Sharpe v Crusi (No. 2)
[2018] VCC 107
•20 February 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised (Not) Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-16-04396
| GEOFFREY SHARPE, and OTHERS (as executors of the estate of Beryl Alice Crusi, deceased) | Plaintiff |
| v | |
| PAUL KEVIN CRUSI | Defendant |
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JUDGE: | HIS HONOUR JUDGE ANDERSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 February 2018 | |
DATE OF JUDGMENT: | 20 February 2018 | |
CASE MAY BE CITED AS: | Sharpe & Ors v Crusi (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 107 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Costs – Dismissal of the proceeding – Whether indemnity costs appropriate – Plaintiffs failed to seek the advice of the Court under Order 54 before initiating the proceeding – Defendant’s solicitors notified plaintiffs of flaw in their case before the action commenced –Plaintiffs proceeded with the claim despite recognising the appropriateness of discontinuing the proceeding – Plaintiffs ordered to pay the cost personally – Issues relating to whether the plaintiffs should be indemnified from the estate in respect of the defendant’s costs order or for their own costs more appropriate for determination by the Supreme Court – Re Beddoe [1893] 1 Ch 547, Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66, Wales v Wales [No 2] [2014] VSC 33, and on appeal at [2014] VSCA 101 considered.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr T R Messer | Millens |
| For the Defendant | Mr S Gannon | McKean Park |
HIS HONOUR:
1 Judgment has been delivered in this matter. The successful defendant has sought orders for costs as follows:
a. that the defendant’s costs be paid on an indemnity basis;
b. that the plaintiffs pay the defendant’s costs personally;
c. that the plaintiffs bear their own costs of the proceeding, without being permitted an indemnity for their costs from the deceased’s estate.
2 There was no issue from plaintiffs’ counsel, Mr Messer, that the order for costs should follow the result of the case and that an order should be made for the payment of the defendant’s costs by the plaintiffs.
Indemnity costs
3 Defendant’s counsel, Mr Gannon, submitted that indemnity costs were appropriate for the following reasons:
a. after receipt of the plaintiffs’ solicitors’ letter of demand dated 11 July 2016, the defendant’s solicitors responded on 20 July 2016 stating, “your clients’ demand for payment is contrary to the provisions of the Will. Clause 7 of the Will is quite clear that any loans are to be taken into account in the distribution of the estate”. This was essentially the reason the defendant succeeded in the litigation;
b. a further letter from the defendant’s solicitors on 16 September 2016 suggested “pre-litigation mediation to be held between the parties, with a view to resolving the issues”. The plaintiffs’ solicitors did not respond to the letter and issued the writ on 3 October 2016;
c. later correspondence between the solicitors agitated these issues further without resolution;
d. the defence filed on 11 November 2016 squarely raised clause 7 of the will and asserted in paragraph 7(o) that, “in acting as they have in issuing this proceeding the plaintiffs have acting contrary to their fiduciary duties and in breach of the trusts contained in the will”;
e. a letter from the defendant’s solicitors to the plaintiffs’ solicitors dated 7 February 2017, raised the issue that “an executor will often seek the Court’s advice and directions under Order 54 of the Supreme Court Rules before proceedings are commenced, to protect them against the possibility of a personal costs order in the event the proceeding fails”.
4 Mr Messer submitted further correspondence between the solicitors:
a. on 24 January 2018, the plaintiffs’ solicitors wrote to the defendant’s solicitors as follows, “We have instructions to discontinue the County Court proceeding. Please sign the attached Notice to Discontinuance and return as soon as possible so that we can file the same with the Court”;
b. the defendant’s solicitors responded,
“I note you have instructions to discontinue. Our client will not consent to the discontinuance unless your clients agree:
1. to pay our client’s costs of the proceeding on an indemnity basis; and
2. that they not be indemnified for their own or our client’s costs from the estate (and any costs relating to the litigation already paid by the estate be paid back).
If your clients agree, we suggest that Minutes of Consent Order reflecting this be prepared, which could be signed by all parties and submitted to the court. Please let us know how you intend proceeding”.
c. the plaintiffs’ solicitors, having failed to obtain the consent of the defendant, on terms acceptable to them, proceeded with the action and did not seek the leave of the Court under Rule 25.02(2)(b) to discontinue the proceeding.
5 Mr Gannon relied upon the principles set out in Re Beddoe [1893] 1 Ch 547 in support of the application for indemnity costs, as well as the other costs orders. Ordinarily, Re Beddoe is considered in the context of a trustee’s entitlement, as of right, to indemnity out of the trust for expenses properly incurred, including the costs of their participation in litigation. Usually some “misconduct” is required before a trustee is deprived of the costs of pursuing or defending a claim.
6 The High Court in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 (“the Macedonian Church case”) at [47] and [48] approved the “warning” given in Re Beddoe “that trustees who become involved, or wish to become involved, in litigation should seek the court’s sanction”.
7 The process for doing so is set out in Order 54 of the Supreme Court (General Civil Procedure) Rules 2015 which are mirrored in Order 54 of the County Court Civil Procedure Rules 2008 (“County Court Rules”). Order 54 provides a procedure for “the determination of any question which could be determined in an Administration proceeding, including any question…arising in the administration of an estate or in the execution of a trust”.
8 The High Court in the Macedonian Church case determined the matter by considering the provisions of section 63 of the Trustee Act 1925 (NSW) which allows a trustee to apply to the Court “for an opinion advice or direction on any question respecting the management or administration of the trust property”.
9 At [41], the plurality noted the English and New South Welsh equivalent of Order 54 as “an alternative to s. 63” and the “important and fundamental similarities between the two” legislative schemes [44]. At [71], the plurality said that, “Obtaining judicial advice resolved doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation”.
10 These principles will determine whether pursuit of litigation without first obtaining the Court’s advice may constitute “misconduct”, and therefore a reason for not allowing the trustee’s costs to be indemnified out of the trust or estate. In my view, the application of these principles may also constitute the basis for an award of indemnity costs in an appropriate case.
11 In the present action, the following matters are sufficient reason for ordering the plaintiffs to pay the defendant’s costs of the proceeding on an indemnity basis:
a. the plaintiffs failure to make an application under Order 54, or to the Supreme Court in its probate jurisdiction, before bringing the proceeding;
b. the plaintiffs’ disregard of the reasoned arguments of the defendant’s solicitors as to the merits of the proposed claim, and;
c. the plaintiffs’ failure to seek the leave of the Court in January 2018 to discontinue the proceeding.
Payment of costs personally
12 It is also appropriate, for the reasons I have given, that the plaintiffs should personally be responsible for payment of the defendant’s costs. I consider that an order determining by whom a costs order should be paid is within the general costs discretion of the Court.
13 Ordinarily, matters involving the administration of deceased estates are dealt with by the Supreme Court. By section 6 of the Administration and Probate Act 1958 (Vic), (“the Act”), “The Court shall have jurisdiction to grant probate of the will or administration of the estate of any deceased person leaving property whether real or personal within Victoria”. Under the Act, “Court” means the Supreme Court of Victoria.
14 Order 54 of the County Court Rules grants a jurisdiction in relation to an “administration proceeding” which is not necessarily inconsistent with the jurisdiction given to the Supreme Court by section 6 of the Act, although that jurisdiction includes the general supervision of the administration of all deceased estates in Victoria.
15 Section 24 (1) of the Supreme Court Act 1986 (Vic) provides that, “Unless otherwise expressly provided by this or any other Act or by Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent costs are to be paid”.
16 I consider that, if this Court were exercising jurisdiction under Order 54, the Court would have a broader discretion in relation to the question of costs which might include all the orders sought by Mr Gannon and the order in paragraph 29(c) of the decision of McMillan J in Wales v Wales [No 2] [2014] VSC 33. I note that the orders of McMillan J were varied on appeal at [2014] VSCA 101. In the present circumstances, I am less confident and would be reluctant to make orders which might trespass upon the Supreme Court’s powers and responsibilities in relation to the general administration of deceased estates.
17 If I were to exercise the powers, I may have made the orders sought by Mr Gannon. However, I do not intend to exercise the powers, and I would not wish to express a concluded view on those matters.
18 I consider, however, that is appropriate for me to order that the defendant’s costs be paid personally by the plaintiffs. I will not however determine the question of whether the plaintiffs are entitled to be indemnified from the deceased’s estate in respect of that costs order.
Indemnity in respect of the plaintiffs’ own costs
19 Similarly, I will make no order as to whether the plaintiffs should be permitted an indemnity, for their own costs of the proceeding, from the deceased’s estate. These matters of indemnity are, in my view, matters more properly for determination by the Supreme Court.
Orders
20 I will make the following orders:
1. Judgment for the defendant against the plaintiffs that the proceeding be dismissed.
2. The plaintiffs must personally pay the defendant’s costs of the proceeding including any reserved costs to be assessed by the Costs Court on an indemnity basis in default of agreement.
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Certificate
I certify that these 6 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 20 February 2018.
Dated: 20 February 2018.
Zeinab Ali
Associate to His Honour Judge Anderson
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