Tong v Tong (No 2)
[2023] ACTSC 336
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Tong v Tong (No 2) |
Citation: | [2023] ACTSC 336 |
Hearing Date: | On the papers |
Decision Date: | 20 November 2023 |
Before: | McWilliam J |
Decision: | (1) Any rent received following the death of the Deceased by the third defendant (the Deceased’s sister) in respect of the property located in Richardson and occupied by the plaintiffs (Richardson property) is to be repaid to the fifth plaintiff. (2) Within 28 days of the making of these orders, the first defendant is to deliver up the assets and records of the Estate of the late Quoc Khai Tong (Estate) and to do all things necessary to give effect to the vesting of the property and assets of the Estate in the ACT Public Trustee and Guardian (Public Trustee). (3) Within 28 days of the making of these orders, the fourth defendant is to deliver up the assets and records of the Tong Family Trust, and to do all things necessary to give effect to the vesting of property and other assets of the said Trust in the Public Trustee. (4) Notwithstanding any power to the contrary in the Deed of Trust executed on 10 May 2019 (Trust Deed) creating the Tong Family Trust, the Public Trustee is named as the appointer of the Trust and the appointment clause in the Trust Deed is deemed to have been varied to that effect. (5) Order 6 of the orders made on 30 June 2023 is varied to read as follows: Within 14 days of any request by the ACT Public Trustee and Guardian following the issue of a grant of probate in respect of the Estate, the third defendant is to do all things and sign all documents necessary to transfer the title to the property in Richardson referred to in Order 1 above free of any encumbrance to the fifth plaintiff as to a 50% share and to the ACT Public Trustee and Guardian as to a 50% share to be held on trust for the first to fourth plaintiffs. (6) The plaintiffs’ costs are to be paid: (a) by the first defendant (out of the Estate fund) as to 50%, (b) by the second defendant as to 25%, and (c) by the third defendant as to 25%. (7) Pursuant to r 1732 of the Court Procedures Rules (2006) (ACT): (a) 50% of the Estate’s assessed legal costs are to be paid by the second defendant and 50% are to be borne by the fund of the Estate; and (b) 50% of the fourth defendant’s assessed legal costs are to be paid by the second and third defendants, and 50% are to be borne by the Tong Family Trust fund. |
Catchwords: | PRACTICE AND PROCEDURE – COSTS – Deceased Estate – where parties had mixed success on overlapping issues – whether costs ought to be paid out of estate or by defendants personally – whether interests of justice served by apportionment PRACTICE AND PROCEDURE – ORDERS – Scope of orders that can be sought under liberty to apply following final judgment – whether claims for interest and substitution of trustee “working out the order” |
Legislation Cited: | Administration and Probate Act 1929 (ACT) s 32 Court Procedures Rules (2006) (ACT) rr 407(1), 1622, 1705, 1721, 1732 Family Provision Act 1969 (ACT) s 8 Public Trustee and Guardian Act 1985 (ACT) s 25 Trustee Act 1925 (ACT) s 59(4) |
Cases Cited: | Australian Hardboards Ltd v Hudson Investment Group Ltd [2007] NSWCA 104; 70 NSWLR 201 Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Clarkson Williams Partners Pty Ltd v Vaughan (No 2) [2016] ACTCA 8 Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 Drummond v Drummond [1999] NSWSC 923 Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 90 ALJR 270 Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Bishop Irinej Dobrijevic (No 3) [2017] NSWCA 109 Kone Elevators Pty Ltd v Shipton [2021] ACTCA 33 Latoudis v Casey (1990) 170 CLR 534 McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 306 Miller v Cameron (1936) 54 CLR 572 National Trustees Executors and Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268 Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 Permanent Trustee Australia Ltd v FAI General Insurance Co (Supreme Court of New South Wales, Hodgson CJ in EQ, 3 June 1998) Pesec v Consolidated Builders Ltd (No 4) [2021] ACTSC 188 Phillips v Walsh (1990) 20 NSWLR 206 Priestley v Priestley (No 2) [2016] NSWSC 1259 Rouse & Ors v IOOF Australia (No 3) [1999] SASC 208 Secretary, Department of Health and Community Services v JWB and SMB [Marion’s Case] (1992) 175 CLR 218 Short v Crawley (No 40) [2008] NSWSC 1302 Tong v Tong [2023] ACTSC 163 Waters v P C Henderson (Aust) Pty Ltd (1994) 254 ALR 328 Yu Ge by her tutor Tao Ge v River Island Clothing Pty Ltd [2002] NSWSC 28 |
Parties: | Edmund Hao Wen Tong ( First Plaintiff) Yi Lin Tong by their litigation guardian Suqin Zhu Tong ( Second Plaintiff) Raymund Jun Wen Tong by their litigation guardian Suqin Zhu Tong ( Third Plaintiff) Desmund Xuan Wen Tong by their litigation guardian Suqin Zhu Tong ( Fourth Plaintiff) Suqin Zhu Tong ( Fifth Plaintiff) Duc Khai Tong in his capacity as Executor of the Estate of the late Quoc Khai Tong ( First Defendant) Duc Khai Tong ( Second Defendant) Le Ngoc Tong ( Third Defendant) Fortitude Investment Group Pty Ltd ACN 631 689 2020 as Trustee of the Tong Family Trust ( Fourth Defendant) |
Representation: | Counsel D Hassall ( Plaintiffs) S Chapple ( Defendants) |
| Solicitors Maxwell & Associates ( Plaintiffs) DDCS Lawyers ( Defendants) | |
File Number: | SC 655 of 2019 |
McWILLIAM J:
1․On 30 June 2023, judgment was delivered between the parties to this proceeding in respect of an undue influence, family provision and constructive trust claim brought by the plaintiffs against the brother and sister of the late Quoc Khai Tong (the Deceased): see Tong v Tong [2023] ACTSC 163 (primary judgment). The plaintiffs are the Deceased’s surviving wife and four children. The orders made were as follows:
(1) The Court declares the property located in [address anonymised] Richardson in the Australian Capital Territory is held on trust as to 50% for the fifth plaintiff and the remaining 50% for the first to fourth plaintiffs in equal shares.
(2) The gift of $360,000 to the second defendant is set aside, and the second defendant is to pay to the Estate of the late Quoc Khai Tong (Estate) the said amount within 28 days of the making of this order.
(3) Family provision is made for the plaintiffs out of the Estate with adjustments to the terms of the Will as follows:
(a)Provision of $40,000 is to be made out of the Estate to the fifth plaintiff.
(b)In lieu of the gift of $70,000 to the second defendant, a gift of $5,000 is to be made.
(c)In lieu of the gift of $70,000 to the third defendant, a gift of $5,000 is to be made.
(d)In lieu of the gift of $30,000 to Khanh Thi Ha, a gift of $5,000 is to be made.
(e)The first to fourth plaintiffs are to retain the benefit of the residual Estate in equal shares.
(4) Pursuant to s 32 of the Administration and Probate Act 1929 (ACT), Duc Khai Tong is removed as executor of the Estate and the ACT Public Trustee is appointed as executor in his place.
(5) Fortitude Investment Group Pty Ltd ACN 631 689 202 is removed from acting as trustee of the Tong Family Trust and the ACT Public Trustee is appointed as trustee in its place.
(6) The third defendant is to do all things and sign all documents necessary to transfer the title to the property in Richardson referred to in Order 1 above free of any encumbrance to the fifth plaintiff as to a 50% share and to the ACT Public Trustee and Guardian as to a 50% share to be held on trust for the first to fourth plaintiffs.
(7) Within 21 days of the making of these orders, the parties are to provide written submissions as to the orders sought and any evidence on the question of costs, including whether any further oral hearing is sought.
(8) The parties have liberty to apply to the Court for the further working out of any orders necessary to give effect to Orders 1 – 6 above.
2․The reasons for the above orders are contained in the primary judgment and are assumed context for the purposes of dealing with the present dispute about subsequent orders and costs.
3․Over 4 August to 15 September 2023, the parties filed various sets of detailed written submissions and evidence, addressing the question of costs and the liberty to apply for the further working out of orders, which was invoked by the plaintiffs. The parties were content to have the issues determined on the papers and this judgment deals with both the costs issue and the further matters arising from the additional orders sought by the plaintiffs.
4․Some of the further orders sought by the plaintiff were not opposed by the defendants. They are as follows:
(a)An order following the declaration made in Order 1 above, in relation to any rent received following the death of the Deceased by the third defendant (the Deceased’s sister) being repaid to the fifth plaintiff (the Deceased’s widow). The rent was in respect of the property located in Richardson (hereafter, the Richardson Property).
(b)Ancillary orders to give effect to the removal of the first defendant as executor and trustee (Order 4 above), directed to the delivery up of assets and records, and the vesting of property and other assets in the replacement trustee.
(c)Ancillary orders to give effect to the removal of the fourth defendant as trustee of the Tong Family Trust (Order 5 above), directed to the delivery up of assets and records, and the vesting of property and other assets in the replacement trustee.
(d)A further ancillary order to give effect to Order 5, by making the replacement trustee the appointor of the Tong Family Trust. This will require an order varying the appointment clause in the trust deed which creates the Tong Family Trust.
(e)Extending the timeframe for compliance with Order 6, due to the effluxion of time. The defendants have agreed to such an order, proposing that the transfer be provided within 14 days of any request by the replacement trustee, following the issuing of a grant of probate.
5․It is appropriate to make orders giving effect to the above agreed position.
Issues in Dispute
6․The remaining orders sought by the plaintiffs are in dispute. The following issues emerge from the written submissions:
(a)Whether the plaintiffs are entitled to interest in respect of the $360,000 gift paid to the Deceased’s brother (the second defendant), which was set aside pursuant to Order 2 above (Issue 1).
(b)Whether the first plaintiff, who is now over 18, may be appointed as executor and trustee (of the children’s share in the Richardson property and of the Tong Family Trust) in lieu of the Public Trustee, or alternatively whether he may be jointly appointed with his mother, the Deceased’s widow (Issue 2).
(c)Whether the third defendant, the Deceased’s sister should be removed from being a back-up executor and trustee of the Tong Family Trust (Issue 3).
(d)Whether the second, third and fourth defendants are required to account to the replacement trustee (Issue 4).
(e)The appropriate exercise of the Court’s discretion on costs, given the mixed success on various issues and the multi-party litigation (Issue 5).
Issue 1: Should an order for interest on $360,000 be made?
7․The plaintiffs seek an order that the second defendant pay interest to the Estate on the $360,000 sum that was set aside by Order 2 above, at the rate provided for by the Court Procedures Rules 2006 (ACT) (the Rules). They submitted such an order is now sought to enable the Estate to have the benefit of the sum from the date on which it was paid to the second defendant in 2019.
8․Rule 407(1)(i) of the Rules specifically identifies interest, including the rate of interest and method of calculation as being a matter which must be specifically pleaded.
9․No order for interest on the sum was ever sought in the primary proceedings.
10․The request for such an order now falls outside the scope of orders working out ancillary relief.
11․The defendants relied upon established principles for the grant of ancillary relief or further orders. They are as follows.
12․An application can be made to deal with matters arising in the course of working out the order by making more specific provision for its implementation, or by modifying its operation to take account of subsequent changes in circumstances. However, that right does not “extend to an application for the purpose of obtaining substantive relief that was not sought in the claim or which is substantially different to that given by the final order”: Phillips v Walsh (1990) 20 NSWLR 206 at 209-210.
13․In Australian Hardboards Ltd v Hudson Investment Group Ltd [2007] NSWCA 104; 70 NSWLR 201 (AHL v Hudson), Campbell JA, with whom Tobias JA and Young CJ in Eq agreed (on this point) set out the procedural law with respect to working out of orders at [50]-[57]. By way of summary of the principles applying in the context relevant to the present case, his Honour stated (emphasis added):
50.When final relief has been granted in a suit, an order granting liberty to apply enables further orders to be made which are necessary for the purpose of implementing and giving effect to the principal relief already pronounced or, as it is sometimes called, "working out the order": Poisson and Woods v Robertson and Turvey (1902) 50 WR 260 at 261; Cristel v Cristel [1951] 2 KB 725 at 729, 730; Nicholson v Nicholson [1974] 2 NSWLR 59 at 63; Hurstville City Council v Renaldo Plus 3 Pty Ltd [2006] NSWCA 248 at [97]...
51.In Abigroup Limited v Abignano (1992) 39 FCR 74 at 88 the Full Federal Court (Lockhart, Morling and Gummow JJ) held that an order that a particular sum of money be paid to a particular party was a final order, notwithstanding that the order also reserved liberty to apply. Their Honours gave a general indication of where and how reservation of liberty to apply operates:
“The reservation of liberty to all parties to apply to a court is a provision directed essentially to questions of machinery which may arise from the implementation of a court's orders. They include cases where a court may need to supervise the enforcement of orders after they have been made. They relate essentially to orders (not often to declarations) in practice in our experience. We agree with the submission of counsel for the appellant that orders of this kind relate to enforcement and not to statements of the rights of the parties. … Historically the reservation by the Court of Chancery of further consideration of a decree was intended to cover the circumstance where following the pronouncement of the decree (a final decree) a further hearing was necessary for the court to deal with some outstanding issue sometimes requiring taking further evidence and making further declarations or orders. But this did not detract from the initial orders as being final orders. Rather it was a mechanism designed by the Court of Chancery to obviate the necessity of a further suit being instituted to deal with matters that were essentially consequential upon the making of the initial final decree. This demonstrates that there is no inconsistency between the making of final decrees, judgments or orders or declarations and subsequent orders of the court. It all depends upon the circumstances of the case and the particular orders or decrees formulated by the court…”
52.Liberty to apply cannot be used to alter the substance of an order already made: Dowdle v Hillier (1949) 66 WN (NSW) 155 at 156; Cristel v Cristel; Clark Equipment Credit of Australia Ltd v Como Factors Pty Ltd (at 559).
…
54.In Fylas Pty Ltd v Vynal Pty Ltd [1992] 2 Qd R 593 at 598, McPherson SPJ considered what is involved in “working out” an order:
“... a judgment or order that expressly reserves to parties a leave or liberty to apply can be varied on an application pursuant to such leave only so far as may be necessary for the purpose of working out the actual terms of the order so as to make it more efficacious in matters of detail. What is meant in this context by “working out” the terms of an order is considered in some of the cases on the point. In Cristel v Cristel [1951] 2 K.B. 727, 728, Somervell LJ said it “involves matters on which it may be necessary to obtain the decision of the court. Prima facie, certainly, it does not entitle people to come and ask that the order itself shall be varied”. A simple judgment for a money sum requires no “working out” in any sense, so that liberty to apply is quite inappropriate in such a case. On the other hand, there are many orders, particularly on the equity side, as to which the process of carrying the primary judgment into effect may require supervision, with the consequence that further or supplementary orders or directions may be needed to enable it to achieve its purpose…”
…
56.Rather, what can be done under a reservation of liberty to apply depends on what needs to be done, in the particular case, to work out the particular orders that have been made. If an order is one the working out of which of its nature involves deciding complex questions, or questions that were not specifically raised at the time that the order was made, those questions can be raised and decided in the original suit pursuant to liberty to apply.
14․I have set out the above principles in some detail because they are relevant to resolving a number of the issues considered below, as well as the present question of whether interest up to judgment should be awarded.
15․Applying the above principles, the only order to which the claim for interest could relate is Order 2. It is a simple order for payment of a monetary sum within 28 days. It does not require “working out”. The plaintiff did not seek an order for interest and it is a separate matter for pleading. I therefore accept the defendants’ submission that the order sought by the plaintiffs is an additional claim requiring a separate order, not a claim that is necessary to “work out” the particular orders that have already been made.
16․However, given the time that has elapsed, if the second defendant has not repaid the $360,000 to the Estate, he is now in default of Order 2 (unless a subsequent order has been made staying the operation of the orders pending any appeal).
17․Again, applying the principles set out above, an order relating to supervision and enforcement of Order 2 may properly fall within the scope of the working out of the orders. I consider it appropriate to order that the usual order as to interest after judgment applies (being r 1622), although if the second defendant repaid the sum within the 28-day period specified, the additional order will have no effect.
Issue 2: Should the first plaintiff be appointed as Executor of the Estate, trustee of the children’s share in the Richardson property, and trustee of the Tong Family Trust?
18․Orders 4-6 of the primary judgment appoint the ACT Public Trustee and Guardian (Public Trustee) as:
(a)Executor of the Estate;
(b)Trustee of a 50% share of the Richardson property, being the share held by each of the children; and
(c)Trustee of the Tong Family Trust.
19․The plaintiffs have sought orders that the eldest child of the Deceased (the first plaintiff), who has now turned 18, replace the Public Trustee in roles (a) and (b) above, either solely or as joint trustee with his mother (the fifth plaintiff). The plaintiffs also seek a separate order that the fifth plaintiff be appointed Trustee of the Tong Family Trust, either solely or jointly with the first plaintiff.
20․The main reason for seeking to replace the Public Trustee relates to the fact that fees will be charged, depleting a relatively small Estate and the assets of the Tong Family Trust. In addition, the involvement of the Public Trustee will add an extra layer of inconvenience for the plaintiffs.
21․The defendants in the present case again relied on the authorities applying to the working out of orders. They submitted that the application to substitute the eldest child as trustee in each case was not a necessary order for the working out of orders that had already been made. It was effectively a request that the order itself shall be varied.
22․I accept that submission and find that the application to substitute the eldest child of the Deceased as executor and trustee (either solely or jointly) is outside the liberty granted to the parties. It is seeking to revisit the findings already made by the Court.
23․The reasons given in the primary judgment for appointing the Public Trustee as Executor were as follows, at [255] (emphasis added):
In any event, this is a case where I am satisfied that going forward, an independent executor would be more appropriate to finalise the due and proper administration of the estate because such a person would have the ability to act independently and deal dispassionately with conflicts and to attend to the necessary steps to achieve such finalisation without delay.
24․The reasons given for appointing the Public Trustee as trustee of the Tong Family Trust were similarly as follows, at [268] (emphasis added):
An independent and experienced trustee is preferable, both from an investment perspective (to ensure confidence in the protection of the Trust assets), as well as from the more personal family perspective. Someone independent would reduce the opportunity for ongoing conflict between the mother of the beneficiaries, who has primary responsibility for the education and welfare of Quoc’s children, and the trustee who has been given the financial means of assisting with that task.
25․The order transferring a 50% interest in the Richardson property was made pursuant to s 8 of the Family Provision Act 1969 (ACT), which permits the Supreme Court to make such provision as the Court thinks fit. Having found (at [229]) that the Deceased had failed in his moral duty to provide adequate provision for the proper maintenance, education or advancement in life of his wife and children, the reasons for adjudging that an interest in real property should be transferred to the children are set out in the primary judgment at [235]-[236]:
235.A further way in which the Court may take account of the testator’s testamentary freedom, balanced against his moral duty to provide for his wife and children, is for the majority of the moneys to form part of the residual Estate and to leave the children as the only beneficiaries of the residue. In that way, the family provision is made directly to the children, which most closely accords with Quoc’s very clear wishes while he was alive and in the terms of his Will.
236.However, the increase in funds available for the children’s proper maintenance, education and advancement will indirectly reduce the burden on Suqin, making the children less dependent on her present income. To that end, it is appropriate to order that additional provision be made to Suqin out of the Estate in two ways. First, Suqin will receive provision by way of a 50% interest in the Richardson property. Second, provision will be made by way of a sum of $40,000. The remainder of the assets (including the other 50% interest in the Richardson property) will form part of the residual Estate and therefore be held on Trust for the children.
26․Even if I had found that the request to replace the Public Trustee with one or more of the plaintiffs fell within the liberty granted, there is a separate reason why I would not have acceded to the request made. In making each of the above orders, the Court is exercising the power to place assets (money and property) with a trustee because there are interests of minor beneficiaries involved. In such circumstances, the Court has the express power to appoint the Public Trustee pursuant to s 25 of the Public Trustee and Guardian Act 1985 (ACT). However, the Court is also exercising the parens patriae jurisdiction of the Court. The parens patriae jurisdictionis ancient, wide-ranging and far-reaching. It is protective in nature, in that the Court must act so as to protect the interests of infants: Yu Ge by her tutor Tao Ge v River Island Clothing Pty Ltd [2002] NSWSC 28 at [28].
27․The jurisdiction extends as far as necessary for the protection of children and those persons who from their legal disability cannot look after themselves and are in need of protection: Secretary, Department of Health and Community Services v JWB and SMB [Marion’s Case] (1992) 175 CLR 218 at 258-9 per Mason CJ, Dawson, Toohey and Gaudron JJ, 279-280 per Brennan J.
28․The plaintiffs’ request was in the nature of placing the funds the hands of a private trustee (being the eldest son or widow jointly or severally), but in circumstances where the private trustees proposed are persons who may have competing or conflicting interests with other family members as to how to manage or spend the inheritance that was left to them.
29․Those issues arise regardless of whether the first or fifth plaintiffs were appointed as sole or joint trustees the Tong Family Trust. It will be apparent from the reasons given above in the primary judgment that a driving concern in appointing the Public Trustee was to avoid further conflict, and that includes between the minor beneficiaries and their mother, the fifth plaintiff, as they get older. The appointment of the Public Trustee was made in full awareness that the child plaintiffs (who were not separately represented) had sought for their mother to be appointed as Executor and Trustee. Express reference was made to the fact that such relief was sought at [16] of the primary judgment.
30․The proposition that the first plaintiff may be jointly responsible with his mother gives rise to a risk that the mother may seek to influence her son to make decisions that may not necessarily be in the best interests of his siblings. At the very least, it may put him in a difficult family position. Moreover, there was no evidence before the Court that the first plaintiff has sufficient experience to manage a family trust or to make decisions about a property asset of substantial size, or that his expertise extended beyond being anything other than a “bright and responsible young man”. By contrast, the Public Trustee is highly experienced, has express statutory duties and most importantly, is entirely independent from any party in the litigation.
31․Accordingly, even if I had found the application made by the plaintiffs to replace the appointments of the Public Trustee with a family member (either the Deceased’s widow or eldest son or both) capable of falling within the liberty to apply, I would not have acceded to the request to vary the orders made.
Issue 3: Should the Deceased’s sister should be removed from being a back-up executor and trustee of the Tong Family Trust?
32․The plaintiffs submitted that an ancillary order was required to further Order 4. They sought that the Court order pursuant to s 32 of the Administration and Probate Act 1929 (ACT) (Administration Act) that the third defendant be removed as executor and trustee of the Estate.
33․This was apparently because of an apprehension that if the Public Trustee ceased to be executor of the Estate for whatever reason, then the Will would provide for the third defendant to take the place of the Public Trustee.
34․Again, this is not an order necessary for the working out of Order 4. It is an order sought in the hypothetical circumstances that Order 4 is not carried out. At present, it could not be said to be a necessary order either to further or enforce Order 4.
35․In any event, the defendants submitted (correctly) that the plaintiffs’ application misunderstands the role of the Deceased’s Will and the Court in granting probate or letters of administration in respect of that Will. The third defendant is not presently the executor of the Will. No grant has been made to the third defendant. The Court’s jurisdiction under s 32 of the Administration Act is simply not enlivened.
36․What the plaintiffs are really seeking is the removal of any reference to the third defendant as a substitute executor in the Will. That is a different exercise of power from that exercised by the Court pursuant to s 32 of the Administration Act in making Order 4. It is unnecessary to explain the principles relating to severance of clauses in a Will or to consider the underlying merit of the request. It suffices to state that such an order constitutes a separate issue, rather than being an ancillary order to Order 4.
Issue 4: Should an order for accounts be made in relation to the Estate of Tong Family Trust?
37․The plaintiffs submitted that consequent upon the making of Order 5, the Court should make a further order that the second, third and fourth defendants account for all moneys held in trust from the Tong Family Trust and all transactions on behalf of the Tong Family Trust.
38․This was an order originally sought in the Amended Statement of Claim. While it arguably falls within the liberty granted, I do not consider it appropriate at this stage to order the taking of accounts. It is not a necessary ancillary step to give effect to the orders appointing the Public Trustee. Although it was found that the Executor and Trustee were each “unfit” as that word is understood in the authorities discussed in the primary judgment, no finding was made that a taking of accounts was the proper relief or even that such an order would be in the interests of the beneficiaries. This was not a case where there were established breaches of trust, or mismanagement of the Estate or Trust assets.
39․The ancillary orders to be made by consent include the delivery up of the records and assets for the Estate and the Tong Family Trust. It is appropriate to leave this additional matter to the discretion of the Public Trustee in the first instance, and if an order for the taking of accounts is considered to be warranted (noting the costs associated with such an exercise and the consequent prolonging of the administration of the Estate), then there is nothing preventing the Public Trustee, as an independent public entity, after inspection of the records provided, from making the relevant application.
Issue 5: Costs
40․The plaintiffs sought the following orders:
(a)An order for their costs, with such costs to be paid personally by the second and third defendant on an ordinary basis.
(b)The defendants’ costs be paid personally, rather than out of the Estate or the Tong Family Trust.
(c)To the extent that payments have already been made out of the Estate or Trust, that the second, third and fourth defendants repay those costs.
41․The defendants sought orders based on an apportionment of various issues in the proceedings, applied an equal percentage division to each issue, and arrived at the following orders:
(a)The second defendant pay 12.5% of the plaintiff’s costs of the proceedings, calculated on the ordinary basis.
(b)The third defendant pay 12.5% of the plaintiff’s costs of the proceedings, calculated on the ordinary basis.
(c)The Estate pay 25% of the plaintiff’s costs of the proceedings on the ordinary basis.
(d)The Tong Family Trust pay 12.5% of the plaintiff’s costs of the proceedings, calculated on the ordinary basis.
(e)37.5% of the defendants’ costs of the proceedings be paid out of the Estate, calculated on a solicitor client basis.
(f)12.5% of the defendants’ costs of the proceedings be paid out of the Tong Family Trust, calculated on a solicitor client basis.
Applicable principles
42․Costs are in the discretion of the Court: see r 1721(1) of the Rules. Rule 1705(1) confirms that the Court has power to make an order for costs in relation to a particular issue.
43․The principles guiding the exercise of the Court’s discretionary power to award costs, applying in a proceeding where there were multiple issues have previously been set out in some detail in Pesec v Consolidated Builders Ltd (No 4) [2021] ACTSC 188 (Pesec)at [6]-[13]. A number of the authorities collected in that summary are set out below.
The ordinary rule: costs follow the event, but what is ‘the event’?
44․A substantially successful party is entitled to recover its costs from the opposing party, because it is just and reasonable that the party who has caused the other party to incur costs should reimburse that party for the liability incurred: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [67]; Latoudis v Casey (1990) 170 CLR 534 at 543 per Mason CJ, at 562-3 per Toohey J, at 566-7 per McHugh J (Latoudis).
45․That principle has been described as the “ordinary rule” that “costs follow the event”: Kone Elevators Pty Ltd v Shipton [2021] ACTCA 33 (Kone) at [294].
46․The relevant ‘event’ is primarily to be determined “by reference to the outcome of the litigation and whether or not the plaintiff has obtained judgment in his favour”. That is so, “even if the defendant has defeated some claims and has succeeded on others, or has succeeded on some issues”: Priestley v Priestley (No 2) [2016] NSWSC 1259 (Priestley) at [49].
47․In Waters v P C Henderson (Aust) Pty Ltd (1994) 254 ALR 328 (Waters) the following guiding principle was articulated at 330-331 (emphasis added):
[Where there are multiple issues in proceedings, the Court generally does not differentiate between those on which the party succeeded or failed]...unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed.
48․The above principle has been cited numerous times, examples being Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 (Elite) at [6]; and Clarkson Williams Partners Pty Ltd v Vaughan (No 2) [2016] ACTCA 8 (Clarkson) at [10].
Amelioration of an otherwise favourable costs order - apportionment
49․A costs order in favour of a successful party can be ameliorated to reflect that party's failure on particular issues even though the successful party did not act unreasonably in raising or defending those issues: Permanent Trustee Australia Ltd v FAI General Insurance Co (Supreme Court of New South Wales, Hodgson CJ in EQ, 3 June 1998) at 10-11; Short v Crawley (No 40) [2008] NSWSC 1302 at [32]; Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 at [31].
50․In Elite, having cited the above extract from Waters, the Court of Appeal listed five further principles at [7]-[11]:
7....In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick (No 2) [2006] NSWCA 374 at [27].
8.Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed).
9....A separable issue can relate to ‘any disputed question of fact or law’ before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34].
...
11....Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272.
51․Accepting that such an approach is available, as submitted by the plaintiffs, there are “good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like”: Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 90 ALJR 270 at [6].
52․Ultimately, the question is what is a fair and just outcome in ordering costs: McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 306 at [22] and [24] per Ward J, cited in Priestley at [51], Pesec at [12]. In the Territory, a description used (which I consider to be of similar sentiment) is what is “the appropriate order in the interests of justice”: Clarkson at [12]. Similarly in EMI Songs Australia Pty Ltd v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9], the Full Federal Court described the result as being one that “best reflects the interests of justice overall in the circumstances of the case”.
Should the plaintiffs be entitled to their costs, or should the court apportion costs by reference to issues?
53․In this case, the plaintiffs were successful in respect of their claims for family provision against the first defendant, undue influence against the second defendant, constructive trust in respect of the Richardson property against the third defendant, and removal of the trustee against the fourth defendant. These were substantive measures of success against each defendant. Further, given that the plaintiffs have obtained substantive orders in their favour in respect of each defendant, this is not a case where there was a ‘mixed outcome’.
54․That said, there were issues and claims on which the plaintiffs did not succeed. They did not succeed in claims of undue influence or unconscionable conduct in respect of the third defendant, or in their claim for testamentary undue influence in respect of the legacies of $70,000 to each of the second and third defendants.
55․However, contrary to the defendants’ submission, these issues were not clearly dominant or separate. Establishing the factual matrix involved untangling the history of the Tong family’s property dealings, making findings concerning the Deceased’s condition and state of mind, and findings of credit in relation to the witnesses. This had the consequence that the issues, while technically discrete, were very much overlapping or intertwined in this case. By way of example, the findings that led the plaintiffs to succeed in respect of the Richardson property also caused them to fail in respect of the Kambah property. The success in establishing a constructive trust in respect of the Richardson property was only achieved through the finding that the gift to the second defendant was not a product of undue influence. The success on the family provision claim overtook the lack of success in respect of the testamentary undue influence claims.
56․Separately, the approach for which the defendants contended was one that sought to impose mathematical division of costs on an issue-by-issue basis. It is precisely the kind of approach rejected in the authorities set out above. The fair and just outcome is that the plaintiffs be entitled to their costs on the ordinary basis.
Should the plaintiffs’ costs be paid by the Estate, the Trust or the Defendants personally?
57․The plaintiffs submitted that the second and third defendants took a partisan stance in the litigation, as they stood to gain from defending provisions of the Will which benefited each of them. The submission was that this affected the approach taken by the corporate Trustee (the directors of which were the second and third defendants) and the Executor in defending the litigation against the Estate.
58․The plaintiffs relied on Miller v Cameron (1936) 54 CLR 572 at 578 (Miller) to argue that the lack of a submitting appearance and highly resistant, litigious stance taken by the Trustee and Executor mean that the second and third defendants should each bear the costs of the litigation personally.
59․The plaintiffs further relied on r 1732(2)(a) of the Rules, which applies where a party sues or is sued as a trustee. It provides:
(2) Unless the court otherwise orders—
(b)the party is entitled to have costs of the proceeding that are not paid by someone else paid out of the fund held by the trustee...
60․The rule furthers s 59(4) of the Trustee Act 1925 (ACT) which provides that a “trustee may reimburse himself or herself, or pay or discharge out of the trust property, all expenses incurred in or about the execution of his or her trusts or powers.”
61․Section 59(4) of the Trustee Act has statutory counterparts throughout Australia. In National Trustees Executors and Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268 at 274, Starke J referred to the equivalent Victorian provision as reflecting the rule at common law that “an executor or trustee is entitled as of right to be recouped everything that he has expended properly in his character as executor or trustee.”
62․In Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Bishop Irinej Dobrijevic (No 3) [2017] NSWCA 109 (Free Serbian Orthodox Church) at [32], Payne JA (with whom Ward and Gleeson JJA agreed) noted these matters and went on to cite Rouse & Ors v IOOF Australia (No 3) [1999] SASC 208 at [38]:
Whether costs have been properly or not properly incurred is a matter of fact. In that determination regard will be had to whether the trustee could have sought advice and directions from the court; the legal advice which was taken; the circumstances in which the litigation arose; whether it was initiated or defended by the trustee; the real prospects of success of the litigation; the person or persons who would have benefited in a successful conclusion of the litigation; the conduct of the trustee in the litigation and the result of the litigation.
63․In the present, the plaintiffs argued that the costs of the proceedings were not properly incurred and should be “paid by someone else” within the terms of r 1732(2)(a).
64․Moreover, it was argued that if the costs of the proceeding are to be paid from the Estate or the Trust, that would in effect mean that the first to fourth plaintiffs would bear the costs of the proceeding, because those plaintiffs are the residual beneficiaries of the Estate and the specific beneficiaries of the Trust. The plaintiffs submitted that to avoid this outcome, the costs should be paid personally by the second, third and fourth defendants.
65․The plaintiffs further relied on r 1732(3), which provides as follows:
However, the costs caused by an unsuccessful claim or unsuccessful resistance to any claim to any property must not be paid out of the fund, unless the court otherwise orders.
66․The plaintiffs say the “presumption” arising from r 1732(3) means that the second, third and fourth defendants, insofar as they mounted an “unsuccessful resistance” to the plaintiffs’ claims, are liable to pay the costs personally absent an order made by the Court. Here, the Court should not “otherwise order” as the second and third defendant resisted the claim in a manner that was improvident and inappropriate in preserving benefits for themselves.
67․The defendants accepted that, to the extent that the plaintiffs’ claims against the second and third defendants in their personal capacity were successful, the second and third defendants should bear those costs personally. This included:
(a)the claim with respect to the $360,000 gift (second defendant); and
(b)the claim with respect to the Richardson property (third defendant).
68․Otherwise, the defendants argued that the claims were not unreasonably defended. The first defendant (on behalf of the Estate) successfully defended the claims of undue influence in respect of the gifts in the Will. To the extent that there was family provision made for the plaintiffs, the defence of the claim itself was not unreasonable.
69․The defendants also relied on Miller as explained in Drummond v Drummond [1999] NSWSC 923 (Drummond), where Austin J summarised the relevant authorities at [43] (emphasis added):
In Miller v Cameron (1936) 54 CLR 572, 578, Latham CJ explained that `as a rule, a trustee is allowed his costs out of the trust estate if his conduct has been honest, even though it may have been mistaken.' In Re Weall; Andrews v Weall (1889) 42 ChD 674, 677, Kekewich J spoke of the `tenderness which the Court is anxious to exhibit towards trustees honestly exercising discretion in discharge of their duties, often difficult and still more often thankless.' In Re Jones; Christmas v Jones [1897] 2 Ch 190, 197 the same judge said that `a man who fulfils the difficult duties of an administrator, executor or trustee is, in common sense and common justice, entitled to be recouped to the very last penny everything that he has expended properly - that is to say, without impropriety - in his character of administrator, executor or trustee ...'. Thus it is normally the case that an executor who commences or defends an action in the capacity of executor is entitled to be indemnified out of the estate for the costs incurred in doing so, even if the litigation is unsuccessful, the executor's conduct is found to have been mistaken, and the other party in the litigation is held to be entitled to an order for costs.
70․I consider that in the circumstances of this case, it is also relevant to refer to what Austin J then went on to say at [44]-[47] (emphasis added)]:
44.This exception to the normal rule that costs follow the event, which permits an executor to recover costs from the estate, is itself subject to some exceptions, as is plain from Latham CJ's reference to honest conduct and Kekewich J's reference to impropriety. There are two ‘sub-exceptions’ which are arguably relevant to the present case.
45.The first is the sub-exception for ‘impropriety‘. As Kekewich J made clear in Re Jones, cases of impropriety include an executor taking or defending proceedings in breach of trust, or conducting the proceedings in such a way that the Court, on a general view of the case, regards the executor's conduct as ‘not honestly brought forward’ ([1897] 2 Ch 190, 198). Additionally, recourse to the estate may be denied to an executor ‘where the claim is of monstrous character, that is, one which no reasonable man could say ought to have been put forward‘ (at 198). In Re Weall the trustees allowed a solicitor to deduct fees which were not properly chargeable to the life tenant from the rental income of the estate. Kekewich J observed that while mistakes or errors in judgment would not disentitle the trustees to an indemnity, the beneficiaries were entitled to expect ‘reasonable prudence’ of the trustees (42 ChD at 678-9).
46.In my opinion the present case falls squarely within the ‘sub-exception’ as articulated by Kekewich J in these two cases. In the present case the defendant acted obstructively, unreasonably and in disregard of his clear duty, during the period from June 1996 until just prior to the hearing. I do not find that he acted dishonestly in any positive sense, but he defended the summons on a basis which no reasonable person could say should be put forward, by an executor or otherwise.
47.Secondly, the rule which gives an executor the prima facie entitlement to be indemnified out of the estate for costs relates only the costs incurred in the administration and distribution of the estate. Such costs are to be distinguished from costs incurred by an executor in furtherance of a personal interest: Miller v Cameron (1936) 54 CLR at 578-9; Re Jones [1897] 2 Ch at 197-8; Plimsoll v Drake (No.2) (Supreme Court of Tasmania, Zeeman J, unreported, 8 June 1995). Executors who pursue personal interests in litigation are ‘not fighting for the estate any more than if they were not executors at all’: Skrimshire v Melbourne Benevolent Asylum (1894) 20 VLR 13, 18 per Madden CJ. An executor who prosecutes or defends proceedings in the capacity of, say, creditor or beneficiary of the estate rather than in the capacity as executor cannot expect to recoup the costs of litigation from the estate simply on the basis that he or she is also an executor. In Miller v Cameron Latham CJ took the view that a trustee who defended an action for his removal was thereby representing his own interests and not those of the trust estate. In Plimsoll v Drake Zeeman J reached a similar conclusion where a trustee unsuccessfully asserted the right to demand a release before distributing the trust estate to the beneficiaries.
71․There is force in what each party says. Again, the factual findings overlap for a number of the claims and the costs incurred in defending claims that were successful cannot be divorced from the costs incurred where the defendants were unsuccessful. The overriding consideration is that costs are compensatory, and I agree with the plaintiffs that an order should be made to ensure that objective is met in reality.
72․However, as submitted by the defendants, the Estate was successful in respect of certain aspects of the claim and to that extent, the defence of the proceeding by the Executor on behalf of the Estate could not be said to be entirely unreasonable.
73․What is significant, though, for the exercise of the Court’s discretion on this aspect of costs, are the following considerations:
(a)Neither the Executor (the first defendant) nor the Trustee (the fourth defendant) sought judicial advice before actively defending the proceeding in its entirety (primary judgment at [254]).
(b)There was an element of partisanship exhibited by the Executor in the conduct giving rise to the proceedings (see primary judgment at [245]-[252]). The second defendant was in a position of a conflict of interest in relation to whether the Estate should bring proceedings to enforce a claim for undue influence or seek to bring the Richardson property into the assets of the Estate on the basis of constructive trust. Judicial advice should have been sought.
(c)The second defendant then unsuccessfully sought to defend his appointment as Executor. On the authorities above, this suggests that he was representing his own interest. This matter had significance for the second defendant, as he was one of the beneficiaries whose testamentary gift was under challenge. Ultimately in closing submissions, he did accept that the Public Trustee may be appropriate to be appointed.
(d)In respect of the Tong Family Trust, as will be apparent from [265]-[266] of the primary judgment, the conduct of the proceeding by the fourth defendant was determined by the partisan attitudes of the second and third defendants. The fourth defendant was found to be an “unfit” trustee because of personal decisions made by the second and third defendants as its directors, which were plainly against the interests of the beneficiaries. In those circumstances, the fourth defendant, a company under the direct control of the second and third defendants, then unsuccessfully sought to defend its appointment as trustee.
74․It is important to record that the failure by a trustee to obtain judicial advice does not of itself mean that a trustee will be deprived of the indemnity to which they are otherwise entitled. However, the absence is a matter highly relevant to the question of whether the trustee has acted unreasonably: Free Serbian Orthodox Church at [42].
75․A balance must be struck. Taking all the above matters into account, I consider that the interests of justice are best served by making an order for apportionment of costs. In my view, the appropriate division is as follows:
(a)As to the plaintiffs’ costs:
(i)The first defendant (the Estate) is to pay 50%;
(ii)The second defendant is to pay 25%; and
(iii)The third defendant is to pay 25%.
(b)As to the defendants’ costs:
(i) The second defendant is to pay:
1.his own legal costs;
2.50% of the Estate’s assessed legal costs; and
3.in the event the fourth defendant incurred any separate legal costs, 25% of those costs.
(ii)The third defendant is to pay her own legal costs and, in the event the fourth defendant incurred any separate legal costs, 25% of the fourth defendant’s legal costs.
(iii)The remaining 50% of the Estate’s assessed legal costs are to be borne by the Estate.
(iv)The remaining 50% of the fourth defendant’s assessed legal costs are to be paid out of the Tong Family Trust.
76․In the primary judgment, I raised for the parties’ consideration whether it may be appropriate for the Court to make a fixed sum costs order, with a view to sparing the parties the further costs of engaging in an assessment process. Ultimately, that course was not established as being appropriate on the submissions and evidence that were put before the Court.
Orders
77․For the above reasons, the orders of the Court are as follows:
(1)Any rent received following the death of the Deceased by the third defendant (the Deceased’s sister) in respect of the property located in Richardson and occupied by the plaintiffs (Richardson property) is to be repaid to the fifth plaintiff.
(2)Within 28 days of the making of these orders, the first defendant is to deliver up the assets and records of the Estate of the late Quoc Khai Tong (Estate) and to do all things necessary to give effect to the vesting of the property and assets of the Estate in the ACT Public Trustee and Guardian (Public Trustee).
(3)Within 28 days of the making of these orders, the fourth defendant is to deliver up the assets and records of the Tong Family Trust, and to do all things necessary to give effect to the vesting of property and other assets of the said Trust in the Public Trustee.
(4)Notwithstanding any power to the contrary in the Deed of Trust executed on 10 May 2019 (Trust Deed) creating the Tong Family Trust, the Public Trustee is named as the appointer of the Trust and the appointment clause in the Trust Deed is deemed to have been varied to that effect.
(5)Order 6 of the orders made on 30 June 2023 is varied to read as follows:
Within 14 days of any request by the ACT Public Trustee and Guardian following the issue of a grant of probate in respect of the Estate, the third defendant is to do all things and sign all documents necessary to transfer the title to the property in Richardson referred to in Order 1 above free of any encumbrance to the fifth plaintiff as to a 50% share and to the ACT Public Trustee and Guardian as to a 50% share to be held on trust for the first to fourth plaintiffs.
(6)The plaintiffs’ costs are to be paid:
(a)by the first defendant (out of the Estate fund) as to 50%,
(b)by the second defendant as to 25%, and
(c)by the third defendant as to 25%.
(7)Pursuant to r 1732 of the Court Procedures Rules (2006) (ACT):
(a)50% of the Estate’s assessed legal costs are to be paid by the second defendant and 50% are to be borne by the fund of the Estate; and
(b)50% of the fourth defendant’s assessed legal costs are to be paid by the second and third defendants, and 50% are to be borne by the Tong Family Trust fund.
| I certify that the preceding seventy-seven [77] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Justice McWilliam. Associate: Date: |
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