Stojanovski v Stojanovski (No 3)

The Court published its reasons for judgment in these proceedings after a long and interrupted hearing on 4 December 2019: Stojanovski v Stojanovski [2019] NSWSC 1713 (the primary judgment).

A further hearing took place on 11 and 12 August 2020 in relation to the substantive orders, and orders for costs, that should be made to give effect to the primary judgment.

Steven and the Trustees made their submissions by reference to separate proposed short minutes of order that they provided to the Court. Angelina substantially agreed with the Trustees’ proposed orders, although she proposed a number of changes. Although Robert and Jovanka did not participate in the hearing, they provided submissions to the Court.

There was a measure of agreement between the parties concerning the orders to be made. Where I set out orders below as orders that have been agreed, I will adopt the substance of those orders but formulate them in my own wording. I will number serially the orders that I will make, and give temporary identification numbers for the other orders proposed by the parties, using the first letters of their names and a number, in order to assist in the explanation of my response to the proposals.

These reasons will assume a familiarity with the reasons in the primary judgment. That is an important assumption, as the issues in the primary judgment required the Court to undertake a comprehensive analysis of the history of these and related proceedings, the circumstances in which the parties have incurred legal costs, and the orders that have already been made in respect of those costs. The issues that are relevant to the determination of the proper costs orders have already been considered extensively in the primary judgment. Repetition of that discussion would lead to excessive complexity. I will, where appropriate, include references to relevant paragraphs in the primary judgment. I will also use the same abbreviations that were used in the primary judgment.

Steven sought an order appointing Steven to represent Nada’s estate for the purpose of enforcing the testamentary agreement between Nada and Robert that Robert would transfer his interest in Breakwell to Steven: as to the terms of the testamentary agreement see [34], and the reference to the testamentary agreement in clause 4 of Nada’s will: see [28].

Steven required this appointment because he ultimately conducted his case on the basis that Nada and Robert were the parties to the testamentary agreement, and Steven was not.

The defendants did not oppose the appointment, although Angelina and the Trustees opposed Steven’s claim for an order that he be paid his costs of the proceedings out of Breakwell on the basis that it was a recoverable part of Nada’s estate. I will deal with this cost claim below.

The circumstances in which the Court will make an order appointing Steven to represent the estate of Nada for the purpose of enforcing the testamentary agreement against Robert are arguably irregular. Care should be taken in using the fact that the Court will make the order in this case as a precedent. As is stated in Ritchie’s Uniform Civil Procedure NSW (2005, Looseleaf, LexisNexis Butterworths) at [7.10.10]: “… However, proceedings must be on foot and no appointment should be made if the deceased has a disinterested executor or administrator…”

There are special features of the present proceedings that commended to the parties the desirability of Steven being appointed to represent Nada’s estate, for the limited purpose of enforcing the testamentary agreement against Robert. First, in the initial part of the hearing, the parties substantially completed the testamentary agreement claim. Steven had not focused on the issue whether he was seeking to enforce his own rights or rights that resided in Nada’s estate. Robert had raised no objection to Steven prosecuting the claim. When Angelina took over the opposition to the claim at the beginning of the first hearing, she also made no objection. The Court had been told that the executor, Jordan, was incapable of prosecuting the claim. There was no formal evidence of this fact. Given the otherwise parlous circumstances of these proceedings, it would have involved an inordinate cost for the Court to have revoked the grant of probate to Jordan and appointed a new administrator to conduct the testamentary agreement claim on behalf of the estate.

At some stage after the end of the first hearing, I raised the possibility that procedural irregularities might be corrected by the appointment of Steven to represent Nada’s estate.

The matter was raised at a directions hearing that took place on 9 May 2019 under some time pressure. Steven and the Trustees were represented by counsel, as Robert had been made bankrupt. Angelina represented herself.

Prior to the hearing, Steven had submitted draft short minutes of order that included an order appointing Steven to represent Nada’s estate. The Trustees now had the primary interest in preserving Robert’s bankrupt estate. However, they did not oppose the enforcement of the testamentary agreement, and have at all times consented to orders to that effect being made by the Court. Only Angelina opposed the enforcement of the testamentary agreement. Consequently, in par 1.1 of the Trustees’ written submissions relevant to the directions hearing, the Trustees said that they “raise no issue as to Steven’s standing to bring that claim in effect on behalf of the estate”.

During the course of the directions hearing, at T 10.11, I stated that I was minded to make an appointment of Steven under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 7.10(2)(b). However, as Angelina was not represented, I made an order directing Angelina to inform the other parties and my Associate by 14 May 2019 as to whether she opposed the making of the orders in the form of the short minutes of order provided to the Court, which included the appointment order.

As it happened, however, Angelina sent an email to my Associate on 14 May 2019, in which she made various suggestions concerning the appropriate terms of the short minutes of order, but omitted to give any response in relation to the appointment of Steven as the representative of Nada’s estate.

As the Trustees had indicated their consent to the order being made, arguably Angelina had no standing to oppose the order. However, for reasons of caution I gave Angelina the opportunity to contest the order. It is difficult to be sure, but it appears that the reason why no order was formally made was that Angelina’s email did not deal with the subject, and no other party raised with the Court the need to formally make the order.

Be that as it may, both Angelina and the Trustees now consent to the order being made. The consequence is that there is no opposition from the parties who now represent the only beneficiaries to Nada’s estate to the representation order being made. Those parties are also the only parties to the proceedings to enforce the testamentary agreement. Those circumstances, in my view, provide an adequate cure for what otherwise may have been irregularities in the appointment of Steven to represent Nada’s estate.

The Court will therefore make the following order:

It should be noted that the order that the parties agreed to contained the words “for the purpose of seeking the relief in prayer 6”. Prayer 6 is only the claim for an order that Steven be appointed to represent the estate for the purpose of enforcing the testamentary agreement. Prayers 9A and 9B are the prayers by which Steven sought to enforce the testamentary agreement. I consider that an order that in these terms is adequate even though the Trustees did not act to become registered proprietors of Robert’s interest in Breakwell.

I found in the primary judgment that Steven is entitled to have Robert’s half interest in Jersey transferred to him by way of enforcement of the testamentary agreement.

As the Trustees explained in their submissions, although the effect of the sequestration order made in respect of Robert’s bankrupt estate was to transfer all of Robert’s property to the Trustees, the Trustees have accepted Steven’s entitlement to Jersey, and accordingly they have not taken steps to become registered as proprietors of Jersey. Robert remains the registered proprietor. Accordingly, the order for the transfer to Steven of Robert’s interest in Jersey must be made against Robert. I will make the following orders (the formal orders made by the Court will include correct title details for all properties the subject of orders):

Steven sought a declaration to determine the legal effect of the testamentary agreement and the implementation of Order 2 that gives effect to that agreement, which, if made, would be in the following terms:

This order was not sought in Steven’s fifth further amended statement of claim.

Steven explained the rationale for this order in pars 2 and 3 of his revised outline of argument in reply. The explanation was given by reference to attached extracts from the Income Tax Assessment Act 1997 (Cth) (the ITAA97).

Steven submitted that this order was appropriate to enable Robert to avoid incurring a large capital gains tax (CGT) liability, as transferor, on his transfer of his half interest in Jersey, as at the date of Nada’s death, which was said to be the date when the testamentary agreement took effect.

Notwithstanding that Steven submitted that, as Robert’s liability to pay CGT will have arisen before he became bankrupt, the liability would be a debt of his bankrupt estate, the Trustees did not ask the Court to make this order, and indeed no mention is made of it in the Trustees’ proposed orders or in their submissions. Consequently, the Trustees have neither supported Steven’s application nor contradicted it.

The absence of a contradictor is significant, as I found Steven’s argument in favour of the need for the order obscure, insofar as the need was said to be derived from the application of the ITAA97.

I accept that the conceptual relationship between Nada’s will and the testamentary agreement is obscure, as a matter of the operation of the principles of the law of succession. The testamentary agreement took the form of a present declaration and gift of Robert’s share in Jersey to Steven. Clause 4 of Nada’s will, insofar as it dealt with Jersey, was expressed as a distribution by Nada of Jersey to Steven, with the distribution explained in the following terms:

Although, at the hearing, Robert argued that he was not obliged by the testamentary agreement to transfer his half interest in Jersey to Steven, he did not put his claim on any basis that depended upon the legal inter-relationship between the testamentary agreement and the will. That inter-relationship was not the subject of submissions.

On the issue of whether the testamentary agreement had a legal effect within or outside Nada’s will, in the latter case having the essential nature of a contractual obligation, it is at least clear that it was not a valid codicil. The combined effect of ss 3 and 7 of the Wills, Probate and Administration Act 1898 (NSW), as they applied at the date of Nada’s death, have the clear effect that the testamentary agreement was not a testamentary instrument and was not formally part of Nada’s will.

It is not necessary for the Court to decide the question whether, for the purposes of the ITAA97, in respect of the imposition of liability for CGT, the peculiar wording of clause 4 of Nada’s will should be taken to have the legal effect that Nada’s interest in Jersey should be treated as having passed to Steven as a beneficiary of Nada’s estate. At the date of Nada’s death, Nada, Robert and Steven owned Jersey as joint tenants (see [13]), so that half of Nada’s interest passed to each of Robert and Steven by survivorship. The transfer of Robert’s own one third share was never the transfer of property of Nada. That one third could only have been transferred to Steven under the testamentary agreement, and not Nada’s will. It is at best an obscure question as to whether any part of the share originally owned by Nada in Jersey could be said to have passed to Steven under her will, and no part of Robert’s share could strictly have done so. It would seem that s 128.50 of the ITAA97 will govern the CGT consequences of the transfer of Nada’s interest in Jersey by survivorship in any event.

However, the reason why it is not necessary for the Court to decide this question is that the only reason for the Court to be asked to make the order sought by Steven is to declare the legal effect of a transaction for the purpose of the application of the CGT provisions of the ITAA97. The order sought has no other proper purpose. The Commissioner for Taxation has an interest in this question. If the declaration sought is made, it will not bind the Commissioner as the Commissioner has not been made a party to the proceedings: see John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd (2010) 241 CLR 1; [2010] HCA 19.

It is perplexing why Steven has proposed this order on the asserted basis that it is intended to benefit Robert. It may be wondered whether the intent of the order was to increase the cost base of Robert’s half interest in Jersey in Steven’s hands. It is not necessary for the Court to resolve that question.

The Court will not make the order sought by Steven.

Clause 4 of Nada’s will included a gift of the whole of Nada’s interest in George to Steven.

For reasons that have not been explained, Jordan, as executor of Nada’s estate, has never transferred George to Steven, and Steven has not taken any steps to ensure that the transfer occurred at a much earlier time, even though Steven has at all times since Jordan was granted probate of Nada’s will had an unquestionable right to the transfer.

The parties have agreed that it should not be necessary for Steven to proceed with his application for a recall of the grant of probate to Jordan, and for the grant of letters of administration with Nada’s will annexed to an appropriate, independent administrator. That would be unduly expensive and should be unnecessary given that the administration of Nada’s estate is almost complete. It is likely that the administration may suitably be completed by means of appropriate orders made by the Court. Against the possibility that there may be outstanding issues, the parties will be given leave to apply to the Court for any orders necessary to complete the administration of the estate.

Consequently, the parties agree that the following orders should be made for the purpose of causing the title to George to be transferred to Steven:

Steven did not seek or obtain orders establishing the interests in Breakwell and Kemp that were the subject of the further caveats that Slattery J gave Steven permission to lodge: see [274]. Consequently, orders should now be made for the withdrawal of those caveats. The Court will make the following orders:

Steven failed in his claim against Jordan as executor of Nada’s estate for further family provision. Steven succeeded in his application for leave to make his family provision claim out of time.

The parties agree that the following further orders should therefore be made:

Steven proposed that the Court make the following costs orders:

In Steven’s revised draft short minutes of order he included orders that would give practical effect to his claimed entitlement to have his costs of the testamentary agreement claim paid out of Breakwell on the indemnity basis. By order 8, Angelina and the Trustees would be required to transfer their interests in Breakwell to the Trustees. In default, order 9 would authorise the Registrar in Equity to execute appropriate transfers. Order 10 would require Steven to withdraw the caveats against the titles to Breakwell and Kemp authorised by Slattery J. Order 11 would have required the Trustees to sell Breakwell by public auction, and to apply the proceeds of sale for a number of purposes, including the payment of Steven’s costs of the testamentary agreement claim on the indemnity basis.

If the Court declines to make order S2, the need to make these consequential orders will not arise.

It will be convenient to deal with proposed order S3, Steven's claim for costs against Robert and Angelina personally first. That will provide a proper background for the consideration of the claim in proposed order S2 that Steven's costs of the testamentary agreement claim be paid out of Breakwell. I will defer the consideration of proposed order S4, until I deal with the Trustees' claim for costs.

Robert did not make any submission in response to this claim by Steven, as he only sought an order that Steven pay his costs of the part of these proceedings that was determined by Pembroke J.

Angelina accepted that Steven was entitled to an order for his costs personally on the basis that costs should follow the event: see UCPR r 42.1. By proposed order S3, Steven claims that Angelina should be liable for the whole of his costs jointly with Robert up to 30 June 2017, which was the commencement of Robert's bankruptcy, and then Angelina should solely be liable for Steven's costs thereafter. As I understand Angelina's position, she accepted that she should be liable personally for Steven's costs from the first day of the first stage of the hearing, being 28 November 2017. That is the time when counsel for Robert was given leave to withdraw as counsel for Robert and to continue as counsel for Angelina. I do not understand Angelina to have accepted liability for Steven's costs before that date.

As will be seen, Angelina's position was that Steven should be ordered to pay her costs of defending the family provision claim, and, as the litigious effort required for that claim was substantially greater than was required for the testamentary agreement claim, the proper course was for the Court to make a single costs order as between Steven and Angelina, being that Steven should pay 85% of Angelina's costs on the ordinary basis.

The Court will make an order against Robert personally that he pay Steven's costs of the part of these proceedings that is identified below on the ordinary basis. As Steven only introduced a claim to enforce the testamentary agreement when the second further amended statement of claim was filed on 7 April 2014, Robert's liability for the costs of the testamentary agreement claim could only run from that date: [288], [292]. Robert's liability for Steven's costs will cease on the commencement of his bankruptcy. As will be seen, the Trustees admitted Steven's entitlement to the benefit of the testamentary agreement. It is agreed by the parties that Steven will not be entitled to enforce this costs judgment by submitting a proof in Robert's bankruptcy, but the order will be enforceable after Robert's discharge: see Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52; [2007] HCA 56.

As, for reasons that will be given below, I propose to make separate costs orders for and against Steven on the one hand and Robert and Angelina on the other, the Court will make the following order against Robert:

The first question in relation to the costs order to be made against Angelina is as to when Angelina's joint liability with Robert should commence. As mentioned, Steven introduced his claim to enforce the testamentary agreement in the second further amended statement of claim on 7 April 2014. The relevant facts were pleaded in pars 2C, 2CA and 4BA(a). In her defence filed on 3 December 2015, which was actually filed in response to the third further amended statement of claim, Angelina denied the first two of these allegations and admitted the third. However, notwithstanding this response to Steven's allegations of fact concerning his testamentary agreement claim, Steven sought no relief against Angelina in respect of that claim, and has only done so in relation to the costs of the proceedings.

Angelina did not make herself liable with Robert for Steven's costs of his testamentary agreement claim merely by pleading a response to his allegations of fact, in circumstances where no relief was sought against her. Angelina only became liable for Steven's costs on 28 November 2016, when she de facto took over the defence of Steven's claims against Robert. The order against her for Steven's costs will commence at that date.

It may be noted that, insofar as Steven seeks, by proposed order S2, that his costs of the testamentary agreement claim be paid out of Breakwell, Angelina is a half owner of Breakwell with the Trustees. Even if order S2 is not made, Steven will be able to execute his personal costs order against Angelina's share in Breakwell. That is subject to any set off for costs that Angelina may have for a cost order made in her favour, and the possibility that the Court will make a single costs order of the form sought by Angelina.

Steven claimed, by proposed order S3, that Robert and Angelina pay "the plaintiff's costs of these proceedings". By these words, Steven sought to recover his costs of both the testamentary agreement claim and the family agreement claim from Robert and Angelina, notwithstanding that he only succeeded on the first claim and he failed on the second.

Steven justified this claim by starting with the observation made by the Court at [56] that the two claims were "intertwined". That was true, in the sense that, although the subject matter and the evidence required for each claim was quite different, success or failure by Steven on the testamentary agreement claim had a logical impact on the prospects of his success on the family provision claim. In short, if Steven prevailed on the family provision claim, then the combined effect of Nada's will and the testamentary agreement would be approximate parity in the value of the property owned by Steven and Robert. As a consideration of all of the evidence customarily relevant in family provision claims to the need for maintenance by both brothers showed that their positions were equally parlous, it would be unlikely that the Court would make a family provision order that significantly disadvantaged Robert over Steven. If, however, the testamentary agreement claim failed, then Steven's financial position would have been significantly worse than that of Robert. There would be a commensurate increase in the likelihood that the Court would make a substantial family provision order in favour of Steven. That likelihood would be enhanced because the result would then achieve the apparent testamentary objective of Nada.

Steven relied upon the principle commonly applied that, where a plaintiff succeeds in obtaining a verdict, the Court will treat that success as the event for the purpose of the application of UCPR r 42.1, and award the plaintiff the whole of the plaintiff's costs, notwithstanding that the plaintiff may have failed on some issues in the proceedings. The Court will usually not attempt to differentiate between the particular issues on which the plaintiff succeeded and those on which the plaintiff failed: see Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 (Elite) at [6]; Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 (Bostik) at [38]; and Chen v Chan (No 2) [2009] VSCA 233 (Chen) at [10(1)].

I have previously considered the relevant legal principles in Almona Pty Ltd v Parklea Corporation Pty Ltd (No 4) [2020] NSWSC 553 (Almona No 4) in the following terms, after having stated the common approach referred to in the previous paragraph:

Steven referred to the example where a plaintiff sues successfully in nuisance, in a case where water has been allowed by the defendant to escape onto the plaintiff's adjoining property, but the plaintiff fails in a claim for negligence to recover the same remedies. That is the sort of case where it would be usual for the Court simply to order the defendant to pay the plaintiff's costs of the proceedings.

I do not accept Steven's argument that the relationship between the testamentary agreement and family provision claims in the present case is analogous to the example given by Steven. In that example, the facts relevant to the nuisance and negligence cases are likely to overlap almost completely. The success of each legal basis for obtaining essentially the same relief is likely to depend on technical legal propositions the consideration of which will not absorb a substantial part of the hearing.

In the present case the family provision claim was not simply an alternative means of claiming the same relief as was sought in the testamentary agreement claim. That is true notwithstanding that success or failure on the testamentary agreement claim was likely to have a substantial impact on the outcome of the family provision claim. The two claims were fundamentally different in their juridical nature, and required the consideration of entirely different evidence.

Initially, when Steven pleaded his family provision claim in his summons filed on 20 March 2012, it was expressed to be an alternative to Steven's claims for orders that would enforce the deed of release: [224], [225].

By the time Steven filed his second further amended statement of claim on 7 April 2014, on an analysis of the pleading, the family provision claim had ceased to be an alternative to the claim for enforcement of the testamentary agreement: see [300]-[302]. As I have observed at [300], and explained more fully at [410]-[415], Steven's family provision claim increasingly took on a life of its own that was independent of the success or failure of the testamentary agreement claim. Until the very end of the second stage of the hearing, Steven claimed, as a component of the further family provision that he sought, an amount sufficient, when added to his net assets, to enable him to meet his expected liability of about $1,410,000 as a result of the family law property proceedings with Jovanka: see [339]. By the second stage of the hearing, Steven sought further family provision to cover all of the costs that he had incurred in the various proceedings: see [386(3)]. The amount of that costs liability was approximately $1.6 million: see [409]. In the primary judgment I accepted, as the value of Jersey (including Milsop) an appraisal at $1.8 million, of which the half share the subject of the testamentary agreement was $900,000: see [25], [26]. A broad consideration of these figures shows how, with the passing of time and the accumulation of Steven's liability for legal fees, the family provision claim came to dominate the litigious effort required by the parties.

It would be wrong for the Court to order Robert and Angelina to pay Steven's legal costs of the family provision claim, notwithstanding his failure to succeed, on the basis that the family provision claim was nothing but a subsidiary or fall back claim to achieve substantially the same result as the testamentary agreement claim.

Finally, it is material to this issue that Steven obviously could have prosecuted his testamentary agreement claim much more efficiently and expeditiously than he did. Even allowing for the advantages of hindsight, Steven could have achieved a result in the testamentary agreement claim that would have informed him whether or not it was worthwhile for him to continue with his family provision claim. If he had done that, he would not have incurred costs, which the Trustees have rightly described as "crippling", that have had the unfortunate consequence that the family provision claim came to overwhelm the testamentary agreement claim in significance.

Subject to what may follow from a consideration of the costs orders sought by Robert and Angelina, I would make a costs order against Robert and Angelina personally, but only in respect of Steven's costs of the testamentary agreement claim.

The personal costs order in favour of Steven against Angelina will be:

I acknowledge that the making of differential costs orders in relation to the testamentary agreement and family provision claims is likely to create enormous difficulties for the assessment process. Steven attempted to solve this difficulty by persuading the Court to order Robert and Angelina to pay all of his costs of the proceedings, but I have rejected that approach. I will defer further consideration of this problem until I deal with the costs order sought by Angelina.

I will now turn to a consideration of Steven's claim, in proposed order S2, that he be entitled to recover his costs of the testamentary agreement claim out of Breakwell.

It may be noted, from the wording of proposed order S2, that it is not in form an order that Steven's costs be paid by Jordan, or that they be paid out of the estate. It is in effect an order directly creating a charge over Breakwell.

Angelina and the Trustee did not object to the Court making an order that Steven's costs of the testamentary agreement claim be made out of the estate. However, the only estate asset retained by Jordan is George. Steven is solely entitled to George under Nada's will. Steven rejected the suggestion that his costs should be a charge against his own property. That is why he seeks an order charging his costs against Breakwell.

Breakwell is owned by Angelina and the Trustees in equal shares. They oppose proposed order S2 being made.

It will be appropriate to start by noticing the following preliminary matters.

First, Breakwell was transmitted by Jordan to Robert shortly after 30 June 2009 in compliance with clause 3.11 of the deed of release: see [157]. On its face, that term had the effect of a direction by the two beneficiaries to the executor to transmit Breakwell to Robert, as the beneficiary entitled to that property under Nada's will.

Under clause 3.14 of the deed of release, Jordan was also required to transfer George to Steven in performance of Nada's will. For unexplained reasons, that did not happen.

Steven submitted that, as Pembroke J made a declaration that the deed of release was void ab initio, the Court should decide his costs claim on the basis that the joint direction of the beneficiaries to the executor in clause 3.11 of the deed of release had never existed.

That, at the least, is a controversial submission. The direction existed as a matter of fact when it was acted upon by Jordan. The subsequent declaration that the deed of release was void did not make the physical deed of release disappear. It also did not have the effect of avoiding the transmission of Breakwell to Robert. Steven has suggested that the avoidance of the deed of release had the consequential effect of obliging Jordan to take proceedings to recover the title of Breakwell from Robert. That may or may not be correct, given that, after all, the title to the property had been transmitted to the correct beneficiary, and the only argument could be that the partial distribution of the estate was premature.

Steven also made the submission that, as a result of the deed of release being declared void ab initio, Angelina and the Trustees hold their interests in Breakwell on trust for Jordan as executor of the estate. I will consider the significance of this argument later.

For present purposes, the significant point is that these matters were not pleaded and have not been the subject of forensic contest. They have only been raised by a side wind in connection with the costs order sought by Steven.

Secondly, it is necessary to follow the evolution of the claims for costs in the serial statements of claim filed by Steven.

Steven first made a claim for the transfer to him of Robert's half interest in Jersey in the second further amended statement of claim filed on 7 April 2014. He did so on the basis that the effect of Robert declining to perform the testamentary agreement was that he held his interest in Jersey on trust for Steven, or alternatively on trust for Jordan as executor of Nada's estate. That remained the basis of Steven's claim in the third further amended statement of claim, which was the pleading on the basis of which the first stage of the hearing took place. As a result, during that hearing, Angelina was defending a constructive trust claim, which was a claim that Steven ultimately did not pursue.

The only claim for costs that Steven made in his third further amended statement of claim was the claim in prayer 10 that Robert and Angelina pay all of his costs on the indemnity basis.

Steven did not make a claim to enforce the testamentary agreement as representative of Nada's estate until he added prayer 6 to that effect in his fourth further amended statement of claim filed on 16 March 2017. The Court considered that issue at the hearing on 9 May 2019 that yielded the inconclusive outcome referred to above. It is proper for the Court to proceed upon the basis that Steven and the other parties understood from that time that the Court would make an appropriate order under UCPR r 7.10(2) formally appointing Steven as the representative of Nada's estate to prosecute the testamentary agreement claim.

However, during the second stage of the hearing, Steven's claim for costs continued to be the claim in prayer 10, which was now found in Steven's fifth further amended statement of claim.

In Steven's submissions at the end of the second stage of the hearing, he put his application for costs of the testamentary agreement claim on two bases. One was that sought in prayer 10, being that the costs be paid by Robert and Angelina personally. The other was that the Court should make an order that the costs be payable out of Nada's estate, because the whole of the proceedings were in some way Nada's fault, because of her decision to enter into the testamentary agreement with Robert. As Nada had sought to implement her testamentary intentions of dividing her properties with approximate equality between Steven and Robert in a way that required the enforcement of the testamentary agreement, outside the administration of her will by her executor, according to Steven’s submission, she created the risk of non-performance of the agreement by Robert.

At [446] of the primary judgment, I rejected Steven's claim that he should be paid his costs of enforcing the testamentary agreement out of Nada's estate because the need for the making of that claim arose out of inadequate testamentary arrangements made by Nada. However, I observed at [447] that there was arguably a case for the Court to make an order that Nada's estate bear the costs of its representative in enforcing the testamentary agreement. I observed that Steven did not put his claim on that basis.

At the hearing, Steven made submissions that the finding at [447] that he had not based his claim for costs on his appointment as representative of Nada’s estate was wrong. Steven did not at the hearing pursue an order included in his draft short minutes of order that would have had the effect of the Court recalling that finding. However, the submissions remained in his revised written submissions. In effect, Steven submitted that it necessarily followed from his appointment as representative of Nada's estate that he would seek a costs order as if he stood in the shoes of the executor, and the defendants ought to have understood that from the beginning. Secondly, he submitted that the parties were only required to deal with the issue of costs after the publication of the primary judgment, so that Steven was at large as to the costs orders that he could seek.

Steven added the submission, in his written reply submissions, that Angelina and the Trustees had omitted, on or about 9 May 2019, to raise the issue of the basis of Steven's costs, when he sought to be appointed as representative of Nada's estate, in order to have the Court impose a costs condition on the appointment. Steven submitted that the defendants had waived their right to resist the costs order now sought by Steven, or made a binding election not to contest the claim.

I do not accept Steven's submissions. The defendants were not given an opportunity on 9 May 2019 to make submissions on the basis of Steven's entitlement to costs as representative of Nada's estate. The Court has never dealt with that issue.

Furthermore, given that Steven expressed in his pleadings, and in his oral submissions to the Court, grounds for the costs order for the testamentary agreement claim being made in his favour that were inconsistent with proposed order S2, the defendants were entitled to conduct their cases as if that was in fact the way Steven would frame his costs claim.

It is clear that Steven has only raised the claim to be paid out of Breakwell as representative of Nada's estate after I suggested the possibility at [447] of the primary judgment.

The reality is that, by reason of Steven's failure to give Angelina and the Trustees any notice that he would eventually seek an order that his costs of the testamentary agreement claim be paid out of Breakwell, those defendants were not able to raise any issue at the hearing that may have disentitled Steven to an order that his costs be paid out of Breakwell.

The essence of Steven's argument that he should be paid his costs of the testamentary agreement claim out of Breakwell was that the effect of his appointment to represent Nada's estate is that he should be treated as standing in the shoes of Jordan, and be entitled to all relief that would have been available to Jordan in respect of his costs, if Jordan had enforced the testamentary agreement on behalf of Nada's estate.

Both Angelina and the Trustees responded to this argument by submitting that, even if it were accepted in principle, Steven should not be entitled to recover his costs out of Breakwell because it is no longer part of Nada's estate.

In his submissions in reply, Steven first submitted that the transmission of Breakwell to Robert was liable to be set aside because the deed of release was declared by this Court to be void ab initio. Consequently, Angelina and the Trustees hold Breakwell on a constructive trust for Nada's estate.

Steven is not now entitled to put his claim for costs on this basis. As explained at [381], at the commencement of the second stage of the hearing, Steven provided to the Court a marked up copy of the fifth further amended statement of claim that indicated the prayers for relief that Steven no longer sought to pursue. In that pleading, at par 26A, Steven pleaded the declaration by this Court on 16 November 2012 that the deed of release was void. At par 26B, Steven alleged that, in consequence of the nullity of the deed of release, Robert became obliged to effect a retransfer of the title to Breakwell to Jordan to hold as executor. Finally, in par 28A, Steven alleged that he was entitled to a taking of accounts and restitution for the benefits received by Robert under the deed of release. Thus, in the pleading, Steven made a claim that Robert was obliged to retransfer the Breakwell to Jordan. However, Steven deleted the claim in prayer 5 for an order that accounts be taken and such orders as the Court thinks just by way of restitution to restore the parties to their positions before the making of the deed of release. The consequence of the avoidance of the deed of release therefore ceased to be an issue in the proceedings. It was not contested by the defendants, and is not the subject of any finding in the primary judgment.

Steven at no stage sought a declaration that the Trustees hold their interest in Breakwell on trust for Steven. Steven sought, by prayer 9D, an order that Angelina transfer her interest in Breakwell to Steven, but that was only by way of provision for Steven as part of his family provision claim.

Further, Steven will only be appointed as the representative of Nada's estate to prosecute the testamentary agreement claim. That appointment would not give him the authority to claim that Jordan's transmission of Breakwell to Robert should be set aside. Steven's only capacity in that respect is as a beneficiary. Steven did not provide any authority for the proposition that a beneficiary has standing to interfere with the decision by the executor as to when to transmit to a beneficiary property to which that beneficiary is entitled under the will.

Steven's second argument was, in effect, that Jordan had prematurely distributed Breakwell to Robert before all of the estate's debts had been ascertained, with the result that Jordan would be entitled to a refund of the amount of the costs from Angelina and the Trustees, as well as being entitled to follow Breakwell into the hands of Angelina and the Trustees, for the purpose of recovering the costs.

With respect to this argument, Steven submitted that both defendants must restore Breakwell "for the payment of the estate debts (such as its liability to Steven for the cost of prosecuting the testamentary agreement)" on the basis that both defendants were volunteers. Steven submitted that Breakwell was not distributed estate that cannot be recalled and "that Jordan would be personally liable for its value to pay any outstanding estate debts".

It may be noted from these arguments that there appears to be some ambiguity as to whether Steven's argument is, on the one hand, that he is entitled to stand in the shoes of Jordan and be given the same costs order as Jordan would be given as executor, or, on the other, whether he is to be treated as a creditor of the estate and entitled to pursue his costs claim against Angelina and the Trustees on that basis.

The Trustees made a second response, being that, by reason of the fact that they were not given notice of the ultimate basis upon which Steven would seek an order that his costs be paid out of Breakwell, they lost the opportunity to claim a paramount lien over Breakwell to cover their costs of recovering that interest from Angelina, by means of the proceedings that were heard and determined by Ward CJ in Eq: see [375]-[377].

Steven responded to this submission by submitting that the Trustees had not given evidence that they would in fact have made this claim, and that, in any event, there was no evidence that the Trustees would be unable to recover their costs by enforcing the order for costs that her Honour made against Angelina.

The Trustees' final response was to put the argument, to be relied upon if necessary, based upon the effect of s 27 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), following what Gleeson JA said in Re Galtari Pty Ltd (in liq) [2018] NSWSC 917 at [57]: “It is well-established that matters involving claims with the effect of declaring for or against the title of a trustee in bankruptcy fall within the scope of s 27: Scott v Bagshaw [2000] FCA 816; (2000) 99 FCR 573”. The point of the submission was that Steven’s claim to be entitled to his costs out of Breakwell impugned the Trustees’ title, and is a “special federal matter” that can only be decided by a Federal Court.

Steven’s response to this argument was to submit that, as the Trustees held their interest in Breakwell on trust for Nada’s estate, it was not part of the bankrupt estate held beneficially by the Trustees, so that Steven was entitled to assert the estate’s beneficial entitlement to Breakwell in these proceedings.

I now turn to a consideration of the issue of whether the Court should make the order sought by Steven charging Breakwell with his costs of the testamentary agreement claim.

As already noted, Steven submitted that the Court should exercise its costs discretion by treating Steven as standing in the shoes of Jordan, the executor, to prosecute the enforcement of the testamentary agreement.

Steven relied upon authorities that establish in proceedings commenced by executors and trustees, such as construction suits, or for the grant of probate, the standard order is that the costs of the executor or trustee are to be paid out of residue. It is not necessary to examine those authorities. However, the following statement by Campbell J (as his Honour then was) in Re Estate Late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311 is pertinent:

It is clear that, if Steven had prosecuted the claim in the capacity of executor of Nada’s estate, he would be entitled to reimburse himself for the costs out of the assets of the estate: see National Trustees Executors and Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268; [1941] HCA 3 (Barnes), especially per Williams J at 277. The executor would have been entitled to ask for such an order at the end of the hearing, provided, as here, all of the beneficiaries had been joined. The executor would be given a costs order against the defendant personally, as well as an order that, after having recovered as much of the executor’s costs as possible from the defendant, the executor would be authorised to retain any unrecovered part out of the assets of the estate (at 280). Moreover, as Williams J said at 279: “… At the same time the indemnity must be given effect to in such a way as to make the burden fall upon the beneficiaries equitably having regard to the circumstances under which the costs, charges and expenses were incurred. Here they were incurred as a result of the action of nine out of the 37 beneficiaries, so that the shares of these beneficiaries should be exhausted before any part of the burden is placed on the shares of the 28”.

By reason of the executor’s fiduciary duty to uphold the will and to administer the estate, the executor has, by reason of his or her office, a right of indemnity that was explained by Powell J (as his Honour then was) in Re Estate of Hodges (deceased); Shorter v Hodges (1988) 14 NSWLR 698 at 709, in the course of explaining exceptions that apply in the field of probate litigation to the general rule that costs follow the event:

Thus, if Steven had been an executor, the Court would have made an appropriate costs order in respect of Steven’s costs of prosecuting the testamentary agreement claim against Robert personally (and in the peculiar circumstances of the present case, also against Angelina personally). There would be an order that Steven could retain any unrecovered balance out of the estate’s assets in his hands. To the extent he retained property given to Robert under Nada’s will, Steven would have been authorised to exhaust that property in recovering the balance before he looked to any other property in the estate.

The question is whether Steven is entitled to costs orders to an equivalent effect in this case, where he has been appointed to represent Nada’s estate by an order made under UCPR r 7.10(2)(b). Steven does not have the right to an indemnity, as he would if he were the executor. He can only gain that entitlement through the Court making an equivalent order in the exercise of its discretion under s 98 of the Civil Procedure Act 2005 (NSW) (Civil Procedure Act).

I note that in Walton v Walton [2015] NSWSC 405, Stevenson J expressed a reservation as to whether it was proper to treat a representative appointed under UCPR r 7.10(2) as if the representative were an executor for the purpose of determining the representative’s entitlement to costs of proceedings. His Honour was not required to consider the issue in detail, and the representative’s application failed for other reasons. His Honour said:

Orders may be made under UCPR r 7.10(2) for the appointment of a representative of a deceased estate to conduct or defend proceedings in many circumstances. In order to confine the focus of the discussion necessary to determine Steven's claim, it will be appropriate to identify the relevant characteristics of the present case.

First, because of the arguably irregular approach of appointing Steven as representative of Nada's estate, for the purpose of prosecuting the testamentary agreement claim while Jordan continues to be the executor, complications may arise that would not arise in the general case where there is no executor.

As noted, Jordan continues to hold property in the estate that is notionally available to meet a costs order made in favour of a representative of the estate, but that property was given solely to Steven under Nada's will. This is not a case where property remains in the estate that is not the subject of a gift to the representative.

This is not a case where the estate has many beneficiaries, and the representative is appointed to pursue a claim on behalf of the estate for the benefit of the beneficiaries generally. Here, there are only two beneficiaries and one, being Steven, seeks to pursue a claim against Angelina and the Trustees, who hold Breakwell through the other beneficiary, Robert.

Steven will be appointed to represent Nada's estate to enforce the testamentary agreement. That action is solely for Steven's benefit. It may be considered to be to the benefit of the estate only in so far as it will fulfil the wish stated by Nada in clause 4A of her will that: "Robert Stojanovski is to transfer his share in this property to his brother Steven Stojanovski".

This is a case where Steven asks the Court to order that a charge be created over Breakwell, after it was distributed out of the estate by the transmission from Jordan to Robert.

As already noted, Jordan in fact transmitted Breakwell to Robert at the direction of both beneficiaries under Nada's will, notwithstanding that the deed of release was subsequently declared by the Court to be void. The question whether the direction upon which Jordan acted was also ineffective is unresolved.

After the transmission of Breakwell to Robert, and before the Court has been asked to create the charge for Steven's costs over Breakwell, Robert has transferred half of his interest to Angelina as a volunteer, but his remaining interest has become vested in the Trustees because of his intervening bankruptcy.

Even though Steven will be appointed to represent Nada's estate, he will not hold the office of executor, and will not have a right of exoneration from the estate property that exists by reason of his office. The question is whether, by the making by the Court of an order under s 98 of the Civil Procedure Act, the Court should now create a charge over Breakwell in favour of Steven.

This question must be addressed in the context that the Court will make an order for Steven's costs of the testamentary agreement claim against Robert and Angelina personally. Steven will be entitled to enforce his costs claim against Angelina, assuming it is ultimately made, out of her half share in Breakwell, together with any other property that she may own. Steven will not be able to enforce the costs order against Robert against the half interest in Breakwell that is in the hands of the Trustees, but that is because his bankruptcy has intervened. If the Court created by its costs order the charge sought by Steven, that would prefer Steven over the unsecured creditors of Robert.

I have referred above to the ambiguity arising out of Steven's submissions as to whether he bases his claim for a charge for his costs over Breakwell on the basis that he should be treated as if he stood in Jordan's shoes as executor of Nada's estate, or whether he should be treated as a creditor. I do not think that it would be valid for the Court to approach the question on the basis that the costs order would make Steven a creditor of the estate.

Steven is not now a creditor of Nada's estate. His entitlement will only arise when the Court makes the order. Plainly, Steven was not a creditor of Nada, and if the effect of the Court's order was to make Steven a creditor, the only debtor could be Jordan. Jordan has not been given notice of Steven's costs claim. The Court has been told that Jordan has submitted to the order of the Court. I have not been able to find any submitting appearance on the Court's file. If Jordan did formally submit, I would infer that the submission was not in respect of the costs claim now made by Steven.

The natural and proper basis for the Court to determine Steven's claim for a charge for his costs over Breakwell is from the perspective of his appointment to represent Nada's estate as a de facto substitute for the executor, Jordan.

That calls for a consideration of the entitlement that Jordan would have had to recover the costs of the testamentary agreement claim, either from Angelina and the Trustees, or by means of a charge over Breakwell if Jordan had prosecuted the testamentary agreement claim.

Although Steven seeks to trace Breakwell into the hands of Angelina and the Trustees, on the basis that they are volunteers, in my view the amount for which both defendants could be liable to refund to Jordan can be no more than would have been required to be refunded by Robert before he transferred Breakwell in two steps to Angelina.

The issue is whether Steven is entitled to a charge over Breakwell in order to recoup his liability to pay the costs that he has incurred to his lawyers.

The lawyers are creditors of Steven and not of the estate.

The principles that govern the rights of creditors of the estate to follow and trace property of the estate distributed to beneficiaries are thus not relevant.

Steven's claim to enforce the testamentary agreement is not an aspect of the administration of the estate of Nada in the strict sense. If Jordan had taken action, it would have been a suit to enforce a contract made by the deceased with a third party to confer a benefit on another party. An executor is entitled to prosecute such a claim: see J R Martyn and N Caddick, Williams, Mortimer and Sunnucks, Executors, Administrators and Probate (20th ed, 2013, Sweet & Maxwell) (Williams, Mortimer and Sunnucks) at [68-01]. Normally, the Court could make an order that Robert pay Jordan's costs personally under s 98 of the Civil Procedure Act, but could not make any order that Jordan be entitled to recover any shortfall out of the assets of the estate: see Williams, Mortimer and Sunnucks at [68-01]. That is because the beneficiaries of the estate would not usually be parties to the suit. As it happens, in the present case, Steven and Robert are both parties. On the authority of Barnes, referred to above, this Court would therefore have jurisdiction to make a costs order of the type that would be made in administration proceedings. No party made any submission to the contrary.

Jordan would have had a right of exoneration out of the assets of the estate in his hands. That would have permitted him to have had recourse to George for any shortfall in the costs that he was able to recover personally from Robert. Jordan would have had that entitlement, even though it would have been to the prejudice of Steven, who was the intended beneficiary of the testamentary agreement entered into by Nada.

It is not clear, as a matter of principle, that in those circumstances, Jordan would have been entitled to follow Breakwell into the hands of Angelina and the Trustees through Robert, simply because Robert was the defaulting party under the testamentary agreement. Because of the unusual terms of Nada's will, that would have been a difficult question to answer. Strictly, Robert was a contracting party in respect of Jersey, and not a beneficiary. It is not clear whether the principle referred to in Barnes, of making the burden fall upon the beneficiaries equitably, would justify treating Robert as a beneficiary, rather than simply a defaulting contracting party, just because the testamentary agreement is mentioned in Nada's will.

For the purposes of the argument, I will make the questionable assumption that the terms of Nada's will, and the breach of the testamentary agreement by Robert, would have justified Jordan seeking to recall Breakwell from Robert, rather than to have recourse against George for any shortfall in the recovery of his costs from Robert.

If that assumption is made, the question becomes: what would the outcome have been, if Jordan had sought to recall Breakwell from Robert and trace that property into the hands of Angelina and the trustees?

The learned authors of Williams, Mortimer and Sunnucks say the following concerning the executor's right to a refund at [83-05] (footnotes omitted):

See also Halsbury’s Laws of Australia (2005, Online, LexisNexis Butterworths) (Halsbury’s) at [395-4715]. It is not necessary to investigate these principles in detail, as they were not addressed at the substantive hearing and it is only necessary to understand the issues that would have arisen if they had been addressed.

Thus, the executor does not have a right to a refund if the executor knows of or is on notice of unpaid estate creditors. The executor will be entitled to a refund in respect of entirely unknown creditors, or where debts crystallise from contingent possibilities.

Jordan's right to a refund from Robert, and consequently from Angelina and the Trustees, may have been defeated if the defendants could establish that Jordan had transmitted Breakwell to Robert voluntarily, or that he had relevant notice of the debts to lawyers that he would subsequently incur in the course of proceedings to enforce the testamentary agreement.

That consideration gives rise to issues that did not arise in the present proceedings and have not been the subject of forensic contest.

First, there is a question whether Jordan's transmission of Breakwell to Robert, in compliance with clause 3.11 of the deed of release, should be treated as being voluntary on the part of Jordan, or in effect under the compulsion of the direction of the two beneficiaries of the estate.

Secondly, and I consider more problematically, there is a question as to whether an executor, who chooses not to enforce a contract entered into by the deceased, such as the testamentary agreement, before distributing the estate's property, can then incur the legal costs involved in such a proceeding, and assert that the executor did not relevantly have notice that the estate would incur those costs in the future.

That these questions were not raised or explored in these proceedings is the first reason that I would not make an order charging Breakwell for Steven's costs of the testamentary agreement claim, on the basis that Steven should be treated as if he stood in the shoes of Jordan.

My second reason for coming to that conclusion is the principle, generally accepted as being established by the decision of the Court of Appeal of England and Wales in Re Diplock [1948] Ch 465, that the action by the executor for a refund from a beneficiary is an equitable action to which equitable defences such as laches and estoppel apply: see Williams, Mortimer and Sunnucks at [83-04]. There may be an unresolved question about whether the defence of change of position also applies.

Given the events that have occurred since Breakwell was transmitted by Jordan to Robert in mid-2009, at the apparent direction of both Steven and Robert, only some of which have been considered in these proceedings, there is a real possibility that Angelina and the Trustees would have been able to mount equitable defences, if Steven had sought a charge over Breakwell to meet his costs of the testamentary agreement claim as a substantive issue in these proceedings.

I accept the Trustees' submission that Steven is not entitled to seek an order granting him a charge over Breakwell simply as an adjunct to his costs claim. It is a separate, substantive claim that Steven would be required to plead, just as Jordan would have had to institute proceedings against Robert or Angelina and the Trustees for the refund of Breakwell.

In these circumstances, it is not necessary for the Court to deal with the Trustees’ arguments that they have been deprived of the opportunity to seek to enforce a paramount lien over Breakwell for their costs of the proceedings before Ward CJ in Eq, or their argument based upon the effect of s 27 of the Bankruptcy Act. The submissions of the parties in respect of these arguments were not well developed.

I add that, if I had not concluded that the Court could not properly make the order sought by Steven in these proceedings, I would have declined to make the order in the exercise of my discretion under s 98 of the Civil Procedure Act.

First, so far as the Trustees are concerned, the Court will make a costs order in respect of the testamentary agreement claim against Robert personally. Had the order been made before Robert's bankruptcy, it could have been enforced against Breakwell, necessarily after the setting aside of the second transfer from Robert to Angelina under s 37A of the Conveyancing Act 1919 (NSW) (Conveyancing Act). Given that, in reality, Steven has enforced the testamentary agreement in his own interests, and his appointment as representative of Nada's estate was made merely to avoid the consequences of the improper constitution of the suit, it would not be appropriate for the Court to prefer Steven over the other unsecured creditors, by creating a charge over Breakwell by order of the Court. Steven's position is different from that of an executor, who has a right of exoneration out of the assets of the estate, before any interest in the estate vests in beneficiaries.

Secondly, given the complex reality of the present proceedings, and the fact that it will be appropriate for the Court to make costs orders for and against some of the parties on the ordinary basis, I do not think that the making of a procedural appointment of Steven to represent Nada's estate should give him the benefit of a right to indemnity costs on a secured basis, when the parties who will be given costs orders against Steven have not received that benefit.

Consequently, the Court will not make order S2 as sought by Steven.

As I have explained above, it would not be justifiable to treat the costs incurred by the parties to these proceedings on the basis that those costs related to a single set of interrelated issues. There were separate aspects of these proceedings that may call for differential costs orders. There were also related proceedings, in some of which costs orders were made or agreements noted whereby the costs will follow the outcome of these proceedings.

A considerable part of the primary judgment was concerned with an analysis of these costs issues, which was necessary because Steven initially claimed that a family provision order should be made in his favour so that he could pay all of his costs out of Nada’s estate. At the last moment, Steven changed his position to one in which he would pursue his entitlement to costs orders from the other parties separately, but he asked for a family provision order that would reimburse him for the shortfall in costs that he might be able to recover in the future. This change of position also necessitated the Court analysing the costs consequences of this and the other proceedings, although it made the exercise more complicated and indefinite.

The Court was not required to actually determine the costs consequences of the various issues under consideration. That position has now changed. The Court must now rule on the various costs claims that have been set out above. Additionally, it must now identify, in a precise way, the entitlement of the parties to the costs of the various aspects of these and other proceedings. That is so that, where the Court does make orders that one party pay the costs of another, it will be clear what costs are intended by the Court to be encompassed by the orders.

Where I refer to Steven’s costs below, that is to the evidence given at the hearing concerning the costs that have been billed to Steven. I have accepted the apportionment of costs made by the solicitor. I make no finding about the actual quantum or reasonableness of any of the costs that Steven has incurred.

Steven's costs of this application were $27,155.20. This application by Steven was by agreement discontinued under the terms of the deed of release, and at the time no order for costs was made. There is no basis for including these costs within the costs of the present proceedings, particularly as the first proceedings did not seek enforcement of the testamentary agreement. As I understand it, Steven accepts this position.

Robert’s application for a costs order against Steven concerns this aspect of the proceedings.

The amount of Steven's costs of this aspect of these proceedings was $189,639.01.

This aspect of the proceedings concerned the issues raised by Steven in his initial statement of claim, which are set out at [232]. The relief sought was the enforcement of the deed of release, not the enforcement of the testamentary agreement. In the deed of release, Steven compromised his initial family provision claim and any claim he had to enforce the testamentary agreement.

The effect of the judgment given by Pembroke J on 16 November 2012 was that the deed of release was void ab initio, because of the failure of the condition in cl 3.19 that Steven had not satisfied.

Steven made the tactical decision to institute proceedings to enforce the deed of release, notwithstanding the clear probability that it was void. His claim was dismissed.

Pembroke J did not make an order for the costs of the proceedings up to the judgment given by his Honour.

At the hearing, Steven's final position was that he should make an application to Pembroke J to decide the issue of costs of the proceedings up to the application that his Honour determined. As his Honour has now retired, it will be necessary for me to deal with the issue.

As recorded at [246], Pembroke J made a veiled threat that, if the testamentary agreement claim ultimately succeeded against Robert, Pembroke J would "hear submissions about an appropriate costs order against him that reflects that final result".

As Steven’s claim was dismissed, this aspect of his costs could not fairly be included in any order that any other party pay Steven’s costs.

I will consider Robert’s claim that an order should be made that Steven pay Robert’s costs of this aspect of the proceedings below, when I deal separately with that application, as it will be necessary to consider the consequences of Robert’s bankruptcy.

The application that was heard by Slattery J was heard in separate proceedings to the present proceedings.

Angelina has claimed that her costs of defending the proceedings heard by Slattery J should be covered by the costs order against Steven in her favour that she seeks in these proceedings.

Steven incurred $161,857 as the costs of this application.

As a matter of fact, Steven was prompted to lodge caveats against the titles to Breakwell and Kemp after he learned that Robert had transferred his remaining half interest in Breakwell and his interest in Kemp to Angelina on 31 May 2013, after Pembroke J had set down Steven’s family provision application on 1 February 2013 for a hearing commencing on 27 May 2013. As noted at [253], I have not been able to resolve the apparent inconsistency between the hearing being fixed by Pembroke J to commence on 27 May 2013, and the transfer by Robert to Angelina not happening until 31 May 2013. The hearing of the family provision application was vacated as a result of the transfer.

By his caveats, Steven sought to protect the family provision order that he then hoped to obtain by persuading the Court to make declarations that Breakwell and Kemp were notional estate of Nada.

At this stage, Steven was not seeking to enforce the testamentary agreement. As already stated, Steven first introduced a claim to enforce the testamentary agreement after the proceedings before Slattery J when he filed his second further amended statement of claim on 7 April 2014: see [292], [293]. Slattery J refused to allow the caveats lodged by Steven to be continued, because the subsistence of an application for a family provision order does not give the applicant an arguable beneficial interest in former property of the deceased that may be declared at a hearing to be notional estate of the deceased. However, Slattery J made orders permitting Steven to lodge new caveats against the titles to Breakwell and Kemp: [274]. Those new caveats protected equitable interests in the properties claimed by Steven, based upon possible constructive trusts that Steven claimed were imposed upon Robert as a result of an alleged tripartite agreement between Nada, Steven and Robert, rather than the testamentary agreement between Nada and Robert.

As noted at [279], Slattery J made an order that the costs of the proceedings before him would be the parties’ costs in these proceedings.

In these proceedings, Steven, as representative of Nada’s estate, has succeeded in enforcing against Robert the testamentary agreement. However, the only claim that Steven pursued was that there was a bipartite agreement between Nada and Robert. Steven did not pursue the claim that he was a party to the agreement, and accordingly he did not seek to enforce the agreement that he relied upon when lodging the new caveats against the titles to Breakwell and Kemp as having given him a caveatable interest in those properties.

As the testamentary agreement only applied to Robert’s interest in Jersey, the new caveats were not lodged to preserve the subject matter of Steven’s claim to enforce the testamentary agreement. In practical terms, the new caveats were lodged to preserve Steven’s potential recovery of a family provision order out of those properties.

Slattery J’s costs order remains in force. The question is: what did his Honour mean when he referred to “these proceedings” in his order. It must be inferred that his Honour understood that Steven would appropriately amend his pleadings to seek to sustain the existence of the interests in Breakwell and Kemp that he claimed arose by reason of the constructive trusts that Slattery J tentatively recognised.

Whatever Slattery J’s intention was, it could not have included that the proceedings would encompass the enforcement by Steven, as the appointed representative of Nada’s estate, of the testamentary agreement. As noted, Steven had not yet amended his pleadings to make that claim.

Where an applicant for interlocutory relief obtains that relief, after having established a prima facie case, the usual order is that the costs of the interlocutory application are to be costs in the cause: His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 142 at [21]. Where the applicant is unsuccessful at the final hearing, the applicant should not receive the costs of the application. See also G E Dal Pont, Law of Costs (4th ed, 2018, LexisNexis Butterworths) (Dal Pont) at [14.26].

The application of the accepted principles that govern costs that have been ordered to be the plaintiff’s costs in the cause, following a successful application for interlocutory relief, but where the plaintiff fails at the final hearing, would have the consequence that Steven would not be entitled to an order that Angelina pay his costs of the interlocutory application.

The Court could not properly order Angelina to pay Steven’s costs of the proceedings before Slattery J solely on the basis that the Court disapproved Angelina’s conduct in taking transfers of Breakwell and Kemp from Robert on 31 March 2013 for no consideration. It is possible that Angelina’s conduct was unlawful. That conclusion has not, however, been the subject of judicial determination, because the Trustees’ success in having the transfers set aside on grounds arising under the Bankruptcy Act have obviated the need for the Court to determine Steven’s claim under s 37A of the Conveyancing Act. In any event, costs orders are not made by the Court to punish a party for conduct that has been the cause of proceedings being commenced on the basis that the Court disapproves of the party’s conduct: see Dal Pont at [7.5].

Consequently, any order for costs made in Steven’s favour that his costs of any part of these proceedings be paid by Angelina cannot include Steven’s costs of the proceedings heard by Slattery J.

I will consider the question whether Steven should be ordered to pay Angelina’s costs of those proceedings below, when I deal with Angelina’s application for an order that Steven pay her costs.

Both Angelina and the Trustees ask for an order that the costs that they are ordered to be paid by Steven will include those parties’ respective costs of the proceedings in the Federal Court.

Steven incurred costs of $46,741.35 in obtaining leave from Flick J, in the Federal Court of Australia, under s 58(3) of the Bankruptcy Act, to prosecute in these proceedings certain claims against Robert, notwithstanding that a sequestration order in bankruptcy had been made against Robert’s estate.

By reason of the leave granted by Flick J, Steven claimed in prayer 9 of the fifth further amended statement of claim an order that he be entitled to equitable compensation, and that the order for compensation is to constitute a provable debt in Robert’s bankrupt estate. In prayer 10, Steven claimed an order that Robert jointly with Angelina pay Steven’s costs, and, in the case of Robert, that Steven be entitled to claim such costs as a provable debt in Robert’s bankrupt estate.

As recorded at [366], Flick J noted that there would be no order as to costs, and recorded an agreement made between the parties to the application before him that “the costs of the present proceeding in this Court will be their costs in the Supreme Court”.

Notwithstanding the questions about the effect of this costs order that I raised at [368] and [369], I am satisfied that the broad discretion given to this Court by s 98 of the Civil Procedure Act empowers the Court to have regard to, and enforce, the agreement recorded by Flick J. The Court does not need to require the parties to the agreement to commence separate proceedings in this Court for the enforcement of the agreement. That approach is at least open where, as here, it was necessary for an application for leave under the Bankruptcy Act to be made in the Federal Court, as an adjunct to the prosecution of proceedings that were otherwise properly instituted in this Court.

Steven is not entitled to an order in these proceedings that any other party to the Federal Court proceedings pay his costs of those proceedings. That is for two reasons. First, Steven ultimately abandoned the claims in prayers 9 and 10, which have been noted above, for which he needed and was given leave to proceed in these proceedings by Flick J. Consequently, the costs of that application cannot be Steven’s costs in these proceedings.

Secondly, it is clear that the claims in prayers 9 and 10 had no relevance to the claim for enforcement of the testamentary agreement, which is the only claim on which Steven succeeded.

I will consider whether Steven should be ordered to pay Angelina’s and the Trustees’ cost of the Federal Court proceedings when I deal with their respective costs claims.

I mention these costs for the sake of completeness. These applications concerned Steven’s successful application for an order setting aside the consent orders in the Family Court under which Robert transferred his interests in Breakwell and Kemp to Angelina, and Steven’s successful defence of Angelina’s application to set aside that order. The total amount of the costs incurred by Steven was $332,160. These costs need no further consideration in these reasons, as their recovery must be sought in the Family Court.

The Court was given evidence that Steven incurred legal costs of $859,827, as the costs of these proceedings. As I understand it, that amount does not include the costs of the initial family provision application that was discontinued or the costs of the caveat proceedings before Slattery J, the costs of the Family Court proceedings, or the costs of the Federal Court proceedings decided by Flick J. I understand that it does include the costs of these proceedings up to 14 December 2012 of $189,639.01.

As I have decided that Steven is not entitled to an order that those costs be paid by any defendant, the amount of Steven’s costs incurred in pursuing both his testamentary agreement claim and his family provision application may be about $670,188. That amount is derived by taking the evidence of Steven’s costs of these proceedings at face value, and does not represent a finding as to the actual amount of costs incurred by Steven.

The result of this analysis of the evidence given on behalf of Steven as to the costs that he incurred in pursuing these and other proceedings is that about $670,188 represents Steven’s costs that may be made the subject of a costs order in his favour. However, those costs were incurred in an undifferentiated way in the pursuit of both Steven’s claim to enforce the testamentary agreement against Robert and his claim for a family provision order against Jordan as the executor of Nada’s estate.

It is now necessary for the Court to deal with a number of matters that are relevant to the determination of the costs orders that should be made in respect of that part of Steven’s overall costs that indistinguishably arise out of his prosecution of the testamentary agreement claim and his family provision claim. In principle, Steven should be entitled to the first part of these costs but not the second part. This will cause difficulty in the assessment process.

It will be appropriate for the Court to consider briefly the many amendments that Steven made to his statement of claim.

Steven filed a summons in these proceedings and a statement of claim, and then amended the statement of claim five times. For reasons that are unclear, the Court did not make the usual costs order on each occasion when Steven was given leave to amend his statement of claim. The costs of the grant of leave to amend were effectively reserved.

None of the defendants included in their proposed short minutes of order the costs order that is usually made against a plaintiff when the plaintiff is given leave to amend its statement of claim. That may be because almost all of the amendments made by Steven concerned aspects of the proceedings that the defendants expect will be the subject of costs orders in their favour any way. If that happens, then separate costs orders concerning the amendments will not be necessary. It is therefore not necessary for the Court to make such orders in favour of the defendants. However, in order to minimise the scope for subsequent dispute, it will be appropriate for the Court to include in the orders made a notation that the defendants, in respect of costs orders made against Steven in their favour, are entitled to include the costs that they have incurred because of, or thrown away by, the amendments.

Steven’s amended statements of claim are the amended statement of claim ([234]-[237]); the further amended statement of claim ([248]-[249]); the second further amended statement of claim ([286]-[305]); the third further amended statement of claim ([319]-[333]); the fourth further amended statement of claim ([344]-[347]); and the fifth further amended statement of claim ([372]-[374]. The changes to Steven’s case effected by the amendments are discussed in the paragraphs of the primary judgment indicated. Many of the changes were substantial, in that they introduced new causes of action.

The third further amended statement of claim is particularly significant, as it was the version in effect when the first stage of the hearing commenced. It introduced a claim for orders designating Breakwell, Kemp and Jersey as notional estate of Nada, as well as a claim that Angelina held Morts on a resulting or constructive trust for Nada’s estate. Steven introduced a claim that the transfer by Robert of his interest in Morts to Angelina on 31 May 2013 constituted an alienation of property with intent to defraud creditors, within the meaning of s 37A of the Conveyancing Act. Steven claimed an order for equitable compensation in respect of the rents and profits of the properties that he claimed were part of Nada’s estate. Steven introduced claims against Jovanka, Angelina and Jordan based upon what were described as “equal entitlement testamentary intentions” and sought relief against Jordan for defaults described as “Jordan’s testamentary contraventions”. I mention these changes in particular, because they were included in the issues that were before the Court during the first stage of the hearing, until they and other issues were abandoned by Steven in later versions of his statement of claim.

Not only did Steven’s many amendments to his statement of claim introduce new causes of action, but they also involved the abandonment of many causes of action: see in particular [303], [333] and [381]. The abandonment of the claims referred to at [381] occurred by Steven providing to the Court, at the commencement of the second stage of the hearing, a copy of the fifth further amended statement of claim that had deleted the prayers for relief that would not be pursued.

As is explained at [410]-[421], at the end of the hearing, Steven made a fundamental change to the way in which he said that the legal costs that he had incurred were relevant to his family provision application. This change occurred without amendment to the pleadings. Since the time when Steven’s family provision application had ceased to be an alternative to his testamentary agreement claim, by means of his second further amended statement of claim filed on 28 March 2014 (see [302]), Steven had initially claimed a family provision order in a sum sufficient to pay all of his legal costs of all of the proceedings. Right at the end of the hearing, Steven said that he would pursue costs claims against relevant defendants before the courts that had decided the various aspects of the dispute between the parties. Also, for the purposes of his family provision claim, Steven said the Court should only take into account the legal costs that he had incurred in a general way, in order to make an allowance between the shortfall in the actual costs incurred and the costs that may be recovered by the new approach adopted by Steven.

Although Steven changed the basis of his claim concerning the significance of the amount of legal costs that he had incurred, it is clear that all of the evidence going to the amount of those costs, and the manner in which they had been incurred, related solely to his family provision application.

I will therefore make a notation in the following terms:

It is necessary for the Court to consider the relative litigious effort required by the parties to contest the testamentary agreement and the family provision claims. As Steven succeeded on one claim, but failed on the other, the Court may be required to make differential costs orders that will have the effect of making the assessment process difficult. Sometimes that difficulty can be avoided where the Court is able to make a broad assessment whereby one party is simply ordered to pay a proportion of the costs incurred by the other party. Order A1 proposed by Angelina calls for the Court to make an order of this nature.

I will refer to the principles I have set out above extracted from Almona No 4 concerning the legal principles that govern the determination of costs orders in these circumstances.

Steven’s testamentary agreement claim was effectively heard during the first stage hearing, and the nature and complexity of the issues involved are reflected in the primary judgment at [34]-[108]. There were only three significant witnesses, as Steven himself did not witness the making of the testamentary agreement.

The forensic effort needed to litigate the testamentary agreement claim was limited in comparison to the effort required to litigate the family provision application. The litigation of the family provision application required not only the determination of Steven’s application for an extension of time to make his application ([461]-[497]), and the consideration of all of the factors commonly relevant to the determination of such an application ([514]-[560]), but it also required, because of the way Steven ran his case, a detailed examination of the manner in which various applications relevant to the dispute between the parties had been dealt with by the Courts. That detailed examination consumed a substantial part of the parties’ litigious effort, and was only necessary because Steven sought to make his legal costs a factor in his family provision application.

Unfortunately, as was the case for McDougall J in James v Royal Bank of Scotland; McKeith v Royal Bank of Scotland (No 2) [2015] NSWSC 970, I am not satisfied that the Court has enough information to make a reasonable broad brush estimate of the proportion of the entire litigious effort that should be separately attributed to the testamentary agreement and the family provision claims. On Steven's side, the $670,188 incurred by him that may be recoverable is such a substantial amount that I cannot intuitively attribute it to the two claims.

On the part of Robert and Angelina, I have no evidence concerning the costs that they incurred when they had retained legal representatives, and for most of the second stage of the hearing, Angelina appeared unrepresented.

I do not accept Angelina’s submission that it is an adequate approach to conclude that the testamentary agreement claim, if efficiently and reasonably prosecuted, should have been concluded in one to two days, and that a two-day hearing represents approximately 15% of the 13 days it took to conclude the hearing. Attributing only two days to the testamentary agreement claim is not a fair division between the two claims. In any event, I do not accept that the costs should be apportioned having regard only to what happened in the hearing.

It is possible that the Court might be able to fashion orders that could lead to a reasonable and fair assessment on a gross sum basis of the costs that will be payable by Steven, Robert and Angelina. That would require sufficiently detailed additional evidence of the litigious effort and its costs to the relevant parties. It may be that the appointment of a suitably qualified experienced costs assessor as a referee would be the most efficient way to resolve this difficult problem. Otherwise, if any party pursues a costs order in his or her favour they will have to endure the ordinary assessment process.

Robert provided written submissions to the Court in which the only order that he sought was the following costs order concerning his costs of the proceedings determined by Pembroke J: see [230] to [247]:

In the alternative, Robert sought an order for his costs in these terms on the ordinary basis (R2). I propose to make order R2, which will become order 15. Robert has not made out a case for these costs to be on the indemnity basis.

As I have said above, when explaining why any order for costs made in favour of Steven should not include his costs of this aspect of the proceedings, Robert’s defence of Steven’s claim was successful, and Pembroke J found that the deed of release was void ab initio. That was because Steven had not satisfied the condition subsequent to the continued validity of the deed of release.

If Robert still had title to the claim that he initially had for an order for Steven to pay his costs, it would have been appropriate to apply the general rule that costs follow the event: see UCPR r 42.1. It could not be a disentitling circumstance that Robert has now been shown to have breached the testamentary agreement. Steven initially compromised that claim by the deed of release, and then failed in his claim to enforce the deed of release. Steven took the obvious risk that the Court would find that the deed of release was void.

Robert’s bankruptcy may create an impediment to the Court making the costs order in favour of Robert that it would otherwise have made. The effect of Robert’s bankruptcy may have been to vest his chose in action for an order that Steven pay his costs in the Trustees: see s 58(1) of the Bankruptcy Act and Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178 (Daemar) per Kirby P (as his Honour then was) at 185; followed by Hidden J in Foyster v Australia & New Zealand Banking Group Ltd [1999] NSWSC 300 (Foyster) at [21]-[25]. That conclusion assumes that, at the time of the sequestration order, Robert’s entitlement to pursue the order for costs that he now seeks was an action, as described by Kirby P in Daemar at 185.

Robert’s bankruptcy has not yet been discharged. However, if Robert’s right to seek the costs order has become vested in the Trustees, the eventual discharge of Robert will not have the effect of revesting in Robert the title to any of Robert’s former property that remains in the hands of the Trustees: see Daemar at 184,185, approving Needham J in Pegler v Dale (1975) 1 NSWLR 265 at 266-267.

In the present case, I understand that there is some possibility that the Trustees will be able to pay all of Robert’s creditors 100% on the dollar. That should have been the case, given the value of the property in Robert’s bankrupt estate, although the continuing accumulation of costs of these and related proceedings may make that outcome doubtful. It is therefore possible that, when Robert is discharged from his bankruptcy, the Trustees will hold surplus property that is not required to be paid to creditors.

The editors of Halsbury’s at [50-1570] in footnote 11 state that, although discharge does not revest title to property in the bankrupt or otherwise affect the title of the trustee, the trustee will retransfer any surplus when debts are paid. No authority for this proposition is given, although it would seem to be a proper result in cases where the trustee is satisfied that all creditors have been paid.

The point of these observations is that, even if the right to seek the costs order claimed by Robert has vested in the Trustees, it is possible that Robert will regain the entitlement to claim and retain the benefit of any costs orders made in his favour in the future.

Furthermore, even if Robert’s right to apply for a cost order against Steven is a chose in action that has been transferred to the Trustees, the nature of the right may give Steven an entitlement to pursue his claim, notwithstanding that the right to receive any costs from Steven may not be vested in him.

In Kison v Papasian (1994) 61 SASR 567; [1994] SASC 4476, the Full Court of the Supreme Court of South Australia was concerned with a case in which the trial judge had reserved judgment, and before judgment the respondent was made bankrupt. Judgment with an order for costs was then delivered in favour of the respondent. The trustee in bankruptcy declined to take steps to enforce the order for costs because he took the view that the costs awarded would be held on trust for the respondent’s solicitor. Following the respondent’s release from bankruptcy, the respondent taxed his costs and sought to recover those costs from the appellant. The appellant applied for a stay of any enforcement of the order on the basis that the right to recover costs was vested solely in the trustee in bankruptcy and could not be enforced by the respondent.

The Full Court declined to grant the stay. King CJ, with whom Mullighan J agreed, recorded at 568 that the amount of the costs ordered to be paid was less than the amount that the respondent owed to his solicitors. On that basis, the Chief Justice reasoned, applying the principle that the solicitors had a lien over the costs ordered to be paid from the date the order was made, that the costs order did not vest in the trustee in bankruptcy. That was because the lien in favour of the solicitors sprang into existence the instant that the order for costs was made. The respondent was therefore entitled to enforce the costs order, although that effort may be for the benefit of the solicitors, if they enforced their lien.

I interpolate that it is not clear how this principle may apply in this case, if the costs orders sought by Robert were to be made. At least one firm of solicitors who acted for Robert was the plaintiff on the application for the making of a sequestration order against him. It is possible that, at some stage, the solicitors who acted for Robert in relation to the proceedings up to the time of the judgment of Pembroke J will be paid out by the Trustees from other property that they hold in the bankruptcy. If that happened, Robert’s entitlement to be paid costs by Steven may be released from the solicitors’ lien.

While this possibility is real, the outcome is presently a matter for speculation, and the Court cannot predict what will happen.

More relevant to the present case is the alternative basis relied upon by Bollen J in Kison v Papasian for refusing the stay of enforcement sought by the appellant. At 569, King CJ said that, if he had found that the benefit of the costs order vested in the trustee, he would nevertheless have upheld the right of the respondent to enforce the order, in the absence of any intervention by the trustee, for the reasons given by Bollen J.

Bollen J stated expressly that he did not disagree with the views expressed by Needham J in Pegler v Dale or by the Court of Appeal in Daemar. However, on the basis that the costs order was made after the respondent had become bankrupt, his Honour held that the right to costs was after-acquired property. Relying upon the decision of Bowen CJ in Eq in Thistlethwayte v Gender Estates Pty Ltd (1976) 8 ALR 700 (Thistlethwayte), and the authorities reviewed in that case, Bollen J accepted, at 572, the following statement by Bowen CJ in Eq:

This conclusion draws force from the terms of s 126(1) of the Bankruptcy Act, which provides:

In Nathan Elali (a bankrupt) v Mahrs [2013] NSWSC 1883, Slattery J said, following a discussion of Bowen CJ in Eq’s judgment in Thistlethwayte:

In their submissions, the Trustees noted that a costs order in favour of Robert would potentially benefit the estate as after-acquired property. However, the Trustees said that they saw no advantage to the estate in obtaining an order for the costs of the proceedings before Pembroke J, in circumstances where they are not in a position to establish, in the course of any assessment, what cost were actually incurred by Robert. They said at par 13.1(ii): “… Of course, Robert himself might seek such an order although he would need to establish he had standing to do so given the bankruptcy”.

Thus, the stance taken by the Trustees is that they have not intervened in Robert’s application, or refused to give him permission to pursue his costs claim against Steven.

As, in the present case, the Court has not yet made any costs order, any such order that is now made will be even more clearly after acquired property than was the case in Kison v Papasian, where the costs order had already been made.

I therefore find that Robert is entitled to apply for the costs order that he seeks, and accordingly will make order R2 for the reasons given above.

Jovanka provided written submissions to the Court in which she sought the following costs order:

The alternative order sought by Jovanka was in the same terms, save that the order would be made against Jordan, so that Jovanka’s costs would be paid out of Nada’s estate (J2). Jovanka did not address the question as to what assets of the estate should be the source of payment of her costs, given that the only property presently held in the name of Jordan is George. That is a property to which Steven is entitled.

Jovanka swore an affidavit in support of her application for costs, which was only filed in court on 5 June 2019. She stated that she had incurred legal costs and disbursements of $103,945.40, of which $62,707.76 have been paid. Jovanka said that barrister’s fees of $2,598.75 and solicitors’ fees of $38,638.89 remain outstanding.

Jovanka annexed to her affidavit 20 tax invoices from her solicitors and one tax invoice from a barrister. On my calculation, the total amount evidenced by the tax invoices is $62,118.51. The discrepancy may be explicable by Jovanka having counted a credit of $5000 dated 17 April 2014 as a cost, and she may have added the $36,823.89 that appears as a cost rendered in the 28 February 2017 tax invoice as an additional cost.

The circumstances of Jovanka’s involvement in these proceedings are not entirely clear. Steven filed the summons that commenced these proceedings on 20 March 2012: [221]. On 22 May 2012, a Registrar made an order that Steven join Jovanka to these proceedings within seven days. Apparently, Steven did not comply with that order.

On 29 May 2012, Robert’s then solicitors wrote a letter to Jovanka’s solicitors. The letter noted that Steven had been ordered to join Jovanka. It suggested that prayers 1 to 5 of Steven’s summons be heard separately. Those prayers were concerned with Steven’s attempt to enforce the deed of release. The expressed purpose for the separate determination was to enable Family Court proceedings that had been listed in August 2012 to be heard, rather than being adjourned.

Jovanka’s solicitors wrote to Steven’s and Robert’s solicitors on 4 June 2012. Among other things, the letter stated that Jovanka would file a submitting appearance in respect of prayers 1 to 5 of the summons, but she reserved the right to file a claim for further family provision in the proceedings.

On 13 June 2012, Robert’s solicitors said in a letter to Jovanka’s solicitors: “Given that you have indicated that your client will file a submitting appearance we seek your client’s consent to be joined to the proceedings on the basis that she file a submitting appearance”.

Jovanka’s solicitors advised the solicitors for Steven and Robert, by letter dated 19 June 2012, that they had instructions that Jovanka consented to being joined as a party to these proceedings on the basis that she would file a submitting appearance in relation to prayers 1 to 5 of the summons, but that she reserved the right to make an application for family provision relief.

It is not clear when Jovanka was joined as the second defendant to the proceedings. The third further amended statement of claim was filed by Steven on 16 October 2015: [319]. Jovanka is a party to that pleading.

Jovanka filed a submitting appearance on 6 November 2015 in the following terms:

Prayers 1 to 10 of the third amended statement of claim encompassed all of the relief sought by Steven.

The position appears to be that Jovanka was initially invited to consent to being made a party to these proceedings on the basis of her prior indication that she would submit to the Court’s orders in relation to Steven’s claim to enforce the deed of release. I infer that Jovanka was served by Steven with the series of statements of claim up to the third amended statement of claim, as well as any defences filed by the defendants.

It appears that Jovanka was joined to the proceedings as an interested party, and so that she would be bound by the Court’s orders. It was expected that the orders would establish what property Steven and Robert would receive out of Nada’s estate. Those orders would establish the matrimonial property, as between Steven and Jovanka, for the purpose of the Family Court proceedings that were on foot. Robert was also a party to those proceedings.

On 18 March 2016, Young AJA made an order that Jovanka and Jordan be excused from appearing at the hearing of the third amended statement of claim. Thereafter, from time to time, Jovanka attended court, and usually sat in the public gallery.

Jovanka has not provided submissions that explain the basis of her claim for costs.

I have reviewed the tax invoices issued by Jovanka’s solicitors and counsel but, without further detailed evidence, I am unable to draw safe conclusions about the meaning of the evidence. A number of preliminary observations may be made. The legal work done does not appear to have been unreasonable on its face. A significant proportion of the work appears to have involved a watching brief. That is not surprising, as the litigious enterprise in which Steven was engaged was likely to have serious ramifications for Jovanka’s future financial position, because all of the matrimonial property was either at stake or at risk. One conclusion that can be drawn is that Jovanka was represented by solicitor and counsel at the hearings before Pembroke J. Those hearings dealt with Steven’s failed attempt to enforce the deed of release. It appears that Jovanka was represented in a conventional way for that aspect of the proceedings, including four directions hearings. There is a possibility that some of Jovanka’s legal costs concerned the investigation of a possible family provision claim on her part against Nada’s estate. There are occasional references in the tax invoices to work being done on the Family Court matter. However, without a more transparent evidentiary explanation of the significance of the entries in the tax invoices, most of these observations should be treated as being tentative.

In considering Jovanka’s entitlement to a cost order as sought by her, it must be borne in mind that she was originally joined on the basis that she would submit to the order of the Court on Steven’s deed of release claim. Jovanka has not commenced any family provision claim. No party has claimed any relief against Jovanka. Jovanka did not file a submitting appearance until 6 November 2015.

In these circumstances, Jovanka has not demonstrated an entitlement to any cost order either against Robert or against Nada’s estate.

Consequently, the Court will not make either of orders J1 or J2 as sought by Jovanka.

However, I will not dismiss Jovanka’s costs claim now. Jovanka is self- represented. She has incurred a considerable cost burden. Her interests have probably been detrimentally affected by these proceedings. It is reasonable to infer that Jovanka did not have the resources to continue to retain appropriate legal representation after her solicitors ceased to act for her in the proceedings. It is possible that Jovanka has a better claim for costs than she has been able to put to the Court through her own resources. I will therefore give her an opportunity to make a further application. I respectfully advise Jovanka that it will probably not avail her unless she can get appropriate legal advice and assistance. Jovanka should bear in mind that if she makes an application that is not sustainable she may be at risk of an adverse costs order.

The orders that I will make concerning Jovanka’s application for costs are:

Angelina asked the Court to make the following costs orders:

Angelina also made an alternative claim for an order for her costs on the ordinary basis (A3).

Angelina sought an order that Steven pay 85% of her costs on the basis that Angelina would be liable for part of Steven’s costs of his testamentary agreement claim, but, as Steven failed in his family provision claim, which included a claim that property owned by Angelina should form part of the notional estate of Nada, Steven should be ordered to pay Angelina’s costs of resisting the family provision claim. Angelina submitted that the litigious effort involved in the family provision claim was substantially greater than for the testamentary agreement claim. Accordingly, Angelina submitted, the appropriate course was for the Court to make a single costs order that reduced the costs that Steven was ordered to pay Angelina by 15%.

The first question is whether Angelina is entitled to an order for her costs of defending Steven’s family provision claim.

The first stage of the hearing was conducted on the basis of Steven’s third further amended statement of claim. The claims made by Steven that affected Angelina’s interests are described at [320]-[327] and [331], [332] of the primary judgment. It is clear that Angelina had a personal interest in defending these claims.

After further amendment and the abandonment of some claims, the second stage of the hearing was conducted on the basis of Steven’s revised fifth further amended statement of claim. Prayers 1 and 2 of that pleading continued to claim a designation that Breakwell is part of the notional estate of Nada. Angelina no longer had an interest in defending a designation of Kemp as the Court had ordered that Angelina transfer her interest in that property to the Trustees. Consequently, Angelina continued to have an interest in defending Steven’s family provision application.

Angelina succeeded in her defence of Steven’s family provision application and accordingly the protection of her interest in Breakwell.

Consequently, Angelina is entitled to an order that Steven pay her costs of the family provision claim on the ordinary basis.

In expressing that conclusion, I refer to the ruling that I have already made above that Steven’s entitlement to his costs of prosecuting the testamentary agreement claim does not encompass the costs of the family provision claim.

The next question is whether the Court should make order A1 as sought by Angelina, which would have the effect of combining the costs orders made for and against Steven and Angelina by estimating Steven’s recoverable costs of the testamentary agreement claim as being 15% of the recoverable costs of Angelina’s defence of the family provision claim, and making a single order that Steven pay 85% of Angelina’s costs on the ordinary basis.

Angelina did not tender any evidence of her costs. Angelina was represented by counsel at the first stage of the hearing, after counsel changed his appearance from Robert to Angelina. However, the first stage of the hearing was primarily – though not exclusively – concerned with the testamentary agreement claim. For most of the balance of the proceedings, including the second stage, Angelina was not legally represented. As a practical matter, Angelina took advantage of the fact that the Trustees were legally represented and fully contested the testamentary agreement claim. Angelina was legally represented on a number of applications, including the recent hearing in respect of the final orders that should be made by the Court.

Notwithstanding the absence of any quantitative evidence concerning the costs incurred by Angelina, the Court can be confident that – at least in relation to her defence of the family provision claim – the cost will be substantially less than the costs incurred by Steven in prosecuting his testamentary agreement claim.

The Court must decide, in the circumstances, whether this is an appropriate case to make a single reduced costs order in favour of Angelina. I have considered the principles relevant to this question in Almona No 4 at [120]-[229].

The present case is not a suitable one for simplifying the effect of the costs orders in favour of Angelina and Steven by the Court making a composite order that Steven pay 85% of Angelina’s costs, or some other appropriate percentage. The reason is that Angelina’s costs are so relatively small in proportion to the costs incurred by Steven that the practical effect of such an order would simply be to deprive Steven of a substantial proportion of his costs to which he is properly entitled.

That is shown by the following example. Assume parties A and B contest two issues. Each party succeeds on one issue and fails on the other. Assume that, from the perspective of the Court, the litigious effort required by A in succeeding on one issue is twice the litigious effort required by B to succeed on the other issue. It might seem that a suitable costs order is that B pay A 2/3 of A’s costs. But if for some reason A’s costs were $3X and B’s costs were $10X, such an order would have the following effect. B would be required to pay $2X to A, who would only have to bear a shortfall of $X. On the other hand, B would not recover any of the $10X in costs that B has incurred in succeeding on an issue that involved 1/3 of the total litigious effort in the case. This reasoning simply shows that, where the Court contemplates making a single composite order, the result is likely to be unfair on one of the parties, unless the Court has evidence of all of the parties’ costs, and those costs are incurred on the same basis – generally professionally – and the costs are reasonably commensurate with the relative litigious effort.

I must add that, even though, for the reasons discussed above, I have not found it possible, at this stage of the proceedings, to make a reliable judgment about the relative litigious effort required for the testamentary agreement and the family provision claims, I do not accept that a reduction of as little as 15% of Angelina's costs would be appropriate to accommodate Steven's success on the testamentary agreement claim.

The Court will not make order A1, but will make the conventional order that Steven pay Angelina’s costs of the family provision claim on the ordinary basis.

That Order will be:

The next question is whether the Court should make proposed order A2 in so far as that order would involve a notation that Angelina’s costs of the proceedings before Slattery J be treated as her costs of these proceedings.

As appears from the reasons for judgment of Slattery J, Angelina represented herself at the hearing before his Honour: see Stojanovski v Stojanovski [2013] NSWSC 1491. Consequently, her costs should not be substantial relative to the costs that Steven claims to have incurred.

As I have explained above, when considering Steven's claim to be awarded these costs, at the hearing in these proceedings Steven only sought to enforce the testamentary agreement as representative of Nada’s estate, on the basis that the only parties to that agreement were Nada and Robert. Consequently, Steven did not attempt to prove that he had the interests in Breakwell and Kemp that he sought to protect by the caveats that he lodged against the titles to those properties with the leave of Slattery J. He did not prove the existence of those interests.

Accordingly, Angelina must be considered to be the successful party in these proceedings concerning the issue determined by Slattery J in the other proceedings heard by his Honour.

Accordingly, the Court will make the following notation:

The remaining question is whether the Court should make proposed order A2, insofar as it has the effect that the costs recoverable by Angelina under order 13 shall include Angelina’s costs of the Federal Court proceedings before Flick J.

As noted already, Flick J recorded that the parties to the application before him had agreed that the costs of the proceeding will be the parties’ costs in this Court. Consequently, the costs of the Federal Court proceedings should be included in the costs recoverable by the successful parties in these proceedings on the issues that required Steven to make his application for leave in the Federal Court.

The Federal Court application was made in order to obtain that Court’s leave for Steven to pursue prayers 9 and 10 of the fifth further amended statement of claim.

Prayers 9 and 10 of the fifth further amended statement of claim were in the following terms (with the underlining showing the amendments made):

Prayer 9 was made in the alternative. The identification of the prayers to which prayer 9 was intended to be an alternative is not straightforward. Prayers 1 to 3 sought notional estate designations in respect of Breakwell, Kemp and Jersey. Prayers 4 to 5A sought relief in relation to Morts that was abandoned. Prayer 5B sought an order for accounts following the avoidance of the deed of release. Prayer 6 sought an order that Steven be appointed as the representative of Nada’s estate to enforce the testamentary agreement in respect of Jersey. Prayers 7 and 8 sought to resurrect Steven’s abandoned family provision claim.

Prayer 9 clearly is directed at obtaining relief in respect of Jersey. Sub-paragraph (a) appears to assume that Robert’s half interest in Jersey will not actually be transferred to Steven and seeks equitable compensation in lieu. The purpose of the claims in sub-pars (b) and (c) is unclear, as the evidence established that in fact since Nada’s death, Steven has solely enjoyed the benefit of Jersey: see [604].

It is to be noted that prayers 9A and 9B seek orders against the Trustees that they hold a one half interest in Jersey on a constructive trust for Nada’s estate or alternatively for Steven, and that the Trustees transfer their interest in Jersey to Steven.

Although the structure of the prayers for relief in the fifth further amended statement of claim is infelicitous, I conclude that prayer 9 was intended to be an alternative claim to the following prayers 9A and 9B. That is, Steven sought equitable compensation for breach of the testamentary agreement if, for some reason, he failed in his claim that the Trustees were obliged to transfer the half interest in Jersey to Steven in performance of the testamentary agreement.

Section 58(3) of the Bankruptcy Act prevented Steven from prosecuting any claim for a provable debt against the Trustees without the leave of the Federal Court. That is why that Court’s leave was required in relation to prayers 9 and 10.

As the Trustees effectively conceded Steven’s right to the relief in prayers 9A and 9B, they did not put in issue the need for Steven to prosecute the alternative relief in prayer 9.

The Court accepted Angelina’s claim that she had standing to resist Steven’s testamentary agreement claim: see [49]-[64]. Angelina then defended that claim unsuccessfully.

However, nothing of substance was done by Angelina in resistance to Steven’s alternative equitable compensation claim.

That may be because, at the commencement of the second stage of the hearing, Steven provided to the Court a marked up copy of the fifth further amended statement of claim that indicated that, among other changes, he abandoned so much of prayers 9 and 10 as claimed orders that he was entitled to equitable compensation and costs from Robert that were provable in Robert’s bankruptcy: see [381(3) and (4)]. For clarity, prayer 9 in its entirety was deleted, and although Steven continued to claim his costs from both Robert and Angelina, he deleted the part of prayer 10 that claimed that the costs were a provable debt in Robert’s bankruptcy.

It appears from the judgment of Flick J that that Angelina was represented in the Federal Court proceedings. Accordingly, she would have incurred some costs. However, it was the Trustees who had the primary responsibility for dealing with Steven’s application. The Trustees were represented by counsel. The outcome of the application was relatively uncontroversial. Insofar as s 58(3) of the Bankruptcy Act prohibited Steven taking further steps in this Court without leave of the Federal Court to prosecute a provable debt, Flick J required Steven’s pleading to be amended to insert the claims that the equitable compensation and costs would be a provable debt. However, Flick J made it a condition of the leave that he gave that Steven not enforce any judgment in respect of a provable debt without the leave of the Federal Court. The application was therefore not contentious in that respect.

It is reasonable to infer that Steven joined Angelina in the Federal Court application because she was a party to the proceedings in this Court and to ensure that she was bound by any order made by the Federal Court.

Steven made his application to the Federal Court for reasons necessitated by the Bankruptcy Act. The application had nothing to do with Steven's right to proceed against Angelina in this Court. The fact that Steven has abandoned the claims that caused him to obtain the orders from Flick J does not mean that he should be ordered to pay Angelina's costs of those proceedings. Angelina had no interest other than to submit to such order as the Federal Court might make.

Accordingly the Court will not make the note sought by Angelina that her costs pursuant to order 19 should include her costs of the Federal Court proceedings.

The Trustees also opposed the Court making the costs orders sought by Steven

The Trustees proposed that the Court make the following orders for their costs, instead of the orders sought by Steven:

From the time the Trustees filed their defence to Steven’s fifth further amended statement of claim, they have admitted Steven’s entitlement to the benefit of the testamentary agreement: see [48]. The Trustees have done nothing to impede Steven’s success on that claim. Steven complained that the Trustees had spent too long in assessing how they should plead to the testamentary agreement claim, but the validity of that complaint will be a matter for the assessment process.

The only course taken by the Trustees was to defend Steven’s family provision claim, effectively standing in the shoes of the bankrupt Robert. They acted to protect the bankrupt estate from Steven’s claim that property held by them in their official capacity should be declared to be notional estate of Nada.

Specifically, the Trustees at no time acted as representatives of Nada’s estate. When the issue of the standing of the active parties in the proceedings was considered in May 2019, the Trustees expressly declined to be the subject of any order that they be appointed to represent the estate. Apart from other considerations, the absence of consent from the Trustees prevented such an order being made: see UCPR r 7.10(2)(b). As I stated on 9 May 2019, in the circumstances the Court could not appoint the Trustees as representatives: see T 11.30.

Not only do the Trustees not seek the order proposed by Steven that an order be made that the Trustees’ costs be paid out of Breakwell, but there is no basis in principle for such an order to be made.

The Trustees succeeded on all issues in their defence of the family provision claim made by Steven. There is no reason why the costs should not follow the event: see UCPR r 42.1. I will therefore make proposed order T1 sought by the Trustees.

The remaining question is whether the Court should make proposed order T2, which is a note having the effect that the costs recoverable by the Trustees under order T1 shall include the Trustees’ costs of the Federal Court proceedings before Flick J.

I have set out the considerations relevant to this issue in the discussion above concerning Angelina's application for a similar notation to that which is sought by the Trustees.

The position of the Trustees is different to that of Angelina, in that they had an obvious interest in ensuring that the application made by Steven under the Bankruptcy Act was dealt with properly in the interests of the bankrupt estate. There is no suggestion that the Trustees conducted themselves otherwise than appropriately.

As Steven abandoned the claims for which he sought leave to proceed in this Court, the Trustees must be considered the successful parties for the purpose of the agreement as to costs recorded by Flick J.

Accordingly, the Trustees are entitled to the notation that they have sought.

The Court makes the following orders: