Vosahlo v Kantor
[2005] VSC 133
•23 February 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
PRACTICE COURT
No. 9497 of 2003
| VLADIMIR VOSAHLO | Plaintiff |
| v | |
| MILAN KANTOR AND ANOR | Defendant |
---
JUDGE: | KAYE J. | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 23 February 2005 | |
DATE OF JUDGMENT: | 23 February 2005 | |
CASE MAY BE CITED AS: | Vosahlo v Kantor and anor | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 133 | |
---
COSTS – Solicitor-client costs – Proceedings ended without adjudication – No reasonable basis for proceedings.
---
APPEARANCES: | Counsel |
| For the Plaintiff | Mr R.B. Phillips |
| For the Defendant | Mr S. Newton |
HIS HONOUR:
This matter came before me originally on an application by the defendant for summary judgment under r.23.01(1), or alternatively on an application for judgment on the merits under r.23.03 of the Rules of the Supreme Court. Although the issues have now been somewhat confined, it is necessary to briefly rehearse the facts in order to explain the conclusion which I have reached.
The defendants are sued as executors and trustees of the will of Emily Marie Vosahlo, who died on 2 December 2001. The plaintiff is the brother-in-law of the deceased, and he has in these proceedings by originating motion sought relief consisting of the removal of the defendants as executors of the will under s.34(1)(c) of the Administration and Probate Act and, so far as is necessary, removal of them as trustees under s.48(1) of the Trustee Act.
The deceased left an estate valued at approximately $825,000. Her estate also had a share in another estate which is valued at approximately $700,000. The deceased made some five wills in the last ten years of her life. By each will she appointed the defendants as executors of the estate. The last will was dated 26 May 1999. The sole beneficiary under that will was Miroslav Kruntorad, who was the son of a long-time friend of the deceased. The second last will of the testatrix was dated 12 March 1996. By that will she left her estate to three beneficiaries in equal parts. One of those beneficiaries is the plaintiff.
Probate of the last will, that is, the will dated 26 May 1999, was granted to the defendants on 7 February 2002.
On 6 August 2002 the plaintiff's daughters, that is, the nieces by marriage of the deceased, made application under Part IV of the Administration and Probate Act. That application was dismissed on 4 December 2002.
On 6 December 2002 the plaintiff made an application to have the probate which had been granted to the defendants revoked on the grounds of lack of testamentary capacity of the deceased. That proceeding came on for hearing before Byrne, J. in 2003. By order dated 4 April 2003 his Honour revoked the probate of the last will and made orders granting probate of the second last will, which, as I say, was dated 12 March 1996.
The defendants then sought advice from senior counsel and, acting on that advice, they commenced an appeal from the decision of Byrne, J. by a notice of appeal dated 17 April 2003. That matter in due course came before the Court of Appeal. On 16 December 2004 the Court of Appeal upheld the appeal and made orders in substance that the original grant of probate in relation to the last will be reinstated.
The plaintiff, as I have stated, has brought these proceedings by originating motion for the removal of the defendants as executors and trustees of the will of the deceased. The proceedings were commenced before, of course, the Court of Appeal reinstated the last will and at a time when probate had been granted in relation to the second last will. Thus, at that time the plaintiff had standing to bring the proceedings. The effect of the decision of the Court of Appeal is that the plaintiff no longer has standing to bring these proceedings. Accordingly it is properly conceded that the proceedings must be either discontinued or dismissed.
The issue before me is as to who should pay the costs of the proceedings brought by the plaintiff. The plaintiff's claim was based on two footings. Firstly, he made a claim that the defendants had a conflict of interest. It was said that the conflict of interest resided in the prosecution by the defendants of their appeal from the order of Byrne, J. and thereby failing to seek to uphold the validity of the penultimate will of the testatrix, of which they had been appointed executors. In other words, it was put that the defendants by prosecuting the appeal were favouring one group of beneficiaries over the other.
Secondly, it was put that under the last will, and while the executors were appointed executors of the last will under probate, they had made two payments totalling $93,000 to the beneficiary under that will, Mr Kruntorad. Since that probate had been revoked by the order of Byrne, J., the defendants had taken no steps to recover those payments from Mr Kruntorad or, more properly, his estate, and the defendants had acted in conflict of interest and improperly in failing to do so.
Mr Kantor has sworn an affidavit setting out the circumstances of the payments. The first payment was made in February 2002, that is, shortly after probate was granted in relation to the last will. Mr Kruntorad asked for a partial distribution to discharge debts. The estate then had $42,000 in a trust account and $734,000 invested with the Bank of Melbourne. The executors made the partial distribution to Mr Kruntorad. This, of course, was while the executors had been appointed as executors under the last will, of which probate was still standing.
In the middle of 2002, Mr Kruntorad learnt that he had contracted cancer, from which he was terminally ill. By October 2002 he was extremely ill and in the last stages of his life. He asked for a further distribution from the defendants because he needed the money to make changes to the house of his sister, with whom he was living, in order to assist him live out his last days in some comfort. At that stage the plaintiff's daughters had instituted their Part IV claim. The defendants sought advice and, acting on that advice, made a distribution of $51,000 to Mr Kruntorad. Subsequently, in February 2003, Mr Kruntorad passed away. Searches undertaken on behalf of the defendants revealed that he died without any real assets.
This case is to come for trial on 8 March next, but, of course, the sub-stratum of the claim has now disappeared, given the decision of the Court of Appeal on 16 December last. The question therefore, as I have stated, is whether, as Mr Newton, who appeared on behalf of the defendants, submitted, the plaintiff ought to pay the costs of the proceeding and, if so, whether he ought to be compelled to do so on a solicitor-client basis.
Mr Phillips, who has made thorough and helpful submissions to me, drew my attention to the authorities which govern the question as to when costs should be paid in circumstances which prevail in this case, namely, where proceedings must come to an end without an adjudication on the merits. The authorities make two matters clear. First, the court is not to embark on an hypothetical exercise of determining the trial which never was. Secondly, costs will only be awarded against the instigator of the litigation, that is, in this case, the plaintiff, if it appears that the plaintiff has acted unreasonably in commencing and prosecuting the claim: Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin;[1] OneTel Ltd v Deputy Commissioner of Taxation;[2] and Hider Consulting Victoria Pty Ltd v CGU Insurance Ltd.[3]
[1](1997) 186 CLR 622 at 625.
[2](1999) 171 ALR 227, especially at 231.
[3][2003] VSC 223.
In this case, Mr Newton, who appeared for the defendants, submitted to me that the proceedings had been brought and prosecuted unreasonably. He submitted to me that, irrespective of the question of standing, the plaintiff's claim was doomed to failure because it was misconceived. In particular, he submitted that there was no conflict of interest in the defendants pursuing the appeal to the Court of Appeal on counsel's advice, that they were simply thus operating pursuant to the traditional philosophy that it is the duty of an executor to uphold the provisions of the last will unless there is evidence that leads him to the conclusion that that will should be impugned. Secondly, he pointed out that the payments to Mr Kruntorad had been made before the order of Byrne, J. of April 2003 setting aside probate. Thereafter it was clear that the estate of Mr Kruntorad had no assets, Mr Kruntorad having already passed away, and it would have been futile for the defendants to have sought any recovery of the moneys paid to Mr Kruntorad from the estate.
Mr Phillips submitted that there was a conflict of interest really arising out of the combination, firstly, of the defendants prosecuting the appeal which favoured the last will and the beneficiaries under the last will over the beneficiaries under the second last will, together with the failure of the defendants to pursue recovery of the moneys paid to Mr Kruntorad from the estate. Mr Phillips submitted that no proper evidence had been put before me showing that the defendants had taken all reasonable steps to seek recovery of the moneys paid to Mr Kruntorad. Therefore, there was evidence that the defendants had acted in conflict of interest and thus the plaintiff had not acted unreasonably in both commencing and prosecuting the litigation.
The affidavit materials do make it absolutely clear to my satisfaction that the estate of Mr Kruntorad had no, or very few, assets, and it would have been a waste not only of time but, more importantly, the moneys of the estate if the executors had done more than they did do to seek recovery of any assets from the estate of Mr Kruntorad. No evidence has been adduced before me to show that Mr Kruntorad had funds or that there was any further enquiry that ought to have been made by the defendants to ascertain whether he had such funds. Pending the appeal to the Court of Appeal, no step was taken by the defendants which would have compromised the rights and entitlements of the beneficiaries under the penultimate will if the appeal had failed. By simply remaining the executors under the penultimate will and not being removed, the defendants were not acting in conflict of their duties to the beneficiaries under that will by prosecuting the appeal from the decision of Byrne, J. which impugned the last will. No evidence has been adduced to show any act by which the defendants acted in conflict of their duties to the beneficiaries under the penultimate will.
In those circumstances, nothing has been put before me which shows that the plaintiff had any viable basis upon which to institute or continue his proceedings against the defendants. I do appreciate that I must not embark on an hypothetical exercise. Particularly I must desist from adjudicating on the merits of any proceeding which might have been persisted with against the defendants had the Court of Appeal decided against the appellant last December. However, and notwithstanding that, it seems clear to me that the proceedings were brought without any reasonable basis. This is particularly so because, as Mr Newton correctly points out, in order to sustain his claim the plaintiff must show that the defendant has conducted himself in a manner so as to render him unfit to be the executor of the estate of the deceased. No evidence put before me indicates that the plaintiff had any reasonable basis at all upon which to sustain such a conclusion being made by a court.
In those circumstances, I do consider that it is appropriate, in line with the authorities to which my attention has been drawn, to order that the costs of the proceeding be paid by the plaintiff.
The remaining issue is whether the costs should be paid on the traditional party-party basis or a solicitor-client basis. Mr Newton contends that they should be paid on a solicitor-client and drew my attention to the decision of Woodward, J. in Fountain Selected Meat Sales Pty Ltd v. International Produce Merchants Pty Ltd.[4] In that case Woodward J suggested that where a case is commenced which is hopeless, then an inference can be drawn that it was commenced for some ulterior motive or in wilful disregard of the known facts or the clearly established law. If such an inference were to be drawn, then there would be a sound basis for making an order for costs on a solicitor-client basis, and in this respect I also refer to the decision of Harper J in Ugly Tribe Company Pty Ltd v Sikola.[5]
[4](1988) 81 ALR 397 at 401.
[5][2001] VSC 189 at [7].
I have found that the plaintiff instituted the proceedings and in doing so was acting unreasonably. However, on the materials before me, I am not in a position to infer that he wilfully disregarded the known facts or the law, or that he did so for an ulterior motive. I am conscious of the fact that this case does arise in a family setting. Often in these types of cases, where there are a number of wills left by a testatrix, feelings can run high, but those feelings do not convert themselves into the prosecution of an ulterior motive but simply invest in a litigant excessive optimism which really is not justified by the facts or the law.
In those circumstances, particularly because this is brought on an interlocutory basis, I would not, on the material before me, infer that the plaintiff acted in pursuit of an ulterior motive or in knowing disregard of the facts or the law. In those circumstances, I would only award costs on the party-party basis.
I order -
1.That the proceeding be dismissed.
2.That the plaintiff pay the defendants' costs of the proceeding including the costs of this application and any reserved costs.
---
0
4
0