Tobin v Ezekiel - Ezekiel Estate

[2008] NSWSC 1108

CITATION:	Tobin v Ezekiel - Ezekiel Estate [2008] NSWSC 1108
HEARING DATE(S):	20 August 2008
JUDGMENT DATE :	23 October 2008
JURISDICTION:	Equity Division Probate List
JUDGMENT OF:	Palmer J
DECISION:	Defendants’ motion dismissed with costs.
CATCHWORDS:	PRACTICE – COSTS – CASE MANAGEMENT – Parties in family dispute incur grossly excessive legal costs – time for trial and number of witnesses grossly disproportionate to subject matter – duty of Court to ensure that its resources are not disproportionately engaged in one litigation to detriment of other litigants – Court’s power to make orders to curb litigious excess.
LEGISLATION CITED:	- Civil Procedure Act 2005 (NSW) – Pt 6 Div 1, s 56, s 57, s 60, s 62 - Conveyancing Act 1919 (NSW) – s 153(1) - Family Provision Act 1982 (NSW) – s 7 - Uniform Civil Procedure Rules 2005 (NSW) – 42.4
CATEGORY:	Procedural and other rulings
CASES CITED:	- Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98 - Compsyd Pty Ltd v Streamline Travel Service Pty Ltd (1987) 10 NSWLR 648 - Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268, at [21]-[31] ([2005] NSWSC 1003) - Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corporation Ltd [1984] 1 NSWLR 710
PARTIES:	Evelyn Tobin (First Plaintiff) Clara Ezekiel (Second Plaintiff) Morris Ezekiel (First Defendant) Albert Ezekiel (Second Defendant)
FILE NUMBER(S):	SC 106746/06
COUNSEL:	J.P. Gormly SC (Plaintiffs) P.P. O’Loughlin (Defendants)
SOLICITORS:	T.D. Kelly & Co (Plaintiffs) Segal & Assoc (Defendants)

106746/06 Ezekiel Estate: Tobin & Anor v Ezekiel & Anor

JUDGMENT
23 October, 2008

Introduction

1    This litigation is a dispute between brothers and sisters over their mother’s will. Both sides have already incurred enormous legal costs, grossly disproportionate to the amount in dispute and to the issues involved. In this application the Defendants, who are the executors of the estate, seek the Court’s permission to mortgage the estate for more than a third of its value in order to pay their lawyers to conduct their case.


Background

2 The Plaintiffs, Mrs Evelyn Tobin and Ms Clara Ezekiel, and the Defendants, Messrs Morris and Albert Ezekiel, are the children of Mrs Lily Ezekiel, who died on 2 November 2005. The deceased made a will dated 28 September 1977, in which she left her estate to her four children equally. On 10 December 1997, the deceased revoked this will and made a new will leaving her estate to the Defendants alone and she appointed them executors. Probate of the second will was granted to the Defendants on 3 February 2006. 3 On 2 May 2006, the Plaintiffs commenced these proceedings against the Defendants. They sought an order revoking the grant of probate of the 1997 will on the ground that the deceased lacked testamentary capacity at the time of making it and they sought an order granting probate of the 1977 will to the executor appointed therein. Alternatively, they sought a declaration that the deceased died intestate. Further in the alternative, they sought an order for provision out of the estate under s 7 Family Provision Act 1982 (NSW). By an amendment made in May 2008, the Plaintiffs added a claim that the 1997 will had been procured by undue influence on the part of the Defendants. 4 The issues raised in this case – testamentary capacity, undue influence by one family member over another in the course of making a will, and a child’s need for provision out of a deceased estate – are dealt with routinely in this Court in dozens of cases every year. The deceased’s estate is modest. It comprises a house at Bondi, valued at $1.7M – perhaps somewhat less now, in a declining market.


Costs incurred and to be incurred

5 In these circumstances, one would have expected that this case would be conducted on both sides with the principle of proportionality firmly in mind. One would have expected affidavits from the Plaintiffs as to their observation of the deceased’s condition and their brothers’ behaviour, and as to their own means and needs. One would have expected affidavits from the deceased’s treating doctor as to her medical history, perhaps an affidavit from a medical expert as to testamentary capacity, and perhaps one or two more affidavits from lay witnesses. There should be an agreed valuation of the property. In short, one would have expected that the Plaintiffs would rely upon some six or seven affidavits in all. One would have expected a similar number of affidavits from the Defendants. 6 The case is still in the course of preparation for trial. Yet the Plaintiffs have already served forty-nine affidavits and reports and there are more to come. Their solicitors have foreshadowed new evidence from a handwriting expert and a forensic accountant. The Plaintiffs have served seventy-one subpoenas on third parties to produce documents. Some of the subpoenas call for documents dating back to 1975. 7 The Defendants have served twenty affidavits and reports and have issued two subpoenas. Again, it appears that there are more to come. 8 As matters now stand, the Plaintiffs will call about twenty witnesses and the Defendants will call about eight. The parties say that the trial will take ten days. 9 The Plaintiffs’ costs and expenses of the trial to date are calculated by the Plaintiffs’ solicitor, Mr T. Kelly, at $250,000. Mr Kelly estimates the further costs of preparation and of the trial at between $80,000 to $100,000. Mr Kelly says that that is a conservative estimate and it does not take into account the costs of issuing at least six further subpoenas and other expenses, for which he allows another $10,000. In other words, the Plaintiffs’ further costs are likely to be $110,000, bringing the Plaintiffs’ costs of the proceedings to a total of about $360,000. 10 The Defendants have incurred costs to date of about $148,000. The Defendants’ solicitor estimates that further costs to be incurred will be $136,130, bringing the Defendants’ costs of the proceedings to a total of about $285,000. 11 In summary, a contest over an estate worth $1.7M will consume costs of at least $645,000. 12 The Plaintiffs’ solicitors have agreed to conduct the case on a “no win, no fee” basis. Doubtless they are “investing” in the litigation in the hope that their clients will obtain a half share of the estate outright, from which they will be paid or, if the Plaintiffs’ fail, they will at least have an order for the payment of their costs out of the estate. 13 The Defendants’ solicitors have resorted to a different means of obtaining payment of their costs and expenses out of the estate. On 12 July 2006, the Defendants executed a mortgage over the sole asset of the estate, that is, the Bondi property, to secure a loan to them of $300,000. They did so, apparently, in purported exercise of the powers conferred on executors by s 153(1)(a) of the Conveyancing Act 1919 (NSW), which provides:

“ Powers of executors and administrators as to sale, mortgage or lease of real estate

(1) Subject as hereinafter mentioned executors and administrators may without the consent of any person or the order of a court:

(a) sell or mortgage the real estate of the deceased person for purposes of administration, …”

“Purposes of administration” is defined in s 152(b) as including:
“… the payment in a due course of administration of the debts, funeral and testamentary expenses duties and commission, and the costs, charges, and expenses of the executor or administrator, and any costs which may be ordered to be paid out of the estate.”
14    The loan of $300,000 was applied by the Defendants as follows:

payment of funeral expenses and maintenance of the Bondi property	$28,025.51
payment to their solicitors of legal costs in these proceedings and related expenses	$83,469.05
payment of Albert Ezekiel’s debts	$33,000.00
payment of Morris Ezekiel’s debts	$30,399.00
interest payments and charges under the mortgage	$30,868.00
living expenses for Morris Ezekiel	$8,038.19
living expenses for Albert Ezekiel	$30,098.53
purchase of goods for use in Morris Ezekiel’s business and car loan repayments	$56,097.65

15    It will be seen that only the sum of $28,025 out of the $300,000 borrowed was unquestionably expended on “purposes of administration” as defined in s 152(b). Money spent on payment of the personal debts of Morris and Albert Ezekiel and otherwise for their personal benefit could not possibly be administration expenses. Whether the legal expenses of $83,469 incurred in this litigation were incurred for “purposes of administration” is a question to which I will return shortly.


This application

16    The Defendants say that they have no funds left to pay the costs of these proceedings which have been incurred to date but not paid, and the costs still to be incurred. They wish to mortgage the Bondi property for $650,000, which they intended to apply as follows:


– $350,000 to discharge the existing mortgage and to pay the associated costs and expenses of the discharge;

– $300,000 to be paid into their solicitors’ trust account to pay the costs and expenses of the litigation incurred to date but not paid, the costs of the litigation yet to be incurred, and living expenses.

17 Presumably, the Defendants would have mortgaged the Bondi property for an additional $300,000 without reference to the Court or to the Plaintiffs – again, purportedly pursuant to s 153 of Conveyancing Act – were it not that, on 15 August 2006, Windeyer J granted an interlocutory injunction restraining the Defendants from mortgaging the property for an amount in excess of $300,000. The terms of that injunction were an agreed substitute for a caveat which the Plaintiffs had placed on the title to the property. The Defendants now apply to the Court for an order varying the terms of that injunction so as to permit them to mortgage the property to secure an amount of $650,000. 18    The Defendants say that the Plaintiffs would not be prejudiced by the additional borrowing which they seek because the new mortgage loan of $650,000 is less than half of the nett value of the estate, which is what the Plaintiffs claim in these proceedings:

Bondi property	$1,700,000
Less Defendants’ costs	285,000
Balance of estate	$ 1,415,000
Plaintiffs’ half share of estate	$707,500
Surplus after borrowing $650,000	$ 57,500

19    The validity of this calculation depends upon:


– the value of the Bondi property not falling by more than $57,000 by the time of realisation – a highly uncertain proposition in today’s economic climate;

– the costs of the Plaintiffs not being payable out of the estate.

20    If the Plaintiffs succeeded either in obtaining a grant of probate of the 1977 will or in obtaining provision out of the estate under the Family Provision Act , they would also have an order for payment of their costs out of the estate – although, I venture to say now, not in an amount remotely approaching $360,000. If the Plaintiffs obtained a costs order for, say, $80,000, the nett estate would, on the Defendants’ calculations, be less than half of the mortgage loan. If the Bondi property sells for less than $1.7M, the shortfall is increased. 21    The Plaintiffs object to any variation of the terms of the injunction. Their principal ground is that if the new mortgage were permitted, the Defendants would be better funded to conduct the litigation than they are. That is a rather curious submission since the Plaintiffs’ solicitors are conducting the case on a ‘no win, no fee’ basis. The Plaintiffs are not paying legal fees as they go and it is really up to the Plaintiffs’ solicitors and Counsel how much work they continue to do in the hope of getting paid at the end of the proceedings. 22    Behind the Plaintiffs’ submission lies, I suspect, an attitude on the part of their solicitors that it is unfair that the Defendants’ solicitors are to be put in funds during the course of the proceedings while they themselves have to take their chances until the proceedings are concluded.


The application fails

23 I do not propose to vary the terms of the injunction to permit the mortgage on the Bondi property to be increased, for the following reasons. 24 First, the most substantial part of the new borrowing is not for the purposes of administering the estate, so as to be within the power to mortgage conferred upon executors by s 153(1)(a) Conveyancing Act . A large part of the sum of $650,000 is to go in discharge of the prior mortgage of $300,000, more than half of which went to pay the debts and living expenses of Messrs Morris and Albert Ezekiel, and to pay for business stock acquired by Mr Morris Ezekiel. There is also a substantial amount paid for interest on the borrowing. Apparently, about $100,000 of the proposed new borrowing will go to the living expenses of the Defendants. 25 It is an open question at this time whether the Defendants’ costs of defending the suit will be executors’ costs incurred in the administration of the estate. If it is ultimately held that the Defendants procured the 1997 will by undue influence or at a time when, to their knowledge, the deceased lacked testamentary capacity, the grant of probate of the 1997 will would be revoked and, at least prima facie, the Defendants would not be allowed their costs of the suit out of the estate. Those costs would not be costs of administering the estate of which the Defendants are executors; rather, they would be costs incurred by the Defendants in defending themselves against a claim that they wrongfully procured a grant of probate of an invalid will. 26 The considerations to which I have referred would have applied to the Defendants’ first attempt to mortgage the Bondi property for $300,000. I do not think that the grant of that mortgage was within the power of the Defendants under s 153 Conveyancing Act . The Plaintiffs, however, having placed a caveat on the title which would have prevented the mortgage entirely, later consented to lift the caveat in exchange for an injunction limiting the Defendants’ power to mortgage to an amount not exceeding $300,000. Probably, the Plaintiffs considered that whichever will of the deceased prevailed, the Defendants’ share of the nett estate would certainly exceed $300,000, so that the borrowing could be notionally repaid to the estate out of the Defendants’ share. 27    However, that injunction was granted in May 2005. As I have explained, the total costs of the litigation, incurred and to be incurred, have now swollen to some $645,000 and the valuation of the Bondi property at $1.7M is by no means still accurate. If the proposed new mortgage of the Bondi property is permitted, it is possible that repayment of principal and interest will consume more than half of the nett assets of the estate after payment of legal costs. In that event, if the Plaintiffs succeeded in obtaining grant of the 1977 will or in establishing a claim to half of the estate under the Family Provision Act , their share in the estate could be substantially reduced. 28    Second, I do not accept that the Defendants will be unable to continue to defend the proceedings unless payment to their solicitors is made out of the new additional borrowing. The Defendants seem assured of receiving at least half of the nett estate if either of the claims of the Plaintiffs succeed. They will, of course, receive the whole of the nett estate if the Plaintiffs’ claims both fail. There is nothing to prevent the Defendants from charging in equity their share of the estate, as future property, in favour of their solicitors as security for payment of their solicitors’ costs. Such a charge would not affect the Plaintiffs’ claims to a share in the estate as it attaches, not to the estate’s assets, but to the Defendants’ own property, when that property comes into existence. 29    Third, to vary the injunction as sought in this case would, in my opinion, set a highly dangerous precedent in encouraging recourse to estate assets for the purposes of funding contested probate suits or Family Provision Act claims. If such recourse is allowed, the result may well be to frustrate a costs order which the Court would otherwise make at the conclusion of the proceedings. 30    For these reasons, I decline to vary the terms of the injunction, as sought by the Defendants.


Case management and costs

31    As I have observed, the legal costs expended by the parties in the conduct of the proceedings so far have been grossly disproportionate to the size of the estate and are not justified by the difficulty of the issues for trial. For this state of affairs the Plaintiffs are mostly to blame, although the Defendants’ expenditure is excessive also. The Defendants do not have to respond to every piece of evidence put forward by the Plaintiffs, no matter how remote and inconsequential. 32    When the amounts expended, and still to be expended, in the costs of these proceedings were disclosed in a directions hearing, I became concerned whether the parties’ solicitors were “over-servicing”, i.e. undertaking more work and more investigation and preparation than was necessary, in order to increase their fees. I directed that affidavits be provided by the parties themselves, stating what they had been informed about the level of costs incurred and whether they had approved. 33    The affidavit evidence of Ms Clara Ezekiel encapsulates the Plaintiffs’ attitude to the proceedings. Ms Ezekiel says that the Plaintiffs have been kept informed by their solicitors about the work being done and as to what the costs are. She says:
“I am content with the way this case has been conducted. I know that legal costs will take up a large part of the estate of my parents but that is better than allowing my brothers to get away with what I regard as an invalid Will. It is also better than getting nothing from our parents’ estate.”

The affidavit of Ms Tobin is to the same effect.

34    In other words, the Plaintiffs’ attitude is that they do not really care if the whole of the estate is consumed in the costs of this litigation. They have nothing to lose. It does not cost them anything out of their own pockets to run the case because their solicitors are undertaking the work on a contingency fee basis. If the whole of the estate is consumed in costs, at least their brothers will get nothing. If there is something for the Plaintiffs at the end of the exercise, no matter how little, it will be more than they had at the beginning of the case. 35    In their affidavits, the Defendants say that their solicitors have kept them informed of the increasing costs of the litigation. They say that they are aware that the costs of the proceedings are far higher than usual, but they say that that is the fault of the Plaintiffs. They indicate their own feelings of hostility towards the Plaintiffs and that they are determined to defend the proceedings with vigour. The only complaint made against their solicitors is that “they should have been more aggressive” . 36 If a person in full possession of his faculties wishes to expend the whole of his means and substance upon his lawyers, he is free to do so. If both sides to litigation, being in full possession of their faculties, choose to expend their collective assets and means on their lawyers then, likewise, they are free to do so. What they are not free to do is to expend, in the pursuit of their litigious obsession, as much of the Court’s resources as they wish. 37 Litigants are entitled to a fair opportunity to present their case; that does not mean that they can take as long as they like in doing so. The judicial time and administrative of this State’s courts are strained by the press of litigants seeking to have their cases heard quickly and efficiently. No one litigant has the right to insist that his case will consume as much of the Court’s time and resources as his own pockets will bear. 38 Neither has a litigant the right to insist that a limitless number of citizens who have no interest in the litigation will be put to the expense and inconvenience – often serious – of complying with subpoenas to attend and give evidence or produce documents. The litigant has the right to invoke the coercive power of the subpoena only for the purpose of having a fair trial of the real and determinative issues. 39 Unrestrained and prolific issuing of subpoenas by a litigant may constitute an abuse of the Court’s process. The terms of the subpoenas, considered individually, may not be too wide or oppressive in themselves, but if the number of subpoenas is large and the issues to which they relate are peripheral to the decisive issues for trial, not only are many non-parties to the litigation unnecessarily inconvenienced and put to expense, but a great deal of unnecessary costs will be incurred in the proceedings, bringing the proceedings to trial will be delayed, and the time for trial will be unnecessarily expanded by the raising of false or peripheral issues. All of these mischiefs the Court must be astute to prevent, in accordance with s 56 Civil Procedure Act 2005 (NSW) (“CPA”). It has ample power to do so, both in its inherent jurisdiction to control its own process and under the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”): see e.g. Southern Pacific Hotel Services Inc v Southern Pacific Hotel Corporation Ltd [1984] 1 NSWLR 710, at 719; Compsyd Pty Ltd v Streamline Travel Service Pty Ltd (1987) 10 NSWLR 648; Botany Bay Instrumentation & Control Pty Ltd v Stewart [1984] 3 NSWLR 98. 40 None of the propositions I have enunciated is revolutionary. All are enshrined in the Civil Procedure Act 2005 (NSW) and in the Uniform Civil Procedure Rules . The obligation to ensure that litigation is conducted justly, quickly and cheaply is placed equally upon the Court, the litigant and the legal profession: see CPA Pt 6 Div 1, s 56(2), (3) and (4). The Court must ensure that issues in litigation are resolved in such a way that the cost to parties is proportionate to the importance and complexity of the subject matter: CPA s 60. Amongst the objects which the Court must achieve is the efficient use of available judicial and administrative resources to ensure the timely disposal of all proceedings in the Court: CPA s 57(1)(c) and (d). The Court is given ample power to ensure that a trial is conducted with due regard to these principles: CPA s 62. 41 As I have noted above, the affidavits so far served by the parties number more than sixty-five and there are more foreshadowed. Not all affidavits may be read at the trial but there seem to be very many witnesses to be called, including medical, accounting, handwriting and valuation experts. A trial lasting ten days is estimated. 42 I have studied the issues for trial as formulated in the pleadings. As I have observed, they are not complex; they are of a kind dealt with every day by the Judges and Associate Judges of this Division. Even though the parties themselves wish to inflate the trial beyond all sensible proportions in order to vindicate their animosity towards each other, I cannot, consistently with the Court’s obligations under CPA Pt 6 Div 1, permit them to do so at the expense of judicial time and resources which should be available to other litigants. 43 The view which I have formed on a tentative basis – because I have not yet heard the parties on the question – is that the trial of the case should not occupy more than four days and that each side will have to make a decision as to who are the important witnesses to be called, so as to ensure that evidence and submissions are concluded within that four day period. The time for cross examination will have to be strictly limited. The Court can make orders under s 62 CPA to ensure that result. However, I will hear the parties at a further case management hearing as to whether such orders are appropriate; I will need to be convinced that they are not. I will then also hear submissions as to why the costs to be incurred in the proceedings from now until the conclusion of the trial should not be capped under UCPR 42.4: see Sherborne Estate (No 2); Vanvalen v Neaves (2005) 65 NSWLR 268, at [21]-[31] ([2005] NSWSC 1003).

Orders

44    The Defendants’ Notice of Motion is dismissed. The Defendants will pay the Plaintiffs’ costs of the motion. I will list the matter for further case management.
– oOo –