Simunovich v Moulton

[2012] NZHC 710

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2011-404-007903 [2012] NZHC 710

IN THE ESTATE             of BRANKA SIMUNOVICH AND

IN THE MATTER OF     An application for letters of administration with will annexed

BETWEEN  PETER JOHN SIMUNOVICH Applicant

ANDDANTE DUSANKA MOULTON AND JADRANKA ANGELA BORIC Respondents

Hearing:         4 April 2012

Counsel:         RJ Hollyman and AV Williamson for Applicant

AJH Witten-Hannah for Respondents

Judgment:      17 April 2012

COSTS JUDGMENT OF TOOGOOD J

This judgment was delivered by me on 17 April 2012 at 4:30 pm

Pursuant to Rule 11.5 High Court Rules

Registrar/Deputy Registrar

Solicitors:

A Williamson, Jackson Russell, Auckland:  [email protected]

AJH Witten-Hannah, Witten-Hannah Howard, Auckland: Copy:

RJ Hollyman, Auckland:  [email protected]

SIMUNOVICH V MOULTON AND ANOR HC AK CIV-2011-404-007903 [17 April 2012]

Introduction

[1]      Branka Simunovich (“the deceased”) died at Auckland on 5 June 2011.  She left a testamentary document, which she headed “MY LAST MEASGE”, in which she purported to make dispositions of particular assets.   She did not appoint an executor or trustee and made no disposition of the residue of her estate.

[2]      At the time of her death, the deceased was separated from her husband, Ivan

Simunovich, who now lives in Croatia having been settled there for over three years.

[3]      The applicant, Ivan Simunovich’s son, obtained an order nisi for grant of letters of administration with will annexed where a caveat was lodged under the provisions of the Administration Act 1969, acting in the capacity of attorney for his father.

[4]      The respondents, the daughters of the deceased, applied for a discharge of the order nisi.  On 19 December 2011, the respondents applied without notice for a grant in their favour of letters of administration with will annexed, which application was opposed by the applicant.

[5]      On  13 February 2012,  Duffy J  dismissed  the  respondents’ application,  by consent, and made an order consolidating the respondents’ proceedings with those of the applicant.  By consent, the Public Trustee was appointed as administrator of the deceased’s estate.

[6]      Costs were reserved and the applicant now applies for orders that his costs on the application be paid out of the estate.   The respondents oppose the costs application.  Memoranda and affidavits were filed and I heard oral submissions from counsel.

The applicant’s claim for costs

[7]      The claim by the applicant is  that his actual and reasonable costs up to

2 December 2011,  totalling  approximately $21,000  including  expenses  and  GST,

should be paid from the estate generally.  He also claims that in respect of all matters after   2 December 2011,   he   should   be   awarded   indemnity   costs,   totalling approximately $38,000 including expenses and GST, from the respondents’ shares in the estate.  In the alternative, he seeks an order that increased costs be paid on the same basis.

[8]      The applicant also seeks  an award of costs on  the costs  application and hearing.

The respondents’ position

[9]      The respondents say that costs in respect of both applications for grants of letters of administration should lie where they fall, but that costs on the costs application should be awarded according to the provisions of the High Court Rules.

Background

[10]     Why there should be a dispute over costs in relation to what on the face of it was the relatively straightforward procedure of appointing an administrator to the estate of a partly intestate deceased is not apparent without an understanding of the background, and the course of the proceedings.

[11]     Ivan Simunovich is apparently a very wealthy man, having sold his interest in a family business, in 2004, for a sum estimated by the respondents to be approximately $50 million.  At the time of the sale, Mr Simunovich had been living in  a  defacto  relationship  with  the  deceased  for  some  11 years.     In  2007, Mr Simunovich and the deceased were married, but it seems that they separated about two years later when Mr Simunovich left New Zealand to spend the rest of his life in Croatia.

[12]     The deceased subsequently entered into a defacto relationship, but not one, it seems, which is likely to give rise to a claim against her estate.  At the time of her death, the deceased was living on and managing an olive estate in the Bombay Hills with her defacto partner of approximately six  months, earning a modest annual

income.  There is some doubt as to the value of her estate, which is said to include a

shareholder’s loan account dubiously valued at $1.65 million.

[13]     It  appears  that  there  was  never  any formal  agreement  as  to  relationship property  between  the  deceased  and  Ivan Simunovich  during  their  relationship. Nevertheless, on the face of it, the deceased had at least an arguable claim under the Property (Relationships) Act 1976 to a share in her husband’s substantial assets, which claim the respondents estimate may have amounted to more than $20 million in value.

The proceedings

[14]     It seems to be common ground that, at the beginning of August 2011, the respondents were content for the applicant to pursue an application to have letters of administration  granted to  them  jointly with  the  applicant  in  his  capacity as  his father’s attorney.   The applicant’s solicitors began preparing the necessary papers, beginning  with  an  application  to  have  the  testamentary  document  left  by  the deceased declared a valid will.  An order to that effect was made without opposition from the respondents on 17 October 2011.

[15]     Thereafter, an application for a grant of letters of administration in the joint names of the applicant and the respondents, and supporting affidavits, were drafted by the applicant’s solicitors and an affidavit intended to be sworn by the respondents was     delivered     to     their     then     solicitors,    Witten-Hannah     Howard,     on

16 November 2011.

[16]   It appears, however, that by then the respondents had withdrawn their instructions from their solicitors and the affidavit was not sworn.

[17]     On  21  November 2011,  the  applicant’s  solicitors  wrote  directly  to  the respondents requesting completion of the affidavit by 25 November, indicating that, in the event that the affidavit was not completed, an application would be made by Peter  Simunovich  as  attorney  for  Ivan Simunovich  for  the  grant  of  letters  of administration to him solely

[18]     On 24 November 2011, a new firm of solicitors, Ayres Legal, wrote to the applicant’s  solicitors  on  behalf  of  the  respondents  informing  them  that  the respondents had formed the view that they could not work effectively as administrators with the applicant.   The solicitors revealed that they had been instructed to make an application for a grant of letters of administration  to the respondents only.

[19]     On 25 November 2011, Ayres Legal confirmed to the applicant’s solicitors that the respondents did not consent to an application for a grant of administration to Peter Simunovich as attorney for his father.   In response, the applicant’s solicitors wrote to Ayres Legal, referring to the prior agreement to the making of a joint application and proposing a meeting of the interested parties, including Peter Simunovich’s sister Donna, “with a view to entering into a mutually satisfactory arrangement for the administration of the estate, jointly or otherwise.”

[20]     In an exchange of emails, the applicant’s solicitors informed Ayres Legal of the urgency of making an application for a grant of letters of administration, having regard to pressing business matters affecting the estate.

[21]     It is not clear from the affidavits filed when the respondents first indicated to the applicant their awareness of a possibility of a relationship property claim by their late mother’s estate against Ivan Simunovich.  It seems, however, that this prospect must  have  been  a  topic  of  discussion  between  the  parties  at  the  end  of November 2011  because,  on  2 December 2011,  the  respondents  informed  the applicant’s  solicitors  that  they  would  consent  to  the  appointment  of  the  Public Trustee as the administrator of their mother’s estate.   The respondents’ solicitors indicated they were attempting to contact a representative of the Public Trustee in Hamilton.

[22]     On  6 December 2011,  however,  Ayres  Legal  wrote  to  the  applicant’s solicitors advising that they were no longer instructed in the matter and that they had no instructions regarding new counsel.  They provided separate addresses for service for each of the respondents.

[23]     On 9 December 2011, the applicant filed his application for a grant of letters of  administration  to  him  as  attorney  for  Ivan Simunovich.    In  his  supporting affidavit, he referred to the specific bequests in the deceased’s will and informed the Court that he believed that:

“other assets owned by the deceased include:

-     bank accounts (present balance not known);

-     a life insurance policy of around $630,000 cover;

-a residential property at Pukekohe having a current QV of around $305,000 and being subject to mortgage;

-     a  shareholder’s  loan  account  in  the  books  of  Simunovich  Olive  Estate

Limited, of approximately $1,650,000.”

[24]     There was no reference in the affidavit to the potential relationship property claim the estate may have had against Ivan Simunovich.

[25]     An Order Nisi was made on 14 December 2011 in favour of the applicant as attorney for Ivan Simunovich, the grant to be limited until Ivan Simunovich applied for and obtained a grant of letters of administration to himself.  The Order notified the respondents as caveators that they would be required to show cause why the Order should not be made absolute at a hearing which was scheduled to take place on 13 February 2012.

[26]     On  19 December 2011,  Witten-Hannah  Howard  informed  the  applicant’s solicitors that the firm had been “re-instructed” to act for the respondents and provided them with a copy of an application by the respondents for a grant of letters of administration to them.  In the affidavit in support, the respondents claimed that the residue of the deceased’s estate included not only the proceeds of the insurance policy and the other assets listed by the applicant but also the proceeds of a potential claim against Ivan Simunovich under s 88 of the Property (Relationships) Act 1976.

The  respondents  suggested  that  the  potential  value  of  that  claim  “could  be

$20,000,000.”

[27]     The respondents referred also to the provisions of s 77 of the Administration

Act 1969, under which they would receive two-thirds of the residuary estate.

[28]     The applicant filed a Notice of Opposition to the respondents’ application. Among other grounds relied upon, he claimed that Ivan Simunovich had a priority to a grant of letters of administration because the value of his interest in the residue was said to exceed the value of the separate interests of the respondents.  The applicant also claimed  that the respondents  would have  a conflict between  their personal interests and the interests of their obligations as administrators to uphold the estate and its beneficiaries because:

(a)      the purported claim against Ivan Simunovich could be brought only if leave was granted under s 88 of the Property (Relationships) Act;

(b)      an application for leave must be made by the administrator; and

(c)      if the respondents were appointed administrators they would pursue the application for leave regardless of the merits, at significant cost to the estate and to the detriment of its beneficiaries.

[29]     As noted above, the competing applications were resolved by consent orders made by Duffy J on 13 February 2012.   The apparently sensible solution that the Public Trustee should be appointed as administrator of the estate requires further discussion.

The real issue between the parties

[30]     It  is  clear  that  the  issue  of  the  potential  claim  by  the  estate  against Ivan Simunovich  is  at  the  heart  of  the  dispute  between  the  applicant  and  the respondents, and that much water is likely to flow under several bridges before there is any resolution of it.

[31]     It  appears  that,  in  the  dialogue  which  occurred  in  November 2011,  the respondents came to the view that they would not seek the appointment of the Public Trustee as administrator in the absence of an undertaking by the Trustee that an application for leave to apply under the Property (Relationships) Act would be made in due course.  It is not surprising that the Public Trustee was not prepared to give such an undertaking prior to an appointment as administrator and a proper investigation of the merits of such a claim.  The respondents seem to have taken the view initially that the Public Trustee’s decision as to the making of an application for leave would be final.

[32]     Shortly before the hearing before Duffy J  on 13 February 2012, however, experienced counsel instructed to advise the respondents satisfied them that, in the “unlikely” event that the Public Trustee declined to make an application for leave to commence the relationship property proceedings, there would be grounds for them to apply to the Court to remove the Public Trustee and substitute themselves as sole administrators.   The respondents now appear to accept that their interests as beneficiaries are reasonably well protected by the agreed arrangements.

The applicant’s costs up to and including 2 December 2011

[33]     Having  regard  to  the  background  events  up  to  the  initial  agreement  in December 2011, that the Public Trustee should be appointed as administrator, and bearing in mind that the proceedings to validate the will and obtain a grant of letters of administration arose because of the state of the deceased’s personal affairs, I consider it appropriate to order that the applicant’s actual and reasonable legal costs and expenses up to and including 2 December 2011 be paid from the estate.[1]   There does not seem to be any reason why the parties could not agree on an appropriate sum if there is full disclosure of time and costs records but, in case there should be

any disagreement, I will reserve leave to the parties to apply to the Court for further

directions.

[1] In re Paterson [1924] NZLR 441.

[34]     As  to  the  costs  of  the  parties  since  2 December 2011,  I  consider  the responsibility for what may be seen to have been unnecessary additional expense should be shared equally by the parties.

[35]     The respondents are apparently of limited financial means and I do not doubt that the prospect of a substantial relationship property claim was one of great significance for them.  It is understandable that they would be concerned to ensure that nothing was done to deprive them, before the issues could be fully explored and, if necessary, determined by a Court, of any justifiable interest they may have had in seeing the size of their late mother’s estate increased significantly.  I do not discount either the emotional effect on them of their mother’s death and the particular circumstances of it.  Nevertheless, it was not a realistic proposition for them to insist on an undertaking from the Public Trustee before consenting to a grant in favour of the Trustee, and it is no fault of the applicant that Mr Parmenter’s sensible advice on that matter was not available until mid-February 2012.

[36]     I   accept   that   the   applicant’s   solicitors   notified   the   respondents   in November 2011 of the urgency of having an administrator appointed and that his intention to apply solely was signalled at that time.  Nevertheless, it was provocative of the applicant to apply for a grant in his favour without informing the Court of the prospect of a substantial claim to relationship property.   The suggestion that the respondents would have had a conflict of interest between their duties as administrators and their interests as beneficiaries applies equally to the applicant and his father who would have every reason to resist the making of claims under the Property (Relationships) Act.

[37]     As Mr Witten-Hannah explained, the respondents have borne the costs of making their separate application for appointment and opposing the applicant’s appointment.  I think it is right in, all of the circumstances, that the applicant should equally bear his costs in the proceedings since the beginning of December.

[38]     I decline, therefore, to make any Order for costs except as to those incurred by the applicant up to and including 2 December 2011.  The applicant’s actual and reasonable costs and expenses up to then are to be paid out of the estate.  The parties, and the Public Trustee, shall have leave to make a further application to the Court in respect of those costs if necessary. All other costs shall lie where they fall.

[39]     I have come to a similar view on the issue of costs on the costs application. While Mr Witten-Hannah was critical of the applicant for seeking a one-hour hearing on the substantive costs issue, I was assisted in my understanding of the issues by the oral submissions.   Each of the parties has had a measure of success and, in the circumstances, I consider that costs on the costs application should also lie where they fall.

............................................

Toogood J