Shtark v Silman
[2016] VSC 363
•16 June 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COSTS COURT
S CI 2016 01812
| MAURICE SILMAN (in his capacity as executor of the estate of Israel Joel Silman, deceased) | Applicant |
| v | |
| IRENA SHTARK | Respondent |
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JUDGE: | Mukhtar AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 June 2016 |
DATE OF JUDGMENT: | 16 June 2016 |
CASE MAY BE CITED AS: | Shtark v Silman |
MEDIUM NEUTRAL CITATION: | [2016] VSC 363 |
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PRIVATE INTERNATIONAL LAW – Jurisdiction in personam – Service of process out of Australia – Requirement of leave to serve ‘any summons, order or notice in any proceeding’ – Distinguishable from service out without leave for originating process – Proceeding commenced in Victoria by foreign resident – Adverse costs order – Whether summons for taxation in Costs Court is originating process – Factors for granting leave to serve summons ex juris – Whether foreign resident has already submitted to local jurisdiction – Leave granted – Supreme Court (General Civil Procedure) Rules 2015, r 7.06(c).
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APPEARANCES: | Counsel | Solicitors |
| For the applicant | Ms S Scully | |
| For the respondent | No appearance (ex parte) |
HIS HONOUR:
This application is for the Court’s leave to allow a summons for taxation in the Costs Court to be served out of the jurisdiction in Jerusalem, Israel. The application is brought under rule 7.06(c) of the Supreme Court (General Civil Procedure) Rules 2015. Under that rule, the court, by order ‘…may allow service out of Australia of…(c) any summons, order or notice in any proceeding’. The process here is the summons for a taxation of the applicant’s costs of successfully opposing a proceeding in this Court. Such extra territorial orders require circumspection in approach by the Court: see Nygh’s Conflict of Laws in Australia.[1] I am going to allow service out of the summons but it is necessary to expose the principled basis on which the Court has acted.
[1](8th ed), p 37.
The applicant here, Maurice Silman (in his capacity as executor of the estate of Israel Joel Silman, deceased), was the defendant in a proceeding commenced in 2013 by originating motion S CI 2013 01222 by Irena Shtark. Maurice Silman is the son of the deceased. Irena Shtark is a beneficiary under the will and, as I gather the facts, was not the deceased’s spouse but has been described elsewhere by Maurice Silman as someone on whom the deceased (who had separated from his wife) depended and who lived with him in Jerusalem.[2] The solicitors that acted for Irena Shtark in that proceeding were Messrs Kliger Partners of Level 2, 280 Queen Street, Melbourne. The evidence on this application reveals very little about that proceeding, so I have had to inform myself by obtaining the archived file. I have ascertained the following information.
[2]See exhibit DW-21 to the affidavit of D Weinberger sworn 23 April 2013 in proceeding S CI 2013 01222.
Irena Shtark’s motion was an application under Order 54 of the Rules of Court for discovery of documents. Order 54, known commonly as an administration proceeding, enables a claim to be made for relief in connection with the administration of an estate. The deceased Israel Joel Silman, said to be a wealthy businessman, returned to live in Israel in 1972. In 1984 Maurice Silman was entrusted with management of his father’s businesses in Australia. Israel Silman died on 25 January 2011 in Israel leaving a ‘final Australian will’ dated 11 February 2007. Probate was granted to Maurice Silman on 16 December 2011. By the will the deceased left a specific legacy of $16,500,000 to Irena Shtark.
Irena Shtark’s motion stated that ‘the defendant [Maurice Silman] has denied that there are sufficient assets in the estate to satisfy the gift to the plaintiff’. It says that the deceased ‘apparently’ established trust accounts for Irena Shtark for AUD$666,000 in July 2006 and AUD$6,000,000 in about November 2006. It says the defendant has denied the existence of the trusts and has in breach of his duty, failed to provide an account to her of the administration of the deceased’s estate. The order sought was an order that the defendant provide a list of documents such as accounting records, trust documents, minutes of meetings of the trust and tax returns.
The affidavits in support of Irena Shtark’s motion were sworn by Mr David Weinberger of Messrs Kliger Partners. There is no need to go into the contents of his materials beyond one matter. He said there were proceedings pending in Israel relating to the validity of a Financial Agreement between the deceased and Irena Shtark by which, it is said, he promised she would receive certain properties and AUD$16,500,000 in the event of his death. He says that Maurice Silman and his sister in Israel have disputed the validity of that agreement and there are legal proceedings in Israel. There appears to be a real question, apparently being litigated in Israel (or perhaps already been litigated) whether the deceased truly did promise Irena Shtark such a large sum, and whether he ever had such an amount of money to promise.
On 10 May 2013, a Judge of this Court (McMillan J) refused Irena Shtark’s application and dismissed the proceeding. There are no reasons for decision published that I have seen. Her Honour ordered Irena Shtark to pay Maurice Silman’s costs of the application. In the absence of agreement about the amount of the costs, the assessment of those costs goes to the Costs Court which is established within the Trial Division of the Supreme Court and has jurisdiction to hear and determine the assessment of costs in all proceedings in the Supreme Court – see s 17C and 17D of the Supreme Court Act1986 (Vic). Once quantified, an order for the payment of costs is made, to be enforced like any court order for the payment of a monetary obligation.
An application for costs to be taxed is made to the Costs Court by summons, with which a bill of costs must be filed – see rule 63.38 and 63.39. In contemplation of filing such a summons, in December 2015 and January 2016 (that is, about two and a half years after the trial Judge’s costs order) the solicitors for Maurice Silman enquired of Messrs Kliger Partners whether they still acted for Irena Shtark. There was no response.
On 11 May 2016 Maurice Silman filed a summons for taxation, with a bill of costs for $15,429.83. That summons was returnable on 13 June 2016, then extended to 25 July 2016. The Costs Court has determined that it will proceed under rule 63.86 and assess the bill of costs by making an estimate of the approximate total for which an order on taxation would likely be made, rather than making a determination on the individual items on the bill. Rule 63.88 has procedures should anyone object to the estimate so made.
On 16 May 2016 the solicitors for Maurice Silman made another enquiry of Messrs Kliger Partners whether they still acted for Irena Shtark. There was no response.
According to the will dated 11 February 2007 Irena Shtark lives at 7/34 Diskin Street, Jerusalem, Israel. The will states the testator’s address to be in West Melbourne. The two witnesses to his signature state their address to be in Jerusalem.
The necessity for the Court’s leave under rule 7.06 is to be compared to the ‘long arm’ or extended jurisdiction under rule 7.01 which permits, without leave of the Court, service of originating process outside State territorial limits in cases falling under specific categories in rule 7.01. Those categories all describe situations where the subject matter of the proceeding has a nexus with Victoria. In the case of wills or deceased estates, originating process may conceivably be served out of Australia without order of the court in three possible grounds. First where a will is sought to be construed, rectified, set aside or enforced in the proceeding here: rule 7.01(1)(b). Secondly, where any relief is sought against a person domiciled or ordinarily resident here: rule 7.01(1)(c). Thirdly, if the proceeding is for the administration of the estate of a person who died domiciled in Victoria, or, for any relief or remedy which might be obtained in any such proceeding: rule 7.01(1)(d).
It is important to see that the service out under rule 7.01 without leave is referable to originating process. That is defined under rule 1.13 to mean ‘…any process by which a proceeding is commenced…’. Rule 1.13 defines ‘proceeding’ as any matter commenced by writ or originating motion or as otherwise provided by the Rules. Thus, under the scheme of Order 7, there is no requirement for the Court’s leave to serve originating process; but leave is required to serve a summons, order or notice in a proceeding. In the ordinary case, the distinction between the two descriptions of process would not matter. Assuming proper grounds exist for service out of originating process under rule 7.01 and that service is not set aside subsequently, a foreign litigant so served would appoint Victorian solicitors and service of subsequent interlocutory summonses or notices would be served on the solicitors on the record. Service of a ‘summons order or notice’ in that proceeding on a foreign third party would be an entirely different matter.
The Court is not being asked to order substituted service of the summons for taxation on Messrs Kliger Partners. They have not filed a notice of ceasing to act. I suppose the solicitors for Maurice Silman may have taken the view that the taxation is a separate matter for which they will not assume Messrs Kliger Partners are instructed to act, or, with the passage of time, want to make sure they still do.
This exposes the first issue on this application: is the summons for taxation a species of originating process (even though it is called a ‘summons’ which is naturally suggestive of interlocutory process), or is it a summons within or referable the proceeding that was brought here by Irena Shtark? The second issue is this: if the summons for taxation is not originating process, then what are the factors applicable to the exercise of the discretion to grant leave to serve the summons ex juris? Questions can arise (at least with what is classified as coercive process such as a subpoena or notice to produce) whether service of the process on a foreign resident infringes public international law concerning comity or immunity. That is, a question whether leave can be given to enable such (non-originating) process to exercise local sovereignty over a foreigner.[3] Leave under rule 7.06 is required whether or not there is a connecting factor under rule 7.01. And, counsel for the applicant here says there is no connecting factor under rule 7.01 on this summons.
[3]See generally Civil Procedure Victoria, Vol 1, [7.060] – [7.06.5].
In one sense it might be said superficially that the taxation of costs, unconcerned with the merits of the case which has already been dealt with, is a separate proceeding and is therefore originating process that commences the taxation exercise. The summons for taxation is filed in the Costs Court and has its own proceeding number. However, the costs order of McMillan J upon which the assessment necessarily depends was made in Irena Shtark’s proceeding. It was part of the outcome. It was referable to the merits of the case when it came to the exercise of the costs discretion. Thus, to my mind the taxation derives or originates from the costs order made in the administration action brought by Irena Shtark. I see it as a step in the proceeding brought by Irena Shtark, albeit one to be conducted in the Costs Court.
I do not think this case calls for a disquisition on territorial jurisdiction or foreign immunity. The essential principle is that an essential attribute of the sovereignty of the State is a possession of jurisdiction over all persons and things within its territorial limits and in all causes civil and criminal arising within those limits: see generally Starke’s International Law.[4] Generally speaking, it is recognised that courts of the State will exercise jurisdiction over persons upon whom service is effected within the boundaries of the State, or those who submit. The extension to that principle that has occurred in most court systems to enable process to be served outside the jurisdiction of the State is confined to specified circumstances which are carefully defined as having a relationship between the action in relation to which the process is sought to be served and the State: see Arhill Pty Ltd v General Terminal Co Pty Ltd.[5] Otherwise, it has always been regarded as a serious question whether a foreign party should be brought to contest rights in the local jurisdiction because of the respect for which a State has for the sovereignty of another State.
[4](11th ed) 184 ff.
[5](1990) 23 NSWLR 550.
Authorities on this question seem focussed very much on the coercive quality of the process in question, and in that regard draw distinctions between originating process and other process such as subpoena. This helps understand I think the distinction between originating process and process in rule 7.06. Originating process such as a writ or originating motion gives a foreign party notice of an impending legal action. It enables the foreign party to challenge the jurisdiction or the service out. But, non-originating process such as subpoena is a coercive or compulsive order which compels the recipient to appear or produce documents under threat of punishment for contempt. Thus, the compulsory nature of certain orders or summonses on foreign parties is what is normally the cause for concern about intrusive exercise of powers into another State’s territorial sovereignty. Whilst the power seems to exist to serve a subpoena outside Australia, the rule conferring the power is construed consistently with the principle of international law regarding comity or territorial sovereignty. That is why it is only in rare circumstances that a State can require obedience to its sovereign authority over foreign parties: see Arhill.[6]
[6]Ibid 553-4.
I think I can put the question of subpoenas or notices to produce to one side, for this case does not concern coercive process in that sense. The process here is a summons to attend a taxation which is in one sense coercive but does not oblige a party to attend under sanction of penalty. I think what comes into play on the question here is the factor of voluntary submission to the jurisdiction of this Court. Regardless of process, a foreign defendant may come within the jurisdiction of this Court by voluntary submission to the jurisdiction of this Court, which can occur in a variety of ways: see Nygh’s Conflict of Laws in Australia.[7] The principle is that there must be some conduct in the proceedings by or on behalf of the foreign party that is inconsistent with an objection to jurisdiction.
[7]At [3.100] ff.
I think the decisive consideration in this case is that this summons is not only seeking taxation of costs on a proceeding already heard here, but it was a proceeding brought by the foreign person, Irena Shtark as plaintiff. Having brought her proceeding here, she has submitted herself to the ordinary incidents of the suit such as, for example, a set off or counterclaim arising out of the same matter in dispute or some other claim sufficiently connected or allied to the subject matter so as to make it necessary in the interests of justice that it should be disposed of along with that claim: see Starke’s International Law.[8] Thus:
The justification of this principle was that if a foreign State or foreign sovereign voluntarily chose to litigate, it has to abide by all the rules like any other litigant and ultimately take all the consequences of its decision to sue. The decisive test was, in effect, whether there had been on the part of the plaintiff State a definitive election to submit, for all purposes, to the court in which the suit was instituted.[9]
[8](11th ed) at 195.
[9]At 196.
I adopt the principle as stated in Nygh’s Conflict of Laws in Australia:
A foreign plaintiff who brings action within the jurisdiction submits thereby to any defence by way of counter-claim or by a set-off or cross-claim as well as to any action by way of counter-claim arising out of the same subject matter, whether based on the same cause of action or not, even if such a claim could result in a judgment against the plaintiff exceeding the plaintiff’s claims. But the plaintiff does not thereby submit to claims arising outside of and independent of the subject matter of the plaintiff’s action.[10]
[10]At [3.106].
On those principles, the exercise of discretion favours the grant of leave to serve this summons. I think the taxation of costs cannot be said to be outside of and independent of Irena Shtark’s action. Whatever the nexus requirements, Ms Shtark has chosen to litigate a claim in this Court which was unsuccessful. Under the rules and the discretions of the Court in which she has chosen to litigate, an order was made requiring her to pay the costs of her failed application. Under the same rules, those costs come to be assessed by the Costs Court. The liability to pay costs and their quantification is integral to the case she had brought in this Court. In my opinion, the conclusion is that she has submitted to the jurisdiction of this Court for purposes that extend to the taxation of costs.
The solicitors for Maurice Silman have established contact with lawyers in Tel Aviv who acted for him and his sisters to defend a claim brought by Irena Shtark in Israel against the estate. Those lawyers say they can, and are willing to make arrangements to effect service. But I can make no order facilitating service by such a private arrangement. The matter is governed by Order 80 which came into effect on 1 November 2010 when the Hague Service Convention entered into force in Australia. Israel is a contracting State.[11] Service must take place under the transmission channels of the Hague Convention.
[11]See Civil Procedure Victoria, Vol 1, [80.01.1]
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