Smith v Whittaker
[2016] VSC 287
•26 May 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
S CI 2014 01483
S CI 2014 01485
IN THE MATTER of Part IV of the Administration and Probate Act 1958
IN THE MATTER of the Will and Estate of Michael John Smith, deceased
and
IN THE MATTER of the Will and Estate of Kim Melina Smith, deceased
| NIKITA MAY SMITH (who brings this proceeding by her Litigation Guardian Kylie Burgess) | Plaintiff |
| v | |
| ROBERT CHRISTOPHER WHITTAKER (who is sued as the one of the Executors of the estate of Kim Melina Smith, deceased (and others according to the schedule attached)) | Defendants |
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JUDGE: | Derham AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 May 2016 |
DATE OF JUDGMENT: | 26 May 2016 |
CASE MAY BE CITED AS: | Smith v Whittaker & Ors |
MEDIUM NEUTRAL CITATION: | [2016] VSC 287 |
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ADMINISTRATION AND PROBATE – Approval of compromise – Costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J L Smith | The Probate Professionals |
| For the First and Second Defendants | Mr A Silver | Howes Kaye Halpin Solicitors |
| For the Third Defendant | Mr R N J Young | Rosemarie Ryan Lawyers |
| For the Fourth Defendant | Ms U Stanisich | Tony Hargreaves & Partners |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background......................................................................................................................................... 1
The Course of the proceeding......................................................................................................... 4
The Compromise................................................................................................................................ 7
Submissions........................................................................................................................................ 8
Consideration.................................................................................................................................... 10
HIS HONOUR:
Introduction
Nikita May Smith (‘Nikita’) by her litigation guardian, her mother Kylie Burgess (‘Kylie’) applies for approval of compromises of two claims under Part IV of the Administration and Probate Act 1958 (‘the Act’). Nikita was born on 21 March 2008.[1] The claims are against the estates of Nikita’s grandparents, Kim Melina Smith (‘Kim’) (proceeding S CI 2014 01485) and Michael John Smith (‘Michael’) (proceeding S CI 2014 01483).
[1]Affidavit of Kylie Burgess sworn 27 May 2014 at [2].
The first and second defendants in each proceeding are the executors and trustees of the estates of Kim and Michael (‘Executors’). The third defendant (‘Brett’) is the father of Nikita and the son of Kim and Michael and is entitled under their wills to share equally in the estates with his sister, Alexis Smith (‘Alexis’), who is the fourth defendant. The Originating Motions in each proceeding were filed ‘out of time’ (that is, after the expiry of 6 months after the grant of probate of the wills of Kim and Michael).
The parties have agreed that the proposed compromises are, subject to the approval of the Court, appropriate in the circumstances, that the payment the subject of the compromises should come out of the whole of the estate, that under s 99 of the Act it is appropriate to grant Nikita an extension of time within which to commence her two claims, but they are not in agreement as to the way in which the costs of Brett and Alexis should be dealt with.
Background
On 16 December 2011, Kim and Michael were found dead at their home at 14 Yalita Road, Vermont South, Victoria. Brett has been found responsible for killing them but was found not guilty of their murder by reason of mental impairment. He was committed to the custody of the Victorian Institute of Forensic Mental Health, Thomas Embling Hospital, under a supervision order with a nominal term of 25 years.[2] He was found to suffer from chronic paranoid schizophrenia.[3] He continues to suffer from paranoid schizophrenia, a major psychotic illness.[4]
[2]DPP v Brett Smith [2013] VSC 438 per Weinberg JA at [25]-[28].
[3]Ibid [16]-[18].
[4]Medical Report of Dr Lester Walton dated 20 January 2015.
Kim left a will dated 6 August 1982. She appointed her husband Michael to be her executor and trustee and, if he predeceased her, she appointed her brother and sister, Robert Christopher Whittaker and Elizabeth Anne Whittaker, to be her executors and trustees. She left the whole of her estate to her husband Michael provided he survived her by a period of 30 days. In the event that he did not, she left the whole of her estate to her children, Brett and Alexis, in equal shares. Michael also left a will dated 6 August 1982 and the terms of his will mirror those of Kim.
Probate of the Wills was granted to the Executors on 21 November 2012. The combined assets of the two estates were, according to the inventory of assets and liabilities, valued at $1,161,251.75.[5] Nikita’s applications for provision under Part IV of the Act were made by Originating Motion filed on 1 April 2014, about 10 months late.
[5]Affidavit of Kylie Burgess sworn 27 May 2014 at [7]-[11].
It is common ground between the parties that because Brett was found not guilty of the murder of his parents by reason of mental impairment, the forfeiture rule does not apply to him so that he is still entitled to inherit the share of his parents estates left to him under their wills.[6]
[6]See for example Re Vyner, Vyner v Vyner, (Shepherdson J. Queensland Supreme Court, Unreported, 24 August 1999, BC9905206).
Kylie and Brett had an ‘on and off’ relationship between about May 2005 and sometime in 2010, when Brett’s mental state was such that Kylie would not have him in her house. They never lived together as a couple. Kylie also had another child from a previous relationship. Brett lived with his parents, Kim and Michael, except for some periods when he lived separately or spent time in psychiatric institutions in Melbourne and Sydney. During the relationship, Kylie moved from her residence in Ringwood, a suburb of Melbourne to Ocean Grove, a seaside town in Victoria. She did so, she says, essentially to get away from Brett.[7]
[7]Affidavit of Kylie Burgess sworn 27 May 2014 at [19].
Kylie got on well with Kim and Michael and would see them every two to three weeks. When she lived at Ocean Grove, they visited her and brought Brett with them, or she would visit them at their home in Vermont South. They brought Nikita clothes and shoes and helped Kylie by buying her a new refrigerator.
Kylie’s financial circumstances are very modest. At the time of the commencement of the proceeding, she was in receipt of Centrelink payments and had completed a course in Home and Aged Care. Later she became employed part time in an aged care nursing home.[8]
[8]Affidavit of Kylie Burgess sworn 20 November 2014 at [5].
Kylie did not know that Nikita might have a right to claim against Kim and Michael’s estates until she sought legal advice in March 2014. She made inquiries before that time at the Probate Office as to whether a will or wills had been lodged. She rang in 2012 and in early 2013 and was told that no wills had been lodged. She understood from what she had been told that no will could be lodged until Brett’s trial was completed. In September 2013, she contacted the Probate Office and was told that a will had been lodged. At this time Nikita was seeing a child psychologist. Kylie visited the Probate Office to get a copy of the will but was told it would take an hour or so to find it and she did not have time to wait because of Nikita’s appointment. She did not return to the Probate Office until February 2014. Between September 2013 and February 2014 she had been studying and had experienced some depression and anxiety. This is why she had not returned to the Probate Office sooner. Whilst she was at the Probate Office she met a man by the name of Mr Boots of the firm ‘the Probate Professionals’. He gave her some advice which ultimately led to the commencement of this proceeding on Nikita’s behalf. The Probate Professionals are the solicitors acting for Nikita.
In making her application on behalf of Nikita, Kylie expressly stated that she did not seek to disturb the provision in the wills of Kim and Michael made for Alexis. The claim was made only against the share of the estates that passed to Brett.
The Course of the proceeding
In the usual way, a summons for directions brought the matter before the Court on 25 June 2014. The order of the Associate Judge who dealt with the matter at that time records:
The plaintiff by her counsel informs the Court that she seeks further provision from the estate of the deceased to the extent of a one half interest in the combined estates of [Michael and Kim] …
The plaintiff filed a summons … seeking an extension of time to bring her TFM application. The Court is informed by the solicitor acting for [Brett] … that he will oppose the application for an extension of time. Brett Smith, the son of both deceased, has been committed to the custody of the Victorian Institute of Forensic Mental Health, Thomas Embling Hospital, under a supervision order with a nominal term of 25 years for the killing of his parents. If he is a handicapped person within the meaning of Order 15 of the Rules he will need a litigation guardian.
In a letter dated 24 June 2014, the defendants as executors have given their consent to draft orders which included an extension of time.
The orders then made included the direction for the holding of a mediation of both proceedings together, the notification of the commencement of the proceeding to Brett’s solicitor, leave for Brett to apply to be added as a defendant and other uncontroversial directions. It is recorded in the order that Ms R Ryan, solicitor, appeared for Brett at this directions hearing. The form of notice to be given to Brett was in standard form and ended:
Although legal costs incurred by a party to proceedings of this type are usually allowed by the Court out of the estate of the deceased, it is unlikely that more than one set of costs of separately represented parties with the same or similar interest will be allowed.
Notwithstanding that leave was given to Brett to apply to be added as a defendant, on 25 June 2014, the date of the making of the directions, Rosemarie Ryan Lawyers purported to file an appearance in the proceeding on behalf of Brett.
Then by summons filed on 4 August 2014, application was made by Brett to be added as a defendant in the proceeding. In support of that application, Brett swore an affidavit on 4 August 2014 in which, in substance, he complained that he had never received a copy of the inventory of assets and liabilities of Kim and Michael, he had never received any correspondence from the executors or their solicitors and had not been served with any summons or originating motion.
On 5 August 2014, the matter came on for further directions before me. Counsel appeared for Brett as a beneficiary under the will. It was ordered that the originating motion, summons for directions and supporting affidavit of Kylie (and the exhibits to that affidavit) be served on the solicitor for Brett, that further affidavits desired to be relied upon by the plaintiff be filed and served, and that an affidavit of a medical practitioner in relation to Brett’s mental capacity to conduct the proceeding as a litigant be filed and served.
By affidavit filed on behalf of Nikita on 26 August 2014, Kylie gave further evidence as to the very special relationship that Kim and Michael had with Nikita. Considerable details were given about that relationship. Further evidence was given concerning the reasons for the delay in commencing the proceeding. She mentioned that she telephoned the Law Institute of Victoria in October 2012 in order to find out what to do. She gives further details about her efforts to find the wills of Kim and Michael but to no avail.
By affidavit sworn on 6 November 2014, Brett supported his application to be joined as a defendant. He gives an account of his relationship with Kylie and with Nikita as well as the relationship between Nikita and his parents, Kim and Michael. He says that he has always tried to the best of his ability to make sure that Nikita has the things that she needs and to be a good father to her, and that he will provide for Nikita in the future. He denies many of the things in Kylie’s evidence, including that there was any special relationship between Nikita and Kim and Michael. He also sets out his financial circumstances which are equally modest. He is in receipt of a disability support pension and has a small amount of savings and superannuation, in addition to the interest he has in the estates of Kim and Michael. There were further affidavits filed in support of Brett’s application to be joined as a defendant to the proceeding sworn by his solicitor, Ms Rosemarie Ryan, on 21 November 2014 and by Dr Shannon Reid, psychiatrist, of Thomas Embling Hospital.
On 25 November 2014, Brett’s application to be added as a defendant came before me. At that time, I ordered that Brett make himself available to a medical practitioner selected by the solicitors for Nikita and the Executors for the purposes of the medical practitioner providing a report as to Brett’s ability to manage his financial affairs and to provide instructions to conduct this litigation, and generally as to his ability to understand the matters the subject of the litigation. Other directions were made as to the provision of material to the solicitor acting for Brett and the filing of further affidavits.
By affidavit sworn 5 February 2015, Ms Ryan set out the circumstances in which she came to act for Brett and gave an account of discussions with the solicitor acting for the plaintiff, which included that the Executors solicitors had written to Nikita’s solicitors as early as 24 June 2014 consenting to an extension of time for Nikita to make her application subject to conditions, including that the application by Nikita for provision out of the estates of Kim and Michael must be limited to Brett’s share of the estate and that any orders for costs would be similarly borne by Brett’s share. The affidavit also dealt with complaints made on behalf of Brett concerning the whereabouts of his personal property and the compliance with the Rules regarding verification of the inventory of assets and liabilities.
The application by Brett to be added as a defendant, and the directions hearing, came back before me on 6 February 2015. By that time, the report of Dr Lester A Walton, consultant psychiatrist, dated 20 January 2015 had been obtained as to Brett’s mental capacity and had been filed with the Court. That report supported Brett’s ability to understand and give instructions in relation to the proceeding and, as a consequence, Brett was added as the third defendant to the proceeding. It was also ordered that Alexis be given notice of the proceeding and of her right to make application to be added as a defendant. Further directions were made for the conduct of the proceedings and for a mediation.
By order made by consent on 12 May 2015, Alexis was added as the fourth defendant. There were then a number of adjournments with the directions hearings, including adjournments to enable an application to be made by Brett for the removal of the Executors.
The Compromise
It then emerges that Nikita and the Executors desired to compromise Nikita’s claim. In accordance with the procedure now adopted for the approval of a compromise of a claim by a person under a disability, affidavits in support of Nikita’s application and an advice or opinion of Counsel were filed so that the Court could see in advance whether the material was sufficient or needed to be supplemented and to tell the parties what further material may be needed.
In this case, the affidavit material provided showed that a compromise was reached by an exchange of letters on about 24 March 2016 as between Nikita and the Executors and that it was believed by the solicitors for the Executors that Brett and Alexis agreed to the terms of the compromise but had different views as to their costs of the proceeding.[9] Otherwise, the terms of the proposed compromise were that, subject to the approval of the Court:
[9]Affidavit of Alison McNamara sworn 27 April 2016 on behalf of the Kim and Michael, exhibit AM-1.
(a) pursuant to s 99(2) of the Act, there be an extension of time within which Nikita may apply for provision for her proper maintenance and support out of the two estates;
(b) pursuant to s 91 of the Act, there be provision by way of a small legacy out of each estate (which need not be disclosed) for Nikita’s proper maintenance and support, such sums to be paid to the Senior Master pursuant to s 66(3) of the Trustee Act1958. It is implicit that each legacy is agreed to be borne by the residue of each estate, so that it is not paid solely out of the share given to Brett as originally proposed;
(c) Nikita’s costs be paid out of the estates in equal shares, such costs to be agreed or assessed (taxed) on a standard basis; and
(d) the costs of the Executors be paid by the estates on an indemnity basis.
The application was supported by a memorandum of advice from Counsel. The advice noted that the authorities, particularly Feehan v Toomey,[10] are clear as to grandparents’ moral obligation to provide for a grandchild, noting that the obligation primarily rests with the child’s parents and that the fact of the family relationship alone does not establish a responsibility to provide for the plaintiff. After some discussion regarding the particular circumstances of this case, the advice concludes that there is a real risk that Nikita’s claim may be dismissed but that there is a chance that the Court may award a small legacy to Nikita. In the circumstances, Counsel considered that the proposed settlement is in Nikita’s best interests.
[10][2014] VSC 488 [47].
The solicitors for the Executors took the view that it was not necessary for Brett and Alexis to consent to the Compromise, but that it was their understanding that these terms were agreed by them. The only issue remaining was how the Brett’s and Alexis’ costs were to be dealt with.[11]
[11]Affidavit of Alison McNamara sworn 27 April 2016 on behalf of the Kim and Michael, exhibit AM-3.
In these circumstances, particularly that there was no direct evidence that Brett and Alexis agreed to the Compromise at all, regardless of their position with respect to their costs, I required the parties to appear and make submissions generally as to the proposed compromise.
Submissions
Mr R N J Young of Counsel, submitted on behalf of Brett that although settlement by the payment of a small legacy from each estate was acceptable to Brett, this was a case where because Nikita is a grandchild of Kim and Michael prima facie there should be no provision for her and that although Brett agreed to the compromise it should be recorded that it was entered into with a denial of liability. Mr Young was equivocal as to whether or not an extension of time should be granted to enable Nikita to make her application. In the end, it appeared to me, that by Brett’s agreement to the proposed settlement, he must be taken to have acquiesced, if not consented, to the extension of time, assuming that it is appropriate for the Court to grant it.
Mr Young submitted, as I have indicated, that the real issue between the parties was as to the costs of Brett and Alexis. He submitted that this was a case appropriate for Brett’s costs to be paid out of the estate, because when Nikita made her application for provision it was said to be limited to the share of the estates to which Brett was entitled. It was therefore appropriate for Brett to be added as a defendant and to resist the payment of any provision under Part IV solely out of his share of the estates. He also submitted that it was necessary for Brett to be added as a defendant because the Executors ‘were not doing their job’, as they never came near Brett before his joinder. He submitted that Brett had done his best to protect the estates from Nikita’s claims. It was submitted on behalf of Brett that the proceedings should never have been commenced in the first place.
Counsel for Alexis, Ms U Stanisich, submitted that whether Brett’s costs, and indeed Alexis’ costs, should come out of the estate depends upon the overall justice of the case.[12] She submitted that in the circumstances of this case, Brett and Alexis should bear their own costs of their representation. It was apparent from the course of the proceedings that because of Brett’s participation in the proceeding from before he was made a defendant, and because of his circumstances, it was likely that his costs would considerably exceed those of Alexis. As the provision for Nikita was to come out of the whole estates, and thus to be shared equally between Brett and Alexis, it was considerably fairer if Brett were to bear his own costs of the proceeding. Otherwise, there was a significant risk that because of the greater costs incurred by Brett that some of his costs would in the end be borne out of the share of the estates due to Alexis. I was referred to In the will of Lanfear,[13] Richards v Augustine,[14] Westwood v Quilty,[15] and Hodge v De Pasquale.[16]
[12]See Singer v Berghaus (1993) 67 ALJR 708. This was said in the context of an application for security for costs.
[13][1940] WN (NSW) 57 at 181.
[14][2012] QSC 278.
[15][2013] NSWSC 109.
[16][2014] VSC 413.
Ms Stanisich also submitted that the problems relating to the administration of the estates about which Brett has complained in the course of this proceeding, and which have been the occasion for him to make application for the removal of the Executors, have not been brought about by Alexis.
Consideration
The first thing to observe is that the effectiveness of the compromise, ‘as a compromise’, depends upon the beneficiaries agreeing to the compromise. They are both of full age and capacity: Hodge v De Pasquale. As McMillan J said in that case:[17]
A trustee who, in good faith, believes an applicant for further provision has a strong claim or a claim that it would be cheaper to settle than to contest, may still settle the claim and may seek orders giving effect to that settlement by consent, or else by seeking the approval of all beneficiaries who are affected. Beneficiaries who wish to contest such a claim are entitled to be notified and appear, but as litigants are under the same obligations to promote the efficient administration of justice.
[17]Ibid [81].
This a case where the Executors rightly concluded that Nikita has a claim that is cheaper to settle than to contest. It is also a case where the parties, collectively, should not assume that the litigation can be pursued safe in the belief that costs will always be paid out of the estate.[18] The costs warning in the notice given to Brett after the orders made on 25 June 2014 make it tolerably clear that a beneficiary who seeks to be added, and is added, proceeds at the risk that his or her costs will not be paid out of the estate.
[18]Forsyth vSinclair (no 2) [2010] VSCA 195 [27].
The jurisdiction of the Court as to costs is conferred by s 24(1) of the Supreme Court Act 1986. This general discretion must be exercised in accordance with r 63 of the Rules.[19] The principles relating to costs in Part IV litigation require the Court to consider general principles of justice and the reasonableness of the parties in conducting the litigation.[20] In the end, how the costs of the parties should be dealt with must be determined on a consideration of what is just in all the circumstances of this case.[21] Those circumstances include matters that are often assumed and not stated.
[19]Briggs v Mantz (No 2) [2014] VSC 487 [18] per McMillan J, citing Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399 (14 September 2012) (Croft J) [11]; see also Coombes v Ward (No 2) [2002] VSC 85 (27 March 2002) (McDonald J).
[20]Briggs v Mantz (No 2) [2014] VSC 487 [18] per McMillan J.
[21]Re Moerth (No 2) [2011] VSC 275 [31].
In Bates v Cooke (No 2),[22] Kunc J in the New South Wales Supreme Court considered some of these matters, albeit in the different context.[23] In the course of referring to the stronger public policy basis for encouraging settlement than might apply in other types of case, his Honour referred to several considerations that need to be borne in mind in all family provision, or testators family maintenance (‘TFM’) cases, as follows:
[22][2014] NSWSC 1322.
[23]The context was a consideration of the principles relating to an indemnity costs application in a testator’s family maintenance case where an offer of compromise had been refused.
(a) TFM litigation involves a fixed fund which risks being substantially depleted by legal costs to the disadvantage of all concerned if litigation is persisted with;
(b) the jurisdiction is redistributive rather than punitive or compensatory;
(c) as a corollary of the preceding point, TFM litigation is not the fault of the parties in the sense that the parties have not come to Court because of the alleged breach, fault or delict of any of them in the way that might otherwise give rise to civil litigation;
(d) the parties are almost always natural persons and, more often than not, people who are completely unused to litigation. The emotional and financial strain on litigants in TFM claims can be much higher precisely because it concerns matters of family, relationship and emotions;
(e) the amounts at stake are often, but by no means always, not large compared to other matters that come before the Court. Real questions often arise as to the proportionality of the legal costs when compared to the amounts of money at stake;[24]
(f) TFM litigation takes place in an adversary context in which the active parties to the particular litigation are usually expected to be the best judges of what is in their own interests;[25] and
(g) the policy of Australian law encourages the settlement of disputes.[26]
[24]Re Moerth (No 2) [2011] VSC 275 [31]; cited with approval by McMillan J in Briggs v Mantz (No 2) [2014] VSC 487 [34].
[25]see Baltic Shipping Co v Dillon (1991) 22 NSWLR 1 [9] per Gleeson CJ; Bartlett v Coomber [2008] NSWCA 100 [57] per Mason P; Morrison v Abbott [2012] NSWSC 320 [84]; See also s 24 of the Civil Procedure Act 2010.
[26]Ibid.
There are also some general principles applicable to the compromise of Part IV claims, and their approval by the Court, as follows:
(a) the duty of the legal personal representative is either to compromise the claim or to contest it and to seek to uphold the provisions of the will, and to that end, to put before the Court evidence made available by beneficiaries that is relevant to the issues;[27]
[27]In the Will of Lanfear (1940) 57 WN (NSW) 57 at 181, per Williams J at 183; Vasiljev v Public Trustee [1974] 2 NSWLR 497; Bartlett v Coomber [2008] NSWCA 100 [71]; McCusker v Rutter [2010] NSWCA 318 [57]; Morrison v Abbott [2012] NSWSC 320 [72]–[80].
(b) the duty to uphold the deceased's will is not an absolute duty and ordinarily, but especially where the estate is a small, it is the duty of the personal representative either to compromise the claim, or to contest it and seek to uphold the provisions of the will;[28]
[28]In the Will of Lanfear (1940) 57 WN (NSW) 181, per Williams J at 183.
(c) the beneficiaries may be joined as parties, but generally only if it appears that the personal representative is not fulfilling this duty to represent their interests, or there is some other reason justifying this course;[29]
[29]Bartlett v Coomber [2008] NSWCA 100 [71]; Morrison v Abbott [2012] NSWSC 320 [80].
(d) the duty of the personal representative to uphold the will does not extend to doing so where it is of no commercial benefit to anyone, and regard should be had to the extent to which upholding the will would benefit beneficiaries;[30]
[30]McCusker v Rutter [2010] NSWCA 318 [57]; Morrison v Abbott [2012] NSWSC 320 [74]–[75].
(e) the personal representative must exercise a due sense of proportionality in the conduct of the defence and seek to compromise a claim, if at all possible, in a way that would save both the plaintiff and the other beneficiaries' costs;[31]
[31]Per Hallen AsJ in Morrison v Abbott [2012] NSWSC 320 [75], citing Szlazko v Travini [2004] NSWSC 610; The Application of Ferdinando Scali [2010] NSWSC 1254 [10].
(f) an agreement reached that must, under r 15.08 or r 54.02 of the Rules, be approved by order of the Court is binding on the parties, but its operation is suspended until the Court makes an order by which it approves the compromise;[32]
[32]Morrison v Abbott [2012] NSWSC 320 [86].
(g) where the parties have reached an agreement, the Court must still consider whether it has jurisdiction.[33] The Court is not given jurisdiction by the agreement of the parties;[34]
(h) that does not mean that the Court is considering the matter as if it were a contested application and then to give or withhold its approval by comparing the settlement with the judgment which the Court would have given.[35] The Court should proceed with an awareness that it lacks full knowledge about the rights and wrongs of the yet to be litigated dispute. The evidence is undeveloped and untested.[36] This usually means that the Court will generally be satisfied without the need for any significant investigation of the evidence;[37] and
(i) the Court should be aware of the risks of litigation in an area in which reasonable people can reasonably reach different conclusions and give proper weight to the fact that the parties wish to effect the settlement. If the Court is satisfied that the settlement falls within the bounds of a reasonable exercise of discretion then the Court should make orders to give effect to that settlement.[38]
[33]Per Hallen AsJ in Morrison v Abbott [2012] NSWSC 320 [76]–[77], citing Hore v Perpetual Trustee Co Ltd (NSWSC, 8 June 1995, unreported) per Windeyer J; and Schaechtele v Schaechtele [2008] WASC 148, per Le Miere J, [18].
[34]Bartlett v Coomber [2008] NSWCA 100 [37]–[39] per Mason P.
[35]Schaechtele v Schaechtele [2008] WASC 148, per Le Miere J; cited with approval in Morrison v Abbott [2012] NSWSC 320 [77].
[36]Bartlett v Coomber [2008] NSWCA 100 [60] per Mason P.
[37]Bartlett v Coomber [2008] NSWCA 100 [72] per Hodgson JA; Morrison v Abbott [2012] NSWSC 320 [82].
[38]Schaechtele v Schaechtele [2008] WASC 148, per Le Miere J; cited with approval in Morrison v Abbott [2012] NSWSC 320 [77].
In the course of Alexis’ submissions that Brett and she should bear their own costs rather than they be paid out of the estates, I was referred to the decision of Lindsay J in Westwood v Quilty & Ors.[39]That was a case where the determination of the questions for determination were lengthened and made more expensive by the conduct of the residuary beneficiaries, the third and fourth defendants. The questions were, first, whether the first plaintiff was an eligible person by reason of being in a de facto relationship with the deceased at the time of his death, and secondly, whether the first plaintiff’s children (who were the other plaintiffs) were eligible applicants.
[39][2013] NSWSC 109.
The proceeding and trial were lengthened and made more expensive because a disproportionate effort was invested (principally by the children of the deceased’s first marriage, the third and fourth defendants, and consequentially, by the plaintiffs) in a bitter examination of the whole course of the first plaintiff's relationship with the deceased. The third and fourth defendants were joined at their own risks as to costs, the warning expressly incorporated in the order for joinder. They opposed the plaintiffs at every turn. After giving an entertaining account of the dispute, where the third and fourth defendants attempted to show that the first plaintiff was nothing more than ‘a gold-digging welfare cheat’[40] (and failed in the attempt), his Honour said in relation to their costs:
I do not propose to make any order for payment of the costs of the third and fourth defendants out of the deceased's estate or notional estate. They are, in effect, the deceased's residuary beneficiaries. The practical reality is that, to the extent that the costs of other parties (particularly the costs of the plaintiffs, their principal opponents) are paid out of the deceased's resources, they personally will ultimately bear the burden of any costs orders.
[40]Ibid [33].
In the case before me, Brett and Alexis are also the residuary beneficiaries under the Wills of Kim and Michael. Counsel for Alexis submitted that the decision in Westwood v Quilty & Ors, whilst arising from different circumstances, provides a useful guide to the appropriate costs orders in this case.
I was also referred to the costs decision in Richards v Augustine (No 2)[41] where Peter Lyons J adjusted the legacy to a beneficiary to compensate for the effect of the executor’s costs being paid out of the estate. Were it otherwise, the amount that beneficiary would receive from the residuary estate would be diminished because of the litigation:[42]
She [Marie, the beneficiary] has attempted to assist to resolve it. Her financial circumstances have worsened materially since her father's death. She has been delayed for some years now in the receipt of anything from the estate.
It is sometimes said that the primary duty of the personal representative is to uphold the will. However, it has also been said over many years that it is the duty of executors either to compromise a claim for further provision out of an estate, or to contest it and to seek to uphold the provisions of the will. In the present case, the respondents went well beyond what they were required to do by their duty to uphold the will. They had an obvious personal interest in opposing the applicant's application. They appeared quite unwilling to recognise any merit in the applicant's claim, though there seems to me to have been obvious reason for them to have done so. The fact that the costs of the proceedings have eaten up so much of the estate seems to me to be in no small part due to the approach taken by them to these proceedings. In those circumstances, and having regard to Marie's needs, it seems appropriate to me that an order be made which would place her in a position roughly equivalent to that in which she would have been but for the conduct of the respondents.
[41][2012] QSC 278.
[42]Ibid [12]–[13].
Again, Counsel for Alexis submitted that Richards v Augustine (No 2) provided another illustration of the approach of courts TFM applications taking into account the effect on a beneficiaries’ entitlement under the will of the deceased of other parties unnecessarily increasing the costs.
In his affidavits, Brett has denied that there was any special relationship between Nikita and her grandparents, Kim and Michael, that warranted any provision for her out of their estates and that his intention was to leave his whole estate to Nikita.[43] Consistently with his evidence, his Counsel and solicitor have maintained throughout that there should be no provision for Nikita out of the estates of Kim and Michael, and that if there is to be any provision it should be borne by the whole of the residue of each estate passing to Brett and Alexis in equal shares. It was Brett’s consistent position in submissions that he had the responsibility to provide for Nikita and that he was willing to do so. It was also made plain that Brett opposed any extension of time within which Nikita may make application under Part IV of the Act. Even at the hearing in relation to the compromise it was plain from the submissions by Brett’s Counsel that Brett only grudgingly agreed to the proposed compromise, for the purpose of limiting expenditure on costs, and had the same attitude to an extension of time.
[43]Affidavits of Brett Anthony Smith sworn 6 November 2014 in each proceeding.
It is clear from a reading of the Court file in each proceeding, and from my involvement in managing the proceeding, that Brett, through his solicitor and Counsel, has been active in appearing and advancing what was perceived to be his interests. This activism is epitomised by his solicitor appearing before any notice of the proceeding was given to him, perhaps fearing being ignored because he was incarcerated. He thus anticipated the making of the usual orders for notice to be given alerting him to his right to apply to be joined.
The extent of the work performed on Brett’s behalf, and to which the other parties were put, by his activism in the proceeding is not, however, capable of being seen from the Court file alone. There have been numerous adjournments while he applied for the removal of the Executors. There has been, I have no doubt, a great deal of correspondence between solicitors about such things as the mediation of the proceeding, the scheduling of hearings, the affidavit evidence (and objections to it), and no doubt other matters not revealed by steps in the proceeding revealed by the Court files.
In contrast, the involvement of Alexis in the proceedings has been minimal so far as the Court files reveal that involvement.
Brett’s justification for applying to be added as a defendant and for the vigour with which he opposed his daughter’s claims is due to his perception that the Executors were not fulfilling their duty to represent his interests as one of two residuary beneficiaries. Although there are affidavits that show Brett and his solicitor complaining about the conduct of the Executors, there are no answering affidavits and whether it was right that the Executors were or were not performing their duties as Executors is not properly before me. There is, as I have mentioned, an extant application by Brett to remove them which is to be heard in early June 2016.
In some circumstances, activism in litigation is rewarded. But in the case of a proceeding under Part IV, activism is a double edged sword. Some of the matters to which I have referred above (at paragraphs 36 and 37) are relevant to a consideration of whether in the circumstances of this case Brett’s costs should be borne by the estates as a whole, as distinct from being borne by his share of it. They are:
(a) that the Court is faced with a fixed fund and Brett’s activism risks it being unfairly depleted by legal costs. That unfairness is between Brett and Alexis. Whilst the estate is not small by current standards, it is also not large. Each of Brett and Alexis share that estate equally after the costs and expenses of the administration of the estates and the payment of legal costs;
(b) the amounts of provision for Nikita are, and always were likely to be, small and the issue of proportionality between the legal costs and the amounts of money at stake is relevant to the extent to which Brett has involved himself in the proceedings;[44]
(c) the duty of the Executors to uphold the will does not extend to doing so where it is of no commercial benefit to anyone and regard must be taken of the extent to which upholding the will would benefit beneficiaries. In this case, upholding the will by contesting the claim at a trial is plainly not in the interests of the beneficiaries. Resolution by way of a compromise is patently more advantageous to the estates and to Brett and Alexis as the beneficiaries; and
(d) the Executors have exercised a due sense of proportionality in agreeing to compromise a claim in a way that saves Nikita’s, the estates’ and the other beneficiaries' costs.
[44]Section 24 of the Civil Procedure Act2010 (Vic) requires both Brett and his legal representatives to use their reasonable endeavours to ensure the legal and other costs of the proceeding are reasonable and proportionate to the complexity or importance of the issues in dispute and the amount in dispute.
In the present case, in my opinion, Brett has gone well beyond what he needed to do to protect his interests in the two estates. The correspondence between the solicitors for Nikita and the Executors about which his solicitor complained in one affidavit (see paragraph 21) shows a captious approach to the Executors’ conduct of the defence of the claims. Brett’s opposition to Nikita’s application appears to be driven less by his personal interest than by a desire to ensure that the correct result, as he perceives it, is achieved whatever the cost, or that Kylie receive no indirect benefit from the two estates. Brett appears, and has always appeared, quite unwilling to recognise any merit in Nikita’s claim, even now, and despite the fact that she is his daughter. If this is due to the relationship between Brett and Kylie, as Brett’s affidavit material suggests, then this has nothing to do with these proceedings and the way they were conducted.
In my view, the submissions of Counsel for Alexis should be accepted. The payment of Brett’s and Alexis’ costs out of the estate will unfairly burden Alexis’ share of the estates because of Brett’s greater activity and involvement in the proceedings as well as the circumstance that he is incarcerated. I have no doubt that his costs, not to mention the costs of Nikita and the Executors, will, if paid out of the estates, eat up a significant amount of them, and this seems to me to be due in part to the approach taken by Brett to these proceedings. There is no reason why Alexis’ share of the estates should be burdened with any of the costs incurred by Brett.
The compromise reached by Nikita and the Executors provides for Nikita’s costs in each proceeding to be paid out of the respective estate on a standard basis. They are to be taxed if not agreed. Ordinarily, a successful plaintiff will receive costs on an indemnity basis. By agreeing to costs on a standard basis, the compromise may be seen to recognise some weakness in Nikita’s claims. If that is the correct characterisation of the compromise, there should be no room for the solicitors to make application to the Senior Master for any costs in addition to those assessed on a standard basis. The circumstances in which Kylie came to engage the solicitors for Nikita’s suggest that the modesty of the quantum of compromises and the limited costs are likely to be due to the advice given by Nikita’s legal representatives.
In considering whether to approve the compromise, as the parties desire the Court to do, it is necessary that I am satisfied that this is a case appropriate for both the extension of time sought within which to commence the proceeding and that the Court has jurisdiction to order the provision agreed. There were no submissions made of any substance as to either question. I have considered the evidence relevant to the first question and consider that there is a proper explanation for the delay, particularly bearing in mind that ignorance of the right to apply is an excuse in such matters.[45] There has been no distribution of the estate and there is no prejudice to the beneficiaries arising from the delay in making the application. It is appropriate to extend the time under s 99 of the Act.
[45]Re Barrot (Dec’d) [1953] VLR 308, 313.
So far as the second question is concerned, I consider that the jurisdiction to make provision is enlivened by the facts and circumstances of the claim, weak though the claim may be. In reaching this conclusion, I am conscious that I lack full knowledge about the rights and wrongs of the dispute. The evidence is undeveloped and untested. This means that in this case I am able to be satisfied without the need for a significant investigation of the evidence. The material I have surveyed in summary above shows, in my view, that the jurisdiction of the Court is attracted and that the settlement falls within the bounds of a reasonable exercise of discretion.
It is clear that the compromise is for the benefit of Nikita. There is a real risk that she will not do better, and may do worse, at a trial of the claims. The advice of Counsel supports this conclusion.
I will therefore make orders approving the compromises and, in relation to the costs of Brett and Alexis, will order that they should bear their own costs of the proceedings.
SCHEDULE OF PARTIES
| BETWEEN: | |
| NIKITA MAY SMITH (who brings this proceeding by her Litigation Guardian Kylie Burgess) | Plaintiff |
| - and - | |
| ROBERT CHRISTOPHER WHITTAKER (who is sued as the one of the executors of the Wills) | First Defendant |
| ELIZABETH ANNE WHITTAKER (who is sued in her capacity as one of the executors of the Wills) | Second Defendant |
| BRETT ANTHONY SMITH | Third Defendant |
| ALEXIS SMITH | Fourth Defendant |
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