WATKINS & SUTCLIFFE
[2016] FamCA 331
•6 April 2016
FAMILY COURT OF AUSTRALIA
| WATKINS & SUTCLIFFE | [2016] FamCA 331 |
| FAMILY LAW – COSTS – power to order the executor (as a party) is entitled to be indemnified for costs incurred from the deceased’s estate. |
| Family Law Act 1975 (Cth) Judiciary Act 1903 (Cth) |
Trustee Act 1998 (Vic)
| Harris (1993) FLC 92-378 |
| APPLICANT: | Ms Watkins (as legal person representative of Mr Watkins) |
| RESPONDENT: | Ms Sutcliffe |
| FILE NUMBER: | MLC | 11236 | of | 2010 |
| DATE DELIVERED: | 6 April 2016 |
| PLACE DELIVERED: | Melbourne |
| PLACE HEARD: | Melbourne |
| JUDGMENT OF: | Cronin J |
| HEARING DATE: | 6 April 2016 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Ms Fridey |
| SOLICITOR FOR THE APPLICANT: | Wightons Lawyers |
| COUNSEL FOR THE RESPONDENT: | Ms Swan |
| SOLICITOR FOR THE RESPONDENT: | Hartwell Legal |
Orders
That there be orders in terms of paragraph 1 of the application of Ms Watkins filed on 4 March 2016.
That application be otherwise dismissed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Watkins & Sutcliffe has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| FAMILY COURT OF AUSTRALIA AT MELBOURNE |
FILE NUMBER: MLC 11236 of 2010
| Ms Watkins (as personal representative of Mr Watkins) |
Applicant
And
| Ms Sutcliffe |
Respondent
REASONS FOR JUDGMENT
By her application in a case filed on 4 March 2016, Ms Watkins seeks an order that the legal costs and expenses which she incurs in her capacity as the legal personal representative of her late father’s estate be paid on an indemnity basis from the estate’s assets. The application is not opposed by Ms Ridley, who is the litigation guardian for Ms Sutcliffe, but nor is it consented to. Her position is that the application is misconceived, not as to the entitlement but as to the power of the Court to make the order. Her position is that an application should be, if not must be, made to the Supreme Court of Victoria.
Ms Watkins’s application is said to be founded in section 117 of the Family Law Act 1975 (“the Act”). I do not accept the power lies there but that is not an end to the matter. In discussion, I indicated I thought there were other sources of power but the position put on behalf of Ms Ridley is that whilst that might be so, no such application has been brought. In my view, because Ms Ridley does not oppose the concept and entitlement, the nature of the application does not matter. In my view, the order can be made.
The substantive proceeding in this case is most unusual. Mr Watkins and Ms Sutcliffe were married. They separated in 1993 – that is 25 years ago – but did not sort out property issues between themselves until 2011. Then, for whatever reason, final consent orders were made, the details of which do not matter save that Ms Sutcliffe has now brought an application under section 79A of the Act to set aside the orders on the basis of lack of disclosure of financial information by Mr Watkins.
To compound the difficulties with time having passed since separation and therefore, issues of contribution, Mr Watkins has died. Just to add to that problem, it has been accepted that Ms Sutcliffe is not capable of conducting a litigation herself and a case guardian has been appointed for her.
The legal personal representative of the deceased estate is the applicant in this interlocutory application.
There is a significant difference between the legal standing of Ms Watkins and Ms Ridley. A case guardian is not a party to the proceedings, whereas a legal personal representative is.
Rule 6.08 of the Family Law Rules 2004 provides that:
…a person with a disability may start, continue, respond to or seek to intervene in a case only by a case guardian.
Rule 6.09 makes reference to the case guardian “conducting the case”. Rule 6.10 makes reference to the “case guardian of a party”.
Rule 6.13 provides that:
A person appointed as the case guardian of a party
(a)is bound by the rules;
(b)must do anything required by the rules to be done by the party; and
(c)may, for the benefit of the party, do anything permitted by the rules to be done by the party…
Subrule 2 says the disclosure duty applies to a case guardian for a child and a person with a disability. There is a notation to rule 6.13 which provides:
Note 1:The court may order a case guardian to pay costs.
Rule 6.14 says that the Court may order the costs of a case guardian to be paid by a party or from the income or property of the person for whom the case guardian is appointed.
If a proceeding in a civil jurisdiction is brought by a plaintiff under disability and it fails, and costs therefore follow, the litigation guardian is personally liable for those costs. However, provided that person has acted properly, he or she is entitled to be indemnified for the costs, (Steeden and Walden [1910] 2 Ch. 393).
On the other hand, a legal personal representative is a party. Rule 6.15 says:
The court may order that the legal personal representative of the deceased person be substituted for the deceased person as a party.
That is what has happened here, thus Ms Ridley is not a party but Ms Watkins is. The applicant’s position is that she does not want to personally incur the costs of this litigation without some form of indemnity from the estate. Obviously, there are other beneficiaries to consider who may, for example, object to a defence being mounted to the substantive action.
In addition, there is a metaphorical handbrake that can be placed on what is spent. Can Ms Watkins here simply shrug her shoulders and say she acted in defence of the estate in circumstances where she has, to a limited extent, an interest in that estate? Thus, the applicant in this case wants an indemnity for what she incurs on behalf of the estate on the assumption that the substantive litigation will be complicated by the death of the husband and the disability of the wife.
The solicitor for the applicant points to section 117 of the Act. Section 117 of the Act has two specific relevant subsections:
(1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
Reference was made to authority to support a suggestion that section 117(2) is to be widely interpreted. It is not suggested here that this is an application for security of costs. My interpretation of section 117 is that the estate has to bear its own costs, but the court may depart from that principle if it considers just, to make an order against another party to the proceedings. An order is not sought against Ms Ridley.
In Re JJT and Ors; Ex parte Victoria Legal Aid [1998] HCA 44, the High Court considered a decision made by Faulks J where his Honour ordered that Victoria Legal Aid set aside funds for the representation of a child in proceedings in this court. Victoria Legal Aid argued that the order was made without jurisdiction, apart from other considerations. Hayne J, with whom the other justices predominantly agreed, said:
Some attention was given, in the course of argument, to whether s 117(2) would permit the making of an order for costs against a person not a party to the proceeding but who, nevertheless, had had effective control of the proceeding. I am content to assume, without deciding, that s 117(2) does give the Family Court a power to make an order of the kind dealt with in Knight v FP Special Assets Ltd (1992) HCA 28.
Hayne J went on to say:
But the existence of such a power says nothing of whether an order of the kind made here is authorised by s 117(2). (That is why for present purposes it matters not whether Victoria Legal Aid was properly to be seen as a party to the proceeding in the Family Court.)
In Knight & FP Special Assets, to which I have just referred, Mason CJ and Deane J said:
the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party.
In JJT (supra), Hayne J also said:
Appearing, as it does, in the context of a provision enabling a court to make orders for costs, which is a provision remarkable only because it departs from the ordinary rule that costs follow the event in favour of a prima facie rule that each party abide his or her own costs, nothing in the context of s 117 supports the construction of s 117(2) upon which the impugned order must depend if it is authorised by that sub-section.
Ms Watkins is a party. Section 117 requires she pay her own costs. The provisions of s 117(2) might be activated, but only insofar as an order is sought in the Knight & FP Special Assets sense as costs against, and to be paid by, Ms Ridley.
There is a possibility in this case that section 80 of the Act might provide a power. Relevantly, it provides:
(1) The court, in exercising its powers under this Part, may do any or all of the following:
(a)order payment of a lump sum, whether in one amount or by instalments;
(b)order payment of a weekly, monthly, yearly or other periodic sum;
(ba)order that a specified transfer or settlement of property be made by way of maintenance for a party to a marriage;
(c)order that payment of any sum ordered to be paid be wholly or partly secured in such manner as the court directs;
(d)order that any necessary deed or instrument be executed and that such documents of title be produced or such other things be done as are necessary to enable an order to be carried out effectively or to provide security for the due performance of an order;
(e)appoint or remove trustees;
(f)order that payments be made direct to a party to the marriage, to a trustee to be appointed or into court or to a public authority for the benefit of a party to the marriage;
(h) make a permanent order, an order pending the disposal of proceedings or an order for a fixed term or for a life or during joint lives or until further order;
(i)impose terms and conditions;
(j)make an order by consent;
(k)make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice; and
(l)subject to this Act and the applicable Rules of Court, make an order under this Part at any time before or after the making of a decree under another Part.
(2) The making of an order of a kind referred to in paragraph (1)(ba), or of any other order under this Part, in relation to the maintenance of a party to a marriage does not prevent a court from making a subsequent order in relation to the maintenance of the party.
(3) The applicable Rules of Court may make provision with respect to the making of orders under this Part in relation to the maintenance of parties to marriages (whether as to their form or otherwise) for the purpose of facilitating their enforcement and the collection of maintenance payable under them.
(4) If a bankruptcy trustee is a party to a proceeding before the court, the court may make an order under paragraph (1)(d) directed to the bankrupt.
(5) If the trustee of a personal insolvency agreement is a party to a proceeding before the court, the court may make an order under paragraph (1)(d) directed to the debtor subject to the agreement.
(6) Subsections (4) and (5) do not limit paragraph (1)(d).
Section 80 is not generally seen as an independent source of power (see for example Harris (1993) FLC 92-378). Its purpose is to widen or assist the implementation of the powers in other provisions, such as in section 79. Here, section 80 might be seen to assist section 117, but that would mean reading section 117 as enabling an order to be made for a party to be indemnified out of her own assets. That was not argued and I would be hesitant to exercise that power here. The reason why this does not seem to have been an issue before is it is something normally considered regularly by the supreme courts, because it is a matter relating to the administration and probate powers.
Counsel for the respondent submitted that rule 54 of the Victorian Supreme Court Rules is an applicable power, and the application should be brought there. Rule 54 is simply the machinery provision to enable the discretion and jurisdiction of the court to be activated, and the consequential power can then be exercised.
The law on this subject seems to me to be not only clear, but longstanding. Where an executor or trustee sues or is sued, the trustee or executor has a right, which is described as a right of indemnity, to be paid or to be indemnified for his or her costs by or out of the trust, or in some cases it might be described as the deceased estate, on a solicitor and client basis. (Re Beddoe; Downes v Cottan [1983] 1 Ch 547 at 558).
The power to make the relevant inquiry in relation to all of that and any consequential order seems to me to come from, at least in Victoria, the Trustee Act 1998. Section 36 subsection (2) of the Victorian Trustee Act says:
A trustee may imburse himself or pay or discharge out of the trust premises all expenses incurred in or about the execution of the trusts or powers.
Can this court, therefore, exercise a power to confirm that the trustee is entitled to that indemnity? Section 3 of the Trustee Act defines the court as the Supreme Court of Victoria. Thus, there are two possibilities. First, one can look at section 79 of the Commonwealth Judiciary Act1903, which provides that the laws of each of the States, including the laws relating to procedure, evidence and so forth, shall be binding upon all courts exercise federal jurisdiction. If this is a procedural issue and the Family Law Rules are silent on that question, then the Supreme Court of Victoria Rules might be applied.
It might also be a useful exercise of rule 1.09 of the Family Law Rules 2004. But if it is an issue as to power, then the second possibility arises. That issue comes from the question of whether or not this court can exercise an accrued jurisdiction power.
The words of Gibbs J in R v Ross-Jones; ex parte Beaumont (1979) 141 CLR 504 at 509 are relevant. His Honour said:
Once a proceeding is within the jurisdiction of the Family Court, the power of that Court to make suitable orders for the disposition of the matter is very wide. It is hardly an exaggeration to say that if the Court has jurisdiction in the present case, it can make whatever orders it regards as appropriate.
See section 34(1) and section 80(k) of the Act.
Of course, the fact that the court has wide powers when exercising its jurisdiction does not mean that its jurisdiction is wide. In Valceski & Valceski [2007] NSWSC 440, Brereton J, sitting in the Supreme Court of New South Wales, said:
…if a court has jurisdiction (by way of accrued jurisdiction) in a non-federal aspect of a matter, that carries with it the power to grant the appropriate remedies given by State law in that matter; one does not have to find the remedy within the Family Law Act… And even if the power to grant appropriate remedies had to be found in the Court’s own governing statute, Family Law Act, s 34, confers ample power to grant all appropriate remedies in a matter in which the court has jurisdiction.
The jurisdiction therefore given to this court is not a jurisdiction in respect of matrimonial causes, but rather a jurisdiction in respect of matters. Section 31 of the Act to which Brereton J referred says:
Jurisdiction is conferred on the Family Court with respect to:
(a)matters under this Act or under the repealed Act, in respect of which matrimonial causes are instituted or continued under this Act.
“Matrimonial cause” is defined relevantly to mean proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them.
“Matter” has been the subject of considerable discussion. It relates to the judiciable controversy between the actors to it, and it’s comprised of the substratum of fact and claims representing or amounting to the disputed controversy between or amongst them. It is not the cause of action, nor is it the causes of action brought by a plaintiff. A justiciable controversy is identifiable independently of proceedings brought for its determination.
In the 2006 decision of Houghton & Arms (2006) 225 CLR 553 the plurality of the High Court of Australia held:
The expression "accrued jurisdiction" appears in authorities including Fencott v Muller and Australian Securities and Investments Commission v Edensor Nominees Pty Ltd. In Edensor, the Court saw no harm in the continued use of the term "accrued jurisdiction" provided it be borne in mind that, whilst there might be several claims made in litigation, there was but one "matter", and that jurisdiction conferred with respect to that matter is not "discretionary" and ordinarily is to be exercised by the court concerned. (citations omitted)
On the basis, therefore, that this court is dealing with a matter and has jurisdiction to deal with all matters within it, then one needs to turn to what assistance can be provided by the law of the Commonwealth, the Commonwealth in the sense of the Commonwealth and the states. In my view, this is a case where the relevant powers as set out in the Trustee Act, as interpreted by longstanding authority, should be applied, because there is that one matter. There are no Family Law Rules to guide how such an application should be dealt with, and thus the Supreme Court Rules provide the assistance.
Rule 54(2) provides that a proceeding may be brought for the determination of any question which could be determined in an administration proceeding, including any question directing any act to be done in the administration of the estate or the execution of a trust which the court could order to be done if the estate or trust were being administered or executed under the direction of the court. It seems to me that it is to that issue that I should turn attention.
There are two affidavits that the applicant relied upon. The first was by herself and the second was by her solicitor. At paragraph 11 of the applicant’s own affidavit, she confirmed that she had applied to the Supreme Court, and probate of the late father’s will was granted on 23 July 2015. As a consequence of being granted the probate she ascertained what her father’s estate comprised of, and she determined that the assets were somewhere in the vicinity of almost $1.8 million. 50 per cent of that lies in one real property in Portarlington. She made mention of the fact that her mother is the 50 per cent owner of that real estate. She then said:
...that I have been informed by my solicitors that the estimated legal costs in responding to the application of Ms Sutcliffe, up to and including a private mitigation, will be approximately $25,000 for professional fees, together with out-of-pocket expenses, including court filing fees for a response, court filing fees for any subpoena, together with service fees and conduct money. I do not have the financial resources to meet such costs myself.
The solicitor who argued the matter on behalf of the applicant was also the deponent to the affidavit upon which she relied. Whilst the affidavit traverses a number of matters, there are two significant parts that are relevant. First, she said that she had been instructed in relation to the estate issues and that she had forwarded to Ms Watkins a costs agreement and disclosure notice as required by the state legal professional legislation, and that that had been executed by Ms Sutcliffe. She annexed a copy of that agreement to the affidavit. The purposes of that particular activity was to show the court what sort of costs are anticipated, to some extent supporting what Ms Watkins says.
Ms Fridey then went on to say:
I am informed that notice of the proposed application for costs has been provided to the solicitors acting on behalf of [Mr B Watkins], the son of the deceased, and, to date, his solicitor has simply replied on 16 February 2016 that they have “advised our client that it is not in his interests to agree to such indemnity.”
Ms Fridey went on to say:
Thereafter, however, I am instructed that no further definite response has been received.
That latter point gives rise to the obvious need for such a consideration as has, in my view, been raised by Ms Watkins. The only question is whether it should have been to the Supreme Court or to here, but, having indicated what I have considered the law to be, there is no logical reason why it cannot be dealt with in this court.
I am therefore satisfied of the following matters. First, the applicant is the party. Secondly, she has also responsibilities not only to the estate, but also to its due administration on behalf of the beneficiaries, and she is a trustee. Thirdly, there is clear indication by the presence in this application by counsel on behalf of Ms Ridley that the claim against the estate in this court is, indeed, proceeding. Fourthly, the proceeding in this particular case has shown that there is a beneficiary who seems to have objected to the costs, and, whilst that particular beneficiary has no standing in this court – and I query the depth of standing in the Supreme Court other than for the due administration of the trust –and that beneficiary may have rights against the trustee for failing to protect the estate, but to simply deny the applicant’s right to an indemnity which would normally be granted by the Supreme Court on the basis of the longstanding authorities to which I have mentioned, and then not indicate why it is opposed seems to me to be remarkably odd. Fifthly and finally, I note that there is no further action being taken by that particular beneficiary in the Supreme Court about removing the legal personal representative, nor making any application to curtail her actions in respect of the substantive property proceedings in this court.
On all of those bases, and being satisfied that this court does have the power to make the order sought, I propose to make it in the terms of the formal application.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Cronin delivered on 6 April 2016.
Associate:
Date: 10 May 2016
Key Legal Topics
Areas of Law
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Family Law
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Equity & Trusts
Legal Concepts
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Costs
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Remedies
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