Simon Dirk Kenworthy-Groen as executor of the estate of William Grove v Grove
[2023] WASC 87 (S)
•12 JUNE 2024
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SIMON DIRK KENWORTHY-GROEN as executor of the estate of WILLIAM GROVE -v- GROVE [2023] WASC 87 (S)
CORAM: ACTING MASTER MCDONALD
HEARD: 13 DECEMBER 2023
DELIVERED : 12 JUNE 2024
FILE NO/S: CIV 2188 of 2020
BETWEEN: SIMON DIRK KENWORTHY-GROEN as executor of the estate of WILLIAM GROVE
Plaintiff
AND
NICHOLAS GROVE
First Defendant
SIMON DIRK KENWORTHY-GROEN as trustee for THE GROVE GRAND FATHER FAMILY TRUST
Second Defendant
Catchwords:
Practice and procedure - Costs orders - Action brought by plaintiff as executor to determine proper construction of will - Costs pursuant to O 66 r 4(1) and O 66 r 9(2) RSC - Plaintiff conducted proceedings for his own benefit rather than for the benefit of the Estate - Plaintiff only entitled recover from the Estate his costs incurred in applying to the court for its direction - First and second defendants entitled to costs to be paid by the Estate
Legislation:
Rules of the Supreme Court 1971 (WA)
Supreme Court Act 1935 (WA)
Result:
Costs order made
Plaintiff's costs incurred in applying to the court for its direction to be paid out of estate
First defendant's costs to be paid by plaintiff
Second defendant's costs to be paid by plaintiff
Category: B
Representation:
Counsel:
| Plaintiff | : | L A Tsaknis |
| First Defendant | : | P G Donovan |
| Second Defendant | : | R Nash |
Solicitors:
| Plaintiff | : | Fort Knox Legal |
| First Defendant | : | MDS Legal |
| Second Defendant | : | Croftbridge |
Case(s) referred to in decision(s):
Grljusich v Grljusich (Unreported, WASC, Library No 960646, 08 November 1996)
Kenworthy-Groen v Grove & Anor [2021] WASC 364
Simon Dirk Kenworthy-Groen as executor of the estate of William Grove v Grove [2023] WASC 87
Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119
ACTING MASTER MCDONALD:
On 22 March 2023 I published reasons for decision on the plaintiff's application by originating summons for the construction of a provision of a will (Reasons).[1]
[1] Simon Dirk Kenworthy-Groen as executor of the estate of William Grove v Grove [2023] WASC 87.
The parties were invited to confer in relation to the orders which were made on 12 July 2023 which granted the parties liberty to apply in relation to costs. As the parties could not agree to costs orders, I heard the parties in relation to costs at a special appointment listed on 13 December 2023.
These are my reasons in relation to the appropriate costs orders of the action.
Background
The background to the dispute between the parties is summarised in the Reasons.[2]
[2] I refer to terms as defined in the Reasons.
Relevant to the costs issue is the fact that the origin of these proceedings was the opinion given by counsel for the plaintiff dated 30 October 2020 (Counsel's Opinion) to the effect that:[3]
(1)the competing constructions of the gift to first defendant in cl 6 of the Will meant its meaning was unclear and attendant with considerable uncertainty;
(2)given the competing constructions, cl 6 may be void for uncertainty in which case the purported gift to the first defendant would fall into the residue; and
(3)an application should be made to the Supreme Court seeking directions as to the proper construction of cl 6 of the Will.
[3] Affidavit of Simon Dirk Kenworthy-Groen sworn 30 November 2020 [28] - [31], Annexure 'SKG-11'.
By originating summons dated 1 December 2020, the plaintiff, in his capacity as executor of the Estate, commenced proceedings seeking a direction from the court as to the proper construction of cl 6 of the Will and a declaration as to the first defendant's rights, if any, under that clause.
On 28 February 2022, the plaintiff filed submissions indicating the plaintiff agreed with the other parties, namely, that on the proper construction of cl 6 of the Will, the first defendant was gifted a 5% interest in the partnership which included the Indian Ocean Hotel (IOH) premises and the business conducted from those premises and that cl 6 was not void for uncertainty.
On 12 July 2023, after publishing the Reasons, I made the following orders:
(1)The reference to the Indian Ocean Hotel or IOH in clause 6 of the Will refers to the IOH partnership, the assets of which comprise of both the premises located at 23 Hastings Street, Scarborough (Premises) and the hotel business conducted at the Premises.
(2)The Premises do form part of the property of the IOH partnership.
(3)The gift to the first defendant, Nicholas Grove, was intended to be a gift of the deceased's share of the IOH partnership.
(4)The reference in clause 6 of the Will to the gift of 5% is intended to be 5% of the IOH partnership taken from the deceased's share, not 5% of the deceased's share
(5)The gift to the first defendant is not void for uncertainty.
(6)The parties have liberty to apply in relation to costs.
Parties' submissions on costs
The first defendant
The first defendant seeks orders for the costs of the action in the following terms:
1.The first defendant's costs of the action be paid by Simon Dirk Kenworthy-Groen on the basis that:
(a)the first defendant be paid all the costs incurred by him except in so far as they are of an unreasonable amount or have been unreasonably incurred, so that subject to the above exceptions, he is completely indemnified for his costs; and
(b)Simon Dirk Kenworthy-Groen be liable to pay those costs in his personal capacity and that he not be indemnified with respect to payment of the first defendant's costs from the property of the estate of the late Mr William Grove (Estate).
2.To the extent that Simon Dirk Kenworthy-Groen is unable to pay the first defendant's costs of the action pursuant to order 1 above, the first defendant's costs of the action be paid out of the property of the Estate on the basis that the first defendant be paid all the costs incurred by him except in so far as they are of an unreasonable amount or have been unreasonably incurred, so that subject to the above exceptions, he is completely indemnified for his costs.
3.In the alternative to orders 1 and 2 above, the first defendant's costs of the action be paid by the plaintiff on the basis that the first defendant be paid all the costs incurred by him except in so far as they are of an unreasonable amount or have been unreasonably incurred, so that subject to the above exceptions, he is completely indemnified for his costs.
The first defendant submits that the plaintiff has dealt with the first defendant's interests in the Will in a partisan and inappropriate manner such that the plaintiff should personally pay the costs of the first defendant. The first defendant contends that the plaintiff has breached his duty to act impartially.
In support of this contention the first defendant submits that:
(1)the plaintiff commenced these proceedings only shortly after the first defendant foreshadowed, in a letter from his lawyers to the plaintiff's lawyers dated 9 September 2020, bringing proceedings to remove the plaintiff as executor of the Estate;[4]
(2)approximately six weeks later, on 30 October 2020, Counsel's Opinion was provided to the plaintiff;
(3)on 1 December 2020, the plaintiff commenced these proceedings;
(4)on 18 December 2020, the first defendant commenced proceedings to remove the plaintiff as the executor of the Estate, being CIV 2249 of 2020 (Removal Proceedings). The Removal Proceedings involve issues relating to the alleged deferential treatment between the bequests to the first defendant and the second defendant;
(5)on 2 June 2021, the first defendant filed a Minute of Proposed Orders seeking an order that this action be adjourned sine die pending the determination of the Removal Proceedings (Stay Application);
(6)up until 28 February 2022, the plaintiff maintained that there was a real question as to whether or not the most natural reading of cl 6 resulted in an outcome whereby the gift to the first defendant either fails or is so uncertain that it is void for uncertainty and falls into residue;[5]
(7)this position was adopted by the plaintiff in order to justify his position that these proceedings should be determined prior to the Removal Proceedings and to oppose the Stay Application. The plaintiff opposed the Stay Application on the basis that, if these proceedings determined that, on the proper construction of the will, the first defendant was not a beneficiary, then the first defendant had no standing to bring the Removal Proceedings;[6]
(8)shortly before the hearing listed to determine these proceedings, that being on 21 March 2022, the plaintiff changed his position so to effectively adopt the same position of the first defendant.
[4] Affidavit of Camilla Radenti sworn 2 June 2021, Annexure CDR -1.
[5] Affidavit of Simon Kenworthy-Groen in support of the Application for Directions pursuant to s 45 of the Administration Act 1903 sworn on 30 November 2020.
[6] Plaintiff's submissions for hearing on 1 September 2021 filed on 5 August 2021 [2].
The first defendant relies upon the plaintiff's conduct in the Removal Proceedings in support of his contention that the plaintiff had placed himself in a position of actual, or alternatively, potential conflict between his duty as executor of the Estate and his personal interest as trustee of the 'Grove Grand Father Family Trust'.
The first defendant submits that these proceedings have been adversarial in nature and were commenced as an attempt to seek to thwart the Removal Proceedings. Therefore, the first defendant says that the incurring of costs in these proceedings was entirely unjustified.
The plaintiff and second defendant
The plaintiff and the second defendant oppose the costs sought by the first defendant. They seek an order that each of the plaintiff's, first defendant's and second defendant's costs, including all reserved costs, be paid out of the Estate, to be taxed on a solicitor-client basis if not agreed.
The plaintiff and the second defendant submit that, having received advice from counsel as to the uncertainty of the construction of cl 6 of the Will, the plaintiff, as executor, properly submitted the dispute to court for resolution. They say that the fact that the plaintiff ultimately advanced in his submissions a construction that favoured the interests of the first defendant does not mean that the questions raised in the application were not properly and impartially put to the court by the plaintiff.
Applicable legal principles - costs out of trust property
Section 37(1) of Supreme Court Act 1935 (WA) provides that the court or judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent costs are to be paid.
Order 66 r 4(1) of the Rules of the Supreme Court 1971 (WA) (RSC) provides:
4.Action as to property, ordering costs out of property
(1)Where property is the subject of any action or matter, or where any question arising therein will affect any right or claim to property, the Court may make an order that the costs of any party may be recovered out of the property with or without recourse against any other party: Provided that no such order shall be made unless the Court is satisfied that the party seeking the order had a genuine interest to protect, or that it was reasonable in the circumstances that he should appear.
Order 66 r 9(2) of the RSC provides:
9. Restriction of discretion to order costs in some cases
(2)Where a person is or has been a party to any proceedings in the capacity of trustee, personal representative or mortgagee, he shall, unless the Court otherwise orders, be entitled to the costs of those proceedings, in so far as they are not recovered from or paid by any other person, out of the fund held by the trustee or personal representative or the mortgaged property, as the case may be; and the Court may otherwise order only on the ground that the trustee, personal representative or mortgagee has acted unreasonably, or in the case of a trustee or personal representative, has in substance acted for his own benefit rather than for the benefit of the fund.
Order 66 r 9 is a complete code as to the circumstances in which costs will be awarded to trustees, personal representatives and mortgagees.[7]
[7] Grljusich v Grljusich (Unreported, WASC, Library No 960646, 08 November 1996).
The effect of O 66 r 4(1) and r 9(2) is that, if a proceeding concerns the due administration of an estate, the costs of the proceedings may be seen as costs which have been necessarily incurred in connection with the administration of that estate and therefore, the executor is entitled to their costs from the estate. A relevant consideration as to whether the court should order otherwise is whether the executor has acted unreasonably in bringing and maintaining the application.
In Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119, (Sons of Gwalia) Finkelstein J identified three types of disputes involving trustees. They are summarised as follows.
The first type is an action brought by a trustee relating to the construction of the trust instrument or some other question arising in the course of an administration. When there is a dispute between two beneficiaries concerning the construction of the trust instrument or their respective rights in the trust estate, the trustee has a duty to treat all beneficiaries impartially and remain neutral. In this type of dispute, the trustee should apply to the court for resolution of the dispute but the trustee is not entitled to favour one party over another by advocating in favour of one party. In the first type of action, the costs of all parties are treated as necessarily incurred for the benefit of the estate and are ordered to be paid out of the estate either on a solicitor and client or indemnity basis. An exception to this usual order is where the trustee breaches their duty to act impartially, even if the breach is done in good faith. In such a case, the best costs order the trustee can hope for is that they are entitled to the costs incurred in applying to the court for its direction.
The second type of dispute is where the application is made by someone other than the trustee, usually a beneficiary. In this type of dispute, the issues are the same as in the first type of dispute and therefore could have been an application brought by the trustee. The same costs rules apply to the second type of dispute as they do to the first.
The third type of dispute is where one beneficiary brings a hostile claim against the trustee or another beneficiary. In this type of dispute, the costs usually follow the event.
Appropriate costs orders in these proceedings
Pursuant to O 66 r 9 of the RSC, the plaintiff, acting as executor of the Estate, shall be entitled to the costs of the proceedings out of the Estate, unless the plaintiff has acted unreasonably, or has in substance acted for his own benefit rather than the benefit of the Estate.
The question of whether the plaintiff's costs should be paid out of the Estate requires the court to characterise the nature of the proceedings by reference to the three types of trusts disputes identified in Sons of Gwalia.
This is clearly a trust dispute falling within the first type of action identified - it is an action brought by the executor of an estate relating to the construction of a will. Therefore, unless the court otherwise orders, the costs of all parties are usually ordered to be paid out of the estate either on a solicitor and client or indemnity basis. The issue is whether I should otherwise order on the basis that the executor has acted unreasonably or has not acted impartially (or in the words of O 66 r 9(2), has acted for his own benefit rather than the benefit of the estate).
It is helpful to have regard to how Master Sanderson has previously described this proceeding. On 21 April 2021, a dispute arose in these proceedings between the parties as to whether the plaintiff ought to provide discovery of documents to the first defendant. The matter was listed for a special appointment, but just prior to that being heard the parties consented to an order that the plaintiff provide discovery. The plaintiff filed an affidavit of discovery sworn on 14 May 2021 in which the plaintiff claimed privilege over a number of documents. The first defendant then made an application challenging the plaintiff's claim for privilege. Master Sanderson, in upholding the first defendant's challenge to privilege on the basis that privilege had been waived, made the following observations in relation to the character of the dispute between the parties:[8]
During the course of his submissions, counsel for the plaintiff submitted this application was not really an application for judicial advice. Rather, he said, it was a contest between the first defendant and the second defendant as to whether or not the first defendant was actually a beneficiary under the deceased's will. Counsel said he anticipated that at the hearing of the application, the plaintiff would take no active part. The protagonists would be the first defendant and the second defendant. With respect, I do not accept that to be the case.
[8] Kenworthy-Groen v Grove & Anor [2021] WASC 364 [7].
In my view, the plaintiff, as executor of the Will of the deceased, was clearly entitled to invoke the jurisdiction of the court and seek an opinion as to the proper interpretation of cl 6. The plaintiff had received Counsel's Opinion indicating that there was some uncertainty and that an application should be made to the Supreme Court in relation to the proper construction of cl 6 of the Will. In those circumstances, the plaintiff was entitled to commence these proceedings and to do so was not unreasonable.
However, the plaintiff did more than simply commence these proceedings and seek the direction of the court. The plaintiff took a position on the construction of cl 6 of the Will adverse to the interests of the first defendant. The parties were then engaged in a long and protracted dispute about the proper construction of cl 6. In my view, the plaintiff took a position, until 22 February 2022, that was partial to his interests in his capacity as the second defendant.
In my view, given the bitter family dispute which underpins these proceedings, the adversarial manner in which these proceedings were conducted by the plaintiff and the late agreement of the plaintiff to the interpretation of cl 6 contended for by the first defendant, the plaintiff has conducted the proceedings in a manner in which he acted for his own benefit rather than the benefit of the Estate. Therefore, the court may make an order that the plaintiff is not entitled to his costs from the Estate.
I find that the plaintiff, in his conduct of these proceedings, has acted for his own benefit rather than the benefit of the Estate. I now turn to consider the appropriate costs orders in the context of that finding.
The first defendant seeks an order that the plaintiff pay the first defendant’s costs in his personal capacity, that is that the plaintiff not be indemnified from the Estate.
Even though I have found that, once the proceedings were commenced, the plaintiff did not act impartially, that does not mean that the plaintiff was unreasonable in commencing the proceedings and in seeking the direction of the court, given Counsel's Opinion. It is not appropriate that the plaintiff be ordered to pay the first defendant's costs personally.
The appropriate order in relation to the first defendant's costs is that the first defendant's costs of the action be paid by the Estate on the basis that the first defendant be paid all the costs incurred by him except in so far as they are of an unreasonable amount or have been unreasonably incurred, so that subject to those exceptions, the first defendant is completely indemnified for his costs.
In relation to the plaintiff's costs, I consider the plaintiff ought to be indemnified from the Estate for his costs incurred in applying to the court for its direction. These costs are to be paid from the Estate on the same basis as the first defendant's - that is on the basis that, except in so far as they are of an unreasonable amount or have been unreasonably incurred, the first defendant is indemnified for his costs incurred in applying to the court for its direction.
In relation to the costs of the second defendant, the appropriate order is that the second defendant's costs of the action be paid by the Estate on the basis that the second defendant be paid all the costs incurred by him except in so far as they are of an unreasonable amount or have been unreasonably incurred, so that subject to those exceptions, the second defendant is completely indemnified for his costs.
The parties also made submissions in relation to the appropriate costs orders associated with the preparation for and attendance at the costs hearing. It is, in my view, undesirable for the court to embark on a lengthy determination of the appropriate costs order on a costs application - none of the parties in this case have been wholly successful in obtaining the costs orders that they were seeking. It is not necessary, in those circumstances, to make any specific order in relation to the costs application - the costs simply form part of the action.
Orders
I make the following orders:
(1)The plaintiff's costs incurred in making the application to the court for its direction be paid by the Estate on the basis that the plaintiff be paid all the costs incurred by him in making the application to the court for its direction except in so far as they are of an unreasonable amount or have been unreasonably incurred, so that subject to those exceptions, the plaintiff is completely indemnified for his costs incurred in making the application to the court for its direction.
(2)The first defendant's costs of the action be paid by the Estate on the basis that the first defendant be paid all the costs incurred by him except in so far as they are of an unreasonable amount or have been unreasonably incurred, so that subject to those exceptions, the first defendant is completely indemnified for his costs.
(3)The second defendant's costs of the action be paid by the Estate on the basis that the second defendant be paid all the costs incurred by him except in so far as they are of an unreasonable amount or have been unreasonably incurred, so that subject to those exceptions, the second defendant is completely indemnified for his costs.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LR
Associate to Acting Master McDonald
12 JUNE 2024
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