Bruce v Bruce (No 2)

The Court delivered its principal judgment in these proceedings on 5 December 2025: Bruce v Bruce [2025] NSWSC 1466. This judgment deals with the remaining costs issues in the proceedings. These reasons should be read, and assume familiarity, with the principal judgment. Defined terms in the principal judgment have the same meaning in these reasons.

On 18 December 2025, the Court made costs orders as between Jayleen and Mr Mitchell in relation to the second cross-claim. The Court was able to do that because the second cross-claim was, in effect, a discrete piece of inter partes litigation between them.

Having given the parties time to consider their respective positions as to costs, on 11 February 2026 the Court made directions for the exchange of costs submissions on the basis that unless any party applied for a further hearing, the question of costs would be determined on the papers. Written submissions have been exchanged and no party has made such an application.

At the directions hearing on 11 February 2026, the Executors informed the Court that they did not seek indemnity for their costs from the Estates. It also appeared to be the case that none of them was seeking costs from Mr Mitchell. Neither of those positions has been maintained in the parties’ written submissions:

The Court notes that Mr Mitchell has made no further application for costs.

For the reasons which follow, the Court has determined that the just order for costs in these proceedings is that there be no order as to any of the Executors’ costs. With one qualification, the Court declines to make costs orders. The intention of that outcome is that each Executor pay her own costs.

The one qualification relates to costs incurred by the Executors in relation to the first cross-claim. While the Court’s jurisdiction to make a costs order in relation to the first cross-claim is now spent, I make the observation that to the extent that any of the Executors can demonstrate to the satisfaction of the other beneficiaries of the Estates that any of them provided the Estates with funds that were applied in the prosecution of the first cross-claim, they are entitled to be paid those amounts from the Estates as debts incurred in the due course of administration.

Licia’s written submissions as to costs were prepared by Mr J O’Sullivan of Counsel. Jayleen’s and Colleen’s written submissions as to costs were prepared by Mrs M Pringle of Counsel. No submissions were received from Mr Mitchell. A brief written submission prepared by Ms R Bianchi of Counsel was filed for one of the non-party beneficiaries. As it happened, that submission adopted the Court’s tentative indication of the costs outcome given to the parties when the principal judgment was delivered. These reasons substantially reflect the outcome tentatively foreshadowed in that indication.

Licia sought orders that:

Jayleen and Colleen’s position was:

At [68] of the principal judgment, the Court found that the Executors sued in their personal capacity as beneficiaries and not on behalf of the Estates. In other words, they were advancing their personal interests. This finding does not extend to the first cross-claim, which was not before the Court. Lest there be any doubt, I adhere to the position which I expressed to the parties in argument that, as defaulting fiduciaries, they were not entitled to any reimbursement from the Estates of their costs incurred in prosecuting and defending what were in substance their personal interests.

In relation to settlement of the first cross-claim, Licia’s submission made it clear that she was not seeking indemnity from the Estates for her costs, but rather a reimbursement of the $39,909.81 which she said were costs she had paid to the Estates out of her own pocket towards the costs of the first cross-claim. She submitted that the settlement with Owen Hodge was intended to represent the costs incurred by the Executors in the first cross-claim.

For their part, Jayleen and Colleen submitted that the fruits of the first cross-claim “should be available solely” to them. The legal basis for that submission was not clear.

It is important to note that the first cross-claim was not before the Court in the hearing which culminated in the principal judgment. The first cross-claim had been disposed of by Lindsay J making consent orders on 27 February 2024 which included:

It follows from those orders that the Court’s jurisdiction in relation to the costs of the first cross-claim has been spent. Final orders have been made. There was no case made before me that those orders had been made in error or were otherwise liable to being reopened or set aside.

There can be no doubt that the Estates had an arguable cause of action in professional negligence against Owen Hodge. It was common ground that Jayleen and Colleen had brought the first cross-claim in the interests of the Estates and that Licia had not joined in those proceedings.

The Court was not taken to the terms of the settlement with Owen Hodge. Nevertheless, insofar as Jayleen and Colleen brought the first cross-claim on behalf of the Estates, the fruits of that settlement with Owen Hodge belonged to the Estates. In the proceedings as they are now constituted (that is, without the first cross-claim), the Court has no jurisdiction (whether as to costs or otherwise) to make an order in relation to any of the Executors’ costs that they personally contributed to the Estates to meet the costs of the first cross-claim. Nor is the Court aware of any basis on which any of them could make a claim against the settlement funds in specie.

Nevertheless, it seems to me that (barring some disqualifying factor of which the Court is not aware) whether characterised as executors seeking an indemnity for personal costs expended in the interest of the Estates or as a debt from the Estates for funds advanced to the Estates for the purposes of the first cross-claim, each of Executors should be entitled to recover what they paid in costs in relation to the first cross-claim from the Estates as debts incurred in the ordinary course of administration. However, this observation is expressed with two caveats.

First, each Executor would have to demonstrate that she had in fact paid legal costs for the purpose of the Estates’ claim against Owen Hodge. This includes Licia, even if she did not join in the first cross-claim, if she can demonstrate that she paid funds to the Estates for that purpose. Second, because each of them is in a position of conflict in relation to justifying the claim for those costs from the Estates, before there was any payment to any of them in respect of the claim, they should obtain the agreement of the non-executor beneficiaries to those reimbursements. This would ensure that the non-executor beneficiaries could be independently satisfied as to the amounts claimed.

The 26 October 2022 motion was a motion by Licia to be appointed a representative of the Estates for the purposes of the extension of a caveat over the property. The motion was dismissed by Lindsay J on 26 March 2024 without a hearing on the merits and while making orders for the appointment of a receiver to sell the property. His Honour reserved the costs of the motion.

His Honour’s reservation of the question of costs, in the absence of any further order, means that the costs of the 26 October 2022 motion will go with the costs of the proceedings as determined in this judgment. The Court is of the view that is the appropriate course because the motion was superseded by the order for the appointment of a receiver and thus falls within the general course of the proceedings. Furthermore, in any event, the Court ultimately found that Licia was not bringing these proceedings on behalf of the Estates.

The 17 October 2023 motion could not be progressed in circumstances where Mr Mitchell maintained that he had an equitable interest in the property and resisted its sale. On 6 February 2024, Slattery J ordered that the motion be heard at the time of the determination of the principal proceedings. On 26 March 2024, without a hearing on the merits and while making orders for the appointment of the receiver, Lindsay J dismissed the 27 October 2023 motion and reserved the question of costs.

As with the 26 October 2022 motion, it is appropriate that reservation stands so that the costs of the 17 October 2023 motion become costs in the total proceedings determined by this judgment. That is also appropriate because of the order which Slattery J made, contemplating that the 17 October 2023 motion would be determined as part of the final hearing of the proceedings, given that it incorporated issues that would be (and were) the subject of the final hearing.

Lindsay J, after making the orders appointing a receiver, ordered that the 12 March 2024 motion “be adjourned to be heard at the same time as the substantive proceedings listed for final hearing”.

While not the subject of separate attention at the hearing before me, the issues in the 12 March 2024 motion were undoubtedly swept up in the matters which the Court was required to determine at the final hearing. Accordingly, the costs of that motion should also go with the costs of the final hearing which are determined in the next section of these reasons.

I observed at [65] of the principal judgment that “the constitution of the proceedings insofar as it involves the Executors is not regular”. The consequences of that irregularity are clear for all to see in the present applications by defaulting fiduciaries arguing among themselves as to who should bear their respective costs arising out of events which would not have happened but for their default. For reasons now lost in the mists of the history of these proceedings, it does not seem to have ever occurred to anyone that the proper conduct of these proceedings should have involved the appointment of a person independent of the Executors (for example, one of the non-Executor beneficiaries) to conduct the proceedings on behalf of the Estates in relation to the sale of the property to Jayleen. In my respectful opinion, that observation is not an example of an obscure point that has only become obvious with the benefit of hindsight.

Insofar as there was some suggestion that Mr Mitchell should pay any of the Executor’s costs, I reject that submission. As I noted in [168] of the principal judgment, Mr Mitchell was not a defaulting fiduciary. As between himself and the Executors (distinguishing that from the position as between himself and Jayleen which has already been the subject of costs orders), Mr Mitchell found himself in the position in which he did by reason of the Executors defaulting in their obligations to the Estates. He was, in effect, an innocent party who in the result made out his claim to an equitable interest in the property, but not in priority to the interest of the Estates.

Turning to the position of the Executors (more precisely Licia of the one part and her sisters of the other) there are three reasons why the Court has determined the just outcome as to costs in this case is for there to be no order as to costs to the intent that each of the Executors bears her own costs of the proceedings without recourse to the Estates (subject to what I have said in [11] to [19] above)

First, in my respectful opinion, where the Court is confronted with the unusual situation of defaulting fiduciaries suing among themselves in relation to matters that arise from their own default, the just result is that their own costs should lie where they fall. They are equally the cause of their own misfortune as between themselves. The fundamental difficulty in the approach propounded on behalf of Licia was apparent from the proposed costs which invited the Court to order Jayleen and Colleen (and Mr Mitchell) to pay Licia’s costs jointly and severally “or in such proportions as to the Court thinks fit”. As between the three Executors, to suggest one is entitled to their costs as against the others invites consideration of whether the blameworthiness of any of them can be differentiated in the light of the outcome of the proceedings or at all. It cannot be as between themselves, as opposed to the possibility of exoneration in the context of the position of each of them vis-à-vis the Estates to which each of them owed their duty (see [33] –[34] below).

The second reason for the Court’s conclusion is to apply, at least to so much of the proceedings as were not presented for final determination, the decision of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 Lai Qin. The positions of the Executors at various points in the litigation shifted and reflected the conflicts of interest between them and also with the Estates. The litigation primarily began as a claim that the property had been sold as an undervalue to the disadvantage of the Estates. This later became the claim based upon Jayleen’s and Colleen’s acceptance of Licia’s contention that there had been a breach of the rule against self-dealing (a breach to which Licia herself was a party). A substantial part of the case fell away by the parties agreeing to the appointment of a receiver to sell the property. Even in opening before me, the precise issues for determination were somewhat fluid.

The effect of the observations in the preceding paragraph is that the Court was ultimately left with four discrete issues (see [5] of the principal judgment). Not being called upon to determine the issues that had fallen away, Lai Qin supports the conclusion that that there should be no order as to the costs of those matters. At various points, each of Licia, on the one hand, and Jayleen and Colleen on the other, have asserted against each other that the other’s conduct of the proceedings was unreasonable. In my respectful opinion, that is not an analysis which the Court is required to pursue because it is subsumed in the overarching fact that the origin of the proceedings lies with each of the Executors by their defaulting conduct.

The third reason is that, in relation to the issues which the Court did have to determine, the outcomes for each of the Executors was mixed:

Finally, in reaching this conclusion as to costs, I have not overlooked that the Court exonerated Jayleen and Colleen for their breach of duty, but did not exonerate Licia. The issue of exoneration goes to the extent of their individual liability (if any) to the Estates for their breach. It is not relevant to the issue of the disposition of any costs liability between themselves in their personal capacities.

However, in relation to Licia being left to pay her own costs, I have also taken into account that she failed in her application for exoneration. Licia contends she incurred legal fees to remedy the consequences of the breach of duty: but that is a breach for which she was also responsible. Had the Estates incurred those legal fees to achieve that remedy she would have been liable to the Estates for damages in the amount of those fees because her breach was not exonerated. In other words, she would have been out of pocket for those legal fees on any view.

The Court will add this notation to the final orders which were made on 18 December 2025 that otherwise dispose of the proceedings: