| V | |
| SALLIANNE TRATHEN (formerly SALLIANNE SCHETZER) and SAMUEL MICHAEL BROTT (who are sued as the Executors of the Will of the abovenamed Deceased) | Defendants |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 April 2007 | |
DATE OF JUDGMENT: | 24 May 2007 | |
CASE MAY BE CITED AS: | Schetzer v Trathen | |
MEDIUM NEUTRAL CITATION: | [2007] VSC 161 | |
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Guardianship and Administration – Plaintiff with a disability – Proceeding brought by administrator of plaintiff's estate – Compromise of proceeding – Settlement sum payable to plaintiff with a disability – Whether administrator or Senior Master should manage the settlement sum - Guardianship and Administration Act 1986 (Vic) s. 66(3), Administration and Probate Act 1958 (Vic) Part IV, Supreme Court Act 1986 (Vic) ss. 113(1), 113B(1), 113B(2), Supreme Court (General Civil Procedure) Rules 2005 (Vic), Rules 77.01(b), 79.06.
Testator's Family Maintenance - Plaintiff with a disability – Proceeding brought by administrator of plaintiff's estate – Compromise of proceeding – Settlement sum payable to plaintiff with a disability – Whether administrator or Senior Master should manage the settlement sum - Guardianship and Administration Act 1986 (Vic) s. 66(3), Administration and Probate Act 1958 (Vic) Part IV, Supreme Court Act 1986 (Vic) ss. 113(1), 113B(1), 113B(2), Supreme Court (General Civil Procedure) Rules 2005 (Vic), Rules 77.01(b), 79.06.
Practice and Procedure – Jurisdiction and powers of Masters – Plaintiff with a disability – Proceeding brought by administrator of plaintiff's estate – Compromise of proceeding – Settlement sum payable to plaintiff with a disability – Whether administrator or Senior Master should manage the settlement sum - Guardianship and Administration Act 1986 (Vic) s. 66(3), Administration and Probate Act 1958 (Vic) Part IV, Supreme Court Act 1986 (Vic) ss. 113(1), 113B(1), 113B(2), Supreme Court (General Civil Procedure) Rules 2005 (Vic), Rules 77.01(b), 79.06.
Costs – Compromise of proceeding – Plaintiff with a disability – Approval of compromise by the Court – Agreement as to costs – Whether the Court should approve costs agreement – Sztockman v Taylor [1979] VR 572 discussed.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R. Boaden | State Trustees Ltd, Legal Branch |
| For the Defendants | Mr S. Bond, solicitor | Schetzer Brott & Apel |
| For the Senior Master's (Funds In Court) Office | Mr S. Wharton, by leave, as amicus curiae |
HIS HONOUR:
I. Facts
Patricia Raie Schetzer died on 20 May 2004. She was survived by her four children, one of whom is the plaintiff.
The deceased left a will dated 23 March 1975. On 4 October 2004, probate of the will was granted to Sallianne Schetzer and Samuel Michael Brott. Paragraph 2 of the will empowered the executors and trustees to make a donation of any amount up to $5,000 "to place my daughter Deborah Ann Schetzer in a residential home for the mentally retarded." The residue of the estate was given to the other three children.
The net assets of the estate are approximately $1,200,000.
On 20 May 2005, an originating motion was filed on behalf of the plaintiff seeking orders pursuant to Part IV of the Administration and Probate Act 1958 (Vic) that provision be made for her maintenance and support to the extent of a one-quarter share of the estate.
On 2 June 2006, an order was made by the Victorian Civil and Administrative Tribunal appointing State Trustees Ltd as the administrator of the estate of the plaintiff. The administration order was made in circumstances where the plaintiff is a person with a disability. The plaintiff is currently 54 years old. She was born with Downs Syndrome. She has recently developed schizophrenia. She is at risk of developing early dementia. She lives in a community residential unit which is managed by the Department of Human Services, and which accommodates other residents who are also intellectually disabled. She works part time in a sheltered workshop. She will need to live in supported accommodation for the rest of her life.
The plaintiff has savings of approximately $100,000, which have been invested for her by State Trustees. She has some income, arising from these investments, a Centrelink pension, a mobility allowance and wages from the sheltered workshop. This income is paid to State Trustees as her administrator.
The formal administration order made by the Tribunal is in the following terms:
The Tribunal orders that:
1.State Trustees Limited, 168 Exhibition Street, MELBOURNE VIC 3000, be appointed administrator of the estate of the represented person with all the powers and duties conferred by Part 5 Divisions 3 and 3A of the Guardianship and Administration Act 1986.
2.State Trustees Limited is entitled to the following remuneration (inclusive of GST) from the estate of the represented person for acting as administrator:
A.A commission on gross income received at a rate not exceeding:
(i)3.3% in respect of Centrelink or Department of Veterans' Affairs pensions; and
(ii)6.6% in respect of all other income.
B.A once only capital commission not exceeding 4.4% of the gross value of any assets of the estate; and
C.A fee not exceeding 1.1% per annum on the capital sum invested in the common fund of State Trustees Limited.
For any services provided to the estate State Trustees Limited or its subsidiary STL Financial Services Limited is entitled to remuneration at a rate not exceeding the amount set in the scale of charges lodged with the Treasurer and published in the Government Gazette.
3.This administration order be reassessed no later than 02 June 2009.
4.This order shall continue to have effect until further order of the Tribunal.
The parties engaged in settlement discussions and, subject to approval by the Court, the plaintiff's claim was compromised by written terms of settlement dated 30 January 2007. Relevantly, the terms of settlement provided:
1.These Terms of Settlement are subject to and conditional upon the approval of the Court.
2.The Defendants agree to pay out of the Estate of the Deceased and the Plaintiff agrees to accept in full settlement of her claim, payment of $300,000.00 inclusive of the Plaintiff's costs and disbursements ("the settlement sum").
3....
4.The settlement sum shall be paid to State Trustees Limited of 168 Exhibition Street, Melbourne, Vic, 3000 within 30 days of the Court granting approval of the compromise of the proceeding.
Next, an application was made to a Master of this Court to approve the compromise recorded in the terms of settlement, and for final orders in the proceeding in accordance with that compromise. The application for approval was required under Rule 15.08(1),[1] because the plaintiff is a person under a disability. The application for final orders was made to a Master under the authority conferred under Rule 77.01(b), which gives a Master the power to hear and determine any application and exercise any powers and authorities under Part IV of the Administration and Probate Act "where an order is sought under that Part by consent".
[1]Supreme Court (General Civil Procedure) Rules 2005 (Vic).
The Master was satisfied that the estate of the deceased as effected by her will did not make adequate provision for the proper maintenance and support of the plaintiff. The Master approved the compromise recorded in the terms of settlement. However, the Master did not, as provided for in the terms of settlement and in the form of consent order sought by the parties, order that the settlement sum be paid to the administrator. Instead, the Master ordered that the settlement sum be paid into court to the Senior Master to be invested by him until further order.
Further, the Master's order differed from that sought by consent, because the Master did not take any account of the agreement between the parties that the plaintiff's costs, which were agreed in the sum of $14,211.90, should be paid from the settlement sum. Having regard to this agreement concerning costs, the net effect of the compromise was that the plaintiff was to receive $285,788.10 out of the settlement sum, with the balance of $14,211.90 being paid to her solicitors for the agreed amount of costs.
The formal orders made by the Master were as follows:
1. The compromise be approved.
2.In lieu of the provision made for her in the will of the deceased provision be made for the Plaintiff by paying her the sum of $300,000.00 into Court to the Senior Master within 7 days after this day.
Instead of paragraph 2 of the Master's order, the parties had sought by consent an order that:
2.In lieu of the provision made for her in the will of the Deceased, provision be made for the Plaintiff by paying to her the sum of $300,000 inclusive of her costs in the sum of $14,211.90.
Paragraph 2 of the Master's order departed from the order sought by consent in two relevant respects. First, the Master ordered that the defendants pay $300,000 into court to the Senior Master's Office, rather than to State Trustees. Second, by ordering that the whole of the $300,000 was to be paid to the Senior Master, no provision was made for the plaintiff's legal costs.
The Master did not give written reasons. According to the affidavit evidence, the Master expressed his reasons for the first departure from the consent orders which were sought in the following terms:
1.The Senior Master's Office is more experienced than State Trustees in looking after the funds of persons with disabilities.
2.The commissions charged by State Trustees are substantial, in comparison with those of the Senior Master's Office.
As to the second departure from the consent orders sought, the Master apparently said that the plaintiff's legal fees should be agreed between her administrator and the Senior Master's Office and, failing agreement, should be taxed by the Court. By this, the Master should be taken to have intended that the costs would be paid from the settlement sum in the hands of the Senior Master. However, the Master did not make any orders to this effect, and paragraph 2 of his orders simply directed payment of the entire settlement sum to the Senior Master's Office.
The plaintiff has appealed against paragraph 2 of the Master's order. As this order was not one sought or made by consent, no application for leave to appeal is required.[2]
[2]Compare Rule 77.05(2).
It is apparent from paragraph 2 of the Master's orders, and from his brief reasons, that he intended to exercise the discretion under s. 66(3) of the Guardianship and Administration Act 1986 (Vic) ("the Act"), or the Court's inherent jurisdiction, to order that the Senior Master be responsible for the investment and management of the settlement sum on behalf of the plaintiff. Section 66 of the Act relevantly provides:
66. Matters before a Court
…
(3)If in any civil proceedings before a Court it is adjudged or ordered that money be paid to a person with a disability (whether or not that person is a party to a cause or matter) the money –
(a)is to be paid into court; and
(b)unless the Court otherwise orders is to be paid out to the administrator (if any) of the estate of that person or State Trustees.
Mr Wharton, a representative from the Senior Master's (Funds In Court) Office, informed the Court that the Senior Master's Office performs a number of functions which are akin to those of an administrator appointed under the Act, including the preparation of a budget of a person's circumstances, in order to determine whether the Senior Master will accede to an application for the payment of funds to or on behalf of a person with a disability whose funds are under the Senior Master's control. The Senior Master adopts this practice even where an administrator is appointed in respect of the affairs of that person.
II. Issues on Appeal
The hearing of an appeal from a Master to a Judge is by way of re-hearing de novo of the application to the Master, upon the evidence which was before the Master.[3] On the hearing of the appeal, the judge has power to grant special leave to a party to rely upon an affidavit or oral evidence not used or given before the Master.[4] In this case, I gave the plaintiff special leave to rely upon the affidavit of Georgia Grammenos sworn 27 February 2007. Further, I gave the defendants leave to rely upon the affidavit of Andrew Schnaider sworn 28 February 2007.
[3]Rule 77.05(7)(a).
[4]Rule 77.05(7)(b).
I granted leave to rely upon these affidavits because they are largely responsive to the reasons given by the Master for refusing to make an order sought by consent. Prior to those reasons being given, the plaintiff had not anticipated the need to respond to the issues raised in those reasons. However, it is important to note that these affidavits contained evidence which was not placed before the Master at the time he exercised his discretion.
The appeal came on for hearing in the Practice Court. The parties joined in the submission that it would be of benefit to the profession as a whole if the Court gave written reasons on the appeal which, notwithstanding that the appeal is a rehearing de novo of the application before the Master, considered whether the Master had jurisdiction under Rule 77.01(1)(b) to make any orders otherwise than in accordance with the exact form of the consent orders which were sought. This submission was based upon the contention that this was not an isolated case. Indeed, there was another appeal raising the first issue arising on this appeal.[5] I was informed by counsel that such cases were not uncommon, and that the profession was looking for "a signpost" to guide future cases where applications by consent are made to a Master for final orders under Part IV of the Administration and Probate Act; especially where the application is made on behalf of a person who is represented by an administrator.
[5]Diver v Diver [2007] VSC 146.
Further, this appeal raises another issue of general practical importance. In giving approval to a compromise agreed to on behalf of a plaintiff with a disability, should the Court approve an agreement, or other arrangement short of taxation, as to the amount of the plaintiff's costs?
III. Jurisdiction
Rule 77.01 relevantly provides:
77.01Authority
Subject to this Order, a Master, in addition to exercising the powers and authorities conferred by any other provision of these Rules or any Act, may –
(a)in any proceeding to which these Rules apply, give any judgment or make any order, including any judgment or order in the exercise of the inherent jurisdiction of the Court;
(b)hear and determine any application and exercise any powers and authorities under the following statutory provisions –
Administration and Probate Act 1958, section 65, and Part IV where an order is sought under that Part by consent;[6]
...
Guardianship and Administration Act 1986, section 66;
...
[6]Emphasis added.
It was submitted on behalf of the plaintiff that the extent of the jurisdiction of a Master to hear and determine an application under Part IV of the Administration and Probate Act was limited to the making of the consent orders sought by the parties. Accordingly, by refusing to make the order sought by consent that the settlement sum be paid to State Trustees, and instead ordering that the settlement sum be paid into court to the Senior Master to be invested by him until further order, the Master exceeded his jurisdiction.
For the reasons stated in Diver v Diver,[7] which was heard together with this appeal, I do not accept this submission. The Master had a discretion as to whether he should order that the settlement sum be paid to the administrator, State Trustees, or should be paid to the Senior Master for investment by him. This discretion arose in the inherent jurisdiction of the Court and under s. 66(3) of the Act.
[7][2007] VSC 146.
IV. Discretion
In Diver v Diver, I set out some of the factors which may be relevant to the exercise of the discretion.[8] In this case, as in Diver v Diver, I conclude that the general rule, that money payable under a court order to a person with a disability should be paid to his or her administrator, should apply. I am of this view for the following reasons.
[8]Ibid, [62].
First, State Trustees has been validly appointed by an administration order made by the Tribunal. That order gives State Trustees all of the powers contained in Divisions 3 and 3A of Part 5 of the Act. Those powers are much broader than those of the Senior Master. In the circumstances of this case, there is no good reason why there should be added costs, duplication of work and possible delays in the administration as a result of the administrator having to make application to the Senior Master to access the settlement sum as funds are required, and to monitor the performance of the Senior Master in managing that sum.
Second, the remuneration of State Trustees has been approved by the Tribunal. It is substantial, but there is no evidence that it is out of the ordinary. As I said in Diver v Diver,[9] the fact that an administrator's remuneration is more than that charged by the Senior Master's (Funds In Court) Office is not, by itself, enough to establish a conflict of interest. The issue of conflict of interest is a matter upon which the Tribunal must be satisfied before making an administration order.
[9]Ibid, [42].
Third, the administrator has been in office for a considerable period of time, has gained a familiarity with the needs of the plaintiff and has prepared a budget for her present and future needs. There was evidence before the Master from Paul Radlow, a manager of the Personal Financial Solutions Division of State Trustees. Mr Radlow swore two affidavits, in which he demonstrated familiarity with the plaintiff's physical and mental condition, her present and future needs, her current financial position and plans for the future management of her affairs. Although there is no evidence that the plaintiff or her relatives have developed any special relationship of trust or confidence with State Trustees or any of its representatives, as in Diver v Diver,[10] there is no evidence that the plaintiff or any relative has any objection to State Trustees continuing to manage the affairs of the plaintiff. Nor is there any evidence of criticism or complaint about any aspect of the administration to date or any aspect of the proposed administration by State Trustees.
[10]Ibid, [17], [21], [22], [59](5).
Fourth, there is no reason to believe that State Trustees will not manage the settlement sum in a prudent and efficient way which is designed to produce the best return for the plaintiff without taking undue risks. The evidence establishes that State Trustees has the necessary experience and credentials to perform this task. By s. 66(3) of the Act, Parliament has expressed the clear intention that, unless the Court otherwise orders, money payable under a court order to a person with a disability is to be paid to State Trustees where there is no administrator for the plaintiff. Further, in such circumstances, the order of the Court that money be paid out to State Trustees has the effect as if it were an administration order appointing State Trustees as the administrator.[11]
[11]Section 66(8) of the Act.
Fifth, State Trustees is already managing a fund on behalf of the plaintiff. It would be inefficient and likely to lead to duplication of work and cost for there to be, in effect, two persons administering the plaintiff's funds. It is much more efficient that all of the plaintiff's funds be managed by the one administrator.
It was submitted on behalf of the defendants that there was utility in the settlement sum continuing to be under the control of the Senior Master. It was submitted that the Senior Master's (Funds In Court) Office effectively operates as a bank holding the money on the part of an administrator and that, subject to the Senior Master being satisfied as to the appropriateness of a payment sought from the fund by the administrator, the Senior Master will approve the payment sought as a matter of course. It was submitted that this would act as an independent check and balance, so that the Senior Master would, in effect, supervise the administrator. I do not accept this submission. It would lead to unnecessary duplication of costs, and delays in the administration of the affairs of a person with a disability. There are detailed provisions in the Act for supervision of administrators by the Tribunal.[12] Further, the Court retains its parens patriae jurisdiction which may be exercised on application in an appropriate case.
[12]Sections 58(1)-(2), 60A, 60C and 61-63 of the Act, discussed in Diver v Diver [2007] VSC 146, [42]-[47].
As I said in Diver v Diver, I have no doubt that the Senior Master's Office does an extremely thorough, professional and cost efficient job of managing the funds of persons with disabilities. However, the discretion under s. 66(3)(b) is not, in every case, to be exercised according to a detailed assessment by the Court as to who, in its opinion, will be best able to manage the monetary sum involved in the particular circumstances of that case. Nor should the Court generalise about such matters, as occurred in this case. There must be something about the circumstances of the particular case which justify departure from the general rule specified by Parliament.
Finally, I note again that I gave leave to the plaintiff to rely upon further affidavit material on the hearing of the appeal. That affidavit material was not before the Master. It was relevant to the exercise of the Court's discretion under s. 66(3)(b).
V. Costs
In Sztockman v Taylor[13] Brooking J considered an application to approve a compromise of a personal injuries claim brought on behalf of a plaintiff with a disability. The terms of settlement required the defendant to pay the plaintiff a total sum of $225,000 including $10,000 for the plaintiff's costs. Brooking J was troubled by the agreement as to the amount of the costs.[14] Brooking J reviewed the authorities and the practice in various jurisdictions and noted that the usual order made in Victoria on the approval of a compromise of a claim by a person with a disability is that the plaintiff's costs be taxed and paid by the defendant. Based on his Honour's review of the authorities, Brooking J formulated a general rule in the following terms:
In my view the settlement of a claim by a person under disability on terms requiring payment of an agreed amount for claim and an agreed amount for costs is, speaking generally, undesirable. I can certainly conceive of cases in which the exigencies of the situation render the negotiation of such a settlement desirable in the interests of the person under disability. But as a general rule, agreement upon the amount of costs should not be reached or sought until after the compromise has been arrived at and approved.[15]
[13][1979] VR 572.
[14]Ibid, 573.
[15]Ibid, 574.
Brooking J gave two reasons for expressing the general rule. First, that a solicitor acting for a person with a disability may be placed in a conflict of interest if the negotiation of the plaintiff's costs forms part of the same negotiation as to the amount to be paid to the plaintiff. In this regard, Brooking J stated:
the solicitor acting for a plaintiff under disability stands in a special position with regard to a compromise. The Court has always looked to the legal advisers of such a plaintiff for their opinion on whether the compromise is for the plaintiff's benefit. For reasons given in the two decisions of the Supreme Court of New South Wales to which I have referred, it is in general undesirable that a solicitor charged with the duty of considering whether a proposed compromise is in the interests of a person under disability should be concerned in attempts to determine at the same time the amount to be paid for claim and the amount to be paid for costs; for in general this tends to place the solicitor in a position in which his personal interest conflicts with that of his client ...[16]
[16]Ibid, 575 (citations omitted).
Second, Brooking J stated that settlements involving agreement as to both the amount of the claim and the amount of the costs placed the court considering the application for approval in an embarrassing position, because:
the judge in satisfying himself that the terms of settlement are proper in the interests of the plaintiff must give consideration to the amount agreed upon for costs, but [the Court] is not equipped to perform the functions of the Taxing Master.[17]
[17]Ibid, 576.
In all the circumstances, Brooking J concluded that, in general, the agreement as to costs should be "separate from, independent of, and subsequent to the settlement of the plaintiff's claim".[18]
[18]Ibid, 576.
Brooking J stressed that the general rule was just that. It could be departed from if the exigencies of a particular case demanded it. Brooking J stated in this regard:
To say this is to do no more than lay down a general rule. The circumstances may be such that it is in the plaintiff's interests to embark upon and conclude negotiations for a settlement which fixes the amount payable for costs. Moreover, in cases falling within the general rule I see no reason why, in an appropriate case, the plaintiff's legal advisers should not negotiate a settlement whereby certain concessions are made by the defendant in relation to costs, provided that proper regard is had to the interest of the plaintiff.[19]
[19]Ibid, 575.
It was submitted on behalf of the plaintiff that the Master's order should be set aside because, on any view, the orders make no provision for the plaintiff's costs. It was submitted that the Master should have made some order about costs, and that it was not open to the Master to deal with the matter by mere comment, in the absence of written reasons, that the quantum of the plaintiff's costs should be taken up with the Senior Master for agreement and, in default of agreement, should be determined by taxation. I agree. In the absence of written reasons, an order as to costs should have been made. The issue on appeal is what order the Court should make to deal with the costs in the circumstances of this case.
It was submitted on behalf of the plaintiff that, notwithstanding the decision in Sztockman v Taylor, there are good grounds why the Court should approve the parties' agreement as to the costs in this case.
First, it was submitted that the agreement as to costs should be approved because the costs are of a small amount for a claim such as this and are objectively reasonable. In these circumstances, it was submitted that the costs of taxation are out of all proportion to the amount involved. This may be so. However, for the reasons expressed by Brooking J in Sztockman v Taylor, a Master or Judge will not usually be sufficiently expert in the assessment of reasonable costs for a particular amount to be approved.
Second, it was submitted that the agreement as to costs should be approved because there is a strong public policy in favour of resolving cases by compromise. For this reason, compulsory mediation is routinely ordered by the Court. It was submitted that cases under Part IV of the Administration and Probate Act are particularly suitable to resolution by compromise and it was in the public interest that this continue. It was submitted that the interests of persons with a disability fall to be considered in claims under Part IV of the Administration and Probate Act at two levels. First, where the plaintiff is a person with a disability. Second, where there are one or more residuary beneficiaries with a disability. In this context, disability includes infancy. Accordingly, there are many claims under Part IV of the Administration and Probate Act which involve a consideration of the interests of persons with a disability and where the principles in Sztockman v Taylor may be relevant.
In this context, it was submitted that the general rule in Sztockman v Taylor inhibits settlement. This is because an executor, before committing to pay a plaintiff out of an estate, is justifiably concerned to ensure that he or she is not exposing the estate to an open-ended order for costs. Accordingly, a settlement amount which includes the plaintiff's costs will give the executor certainty as to the total amount to be paid from the estate. This is likely to increase the prospects of settlement.
I accept that public policy requires that the Court should adopt a flexible approach in dealing with cases before it and, where it can be done in accordance with principle, make orders which encourage, rather than inhibit, settlement. However, for the reasons given by Brooking J in Sztockman v Taylor, the settlement of proceedings brought on behalf of a plaintiff with a disability for a total amount including the plaintiff's costs will not, generally, be in accordance with principle. This will generally be so even where, as here, the net settlement sum after deduction of costs is of an amount which the Court is prepared to approve as being in the interests of the plaintiff.
What order as to costs should be made in the circumstances of this case? The alternatives are as follows:
(1)The method suggested, but not ordered, by the Master. The Court could order that the costs be subject to agreement between the administrator and the Senior Master or, in default of agreement, taxed and then paid out of the settlement sum. Alternatively, instead of taxation, the costs could be assessed by an independent costing service.
(2)The Court could simply order that the plaintiff's costs be taxed, or assessed by an independent costing service, and then paid out of the settlement sum.
(3)An alternative method was suggested by the plaintiff. In circumstances where the whole of the settlement sum has been paid to the Senior Master, it was submitted that the plaintiff's costs could be determined and paid in the following manner:
(a) the costs be limited to an agreed maximum of $14,211.90;
(b)the costs be subject to an independent assessment by a costing service approved by the Court;
(c)the assessed amount of the costs be paid out of the settlement sum, subject to a limit of the agreed maximum;
(d)if the assessed amount of the costs exceeds the agreed maximum, the administrator will not be entitled to recover the excess, and the administrator will pay the assessment fees due to the costing service;
(e)if the assessed amount of the costs is less than the agreed maximum, the difference will first be paid towards the assessment fees due to the costing service and the administrator will pay any balance due to the costing service. If there is any surplus, this will be paid to the administrator and form part of the plaintiff's funds.
It was submitted on behalf of the plaintiff that its alternative method of dealing with costs was to be preferred. First, it was submitted that this would avoid the concerns referred to by Brooking J in Sztockman v Taylor as justifying the general rule expressed in that case, because the plaintiff's solicitor would not be in a position of conflict of interest. The costs would be subject to independent assessment. Further, the Court would not need to be concerned with the reasonableness of the agreed maximum during the approval process. In addition, there would be no need for the time of the Senior Master's Office, and perhaps the Senior Master himself, to be used in endeavouring to reach agreement with the administrator as to the amount of the plaintiff's costs.
Second, reliance was placed upon evidence, which was not before the Master, that the costs of taxation of the plaintiff's costs in this case would far outweigh the amount in issue. The evidence disclosed that a taxation of the plaintiff's costs would be approximately $5,000, in circumstances where only $14,211.90 was being claimed. Further, the evidence established that taxation would take about two months. On the other hand, assessment of the plaintiff's costs by a costing service such as that conducted by the Law Institute of Victoria Costing Service would take about two weeks and would cost 9% of the costs as assessed (an amount of approximately $1,300). Accordingly, there would be a substantial saving of both time and costs if the alternative method suggested on behalf of the plaintiff was adopted.
The plaintiff's alternative method for dealing with costs was not before the Master. However, the Court's discretion on a rehearing de novo is to be exercised in the circumstances as they stand at the hearing. In this case, those circumstances include:
(1)The fact that the Master approved the compromise, in circumstances where the settlement sum is inclusive of the plaintiff's costs. Although not the subject of appeal, I have considered the material and I agree with the Master. He was right to approve the compromise, in circumstances where the administrator was seeking only $14,211.90 for costs.
(2)The further affidavit material which was not before the Master, which establishes that the costs of taxation of the plaintiff's costs will be out of all proportion to the amount of costs in issue.
(3)The agreement by the administrator to the alternative method of assessing its costs.
In all the circumstances of this case, I will exercise my discretion to order that the plaintiff's costs be assessed in accordance with the alternative method suggested. In my view, such a method, while somewhat complex, is preferable to forcing the plaintiff to a taxation if no agreement can be reached with the Senior Master's Office. Of course, I accept that the Senior Master's Office will act in good faith in endeavouring to reach agreement with the administrator as to the amount of its reasonable costs, and thus avoid the need for a taxation. However, there is a possibility that an agreement cannot be reached.
An issue arises as to the identity of the costing service to be utilised. Having regard to the evidence in the case, I will order that the Law Institute of Victoria Costing Service undertake the assessment.
In future cases, it would be preferable for the parties, at the time of settling proceedings, to agree upon both the minimum amount to be paid to the plaintiff and a maximum amount for the plaintiff's costs, including the costs of assessment or taxation. A settlement by which the defendant agrees to pay the total of these amounts will provide certainty to the defendant, who will not need to be further concerned with any costs liability. The plaintiff’s solicitors can then apply to the Court for approval of the compromise and, in doing so, disclose the amount of the agreed maximum sum for their costs. If, as here, the Court is prepared to approve the compromise on the assumption that the plaintiff will receive only the minimum amount, the compromise can be approved and costs orders similar to those which I propose making in this case can be made. If the assessed costs are less than the specified maximum, the balance will go to the plaintiff. If the costs are assessed at more than the specified maximum, the plaintiff’s solicitors will be out of pocket. Whether the costs are assessed by a costing service, or by taxation, is a matter to be determined by the Court in the circumstances of each case.
If the Court is in doubt as to whether to approve the compromise on this basis, the Court may order that the costs be assessed or taxed before the Court makes a final decision on the approval application.
The preferable method avoids the concerns expressed by Brooking J in Sztockman v Taylor. First, there will be no conflict of interest. The amount of the costs to which the plaintiff’s solicitors will be entitled will always be subject to independent assessment, the plaintiff will be entitled to any surplus in the event that the assessed costs are less than the nominated maximum and the solicitors will not be entitled to any costs in excess of the maximum. The costs will not be the subject of agreement. Second, the Court will not need to be concerned with its own assessment as to whether the nominated maximum is a reasonable one. That will be a matter for the assessment.
The preferable method is also consistent with the qualification to the general rule expressed by Brooking J in Sztockman v Taylor that there is:
no reason why, in an appropriate case, the plaintiff's legal advisers should not negotiate a settlement whereby certain concessions are made by the defendant in relation to costs, provided that proper regard is had to the interest of the plaintiff.[20]
[20]Ibid, 575.
In my view, it is also appropriate for the plaintiff's legal advisers, or the plaintiff's administrator or guardian, to make a concession in relation to the maximum amount of costs. Such a concession will have proper regard to the interests of the plaintiff by promoting settlement.
Of course, the discretion as to costs must be exercised having regard to the facts of each case. However, the comments which I have made as to a preferable course to be adopted in compromising litigation on behalf of plaintiffs with a disability may provide a useful guide to practitioners and Masters for future cases. The comments may also promote settlements and reduce costs and delays in dealing with costs issues.
Nothing which I have said should be taken as discouraging parties from compromising proceedings brought on behalf of a person with a disability by reaching agreement as to the amount to be paid to the plaintiff, without agreeing anything with respect to costs. In those cases costs will be dealt with by agreement, assessment or taxation after approval of the compromise is obtained. My comments are directed towards those cases where the defendant is unwilling to settle without knowing the maximum amount payable as a result of the settlement, including any costs liability.
VI. Conclusion
For the above reasons, the appeal will be allowed. In lieu of paragraph 2 of the orders made by the Master on 21 February 2007 it will be ordered that:
2(a) In lieu of the provision made for her in the will of the deceased, provision be made for the plaintiff by paying to her the sum of $300,000 inclusive of her costs.
(b)The defendants pay the sum of $300,000 into court to the Senior Master within seven days.[21]
(c)Upon receipt, the Senior Master shall forthwith pay the sum of $285,788.10 to State Trustees Ltd as administrator of the estate of the plaintiff.
(d)The balance of $14,211.90 shall be held by the Senior Master pending an assessment by the Law Institute of Victoria Costing Service as to the plaintiff's costs of and incidental to the proceeding, on a solicitor and client basis.
(e)State Trustees Ltd shall pay the costs of the assessment by the Law Institute of Victoria Costing Service.
(f)Upon assessment of the plaintiff's costs, the sum of $14,211.90 shall be disbursed as follows:
(i)in payment of the assessed costs, up to a maximum of $14,211.90;
(ii)as to any balance, in reimbursement to State Trustees Ltd of the assessment fees paid or payable to the Law Institute of Victoria Costing Service and then to State Trustees Ltd as administrator of the estate of the plaintiff.
[21]This has already occurred.
No party seeks an order for costs of the appeal. I was informed that State Trustees will not seek to recover its costs from the plaintiff's funds, and that the defendants will not seek to recover any of their costs of the appeal from the deceased's estate. I will make orders accordingly.
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