Skaftouros v Dimos (No 2)

[2002] VSC 219

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 5667 of 2001

IN THE MATTER of the Will of Dimitrios Skaftouros (deceased)
AND IN THE MATTER of Section 34 of the Administration and Probate Act 1958

LEE ANTHONY SKAFTOUROS AND ORS	Plaintiffs
v
LEO DIMOS	Defendant

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JUDGE:	Mandie J
WHERE HELD:	Melbourne
DATE OF HEARING:	31 May 2002
DATE OF JUDGMENT:	31 May 2002
CASE MAY BE CITED AS:	Skaftouros v Dimos (No. 2)
MEDIUM NEUTRAL CITATION:	[2002] VSC 219

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Administration and Probate – removal of executor – final orders – costs as between solicitor and client.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr C. Gunst QC with Mr M. Simon	Woodhams O’Keeffe
For the Defendant	Mr R. Berglund QC with Ms C. Sparke	Leo Dimos & Associates

HIS HONOUR:

1. I will deal with each of these orders in turn.  The first order sought by the plaintiffs has not been the subject of any debate as to its form, however, I think that I prefer to express it in these terms: (I will make two orders)

1.The defendant Leo Dimos be this day removed from the office of executor of the will and estate of Dimitrios Skaftouros deceased pursuant to s. 34(1)(c) of the Administration and Probate Act 1958.

2.Insofar as necessary the defendant be this day removed as trustee of the said estate, or any part thereof of which he is or has become Trustee, including specifically the monies held for the infant beneficiaries, pursuant to the inherent jurisdiction of the court.

1. Having been handed a consent of Trust Company of Australia Limited to act as Trustee of the above estate or - I think the correct terminology is administrator - I will have that placed on the file.

1. The third order will be that Trust Company of Australia Limited be appointed administrator of the Will and estate of Dimitrious Skaftouros deceased in place of the executor so removed.

1. I think it is a matter for the beneficiaries;  Ms Sparke mentioned that the defendant wished to contend that State Trustees would be appropriate but I have got no evidence before me that there is any difference, and I think it is primarily a matter for the plaintiffs so I am content to make that order.

1. The defendant has said that the week proposed by the plaintiffs for delivering up of the books, records, moneys titles and other things is insufficient.  I entirely reject that submission. Of course it is a matter of priorities and I appreciate that the defendant is a sole practitioner, but he does have staff. In any event the priorities which have been ignored in the past will now have to be placed to the forefront and I will make the order as sought.

4.That the defendant forthwith and not later than 4 p.m. on 7 June 2002 deliver up to the Administrator at its office at 151 Rathdowne Street Carlton Victoria, all books, records, documents, moneys, titles and other things belonging to or forming part of the estate.

1. I should say that I have not made the order about vesting because, as I have already indicated in the course of argument, I think it is covered by s. 34(4) of the Administration and Probate Act.

1. The next order deals with the filing of a document with the Registrar of Probates.  I will order that the defendant forthwith and not later than 4 p.m. on 7 June 2002 file with the Registrar of Probates a copy of his affidavit filed in this proceeding pursuant to Rule 6.03 of Chapter 3 of the Rules together with a copy of the exhibits and a further affidavit bringing the accounts up to date, namely up to 31 May 2002. 

1. The next matter sought is the repayment of the costs of this proceeding which were taken out of the estate. In my opinion the court has power to make such an order pursuant to s. 34(1), either as a term and condition (as referred to in the section, the court may order the removal of an executor "upon such terms and conditions as the court thinks fit"), alternatively, as part of the further power of the court under that section to, "make all necessary orders for vesting the estate in the new administrator, and ... as to costs". I also invoke the power of the court to make orders as if it were in an administration proceeding to support the making of this order. The other submission made was that the costs needed to be taxed or in some way sorted out because they covered other aspects of the matter. I do not see how the executor was entitled to take these fees out.

1. They relate to the proceeding and that is the basis upon which they were dealt with at the hearing.  Insofar as there may be some small elements of them that can be said to relate to the administration of the estate and not at all to the proceeding, then, in my view, the defendant should be left to whatever other remedies he may or may not have to recover them from the estate but I do not think that this submission should be allowed to be used as a device to prevent the repayment of very substantial sums which almost exclusively, if not entirely it seems to me, relate to the defence of this proceeding.  It was also mentioned that they in part related to the committal proceeding but I do not consider that the defendant should be entitled to have his costs out of the estate in relation to that proceeding in any event.

1. As far as interest is concerned, I will fix a lump sum of $3,000.  I will order that the defendant forthwith and not later than four p.m. on 27 June 2002 pay to the administrator for the estate the sum of $51,231.78 plus interest of $3,000.

1. The next question is the question of costs.  Ms Sparke as counsel on behalf of the defendant put up what I might say was a perfectly respectable sensible argument - although I do not agree with it in the end, but it was properly put - that the defendant had acted reasonably up to a particular date and should have his costs out of the estate up to that date (some time in September 2001) and that after that it was probably a different situation, having regard to the reasons that have been handed down.  And then Ms Sparke said that perhaps in the light of what I was suggesting to her in the course of argument, the best that she could submit was that each party bear their own costs between May 2001 and September 2001 but I did not hear that as indicating that she was resiling from her primary position, that the costs for the period from May to September of the defendant should come out of the estate because he had acted reasonably in defending, at least, in that period.  I do not accept the submission.  On the findings of the court the defendant was warned in February 2001 that instructions had been received to apply for his removal.  The reasons disclosed that there was no sensible reaction to that warning at all.  Proceedings were only issued in May 2001 so, that the defendant had many months to redeem the situation and put the situation right, but he failed to do so and then, as I have noted in the reasons, he after May exacerbated the existing situation and made it worse rather than attempting again to take the opportunity to redeem the situation.

1. In those circumstances I do not consider that the defendant acted reasonably in defending this proceeding from the outset.  I think he acted unreasonably.  All the details are to be found in the judgment.

1. I am fortified in reaching that conclusion by the extraordinary submission which Ms Sparke was specifically instructed to make on behalf of the defendant, after putting the foregoing argument, that he should have his costs of this proceeding on an indemnity basis out of the estate.  I have to categorise that submission as impudent and I think that it demonstrates the recalcitrance and the failure to recognise his duties which I have attempted to describe in my reasons for judgment.  It highlights the cast of mind which led to the failure of the defendant in this case to take an objective view of his duties, to take a proper view of his duties.

1. It also fortifies my independent conclusion that he should be ordered to pay all the costs of the plaintiffs of this proceeding.  Costs should follow the event.  I am of the view that he should be ordered to pay the costs of the plaintiffs of this proceeding, including reserved costs.

1. The plaintiffs contend that those costs should be ordered to be paid on a solicitor/client basis, and they do that based upon a letter written by the plaintiffs' solicitors to the Dimos firm dated 23 November 2001 which makes a "Calderbank" offer, offering to compromise the proceeding on the basis that the defendant consent to Lee and Harry Skaftouros being substituted as executors and the proceeding be struck out with no order as to costs, giving the defendant until 12 December to accept the offer.

1. The plaintiffs also seek costs as between solicitor and client on the basis of the overall conduct of the defendant, of the administration of the estate and in this proceeding.  

1. The solicitor and client basis of taxation is defined in Rule 63.30 of Chapter 1 of the Rules as being "all costs reasonably incurred and of reasonable amount".  The taxation of costs on an indemnity basis, which has been recently defined and inserted in Rule 63.30.1 is similar, although in that category it is provided that:  "all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred, and any doubt which the taxing master has as to whether they are unreasonably incurred or unreasonable amount is to be resolved in favour of the party to whom the costs are payable."  So there is no real difference between the solicitor and client basis and the indemnity basis, except that the onus is reversed in the latter case.  The costs are to be accepted unless unreasonable in the case of an indemnity.  In the case of solicitor/client, the party seeking has to show that the costs were reasonably incurred and of reasonable amount.

1. I think that the plaintiffs should have all their costs in this case, insofar as they are reasonably incurred and of reasonable amount.  And primarily I am of that view because of the total conduct of the defendant.  His conduct in the administration of the estate is described in the judgment, as is his conduct of this proceeding.

1. Based upon the findings that have been made, I think that the appropriate order to be made is that the defendant pay the plaintiffs' costs on a solicitor/client basis.  The court has power to make that order in its discretion.  Rule 63.32.1 provides that:  "The court may order that costs be taxed on a solicitor and client basis."  And it is a matter for the discretion of the court.  The discretion of the court has to be exercised judicially and not unreasonably. 

1. In my view the conduct of the defendant in relation to his administration of the estate, and in his defence of this proceeding, warrants such an order.  I am fortified in reaching that conclusion by the application this morning for indemnity costs in his favour, which coming from an executor would be strange enough in this proceeding, but coming from a solicitor, is quite extraordinary.  Any doubt that I had about making such an order was removed by that application.

1. So far as the Calderbank offer is concerned, it seems to me that I do not need to take that into account.  But if I did, it would only support the conclusions that I have reached.  It made an offer which gave the defendant an opportunity to resign without having to pay the plaintiffs' costs.  Admittedly the substituted executors suggested were unsuitable, but one does not have to be too imaginative to think that if the defendant had agreed to resign on the basis suggested, but proposed some other party as a substitute administrator, that would either have been favourably considered or if rejected, that the situation now would be a very different one.

1. So that if I took it into account, I think it supports the conclusion that I have reached, at least from the date of the offer, but I have reached my conclusion independent of that.

1. I also emphatically think that, in addition to the costs of the proceeding proper, an order for solicitor and client costs against the defendant is well merited in relation to the plaintiffs' applications before Justices Balmford and Beach.  In each case the necessity for the plaintiffs to make those applications was quite unnecessarily created by the conduct of the defendant.  

1. I do not see any reason to distinguish between any of the costs in the case, and I think that the appropriate order is that the defendant pay the plaintiffs' costs of this proceeding, including all reserved costs, to be taxed on a solicitor/client basis.  I will grant a stay of 28 days in relation to the order for costs.

1. The question of the committal proceedings.  I formally order that the plaintiffs' summons of 8 November 2001 be dismissed.  When I said all reserved costs, I will add "including the costs of seeking an injunction pursuant to the plaintiffs' summons of 8 November 2001".

Note:Prior to the authentication of the order His Honour amended orders 2 3 and 4 to read as follows:

2.Insofar as necessary the defendant be this day removed as trustee of the said estate or any part thereof of which he is or has become trustee, including specifically the moneys held for the infant beneficiaries , pursuant to the inherent jurisdiction of the court, and the trust property shall vest in the replacement trustee under para. 3 hereof;

3.Trust Company of Australia Limited of 151 Rathdowne Street, Carlton, Victoria is appointed administrator of the will and estate of Dimitrios Skaftouros deceased in place of the executor so removed and trustee in place of the trustee so removed;

4.The defendant forthwith and not later than 4:00 pm on 7 June 2002 deliver up to the administrator at its office at 151 Rathdowne Street, Carlton, Victoria all books, records, documents, moneys, titles and other things belonging to or forming part of the estate or the trust;

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