Reeves v Reeves (No 2)

HIS HONOUR: On 26 February 2024, I delivered reasons for judgment in these proceedings: see Reeves v Reeves [2024] NSWSC 134 (principal judgment/PJ). These reasons assume familiarity with the principal judgment and will adopt its nomenclature and abbreviations.

The proceedings involved a dispute between the plaintiff and the defendant, who are the only two children of the late Gloria Dawn Reeves (the deceased), in relation to the deceased’s farming land at Stroud Hill near Dungog, NSW.

I directed the parties to bring in short minutes of order to give effect to the reasons for judgment and to consider whether an appropriate costs order could be agreed. If no agreement was able to be reached, I directed the parties to contact my Associate to make arrangements for listing of the matter to address any contested question of the substantive orders and the costs to be made.

Following correspondence with my Associate, I listed the matter for mention on 5 March 2024. On that occasion, I made substantive orders (orders 1-6) in respect of the construction, rectification and estoppel claims. I further made directions for the parties to address the question of costs by serving evidence and submissions and listed the matter for argument on 19 March 2024.

Neither side provided the Court with estimates of costs incurred. However, it is evident that the costs of the hearing are very substantial. At the time of the resumed hearing in October 2023, in the context of an application by the defendant for an interim distribution (main hearing T 380-385), there was evidence adduced indicating that the defendant’s unpaid costs were then approximately $450,000 inclusive of GST (i.e. excluding paid costs): see affidavit of Rachel Gleeson at [18].

These reasons address the costs of the proceedings.

By way of preliminary observation, the submissions raised a number of issues regarding costs and, in particular, an issue regarding costs orders in respect of estate litigation in a context in which:

Overall, the question to be addressed is what is the proper costs order to be made as to both: (1) the basis of assessment of costs; and (2) the ultimate burden of costs.

Subject to the defendant’s submissions noted below, it was accepted that both offers of compromise were, at least in a formal sense, offers of compromise within the meaning of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) and satisfied the formal requirements provided by UCPR r 20.26.

Essentially, the issues in respect of costs were as follows:

The parties did not submit that the question of indemnity should be determined prior to the question of the effect of the offers of compromise. In their written submissions, the parties in substance proceeded on the basis that those questions should be answered sequentially. In Nadilo v Souris (No 2) [2019] NSWSC 246 (Nadilo), Leeming JA (sitting as a trial judge) addressed the effect of an offer of compromise prior to addressing the question of any right of indemnity. Having regard to the above matters, I will approach the questions in a similar manner.

The third issue, regarding indemnification, gives rise to important questions as to the nature of the role of a person appointed to represent the estate pursuant to UCPR r 7.10 (as occurred in this case) which have required some reflection on my part, particularly in light of the very substantial amount of costs incurred.

It is appropriate to set out some details regarding the hearing on costs and address some necessary background regarding the deceased’s property and estate, the administration of the deceased’s estate, the claims for relief in the proceedings, and my findings, in order to provide sufficient context for the determination of the costs issues.

On the costs hearing (19 March 2024), Mr Birtles appeared on behalf of the plaintiff and Ms Fendekian on behalf of the defendant.

The plaintiff’s solicitor, Kristy Nunn, caused to be filed and served an affidavit sworn on 29 February 2024 addressing the issue of costs. That affidavit annexed correspondence and two offers of compromise served by the plaintiff on the defendant dated 22 December 2022 and 14 June 2023. The affidavit was read without objection.

Counsel for the parties filed and served written submissions as follows:

In support of a submission that the defendant’s costs should be reimbursed by the estate, Ms Fendekian set out certain matters which, she submitted, constitutes the relevant procedural background. Those matters were as follows (footnotes omitted):

The deceased’s landholdings comprised 21 lots and an enclosure permit entitlement. For ease of description, each of the 21 lots were given an abbreviated name in the principal judgment: see PJ [46].

The disputed land (identified below) was characterised in a number of ways, including by reference to the Dingadee lots (consisting of 10 lots) and part of the Kennilworth lots (consisting of 11 lots as well as the enclosure permit).

The amended inventory of property included property of the deceased under several categories, specifically:

The executor’s affidavit disclosed that the deceased had liabilities at the date of her death comprising $4,161.63, leaving the net value of the deceased’s estate at $12,312,319.17: PJ [134]-[136]. Pursuant to the deceased’s last Will, leaving aside small legacies of $10,000 for each of the plaintiff’s three children, the plaintiff received (by means of a trust) property consisting of lots (a) and (b) (together with improvements thereon) and a trust for one-third of the balance of the deceased’s estate (i.e. one-third of residue).

The defendant received (by means of a trust) property consisting of all the livestock, motor vehicles, machinery and plant and equipment owned by the deceased, the real property owned by the deceased other than that gifted to the plaintiff (together with improvements thereon) and a trust for two-thirds of the residue of the deceased’s estate: PJ [116].

There is no suggestion in any of the submissions that the fact that the entitlements in cl 7.3 of the last Will were framed in the terms of a discretionary trust precluded any finding that the defendant was substantively the beneficiary of the disputed landholding and two-thirds of the residue and the plaintiff was substantively the beneficiary of lots (a) and (b) and one-third of the residue. I have addressed the costs issues accordingly.

Under the heading of Issue 10 in the principal judgment, dealing with relief, I made some observations regarding the residue and the burden of charges and liabilities in respect of the estate.

The deceased’s estate is a “solvent” estate (i.e. sufficient for the payment in full of her debts and liabilities) and it is not contended that there are any specific directions in the deceased’s last Will regarding discharge of her funeral, testamentary and administrative expenses, debts and liabilities. Thus, her estate is to be applied towards discharge of funeral, testamentary and administrative expenses, debts and liabilities in the order (statutory order) mentioned in Part 2 of the Third Schedule of the Probate and Administration Act 1898 (NSW) (PAA), per s 46C(2) of the PAA: PJ [729]-[736].

Certain distributions had been made to the defendant in the proceedings and, as I noted in the principal judgment, these would need to be the subject of some adjustment on a final administration of the deceased’s estate: PJ [737].

There is caselaw which discusses the principles in accordance with which costs of litigation concerning deceased estates are awarded and how those principles interact with rules for order of application of assets in the administration of estates: e.g. Murdocca v Murdocca (No 2) [2002] NSWSC 505 (Murdocca (No 2)) per Campbell J (as his Honour then was) (unaffected by the appeal on the construction issue which was dismissed with costs: Murdocca v Murdocca [2002] NSWCA 373).

Further, in some cases costs have been ordered to be paid out of the share of residue given to unsuccessful parties: see Re Estate Late Hazel Ruby Grounds; Page v Sedawie [2005] NSWSC 1311 at [37] per Campbell J, citing Harrington v Butt [1905] P 3.

Where an indemnity is permitted, a particular consideration which may guide a Court in determining the share of the estate (and thus the entitlements of beneficiaries) that bears the burden of the indemnity is the circumstances under which the costs, charges and expenses were incurred. Thus, if costs are incurred as a result of the action of only some of the beneficiaries, it may be ordered that the burden falls on the shares of those beneficiaries and such shares be exhausted before any part of the burden is placed on the shares of the other beneficiaries: e.g. National Trustees Executors and Agency Company of Australasia Ltd v Barnes (1941) 64 CLR 268 at 279 per Williams J (Rich ACJ agreeing); [1941] HCA 3.

The proceedings were commenced by a statement of claim on 27 May 2022. In that statement of claim, the plaintiff sought relief in respect of rectification of the deceased’s last Will and declarations affecting lots registered in the name of the deceased on the basis of principles of estoppel.

Initially, there was no formal claim for relief in the proceedings in relation to construction of the deceased’s last Will. The amended statement of claim filed on 19 January 2023 added a construction claim which was retained in the further amended statement of claim filed on 7 September 2023.

As referred to above, the plaintiff received two of the Dingadee lots, being lots (a) and (b), pursuant to the deceased’s last Will.

The plaintiff’s claims for rectification in each of the statement of claim, amended statement of claim and further amended statement of claim related to seeking the remaining eight Dingadee lots (being lots (d), (e), (f-4), (f-5), (g), (h), (i) and (j)).

The plaintiff’s claims regarding estoppel related to seeking the remaining eight Dingadee lots and, in addition, three and a part of the Kennilworth lots (being lots (k), (l), (m) and part of lot (o)) constituting what was described as the Kennilworth leased lots (the disputed Kennilworth lots).

Thus, the parties’ dispute in the proceedings was a contest over:

The means by which the plaintiff pressed his case for the disputed lots were, as observed above, through three claims for relief, namely:

Broadly speaking, I determined that the plaintiff’s construction claim and rectification claim failed but that the estoppel claim succeeded.

I expressed a provisional view regarding the costs of the proceedings as follows (PJ [827]):

The plaintiff’s offer of compromise dated 22 December 2022 (first offer) was in the following terms:

The plaintiff’s offer of compromise dated 14 June 2023 (second offer) was in the following terms:

The plaintiff sought the following costs orders (PWS [20]):

The defendant sought the following costs orders (DWS [43]):

If the first offer was held to satisfy UCPR r 42.14(1), strict application of UCPR r 42.14(2) would mean that the plaintiff’s costs of the proceedings would be paid on the ordinary basis up to 22 December 2022 rather than the modified order which the plaintiff sought, namely that:

In the context of this estate, it was evident from the terms of the last Will and the applicable statutory order that, if costs were to be paid out of the deceased’s estate, ordinarily the costs would be paid first out of residue. In the circumstances here prevailing, and notwithstanding the distributions made to the defendant, the parties and their counsel accepted that any costs orders for payment of costs out of the deceased estate would be borne by the residue, with the plaintiff’s share of residue bearing one-third of the costs and the defendant’s share of residue bearing two-thirds of the costs: T 6.34-7.12.

In addition, in his reply submissions and on the hearing of the matter, Mr Birtles submitted that if the Court were persuaded that it should order any party’s costs to be paid out of the deceased’s estate, the order should include the plaintiff’s costs of the construction and rectification claims, and any costs that would otherwise be ordered against the plaintiff for those claims: PRWS [18(b)]; T 8.21-.24.

Costs are in the discretion of the Court, subject to the Civil Procedure Act 2005 (NSW) (CPA), rules of Court and any other Act: s 98(1)(a) CPA.

The Court has full power to determine by whom, to whom and to what extent costs are to be paid (s 98(1)(b) CPA), and may order that costs are to be awarded on the ordinary basis or on an indemnity basis (s 98(1)(c) CPA).

Subject to Part 42 of the UCPR, if the Court makes any order as to costs, the Court is to order that the costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs: r 42.1 UCPR.

Unless the Court orders otherwise or the UCPR otherwise provide, costs payable to a party under an order of the Court are to be assessed on the ordinary basis: r 42.2 UCPR.

Further, in cases involving Will construction, relevantly s 93(3) of the Trustee Act 1925 (NSW) (Trustee Act) provides:

An award of costs, of its nature, is compensatory in the sense of being awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings. Costs are not awarded by way of punishment of the unsuccessful party: Latoudis v Casey (1990) 170 CLR 534 at 543 per Mason CJ; [1990] HCA 59.

Ms Fendekian referred to the decision of Ward CJ in Eq (as her Honour then was) in Bale v Kimberley Developments Pty Ltd (No 2) [2022] NSWSC 1009 (Bale) at [98]-[99], where her Honour stated as follows:

A number of observations may be made.

First, s 98 of the CPA confers a very wide discretion. It enables the Court to decide who should bear the costs of litigation before it quite independently of whether those costs do, or do not, amount to testamentary expenses: Murdocca (No 2) at [70] (remarks concerning the provisions of s 76 of the Supreme Court Act 1970 (NSW), which for present purposes are not materially different to the relevant provisions of s 98 of the CPA).

Secondly, s 93(3) of the Trustee Act enables the Court to order the costs of construing a particular clause of a Will out of the property which is the subject of that clause: Murdocca (No 2) at [68].

Thirdly, the Court’s discretion under s 93(3) of the Trustee Act (to order any costs to be paid out of such part of the property as in the opinion of the Court is the real subject matter of the proceedings) and s 98 of the CPA (to order the costs of the proceedings to be borne in such way as the Court thinks just), if exercised, displaces (to the extent described in the costs order) the statutory order provisions of s 46C(2) of the PAA concerning how testamentary expenses are to be borne: Murdocca (No 2) at [76].

I will return to this third observation below in relation to the question of indemnity.

The UCPR provide a regime by which offers of compromise may be served to compromise any claim in the proceedings. In cases where an offer is made, a party who has obtained a favourable judgment outcome, having regard to the terms of the offer, is “entitled” to have its costs assessed on an indemnity basis from the beginning of the day following the date of the offer (or 11 am on that following day, if the offer was made on or after the first day of the trial), unless the Court orders otherwise: see rr 42.14, 42.15 and 42.15A UCPR.

UCPR r 42.14 deals with the situation where an offer of compromise has been made by the plaintiff in accordance with the UCPR but not accepted by the defendant, and the plaintiff obtains an order or judgment on the claim no less favourable to the plaintiff than the terms of the offer: r 42.14(1) UCPR.

Relevantly, UCPR r 42.14(2) provides as follows:

There is facility under the UCPR, prior to the making of any order under rr 42.14 or 42.15, for the offeree party to request the offeror party to satisfy the Court that the offeror party was at all material times willing and able to carry out the offer: r 42.17 UCPR. No such request was made in this case.

In Meres v Meres (No 2) [2017] NSWSC 523, Hallen J indicated at [43]-[44] that the question for determination regarding the effect of what is said to be an offer of compromise involves a two-stage process. His Honour stated as follows:

For an offer to be regarded as an offer of compromise it must contain a real element of “compromise”: see e.g. Leichhardt Municipal Council v Green [2004] NSWCA 341 at [23], [31]-[37] per Santow JA (Bryson and Stein JJA agreeing).

Whether any particular offer has the required element of compromise depends upon the totality of the circumstances and involves an impressionistic assessment: see Shellharbour City Council v Johnson (No 2) (2006) 67 NSWLR 308; [2006] NSWCA 114 at [20]-[23] per Hunt AJA (Beazley (as her Excellency then was) and Tobias JJA agreeing).

In her written submissions, Ms Fendekian submitted as follows (DWS [8]-[10]):

Mr Birtles did not relevantly dispute those principles.

The power to order “otherwise” must be for proper reasons: Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 (Leach) at [47] per McColl JA (Gleeson JA and Sackville AJA agreeing), adopting the comments of Hely J in Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281 at [17].

The mere fact that it was reasonable for a litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule. However, that does not mean that reasonableness of the rejection is an irrelevant consideration: Leach at [48].

Ms Fendekian submitted that (DWS [16]-[17]):

In Morgan v Johnson (1998) 44 NSWLR 578 (Morgan v Johnson), Mason P stated at 581E-582E:

In Walker v Harwood [2017] NSWCA 228 (Walker v Harwood), Basten JA made an observation at [16] qualifying the statement of Clarke JA referable to principle (4) above. His Honour stated as follows at [16]-[20] (omitting footnotes):

Mr Birtles made reference to some additional principles in relation to the exercise of the discretion to “order otherwise”, in particular referring to Croghan v Blacktown City Council (2019) 100 NSWLR 757; [2019] NSWCA 248 (Croghan) at [11]-[13] per Meagher JA. Although, in that case, the Court of Appeal was concerned with the provisions of r 42.15 to “order otherwise”, there is no suggestion that the statement of principles by Mason P in Morgan v Johnson, to which Meagher JA referred, were not appropriate principles to apply in relation to a discretion under r 42.14 to “order otherwise”.

In Croghan, Meagher JA (with whom McCallum JA and Simpson AJA agreed), after referring at [11] to the principles drawn from Morgan v Johnson, stated at [12]-[13] as follows:

Whilst broad propositions might from time to time be able to be made regarding the character of a person or entity’s rights and obligations in representing an estate, it is commonly the case that, for the purposes of particular questions in legal proceedings, it is necessary to make distinctions between types of representatives to properly understand the specific obligations and permissions that a particular representative may have.

The different types of representation of an estate are broad in number. They include descriptive and, at times, technical terms such as “representative”, “legal personal representative”, “executor”, “administrator”, “interim administrator”, “representative by court order” and “executor de son tort”.

To say that someone is a representative of a deceased estate of itself does not provide clarity as to the nature of that representative’s functions, obligations, responsibilities, duties, disabilities, powers, rights, remedies, protections, permissions and entitlements (for convenience I will refer to all such terms describing the scope and nature of an estate representative’s role as “obligations and entitlements”).

Common sources of a representative’s obligations and entitlements include: (a) the trust instrument (if any), including a Will; (b) a court order; (c) statutory provisions; and (d) the general law.

It is evident from what I have just mentioned that, although there may be similarities between the sorts of entitlements and obligations that a representative of an estate may have, the precise nature of them will be case specific.

If the representative is appointed under a trust instrument or Will, there may be great detail in some cases or little detail in other cases indicating whether a representative has a particular entitlement or obligation.

If the representative is appointed by court order, clarity as to whether a representative has a particular entitlement or obligation will depend upon the precision of the terms of the court order.

To give an example of the importance of that proposition, one may look no further than court orders in which special grants of administration are made.

Historically, many grants were made in a context where the application was for a type of grant by reference to a Latin description. Thus, there may be special grants of administration ad colligenda bona defuncti (where it is necessary to protect an estate or assets of an estate prior to probate or administration), administration ad litem (where the issue is an appointment of a representative to institute, defend or participate in legal proceedings prior to a grant of probate or letters of administration), and administration durante absentia (where an appointment is necessary to cover the situation in which an executor or administrator is absent from the jurisdiction and there is a temporary need to administer an estate).

If orders were made by reference to such descriptions, the position regarding the nature and scope of the representative’s obligations and entitlements were left to understandings of the nature and scope of the role by reference to the general law.

Modern practice, at least in New South Wales, is that orders are made defining the scope of obligations and entitlements so that the extent of the grant given is not defined by reference to the Latin appellation given to such grant, but rather by reference to the precise wording of the court order making the grant.

By contrast (and I will return to this below), the scope of the obligations and entitlements of representatives appointed under UCPR r 7.10(2(b) is generally not defined with anything like the level of detail regarding the obligations and entitlements of administrators under a special or limited grant of administration.

Precision regarding the obligations and entitlements of representatives is important for many reasons. Relevantly, precision is important in relation to costs in two respects, namely (a) whether a representative has any entitlement to an indemnity for costs, and (b) the capacity of the representative to seek direction or advice from the Court regarding the expenditure of estate funds on costs.

The mere fact that a person is appointed as a representative of an estate and engages in legal proceedings does not entitle the person to an order for costs out of an estate fund.

Generally, whether costs of litigation are permitted to be payable out of an estate fund is determined by or subject to court order. The principles applicable to this issue have often arisen out of a context involving trustees, as opposed to representatives more generally.

Broadly speaking, two requisites justify such an order, namely that the expenditure resulted in a benefit to the common property represented by the fund, and that the expenditure has been “properly” or “reasonably” incurred: Dal Pont – Costs at 306 [10.1], citing inter alia Permanent Trustee Co v Redman (1917) 17 SR (NSW) 353 at 360 per Harvey J and Nobarani v Mariconte (No 2) [2018] HCA 49; (2018) 360 ALR 390 at [2]; Cardaci v Cardaci [2023] WASCA 158 (Cardaci) at [570] per curiam (Buss P, Murphy and Mitchell JJA); see also J D Heydon and M J Leeming, Jacobs’ Law of Trusts in Australia (8th ed, 2016, LexisNexis) (Jacobs’) at [21-07]. There are some nuances on what the words “properly” or “reasonably” mean: Jacobs’ at [21-07]. For example, the phrase “properly incurred” has been said to be equivalent to “not improperly incurred”: Re Beddoe; Downes v Cottam [1893] 1 Ch 547 (Beddoe) at 558 per Lindley LJ. Bowen LJ stated that “properly” means reasonably as well as honestly incurred: Beddoe at 562.

The notion of indemnity is usually discussed by reference to rights of “reimbursement” and “exoneration”. If the trustee or fiduciary has discharged the liability out of his individual property, he is entitled to reimbursement. If he has not discharged it, he is entitled to apply the trust property (i.e. directly) in discharging it by exoneration: Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; [1998] HCA 4 (Buckle) at [47], citing Austin Scott and William Fratcher, Scott on Trusts (4th ed, 1988, Little, Brown and Company), Vol 3A at §246.

The entitlement to reimbursement and exoneration is said to be the price paid by the beneficiary for the gratuitous and onerous services of trustees: see Cardaci at [569], citing Buckle at [49]. The power of exoneration is a power to use trust funds to discharge debts that were properly incurred in the administration of the trust: Cardaci at [569], citing Carter Holt Harvey Woodproducts Australia Pty Ltd v Commonwealth (2019) 268 CLR 524; [2019] HCA 20 (Carter Holt) at [31] per Kiefel CJ, Keane and Edelman JJ.

The distinction between the right of reimbursement and exoneration may be important in relation to rights of subrogation: see Infigo II Pty Ltd v Linmas Holdings Pty Ltd [2023] NSWSC 755 at [74]. The purpose of the power of exoneration is not to exonerate the trustee’s personal estate unconditionally. It is to exonerate the trustee’s estate only from authorised liabilities incurred in the course of the business of the trust: Carter Holt at [40], [44] per Kiefel CJ, Keane and Edelman JJ.

The costs of representatives in adversarial proceedings may or may not be payable out of an estate. The rationale for indemnification in respect of costs or litigation expenses is that the trustee or fiduciary who has incurred the expense has not been acting for his or her own benefit, but for the benefit of the beneficiary or the trust estate in question: see Cardaci at [569], citing Wishart v Castlecroft Securities Ltd [2009] CSIH 65; 2010 SC 16 at [71] per Lord Reed for the Court; Rattigan v Hanly [2020] NSWSC 1722 (Rattigan) at [66] per Hallen J.

A representative who unsuccessfully prosecutes or defends a suit on behalf of an estate will not necessarily be ordered to pay costs from his or her own pocket. The Court has a discretion to order that the costs be paid either directly from the estate fund, or otherwise that the representative’s liability be indemnified from the estate fund: cf Dal Pont – Costs at 307 [10.4].

However, representatives are expected not to lightly engage in litigation that may or will incur costs that diminish the trust property, and ought only to do so if the circumstances justify: cf Dal Pont – Costs at 308 [10.5].

There are statutory and general law sources of indemnity which, so far as possible, should be read coherently: e.g. Warton v Yeo [2015] NSWCA 115; (2015) 15 ASTLR 462 (Warton) at [3] per Basten JA.

Under the Trustee Act, there is an implied right of indemnity. Section 59 provides:

However, the right of indemnity under s 59(4) of the Trustee Act is to a “trustee” as defined for the purposes of the Trustee Act.

Section 5 of the Trustee Act defines “trustee” as having “a meaning corresponding with that of trust; and includes legal representative and the NSW Trustee and a trustee company.”

That definition links with the definition of “trust”, also found in s 5 of the Trustee Act, as follows:

A “legal representative” is defined as meaning “executor or administrator”. The terms “executor” and “administrator” are, in turn, defined in s 5 as follows:

Under the PAA, an “administrator” includes the NSW Trustee and any other person to whom administration as defined in the Act is granted: s 3 PAA. In turn, the definition of “administration” is inclusive, but principally is defined by reference to a grant of the Court: s 3 PAA.

It is evident from the text that the definition of “trustee” in s 5 of the Trustee Act is an extended definition of what is ordinarily encompassed under the general law meaning of trustee, at least to the extent that it includes “executors” and “administrators” as defined: see also Nadilo at [40] per Leeming JA; Katsoulas v Kritikakis; Katsoulas v Apostolatos [2024] NSWSC 67 (Katsoulas) at [30] per Leeming JA (sitting at first instance).

Generally speaking, an estate representative will have a number of options regarding coverage for legal costs.

Relevantly, these include positively obtaining an indemnity either from beneficiaries or seeking judicial advice.

In Walker v Harwood, Basten JA stated the following in the context of discussing the power to order “otherwise” under UCPR r 42.14(2):

In estate litigation there are a number of circumstances in which estate representatives may not be entitled to indemnity from the estate. The matters that bear upon the issue of whether a representative is entitled to an indemnity will include, generally speaking: any relevant statutory provisions; the nature of the proceedings; the character of the representative’s role in the proceedings; and the reasonableness of the representative’s conduct.

It is evident from what has been said above, regarding indemnification of a trustee out of an estate, that at least one aspect of a party acting as a type of representative is that an entitlement or permission to indemnity is not necessarily precluded by an unfavourable outcome of the proceedings.

The UCPR contain provisions in relation to the payment of costs of trustees, and identify two relevant exceptions to a trustee’s right of indemnity (or exoneration, as the case may be), relevantly as follows:

The noun “trustee” is not per se defined in the UCPR or the CPA.

Generally, where a word used in a statute has an established legal meaning, it is presumed that it is used with that meaning unless the context indicates a different meaning: Perry Herzfeld and Thomas Prince, Interpretation (2nd ed, 2020, Lawbook Co.) (Herzfeld and Prince) at [2.170]. For example, as a general rule, a term such as “trust” is to be taken, unless a contrary intention appears, as having been used by the legislature in its legal and technical sense: Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566; [1998] HCA 59 at [45].

Where a statute refers to a common law concept, it generally picks up the caselaw concerning that concept as it develops from time to time: Herzfeld and Prince at [2.100]; see e.g. Aid/Watch Inc v Commissioner of Taxation (2010) 241 CLR 539; [2010] HCA 42 at [23] per French CJ, Gummow, Hayne, Crennan and Bell JJ (use of the term “charitable” was to be understood by reference to its source in the general law regarding charitable trusts).

Broadly speaking, with one exception, there does not appear to be any contrary intention apparent which indicates a meaning of “trustee” in the UCPR and CPA different to its established legal meaning at general law. The one exception is in UCPR Part 55 (which deals with procedure in respect of particular applications under the Trustee Act), in which the text, context and purpose all point to a construction that in Part 55 the noun “trustee” should be understood as “trustee” as defined in s 5 of the Trustee Act. Thus, subject to the obvious exception of Part 55, and subject to any specific text and contextual aspects of the rules, generally speaking “trustee” as used in the UCPR and the CPA will be construed in accordance with its legal meaning at general law.

The general law position regarding indemnity is outlined above. The parties also referred to the exposition by Austin J in Drummond v Drummond [1999] NSWSC 923 (Drummond) at [43], in which his Honour stated:

Whether the cost or expense which is the focus of the indemnity sought is “properly” or “reasonably” incurred is to be assessed by reference to the particular circumstances and to the duty with which the trustee was required to comply or the power the trustee was intending to exercise in the execution, performance or administration of the trust: see Cardaci at [570], citing Nolan v Collie (2003) 7 VR 287; [2003] VSCA 39 at [51] per Ormiston JA and Jacobs’ at [21-07].

Further, whether the trustee has incurred a liability in the performance of the trust depends upon that being the correct legal characterisation of what occurred. The characterisation cannot be determined by the label or description given to the relevant conduct by the parties to it. Rather, it depends upon whether the conduct or action was, or must be taken to have been, undertaken in the proper execution of the trust: TFML Ltd v MacarthurCook Fund Management Ltd [2013] NSWCA 291 at [70] per Meagher JA (McColl and Macfarlan JJA agreeing).

This suggests that the approach to determining these questions is case specific and, subject to any applicable statutory provisions, not addressed technically but substantively. I will consider this approach, derived as it is from the context of trustees, in reference to estate representatives more generally below.

As will be seen below, there are statutory provisions and caselaw which refer to what are described as the “general position” and “exceptions” to that general position in respect of an entitlement to indemnity. It may be that, on the facts of any given case, what is contended to be an exception is not a true exception per se but simply a recognition that the conditions enlivening the general position are not satisfied.

In this case, submissions were made at least in part by reference to what was said to be a “general position” and “exceptions” to that position. In light of that, it is convenient to make some reference to the “exceptions” in statutory provisions and those identified in submissions under the general law.

The two exceptions to the indemnity specified by UCPR r 42.25 are where the trustee has (a) acted unreasonably or (b) “in substance” acted for his or her own benefit rather than for the benefit of the fund: r 42.25(2) UCPR.

A number of circumstances give rise to exceptions at general law which may, in any given case, preclude an estate representative from obtaining an indemnity from the estate or, conversely, allow a person acting in his or her private capacity to recoup costs from the estate.

Caselaw at times has sought to distinguish between types of disputes for such purposes. Thus, for example, in Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220 (Alsop Wilkinson) Lightman J identified three categories of litigation, being a “trust dispute”, a “beneficiaries dispute” and a “third party dispute”, in which trustees may become involved.

Lightman J stated at 1223H-1224C:

Lightman J went on to distinguish the position of whether costs would ordinarily be expected to come out of an estate having regard to the characterisation of the dispute as such. For example, Lightman J indicated that a “beneficiaries dispute” is regarded as ordinary hostile litigation in which costs follow the event and do not come out of the trust estate: Alsop Wilkinson at 1224G.

There is no doubt that in some cases judges have found it helpful to assess the question of indemnity by reference to Lightman J’s categories: e.g. Rattigan at [62]-[63]. Indeed, the characterisation has been used for the purposes of determining whether judicial advice should be given: e.g. Application of Uncle’s Joint Pty Ltd ACN 148 176 792 [2014] NSWSC 321; (2014) 12 ASTLR 487 (Uncle’s Joint) at [22]-[23] per Brereton J (as the Commissioner then was). However, the categorisation was not the subject of submissions here.

In this case, the following two exceptions were the subject of submissions:

In addition, two further matters were raised in submissions, namely:

On one view, the latter are more appropriately considered exceptions to the rule that costs follow the event (UCPR r 42.1), as opposed to UCPR r 42.25 or its general law equivalent. However, for present purposes that need not be debated.

What can be said is that the cause exception and the investigation exception commonly arise in probate litigation, although they are not necessarily limited to probate litigation. Further, as I explained in Estate of Guamani; Guamani v De Cruzado [2023] NSWSC 502 (Guamani), caselaw clearly indicates that there is greater flexibility in cost outcomes in probate litigation than merely those two exceptions: see Guamani at [185]-[192].

The decision of Austin J in Drummond is a convenient source for explaining the impropriety exception, the personal interest exception and the cause exception. His Honour stated at [45], [47] and [49]:

His Honour’s statement of principles at [43]-[47] was approved in Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Bishop Irinej Dobrijevic (No 3) [2017] NSWCA 109 at [14] per Payne JA (Ward (as her Honour then was) and Gleeson JJA agreeing), and in Nadilo at [40] per Leeming JA.

Both counsel referred to other cases bearing upon these exceptions.

Ms Fendekian also made reference to authority addressing exceptions where an executor is not entitled to be indemnified from the estate on the basis of any impropriety or misconduct on the part of that party whether an executor per se or acting as an executor. However, there was no suggestion on the part of Mr Birtles or otherwise that the defendant had misconducted himself in the defence of the proceedings within the terms of that exception.

The Supreme Court has equitable and statutory jurisdiction to give advice to trustees.

The Court’s equitable jurisdiction to give advice is derived from the practice of the Court of Chancery under the general law in giving directions to those entrusted with the administration of property under the control of the Court – affording special assistance to those, such as trustees, who have no direct pecuniary interest in a fund but have assumed the onerous obligation of administering it for the benefit of others: see e.g. Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547 at 548A-B per Young J (as his Honour then was); Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441; [2005] NSWSC 558 at [23] per Palmer J; Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 (the Macedonian Church Case) at [34] fn 47.

Writing extracurially, Susan Kiefel AC suggested that, while the High Court left open in the Macedonian Church Case the question whether, and to what extent, the inherent jurisdiction of a court of equity may explain the jurisdiction to give judicial advice, such jurisdiction may be “extant, even if it is not utilised, and that might be so regardless of the statutes or rules of court which provide a more expeditious procedure”: Susan Kiefel AC, “Judicial advice to trustees: its Origins, Purposes and Nature” (2019) 42(3) Melbourne University Law Review 993 at 1003.

In New South Wales, there is statutory provision for persons who fit the description of “trustees”, for the purposes of the Trustee Act, to seek judicial advice: s 63 Trustee Act. The nature of this jurisdiction was examined by the High Court in the Macedonian Church Case.

The purposes afforded by an application for judicial advice are varied. Broadly speaking, the primary purpose is to enable trustees to ascertain in advance whether particular conduct that they contemplate will be in accordance with their duties as trustees, so that if the trustees then act on the advice, they will not be liable for breach of trust provided that in obtaining the advice they have fairly disclosed all relevant circumstances to the Court: Australian Legion of Ex-Servicemen & Women [2021] NSWSC 149 at [44] per Robb J.

There is a connection between seeking judicial advice pursuant to s 63 of the Trustee Act and the right to an indemnity. The provisions of s 59(4) of the Trustee Act permit a trustee to reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee’s trusts or powers. The procedure for seeking advice is a legislative provision enabling trustees to take advice before embarking upon any course which might carry a risk of incurring costs that might be outside the indemnity: Macedonian Church Case at [69], quoting Re Grimthorpe [1958] Ch 615 at 623 per Danckwerts J.

It is not the case that any person who may fit the description of being a “representative” of the estate is necessarily entitled to apply for judicial advice under s 63 of the Trustee Act. The reference to a “trustee” in s 63 is understood by reference to the definition of “trustee” in s 5 of the Trustee Act, as outlined above.

Thus, for the purposes of s 63 of the Trustee Act, a “trustee” includes:

However, a “trustee” for the purposes of s 63 of the Trustee Act has been held not to include a named or nominated executor in a Will prior to obtaining a grant: see Re Hubbard; Estate of Ross [2011] NSWSC 617; (2011) 4 ASTLR 497 (Hubbard) at [4] per Windeyer AJ.

The Court has power within its equitable jurisdiction and by reference to the UCPR to make orders for representation of an estate.

The Court’s power upon an exercise of equitable jurisdiction is historically derived from the practice of the Court of Chancery: e.g. Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 at 403, 408, 415-424 and 427-429; [1995] HCA 9; Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 at 75-78 per Starke J; [1921] HCA 55; Ahmed v Chowdhury [2012] NSWSC 1452 (Ahmed) at [25]-[51] per Lindsay J.

The various rules in Divisions 2 and 3 of Part 7 of the UCPR all address issues of representation in proceedings. At first blush, many of them are powers which are available to address questions of representation in proceedings involving estates: see rr 7.6, 7.7, 7.8, 7.9, 7.10, 7.11 and 7.12 UCPR.

The Court’s rule-based jurisdiction (now reflected in the UCPR) developed out of the Court’s equitable jurisdiction, and the exercise of the equitable jurisdiction to appoint representative parties informs the exercise of the rule-based jurisdiction: Lewis v Martinez as representative of the partners t/as HWL Ebsworth Lawyers [2021] NSWSC 1303 at [23] per Slattery J; see also Ahmed at [35] per Lindsay J.

There is no particular scheme or structure evident which precisely dictates which of the various rules may apply in any given case. Thus, where there is need in proceedings to make an order regarding representation, there are various candidates amongst the rules in Part 7 of the UCPR, coupled of course with more general provisions under UCPR r 2.1 and s 61(1) of the CPA, as well as the dispensing power under s 14 of the CPA and the power to deal with procedural irregularities under s 63 of the CPA.

The choice of which particular Part 7 rule might be applied to address representation in any given case is “not rendered entirely easy” because, to some extent, the different rules about representation potentially have overlapping areas of operation: Stedman v O’Hearn; Hosemans v O’Hearn [2006] NSWSC 1122 (Stedman) at [7] per Hamilton J. That is, in part, explicable by the history of the rules being drawn most recently from the provisions of Part 8 of the Supreme Court Rules 1970 (NSW) (SCR), and more remotely from Chancery practice in the United Kingdom.

Due to the absence of a particular scheme which allocates the work of any given rule to a discrete subject matter, it will be a matter of adopting the most appropriate rule in the circumstances: e.g. Stedman at [8]. Some observations may be made about the structure of the rules which may guide choices as to which rule may be most appropriate in any given case.

It is not necessary to dwell deeply upon the precise operation and any interaction between UCPR rr 7.6, 7.7, 7.8, 7.9, 7.10, 7.11 and 7.12 (which for convenience I will describe as the “representative rules”) as they relate to estate litigation. It suffices to make a few observations. In terms of structure, I note the following.

There are some obvious differences between the UCPR powers to appoint representatives, which I note below.

The ambit of r 7.8 is not defined from the text of the provision in any detailed way, in contrast to rr 7.6 and 7.10.

Possible situations where a r 7.8 order might be contemplated include where:

Conceptually, a person appointed under r 7.8 might be a non-party, although it is difficult to imagine that the conduct of proceedings would be given to a non-party without also joining the person as a party; yet, r 7.8 does not itself appear to be a source of power to join or substitute parties: Oasis Fund Management Ltd v Royal Bank of Scotland NV [2010] NSWSC 584 at [66] per Biscoe AJ.

There have been cases in which a representative order under r 7.10(2)(b) has been made in combination with one under r 7.8: e.g. Anderson v Hill [2017] NSWSC 1149 at [10], [236]; Antoun v Antoun (No 3); Antoun v Hanna [2023] NSWSC 684 at [8], [17]. However, the precise utility of making an order under r 7.8 in addition to a representative order under either rr 7.6 or 7.10 is unclear. In Hewitt v Gardner [2009] NSWSC 705; (2009) 3 ASTLR 407 (Hewitt), for example, the representative appointed pursuant to r 7.10(2)(b) took on the role of the claimant in the proceedings without the need for any order under r 7.8. That approach is reinforced by observations that in substance a r 7.10(2) appointment is for the appointee “to conduct or defend proceedings”: Stojanovski v Stojanovski (No 3) [2020] NSWSC 1540 (Stojanovski (No 3)) at [113] per Robb J.

It has been observed that cases dealing with whether a representative should be appointed under UCPR r 7.6 (or its equivalent) do not go on to explain the representative’s role after the appointment has been made: Arakella Pty Ltd v Paton (2004) 60 NSWLR 334; [2004] NSWSC 13 (Arakella) at [53] per Austin J.

Broadly speaking, some guidelines can be gleaned from caselaw. However, the precise requirements of the representative’s role will depend upon the facts of any given case: Arakella at [53].

Drawing upon the judgment of Young J in Carnie v Esanda Finance Corporation Ltd (1995) 38 NSWLR 465 at 470-472, both Austin J in Arakella (at [51]-[65]) and Lindsay J in Ahmed (at [45]) observed that aspects of the UCPR r 7.6 role have at times been described as follows. Thus, the r 7.6 representative party:

Rule 7.10 is in the following terms:

The history of the rule has been addressed in a number of cases, including by Austin J in Aliperti v Official Trustee [2000] NSWSC 315 (Aliperti) and Ward J (as her Honour then was) in Hewitt at [75]-[92].

In addressing the rule’s immediate precursor SCR Part 8 Rule 16 (now repealed) in Aliperti, Austin J stated:

In Hewitt, Ward J further noted:

In Bayside Council v Estate of Goodman [2019] NSWSC 530 (Bayside), Robb J addressed the history of UCPR r 7.10 and its precursors at some length: see Bayside at [123]-[137].

Generally, or at least often, the history of a rule as to its genesis and purpose, and the circumstances that are addressed in the authorities that have applied the rule, may provide useful guidance in considering how the power conferred by the rule should be exercised in a particular case, or at least give some insight as to its exercise: see e.g. Macedonian Church Case at [44] in respect of the powers given by s 63 of the Trustee Act.

In Bayside, Robb J referred to Sydney Edward Williams and Frank Guthrie-Smith, Daniell’s Chancery Practice (8th ed, 1914, Stevens and Sons Ltd), Vol 1 (Daniell’s) at 147 and observed:

In Gibson v Wills (1856) 21 Beav 620; 52 ER 999, Sir John Romilly MR stated as to the object of the rule:

Historically, there are instances in which the Court did not appoint a representative, including where: (a) the objective of the proceedings is to oblige an absent defendant to administer an estate; (b) the duties to be enforced were personal to or required positive action on the part of the party to be represented; or (c) the absent party is the only party interested in a particular suit or claim: Bayside at [128]-[129], citing and construing Daniell’s at 157-158.

Nonetheless, helpful as prior applications of the rule and past insights may be as a guide, generally rules may need to be adapted to: address changes in legislative provisions which provide the framework in which case management decisions are made; the changing circumstances of the societies in which the legal systems operate; and differences in the purposes which attended the initial application of rules from those which currently apply.

The provisions of UCPR r 7.10 are predicated on there being proceedings involving a deceased person’s estate and focus on questions of “interest” in the proceedings. The estate may or may not have a representative.

The relevant “interest” is:

Once the criteria of “a deceased person’s estate” and “interest” (adverse or otherwise) are present, a choice arises as to whether the proceedings will continue in the absence of a representative or a representative ought to be appointed.

That choice is not constrained by the setting out of the terms of the rule. Thus, it is not the case that an order under r 7.10(2)(a) may only be made in respect of the circumstance under r 7.10(1)(a), nor that an order under r 7.10(2)(b) may only be made in the respect of the circumstance under r 7.10(1)(b). Rather, once either of the circumstances under r 7.10(1) arise, an order under either of r 7.10(2)(a) or (b) is available.

However, before making an order under UCPR r 7.10, the Court is prompted to consider whether any other relevant interests are affected, and may order that notice of the application be given to such of the persons having an interest in the estate as it thinks fit: r 7.10(4) UCPR. That is an important consideration in ensuring that interests of affected parties are, in any given case, appropriately addressed: see Bayside at [123]-[124].

UCPR r 7.10 applies wherever proceedings have been validly commenced, and a plaintiff or defendant dies after the commencement of the proceedings: Bayside at [182]; see also Tanwar v Aslam [2022] NSWCA 149 at [10] per Leeming JA. Depending on the circumstances, an order under r 7.10 may be made nunc pro tunc: see e.g. Katsoulas at [32], [186] per Leeming JA (the order being backdated to the commencement of the trial).

A UCPR r 7.10 order, and any subsequent judgment or order in the proceedings, binds the deceased person’s estate to the same extent as the estate would have been bound had a personal representative of the deceased person been a party to the proceedings: r 7.10(3) UCPR.

An order made pursuant to r 7.10(2)(a) will be as effective in binding the estate, by force of r 7.10(3), as one made under r 7.10(2)(b): Estate of Zbrozek; Duszyk v Morgan - Interim Administrator of the Estate of the late Maria Zbrozek [2020] NSWSC 1591 at [70(7)] per Rein J; see also David v Ryan [2018] NSWSC 971 at [11] per Slattery J.

Ultimately, whilst an order made pursuant to UCPR r 7.10 binds the deceased’s estate (on one view like an estoppel: Colquhoun v Graffione (2000) 97 FCR 376; [2000] FCA 325 (Colquhoun) at [25]-[27] per Katz J), it has been commented that the rule does not purport to authorise the Court to pronounce any judgment or make any order otherwise than against an identified person or persons: Colquhoun at [27]; Ivanovski v Perdacher [2009] NSWSC 913 at [49] per Hammerschlag J (as his Honour then was); GEL Custodians Pty Ltd v Estate of the late Geoffrey Francis Wells [2013] NSWSC 973 at [64] per Davies J. However, UCPR r 29.12 qualifies this line of authority at least where a party dies after a verdict or finding on the questions of fact, enabling the Court to give judgment, and judgment may be entered, despite the death: Bayside at [71]-[114].

UCPR r 7.10(2)(b) can be used to appoint a representative as a plaintiff (though by reference to reported cases it is historically rare that that has been done): Hewitt at [82]-[87].

An appointment under r 7.10(2)(b) is generally attended by a less formal procedure than the process of securing a grant of administration ad litem: see e.g. Bayside at [65]. To give some perspective on that, differences in formality and cost may be stark.

Thus, a r 7.10(2)(b) appointment might be made in the context of an oral application during proceedings or potentially by the Court, of its own motion, once the criteria under r 7.10 are satisfied.

Meanwhile, the appointment of administrator ad litem is conventionally made on an application by summons and supported by affidavits setting out the relevant facts, including any provision for an administration bond or sureties: Leslie Handler and Richard Neal, Mason and Handler Succession Law and Practice New South Wales (LexisNexis) at [5245]. Further, unless formalities are dispensed with by court order, all applications for administration, including special limited grants such as an ad litem grant, are required to be made in accordance with the probate rules (see SCR Pt 78), with publication of notices of the intended application (family provision applications excepted): s 42 PAA (when read with the definition of “administration” in PAA s 3); Pt 78 r 3 SCR.

I remark on these differences in formality and cost below in relation to the issue of the availability of judicial advice to a r 7.10(2)(b) representative as distinct from an administrator ad litem.

The usual circumstance in which a representative would be appointed under UCPR r 7.10 is where there is no person willing or able to take out a grant of probate or administration and where proceedings cannot be continued or disposed of in the absence of a representative of the estate. However, the use of the rule is not limited to such circumstances: Hewitt at [89]; G E Dal Pont, Law of Executors and Administrators (2022, LexisNexis) (Dal Pont – Executors) at 165 [6.46].

An appointment under r 7.10(2)(b) might be made in situations where there are various litigious claims over the estate but there is a dispute over the validity of a Will or codicil, or where there is a rectification claim which is unresolved. Often where there are various such claims on the estate, the claims are heard concurrently. That is the case in these proceedings, where there was a construction claim, rectification claim and estoppel claim.

An appointment under r 7.10(2)(b) is frequently made in family provision proceedings where a family provision claim has been made and: (a) there is a concurrent claim challenging the validity of the Will, such that there is no formal grant able to be resolved prior to the hearing of the claim; or (b) there is little or no estate such that the instituted executor is unwilling to obtain a grant and the utility of the family provision claim is premised on a claim to have property designated as notional estate.

An appointment pursuant to UCPR r 7.10(2)(b) may only be made with the consent of the person to be appointed.

Notwithstanding the precondition of consent, unless there is some specific notation otherwise, the appointee has no power of veto over subsequent amendments to the proceeding (including, for example, amendments to a statement of claim). Rather, the Court proceeds on the basis that the appointee contemplates or understands that the Court may permit amendments to the proceeding: Government Insurance Office v Johnson [1981] 2 NSWLR 617 (GIO v Johnson) at 637E-F per Mahoney JA (as his Honour then was).

Ideally, a person who is appointed to represent an estate under r 7.10(2)(b) should be independent of the dispute. There are cases in which the Court has indicated a reluctance to appoint a person pursuant to r 7.10(2)(b), if it were necessary to do so, where the proposed appointee had an obvious personal interest in the outcome of the proceedings, as distinct from someone independent of the estate dispute: De Lorenzo v De Lorenzo [2019] NSWSC 534 at [58] per Ward CJ in Eq (as her Honour then was); Bayside at [61], [65]. A person with a conflict between interest and duty in respect of the action, or someone with a claim to estate assets inconsistent with the claim of the estate itself, ought not be appointed: Dal Pont – Executors at 166 [6.47].

A UCPR r 7.10(2)(b) appointment may be made on such terms and conditions as the Court thinks fit: s 86 CPA.

The specification of terms of the appointment of a r 7.10(2)(b) representative will be important, particularly if (as in this case) there is another person who has been appointed with administrative duties under a limited grant.

In principle, it is inappropriate that the Court should clothe different persons with authorisation to conduct estate affairs because the possibility of inconsistent conduct or conflict is obvious, and the imposition of any possible source of confusion on other persons dealing with one or other of the concurrent representatives should be avoided: Bar-Mordecai v Rotman - Estate of the late Eveline Hillston (Supreme Court (NSW), Bryson J, 21 July 1998, unrep) (Estate of Hillston) at 3.

However, the risk of conflict can be avoided by defining the powers of the administrator under the limited grant in ways to exclude conflict. In Estate of Hillston, the risk was managed by directing that the existing administrator pendente lite not take any steps of the kind to which the appointee under the grant of administration ad litem related, except on further direction of the Court.

Depending on the nature and circumstances of the case, it may be appropriate to record specific limitations on the r 7.10(2)(b) appointment.

I am not suggesting that each and every appointment under r 7.10(2)(b) must be attended by the precise form of drafting that sets out the scope and terms of the appointment of administrators under a special grant. However, particularly in the context of contested litigation, any qualifications on the order should be noted so that the appointee and others do not simply assume that the appointee has a right to indemnity in respect of costs out of the estate.

The terms of r 7.10 are silent as to the ambit of the obligations and entitlements of a r 7.10(2)(b) representative.

Some cases have commented at some depth on aspects of an order under r 7.10: e.g. Bayside. However, there is no exhaustive commentary on precisely what role or duties the representative appointed under r 7.10(2)(b) has in the task of representation.

Whilst there are differences between a r 7.10(2)(b) representative and an administrator ad litem, it has been said that the effect of the appointment is akin to that of an administrator ad litem: Dal Pont – Executors at 165 [6.45]

An administrator under a grant is an officer of the Court: Maddock v Registrar of Titles (Vic) (1915) 19 CLR 681 at 689 per Griffith CJ; [1915] HCA 10. An administrator ad litem is “as much an administrator as any other administrator”: cf GIO v Johnson at 625 per Hutley JA. Thus, an administrator ad litem is an officer of the Court.

The purpose of a r 7.10(2)(b) representative’s appointment will be a strong determining factor regarding the nature and scope of the representative’s role: e.g. Stojanovski (No 3) at [113]. Subject to consideration of the purpose of the appointment and the terms imposed, generally speaking, the following may be said regarding the nature and scope of the role of a r 7.10(2)(b) representative:

It should be borne in mind that a r 7.10(2)(b) appointee who is discontent with the way in which the proceedings have developed or evolved may seek to be relieved of his or her position: GIO v Johnson at 638A.

Whether an indemnity is available to a r 7.10(2)(b) representative will depend upon the circumstances of any given case, including the point of time at which the issue arises.

Again, the purpose of the appointment of a r 7.10(2)(b) representative is important. Conceptually, the range of purposes may be broad. The appointment may be made in circumstances where the appointee is in essence performing the role of an administrator ad litem. The appointment may be made in circumstances where it is simply necessary to bind the estate to an outcome in what is otherwise entirely adversarial proceedings.

Thus, the purpose of the appointment will invariably inform questions regarding to what, if any, extent the r 7.10(2)(b) representative will be indemnified.

In many (but not all) cases, the issue of an indemnity will arise at the point of time of the contemplated appointment. Where the proposed appointee is not otherwise interested in the estate and is an independent party, such as a solicitor, it is highly likely that the proposed appointee will not consent to acting without some prima facie arrangement for indemnity from the estate. Indeed, an independent representative might well demand to be remunerated and be given an indemnity as a condition of consent to acting: Bayside at [65]. In such cases, the terms of the appointment may expressly provide for an indemnity.

Sometimes appointments will be made in circumstances where there is some arrangement by which the person who consents to be appointed does so on the basis that he, she or it is to be indemnified as to the costs of representation, by the beneficiaries or otherwise: e.g. Lean v Alston [1947] KB 467 at 475.

The appointment may be made in circumstances where there is some risk that the estate will be insolvent, or its financial position is at best uncertain: e.g. Cong v Shen [2019] NSWSC 1675 (Cong (No 1)) at [92] per Slattery J.

In New South Wales, effective from 22 November 2019, the rule in Hardoon v Belilios [1901] AC 118 has been abolished: s 100A(1) Trustee Act. The rule was to the effect that a beneficiary of a trust who is sui juris and absolutely entitled to the trust property has a personal obligation to indemnify the trustee for liabilities incurred in the proper administration of the trust, unless he could show some good reason why the trustee should bear them personally. Thus, there may be cases where the beneficiaries do not request or consent to the appointment and, absent agreement to do so (see s 100A(2)(a) Trustee Act), are not liable to indemnify the appointee: cf Cong (No 1) at [92].

The terms of an appointment under r 7.10(2)(b) may affect the right to an indemnity in a number of ways. Thus, for example, the terms:

The possibility exists that, if the party seeking an order under r 7.10 is unable to persuade the Court to permit the proceedings to continue in the absence of a representative, the representative might have to be indemnified by that applicant. On occasion, an applicant might be required to fund the defence of its own claim against the estate: Bayside at [65], [168]. Such an outcome, even if distinctly unpalatable to the applicant, may be regarded as the lesser of two evils in the sense that the claim is underwritten at some cost by the applicant as distinct from being stymied from continuing.

Where there is any possibility of future dispute regarding indemnity, the issue should be addressed, as a matter of good practice, at the time of the proposed appointment to avoid the risk that the appointee proceeds on the basis of uncertainty. For example, in the case of the proposed appointment of an independent solicitor, the Court would be disinclined to make the appointment without the proposed appointee having some comfort or assurance regarding costs, expenses and liabilities for acting in the role. The Court would be astute to avoid a situation where the proposed appointee is left without some appropriate indemnity and ensure that the proposed appointee is not left with the financial risk that at the conclusion of the proceedings there are insufficient funds in the estate to cover his or her proper expenses in acting: Cong (No 1) at [93].

However, sometimes there will be situations in which the question of indemnity is not addressed at the time of the appointment but rather at some later point of time, indeed either during the hearing or after judgment has been delivered.

There is caselaw to the effect that a r 7.10(2)(b) appointee does not have the right to an indemnity as one would if one were the executor. Nor does the appointee have a right of exoneration from the estate property that exists by reason of the office: Stojanovski (No 3) at [111], [121]. In Stojanovski (No 3), Robb J observed that the r 7.10(2)(b) appointee may only gain that entitlement through the Court making an equivalent order in the exercise of its discretion under s 98 of the CPA. Prima facie, that is correct. It may be, as Robb J elsewhere observed, that a r 7.10(2)(b) appointee might have an entitlement to an indemnity if the appointee were regarded as a fiduciary: Bayside at [65], citing Ritchie’s Uniform Civil Procedure NSW at [42.1.80] and Lewis v Nortex Pty Ltd (in liq) [2006] NSWSC 480 at [46], [47] per Hamilton J.

As a r 7.10(2)(b) appointment may be made on terms, it seems to me that, whether the appointee is properly regarded as a fiduciary or not, one of those terms may provide for an indemnity from the time of the appointment.

Whether judicial advice is available to a r 7.10(2)(b) representative will depend upon the circumstances of any given case, including the purpose of the appointment, whether the proposed appointee or appointee has “trustee” status and the point of time at which the issue of advice or direction arises.

It is evident from what I have noted earlier that the representative may potentially be: an instituted executor who has not yet obtained a grant; a beneficiary; an independent solicitor; or an administrator under a special or limited grant.

If the representative, by reason of his or her existing status, is a person who has standing to seek judicial advice either under the Court’s inherent jurisdiction to give advice or under its statutory jurisdiction pursuant to s 63 of the Trustee Act, it is open to the representative to seek advice by those means.

Thus, if the r 7.10(2)(b) representative is an administrator under a special or limited grant, he or she may seek advice pursuant to s 63 of the Trustee Act: e.g. Attia.

In Cong (No 1), Slattery J seemed to indicate that a r 7.10(2)(b) appointee may be able to obtain judicial advice under s 63 to resolve any ambiguity as to her functions (at [87]), as well as have a right of indemnity at general law out of estate assets (at [92] – whilst his Honour cited s 51(4) of the Trustee Act for this proposition, it is likely that his Honour intended to cite s 59(4)). The person proposed (an independent solicitor) was appointed pursuant to r 7.10(2)(b), but without a limited grant as administrator.

However, per se, a r 7.10(2)(b) representative is not equivalent to an executor or trustee, and (notwithstanding the expansive definition of “trustee” in the terms of s 5 of the Trustee Act) has no standing to seek judicial advice under s 63 of the Trustee Act: Walton at [16]-[17].

Without being exhaustive as to circumstances in which the question of advice might arise, there would appear to be a number of scenarios in which a r 7.10(2)(b) representative is proposed to be appointed, or is appointed, and the representative is unable to obtain judicial advice either under the Court’s inherent jurisdiction, UCPR r 54.3 or s 63 of the Trustee Act. That was certainly the case in Hubbard: see Hubbard at [4]-[8]. In Walton, the r 7.10(2)(b) representative had not obtained advice regarding the claim and Stevenson J certainly doubted that the representative would have qualified for such advice under s 63 of the Trustee Act: see Walton at [16]-[17].

There may be cases in which a r 7.10(2)(b) representative is not a trustee per se but becomes a trustee by reason of orders made at the conclusion of the hearing. Consequent upon the final hearing in the Hewitt proceedings (see Hewitt v Gardner [2009] NSWSC 1107 at [177]), notwithstanding that the plaintiff r 7.10(2)(b) representative did not have a grant of probate or administration, Ward J fashioned an order that had the effect that the transaction was set aside, and the defendant was to transfer the subject property to the r 7.10(2)(b) representative, to be held by her on trust for the estate, and ultimately dealt with under whatever regime formally governed the deceased’s estate: see also Bayside at [136].

If it be right that a r 7.10(2)(b) representative is not a “trustee” for the purposes of s 63 of the Trustee Act, the question arises whether the Court has other power to give advice or direction to a r 7.10(2)(b) representative.

The question is not arid or lacking utility for various reasons, including the following.

First, the number of appointments of r 7.10(2)(b) representatives is not insubstantial. From my experience in estate law in New South Wales over the last two decades, the number of r 7.10(2)(b) representative appointments over the last five to seven years has been substantially greater than previously.

Secondly, the nature of the estate litigation in which a r 7.10(2)(b) representative is engaged is often of some length and complexity. Significant costs are often incurred in such litigation. Frequently there may be cases in which legitimate questions arise at an early stage in the proceedings as to whether the representative should be engaged in the litigation, consider offers to resolve the litigation and be able to be indemnified. The representative ought to be able to have such questions addressed with advice from the Court.

Thirdly, the formalities and procedural requirements in relation to an appointment of administrator ad litem are not insignificant. It is arguably counter-productive to the just, quick and cheap objectives in the overriding purpose of civil litigation (s 56 CPA) to require a r 7.10(2)(b) representative (who does not otherwise qualify as a “trustee”) to ask the Court to go through the formality and added expense of appointing him or her as an administrator ad litem purely to enable the representative to avail him or herself of judicial advice.

The fact that a r 7.10(2)(b) representative who is not a “trustee” might not be empowered under the terms of an appointment to administer property for the benefit of others is not per se a decisive reason against the notion that the r 7.10(2)(b) representative ought to be able to receive judicial advice. An administrator ad litem, subject to the terms of an order in any given case, does not usually administer properly for the benefit of others. Yet the status of such an administrator as a “trustee” for the purposes of s 63 of the Trustee Act gives an administrator ad litem standing to seek advice.

Consistent with s 56 of the CPA, there is proper scope for the Court to consider whether there is a CPA or UCPR-based jurisdiction for the Court to give some direction or advice to the r 7.10(2)(b) appointee who is unable to avail him or herself of advice pursuant to the equitable jurisdiction or s 63 of the Trustee Act.

In Bayside, Robb J addressed questions which bear upon the role of a r 7.10(2)(b) representative relevantly as follows:

The comments of Robb J suggest that it is a proper concern of the Court, in considering a r 7.10(2)(b) appointment, as to what role the appointee undertakes in the proceedings. That is particularly the case where persons with a real interest in the estate do not consent to representing the estate.

If a r 7.10(2)(b) appointment is made by the Court, it can hardly be the case that the representative is simply left to act in the conduct of a claim, or defence of a claim, at any cost and without guidance.

Robb J considered that the Court must have the power, and perhaps the responsibility, to ensure that a proper and proportionate judgment is made by the r 7.10(2)(b) representative as to what is justified in conducting the claim, or defending the claim, having regard to its merits, the available evidence and the justification for expending the estate in conducting the litigation: Bayside at [216]. I agree. However, his Honour declined, without the benefit of submissions, to identify the source(s) of that power.

The Court must seek to give effect to the overriding purpose when it exercises any power given to it by the CPA or UCPR and when it interprets any provision of the CPA or UCPR: s 56(2) CPA.

There is no reason to think that r 7.10 should not be appropriately construed to have a fully practical effect in all cases of appointment of a representative: cf Bayside at [136], [137], citing the decision in Hewitt.

In my opinion, subject to the purposes to be served by any particular r 7.10(2)(b) appointment, the Court may, pursuant to r 7.10(2)(b) when read with ss 56(2), 61(1), (2)(c), 62(1), (4), (5) and 86 of the CPA, in appropriate cases, make the appointment on terms that permit, at the time of the appointment or subsequently, direction or advice to the r 7.10(2)(b) appointee in relation to his or her role.

The meaning of “conduct of proceedings” (s 61(2)(c) CPA) and “conduct of any hearing” (s 62(1) CPA) for which directions made be given extends to doing the various things that would need to be done in the course of the proceedings in which the party is involved: Rappard v Williams [2013] NSWSC 1279 at [78] per Hallen J.

By way of analogy, although recognising the differences in the nature of the jurisdiction exercised, the simple wording of s 80 of the CPA, which enables a tutor to seek “directions”, has been held to include directions by way of advice as to whether the tutor would be justified in settling proceedings: e.g. Application of Peter Hodges [2021] NSWSC 55 at [17], [36(1)] per Kunc J.

In my view, a person who is appointed by the Court pursuant to r 7.10(2)(b) and designated as being a “representative” of an estate may seek “directions” from the Court, including as to whether the representative is justified in defending the proceedings, continuing to defend the proceedings or accepting an offer to resolve the proceedings.

Further, any lacuna in power would arguably be covered by s 16 of the CPA, which empowers the Court to give directions with respect to any aspect of practice and procedure for which the rules of Court or practice notes do not provide.

I do not suggest that the Court would necessarily give direction or advice in any case in which a r 7.10(2)(b) representative has been appointed. However, if the need arises and if the Court’s equitable jurisdiction to give advice or s 63 of the Trustee Act is not otherwise available, the Court may consider using a CPA and UCPR-based jurisdiction to give direction or advice.

Even if I were incorrect in relation to the above, it is certainly the case that the Court could (if appropriate in the circumstances) consider, albeit at some formal and procedural expense, converting the r 7.10(2)(b) appointment into an appointment as administrator ad litem pursuant to an appropriate head of power (e.g. ss 74 or 75 PAA) and potentially dispense with some of the formal requirements (e.g. Re Estate of the late Assim [2015] NSWSC 337; (2015) 106 ACSR 544). In those circumstances, the administrator would undoubtedly have standing to seek judicial advice pursuant to s 63 of the Trustee Act, by reason of the fact that a “trustee” for the purposes of s 63 includes an administrator under a special and limited grant (see definitions of “trustee” and “administrator” under s 5 of the Trustee Act and s 3 of the PAA, as discussed above): see e.g. Attia.

On any view of the matter, whether or not I am correct in considering that the Court has power to give a r 7.10(2)(b) representative directions in the nature of judicial advice, I consider that in light of the number of r 7.10(2)(b) representatives appointed (which number does not seem to be abating), it is timely that there be an amendment (or at least consideration of an amendment) to the CPA and UCPR clarifying the position of whether a r 7.10(2)(b) representative may be given judicial advice.

During the costs hearing, I queried how one might determine whether a party was in substance acting as a representative or in his or her own interests. Mr Birtles, without being exhaustive, submitted that one would look first at the underlying interests that are being protected and, secondly, for concessions against the party’s own interest or some sort of balance as demonstrating that the position of the party in question was not being directed solely towards the interests of that party as a beneficiary: T 8.41-.45.

Where a party seeks an indemnity out of the estate for costs, the question of whether an indemnity may be given will depend upon the terms governing the administration of the estate and its disposition (whether arising under a Will or on intestacy, or affected by terms of a trust), any relevant statutory provisions and guidance from caselaw.

Statutory provisions and caselaw suggest that an indemnity will not be presumed where the party is acting in his or her own interests as opposed to acting in a representative capacity.

What is less clear is how the assessment or determination is made as to whether the party is “acting in his or her own interest”.

UCPR provisions, where they apply, suggest that the question is addressed not in a technical manner but rather “substantively”: see r 42.25(2)(b) UCPR.

In Drummond, the proceedings involved a dispute amongst members of the Drummond family. The parties to the proceedings were the three children (two sons and a daughter) of the deceased parents, the father having predeceased his wife by approximately six months. Letters of administration with the Will annexed in respect of the father’s estate, and probate of the mother’s Will, were granted to all three children. The plaintiffs (Peter and Robyn) sought orders that certain shares in a family investment company which remained in the father’s estate be distributed and transferred in accordance with the Wills of their parents. The defendant (John) as cross-claimant sought recovery of certain funds and relief in relation to two rings and jewellery in the mother’s estate.

At the commencement of the hearing, counsel for the defendant informed Austin J that he was in a position to consent to the orders sought in the summons, subject to the question of costs, and no longer sought relief in relation to the main monetary claim (approximately $200,000) but nonetheless persisted in claims to a small amount of funds (approximately $20,800) and the jewellery. That announcement prompted a response from the plaintiffs and all substantive claims in the proceedings were resolved subject only to the issue of costs.

Although the defendant contended that he was under a duty to clarify the status and ownership of the company shares, Austin J found that correspondence emanating on the defendant’s part demonstrated ignorance of important legal principles or, alternatively, obstructed the plaintiffs’ claim without justification, putting forward false propositions of law: Drummond at [34]-[37]. His Honour further found that the defendant’s explanation for developing a doubt as to the issue and ownership of the company shares was implausible, and his demand for production of share certificates was impossible to sustain for certain reasons. His Honour found that the costs should follow the event and the defendant pay the plaintiffs’ costs of the summons: Drummond at [37].

On the question of whether the defendant’s costs should be indemnified from the mother’s estate, his Honour referred to various exceptions, including the impropriety exception I have referred to above, and found that, although there was no dishonesty in any positive sense, the defendant defended the summons on a basis which no reasonable person could say should be put forward, by an executor or otherwise: Drummond at [46].

Relevantly, Austin J also referred to the personal interest exception and found that, in refusing to execute share transfers which would enable the company shares to be transferred to beneficiaries of the mother’s estate because he was not satisfied that the shares had been properly issued and held by the father as at the date of his death, the defendant’s concern (if it existed) related to the discharge of his duties as administrator and executor. His Honour could not conclude that in defending the proceedings on that ground, the defendant was acting in his personal interest rather than in the capacity of an executor, and thus found that the personal interest exception had no application to the defence of the summons: Drummond at [47]-[48].

However, the personal interest exception was found to apply to the cross-claim. The cross-claim was partly dismissed and partly discontinued, and his Honour concluded that costs should follow the event unless there was some good reason for departing from the usual rule. Although there were meagre facts adduced bearing upon the cross-claim, his Honour concluded that the defendant ought to pay the plaintiffs’ costs of the cross-claim: Drummond at [64].

On this issue, Austin J concluded that the cause exception (as referred to above) had no application in respect of the cross-claim, as neither of the parents by their conduct “caused” the cross-claim to be brought: Drummond at [49], [65].

The cross-claim in respect of the sum of approximately $200,000 asserted that the mother’s estate was indebted to a pastoral company and appeared to be a form of representative suit on behalf of the partnership. His Honour observed that, to the extent that the defendant was a partner, the cross-claim would have benefited him personally had it been successful. As such, the claim to that amount could not be characterised as a claim by an executor for due administration of the estate, but rather was a claim against the estate to recover a benefit. The same was true of the claim to recover the sum of approximately $20,800 from both parents’ estates, which the defendant asserted on the basis that it constituted recoupment of payments he had made on behalf of both of those estates. His Honour indicated that, whilst the claim asserted a right of reimbursement or recoupment of the defendant in his capacity as executor or trustee, nonetheless the assertion of the right was intended to produce a personal benefit for him. Similarly, the claim in respect of the jewellery was a claim to receive a distribution from the mother’s estate, rather than a claim by one executor against co-executors to enforce due administration of the estate: Drummond at [66].

In those circumstances, Austin J concluded that the cross-claim was brought for the defendant’s personal benefit rather than to discharge his duties as executor of the estate, and that it would not be appropriate to make any order for his costs to be paid out of the estate: Drummond at [67].

In Nowell v Palmer (1993) 32 NSWLR 574 (Nowell), the appellant, Ms Nowell, had been named as the sole beneficiary under the deceased’s Will. Brownie J (as his Honour then was) found at first instance that, prior to his death, the deceased had arranged for mutual Wills with his late de facto wife which set out that the estate of each should be left to the other if he or she was the survivor, and that the survivor should leave his or her estate to Ms Palmer, the respondent. Following his de facto wife’s death, the deceased changed his Will to leave his estate to Ms Nowell. Brownie J held that the deceased’s estate and the proceeds of it should be held in trust for Ms Palmer. Relevantly, his Honour further ordered that Ms Nowell pay the costs of defending the proceedings.

In dismissing the appeal with costs, Mahoney JA (as his Honour then was) (Meagher and Handley JJA agreeing) found that the appellant, in defending the proceeding, was not acting as, or merely as, the executrix of the estate. She was, in a real sense, defending her own interests: Nowell at 581D-582B. Mahoney JA’s reasons have been subsequently applied in a number of decisions of this Court.

In Cumming v Sands [2001] NSWSC 507 (Cumming), Hamilton J came to a similar conclusion. The case relevantly involved a dispute between the plaintiff and the first defendant over their interest in the fund from the proceeds of sale of the first defendant’s mother’s property. The first defendant and her brother, Dr Brand, were the executors of their mother’s estate and were entitled to the property as tenants in common in equal shares. On his death, Dr Brand had left his interest in the property to the plaintiff, who had been the tenant of the property for over two decades. In his principal judgment, his Honour found that the plaintiff was entitled to a charge over the fund.

On the question of costs, Hamilton J concluded that the case appeared to be one that had been conducted “in reality by the first defendant to keep the fund or as much as possible of it from the plaintiff and to defend it in the first defendant’s personal interest”: Cumming at [12]. The circumstances to which his Honour referred in arriving at that conclusion included the following (at [10]): there was nothing left in the estate but the property and the first defendant left the management of that absolutely to her brother for more than 20 years; the fund was the only remaining asset of the estate and all other executorial duties were long since done; and the plaintiff and the first defendant were in reality the only claimants to the fund.

In Nadilo, Leeming JA dealt with costs arising from his Honour’s principal judgment, in which the plaintiffs succeeded in demonstrating their entitlement by way of resulting trust to a portion of the proceeds of sale of the deceased’s home (which was the only substantial asset of the estate). The defendant was the executrix and essentially the sole beneficiary of the estate. Relevantly, Leeming JA found that this was a case where the defendant “was essentially defending her own personal interests”: Nadilo at [38]. His Honour made no order concerning the defendant’s liability to pay costs, with the intention that she not be entitled to be paid out of the estate in respect of costs.

In Zupicic v La Camera Paino as Trustee for the Estate of the Late Mario Novick [2018] NSWSC 1117 (Zupicic), Sackar J found that the unsuccessful defendant executrix was also not entitled to an indemnity out of the estate (of which she was the sole beneficiary), primarily based on the conduct and substance of the litigation: see Zupicic at [39]-[54]. In particular, his Honour noted that, whilst the defendant had an interest in wishing to uphold the validity of the deceased’s Will, she was “in substance acting for her own benefit as opposed to the benefit of the estate”: Zupicic at [44]. In pursuing that interest, the defendant’s role in the litigation went far beyond merely that of a third-party defending the integrity of the Will and was indeed active and adversarial: Zupicic at [40], [54].

However, Bell P (as his Honour then was) in Photios v Photios [2019] NSWCA 158; (2019) 372 ALR 264 (Photios) distinguished Nowell. In that case, the appellant sought a declaration that the deceased’s estate held his one-third interest in a property on trust for the appellant (to which he was entitled under a previous Will). Under the probated Will, that interest formed part of the residuary estate to which the respondent (Mrs Photios) was the sole beneficiary. The respondent was also the executrix. The proceedings were commenced by summons seeking a judicial sale of the property. At first instance, the primary judge found that the appellant was not entitled to a proposed amendment to his statement of cross-claim which sought, in addition to the declaration referred to above, orders that the grant of probate be revoked and a grant of probate in solemn form of the previous Will be made to him.

The appellant was successful in his appeal subject to certain conditions. As to the question of costs of the application for leave to appeal, the appeal and the hearing of the notice of motion at first instance, Bell P noted that, prima facie, whilst the appellant should be awarded his costs, the respondent should be entitled to an indemnity from the estate for her own costs and those which she will be obliged to pay the appellant on account of his success in the proceedings: Photios at [86], citing Drummond at [43], Bovaird v Frost [2009] NSWSC 917 at [28], Poletti v Jones [2015] NSWCA 107.

In making the submission that the respondent should not be so entitled, the appellant submitted that it was a case in which UCPR r 42.25(2)(b) ought to apply. In response to that submission, Bell P stated:

Whilst being mindful of the observations made by Mahoney JA in Nowell, Bell P distinguished the case as follows (at [93]):

The determination of whether someone is acting in his or her own interests, as opposed to in a representative capacity, in pursuing litigation appears to require more than the mere fact that the subject of the dispute involves property to which the representative of the estate is entitled under the Will. In Nadilo, Leeming JA seemed to place some importance on the inference (at [37]) that the defendant appeared to have personal knowledge of the relevant transactions. There also seems to be a distinction to be drawn between cases in which the representative of the estate is acting as a “necessary contradictor” (e.g. Photios) and cases in which the representative takes an “active and adversarial role” in the litigation as opposed to being some form of third-party to the proceedings (e.g. Zupicic, Cumming).

Having regard to the above-mentioned caselaw, the assessment of whether a party is acting in his or her own interest, as opposed to acting in a representative capacity, is:

Factors that have led judges to conclude that a party is acting in his or her own interest, as opposed to acting in a representative capacity, include the following:

Where the Court concludes that a party is acting in his or her own interest, the claim to indemnity out of the estate may be denied and the Court may proceed on the basis that the cost outcome should be treated no differently than ordinary adversarial litigation: e.g. Cumming at [12]; Zupicic at [36], [39].

Specifically, the fact that the party seeking the indemnity claims (a) to be upholding the Will of the deceased and ensuring that the testamentary intentions of the deceased are honoured, (b) not to have personal knowledge of the relevant facts which occurred decades ago and (c) that there is no objective or independent evidence upon which to assess the worth of the claims on the estate, will not necessarily preclude a finding that the party is acting in his or her own interest: Nadilo at [36]-[37].

In Zupicic, examples of the executrix’s role in the litigation going far beyond defending the integrity of the deceased’s Will included submitting that the deceased did not make the alleged representations or promises to the plaintiff, denying in cross-examination the plaintiff’s account of events and criticising the plaintiff’s evidence as unacceptably vague as to any reliance or detriment of the plaintiff as a result of the deceased’s promises, thus contesting key elements of the plaintiff’s equitable estoppel case: Zupicic at [40]-[43].

Ms Fendekian submitted that, in the present case, neither the first offer nor the second offer contained a real element of compromise having regard to the totality of circumstances looked at objectively at the time of service of the offers.

As to the issue of whether the offers contained a real element of compromise, each of the respective counsel made certain observations regarding the offers. Mr Birtles had prepared figures based on my findings in the principal judgment, which were in turn based on Mr Ellis’ supplementary valuation report. Ms Fendekian submitted (at T 3.30-.45), and I accept, that having regard to the dates of the first offer and second offer, both of which predated Mr Ellis’ supplementary valuation report dated 31 August 2023 (PJ [68]; CB 1241-1246), the values for the lots should be taken from the values in his initial valuation report dated 13 September 2022 (PJ [66]; CB 1247-1365).

In Mr Ellis’ initial valuation report, he valued the ten Dingadee lots, comprising a total of 301.13 ha with each lot being valued at $18,000 per hectare, at a total of $5,420,375. The two lots gifted to the plaintiff under the last Will, being lots (a) and (b), were valued at $1,893,600 and $565,020 respectively, totalling $2,458,620: CB 1251. Thus, the balance of the eight other Dingadee lots, based on Mr Ellis’ initial valuation report, were valued at $2,961,755 ($5,420,375 minus $2,458,620).

In relation to the Kennilworth leased lots, I observed in the principal judgment that there was limited evidence as to the size of the part of lot (o) which was leased. I proceeded on the basis that there was some evidence in Appendix 8 of Mr Ellis’ initial valuation report which listed the part of that leased lot as being estimated at 3.5 ha: PJ [795]; CB 1350. I observed that there might be some debate as to how a part of a lot should be valued, and noted that no specific submissions or evidence was addressed to that issue. On the basis that Mr Ellis attributed a value of $18,000 per hectare to lot (o) in his revised report, I attributed a value of $63,000 to the part of lot (o) which was leased (3.5 ha x $18,000): PJ [795]-[796]. However, in Mr Ellis’ initial valuation report he attributed a value of $14,000 per hectare to lot (o), rather than $18,000 per hectare: CB 1252. Based on the value of $14,000 per hectare, the part of lot (o) which was leased had a value of $49,000 (3.5 ha x $14,000). Thus, for the purposes of considering the value of the offers at the time that they were made, lot (o) must be treated as having a value of $49,000.

For the purposes of comparison, it was also necessary to look at the value of the other three Kennilworth leased lots, being lots (k), (l) and (m).

Contrary to the position which applied in relation to lot (o), where Mr Ellis’ initial valuation was based on the rate of $14,000 per hectare and increased in his subsequent valuation to $18,000 per hectare, his assessed rate for the values of lots (k), (l) and (m) decreased between his initial and subsequent valuations. Mr Ellis had attributed rates of $18,000 per hectare to the land the subject of those lots in his initial valuation report: see CB 1252. In the supplementary valuation report, those rates were decreased to $14,000 per hectare: PJ [797]; CB 1246. The result is seen in the following table:

Mr Birtles submitted that if the defendant had accepted the first offer:

Similarly, Mr Birtles submitted that if the defendant had accepted the second offer:

Ms Fendekian did not entirely embrace viewing the offers in terms of dollar amounts: T 5.16-.17. She submitted that there were a number of remedies claimed and that the estoppel claim which sought the leased lots was just one of several possible permutations of remedy: T 5.17-.19.

Ms Fendekian submitted that the first offer did not constitute a genuine offer or contain any real element of compromise having regard to the totality of the circumstances, because:

Similarly, Ms Fendekian submitted that the second offer contained no real offer of compromise on the basis that:

On the costs hearing, and based on the figures that counsel had referred to in written submissions, Ms Fendekian rejected the proposition that the first offer, which would have given the defendant a financial benefit in the order of $534,097 (land value of $334,097 plus $200,000 cash) compared to the plaintiff’s best estoppel case, was a genuine offer of compromise as at the time that it was made. I disagree. In fact, having regard to the revised calculations I have performed based on Ms Fendekian’s submission that the appropriate land values to be adopted are those set out by Mr Ellis in his initial valuation report, the financial benefit to the defendant in the first offer compared to the plaintiff’s best estoppel case (being the plaintiff’s best case in any event) was closer to $600,000 (specifically $597,553, based on land value of $397,553 and $200,000 in cash). I find that the first offer was a genuine offer of compromise.

It follows that the second offer was also a genuine offer of compromise and I reject Ms Fendekian’s submission otherwise. The financial benefit to the defendant as against the plaintiff’s best estoppel case constituted a value of $769,973 (being $397,553 referable to the Kennilworth leased lots plus $372,420 referable to lot (j)).

Mr Birtles submitted that neither offer involved a complete capitulation by the defendant on the plaintiff’s construction and rectification claims. To the contrary, both offers provided that the construction and rectification claims were to be dismissed. Ms Fendekian submitted that as a matter of form that is not clear from the terms of the offers of compromise: T 18.30. However, I reject that submission. The chapeau in both offers clearly indicates that the offer is an offer to compromise “the whole” of the plaintiff’s claims in the proceedings. Further, the terms of the first offer provided that the balance of the statement of claim would be dismissed and the terms of the second offer provided that the balance of the amended statement of claim would be dismissed. As a matter of construction, the offers provided that the rectification and construction claims would be dismissed.

Ms Fendekian submitted that the plaintiff’s opportunities to advance a genuine compromise of his claims in the proceedings were not limited: T 14. However, she did not venture any suggestion as to what a genuine compromise might have constituted in that regard.

It must be remembered that whilst the construction, rectification and estoppel claims were conceptually distinct claims, they were all directed to the one end – a claim in relation to the disputed lots. Practically, the difference between the construction and rectification claims on the one hand and the estoppel claim on the other hand is that the construction and rectification claims, if successful, would have only given the plaintiff the remaining 8 of the 10 Dingadee lots (in addition to the 2 that he is entitled to in any event), while the estoppel claim would have given the plaintiff the disputed Kennilworth lots in addition to the remaining 8 Dingadee lots.

In relation to the question of whether the Court should order “otherwise”, Ms Fendekian accepted that the defendant bore the onus of displacing the presumptive entitlement as to indemnity costs to establish grounds for ordering otherwise: DWS [15].

Ms Fendekian submitted that there were five reasons as to why it was reasonable (or not unreasonable) for the defendant to reject the offers (at DWS [18], [21]), namely:

In response, Mr Birtles disputed that the offers did not involve a substantial or genuine compromise: PRWS [2]. He also made a number of submissions as to why the Court should not order “otherwise”.

First, Mr Birtles submitted that the defendant was protecting his own interests in the position that he took in the proceedings, albeit that his entitlements under the last Will were held on the terms of a discretionary trust: PRWS [5].

Secondly, Mr Birtles did not accept that the defendant’s position on the rectification and construction claims was strong, noting that whilst the Court ultimately dismissed the claims there was an absence of detailed file records and numerous examples of failed recollection by Mr Gowing and Mr Doyle: PRWS [13(a)].

Thirdly, Mr Birtles submitted, and indeed I found, that the plaintiff served detailed evidence both from himself and from a cast of witnesses (including his two sons, Stuart and Andrew, and others including Mr Dillon and Ms Hewitt) who gave evidence corroborating the plaintiff’s case in relation to the promises. He submitted that the absence of evidence from the defendant contradicting that evidence made it less, rather than more, reasonable for the defendant to run the matter to a concluded hearing: PRWS [12], [13(c)].

Finally, Mr Birtles submitted that the inconsistency between the promises made by the deceased to the plaintiff over many years and the terms of her last Will made it reasonable for the plaintiff to “investigate the matter” in circumstances where the records of Mr Gowing and Mr Doyle were “largely non-existent”, their evidence was (according to Mr Birtles’ submission) to some extent at odds with their prior statements and Mr Gowing’s recollection was not clear: PRWS [8], [18(d)].

First, I reject Ms Fendekian’s submission that the offers did not involve a substantial compromise for the reasons I have stated above.

Secondly, although I will say more below regarding the role of the defendant in the proceedings, I do not accept the proposition that “merely defending” the deceased’s estate is an adequate basis to establish reasonable rejection of an offer that is a genuine offer. Indeed, defending “the gifts the deceased had bequeathed” in her last Will underlined the defendant’s personal interest in defending the claim.

Thirdly, in my assessment, the submissions regarding the strength of the defendant’s case on the construction and rectification claims failed to take sufficient account of the connectedness of those claims to the estoppel claim in terms of relief. Each of the claims, as I have noted, were directed to claims the plaintiff had in relation to the disputed lots. If successful, the plaintiff’s estoppel claim would have practically given him all of the relief in terms of the eight additional Dingadee lots to which he was laying claim under the construction and rectification claims, in addition to the disputed Kennilworth lots.

Fourthly, whilst it is true that the deceased’s wishes (as documented in her last Will) ran counter to the estoppel case, that is a common experience in estoppel claims. I do not regard it as being a compelling reason which demonstrates the reasonableness of the defendant’s rejection of the offers.

Fifthly, I reject the submission that the estoppel case was based on events to which the defendant was “a stranger”, and there was no way to test evidence outside of a contested hearing, having regard to the following matters.

The notion of a representative defending an action in circumstances in which he or she is a “stranger” to the plaintiff’s allegations, and so-called “putting the plaintiff to proof”, was the subject of comment by Holland J in Adam v Mullen (1976) 18 BPR 35,773 (Adam v Mullen).

At the end of the reasons for judgment, an interaction is recorded between Holland J and counsel regarding the issue of costs. It is helpful to set out the relevant text of that discussion and the relevant orders that follow it (at 35,787):

It is not uncommon in legal proceedings for parties and their legal representatives to have to assess offers to resolve proceedings in a context where they have differing degrees of familiarity with the evidence marshalled. In some cases, the parties will be very familiar with the evidence against them. In other cases, they may be less familiar and, in some cases, not familiar at all. In the adversarial system, cases are decided within the evidentiary framework the parties have chosen and are often decided on incomplete evidence: e.g. GLJ v The Trustees of the Roman Catholic Church for the Diocese of Lismore [2023] HCA 32; (2023) 97 ALJR 857 at [58] per Kiefel CJ, Gageler (as his Honour then was) and Jagot JJ.

The fact (if it be true) that an executor or representative has little or no information bearing upon parts of a plaintiff’s case does not necessarily mean that there is no way to test the evidence of the plaintiff’s witnesses as to the matters in their affidavits outside the context of a contested hearing, nor that the executor or representative is justified in “putting the plaintiff to proof”. There are many ways in which facts can be investigated, to a greater or lesser degree, outside of the direct knowledge of a party to the proceedings: inquiries can be made; documents can be subpoenaed; other witnesses can be called in a defendant’s case; and forensic decisions can be made regarding the strengths and weaknesses of a case and the inherent likelihood of events having occurred.

In the circumstances of this case, the defendant did not, on the main hearing or the costs hearing, give evidence expressly contending that he was “essentially a stranger to the plaintiff’s entirely undocumented estoppel case”.

On 18 July 2022, the defendant filed a defence. The defence relevantly denied the material allegations in relation to the rectification claim, insofar as the statement of claim pleaded that the deceased intended the gift to the plaintiff to include the eight Dingadee lots in addition to the two lots (lots (a) and (b)) specified in the last Will. The defence also relevantly denied the allegations in respect of the estoppel claim, in particular denying that: (a) the deceased had made the representations constituting the initial promises and the subsequent promises; (b) the deceased had repeated the initial promises and the subsequent promises; (c) the plaintiff had relied upon the promises or given up opportunities in reliance upon the promises; and (d) the deceased knew of or ought to have known of such reliance.

On 17 February 2023, the defendant’s defence to the amended statement of claim relevantly maintained those denials.

Thus, contrary to the remarks of Holland J in Adam v Mullen at 35,787, this is not a case where an executor defends an action in circumstances where “he is in no position to know whether the plaintiff’s allegations are true or false”. In this case, the defendant denied rather than did not admit the material parts of the estoppel claim. The denial suggests he believed that the allegations were untrue, and had sufficient knowledge or belief about those matters that he could appropriately deny the allegations, as distinct from being in a position in which he was unable to know whether or not the allegations were true, after having made reasonable inquiry as to their truth: see r 14.23(3) UCPR and affidavit verifying his defences.

The notion that there was no way to test the evidence of the plaintiff’s witnesses as to the matters in their affidavits, outside the context of a contested hearing, was not supported by evidence.

Generally, a judge will not be privy to what goes on behind the scenes in relation to the preparation of a case. No evidence was led on the costs hearing regarding the precise extent of the defendant’s knowledge of the estoppel case, nor was there evidence supporting the proposition that there were no reasonable avenues available to the defendant and his legal representatives of considering and testing the evidence to be adduced by the plaintiff’s witnesses.

As mentioned above, the defendant denied, rather than did not admit, the material allegations in the estoppel case.

Further, I found that the defendant did not deny that the plaintiff had inheritance expectations and indeed had given evidence that he was “very much aware of [the plaintiff’s] expectations”: PJ [215]. Further, the defendant did not dispute that the plaintiff performed maintenance work on all of the leased lots; rather, his evidence was that the plaintiff was not authorised to do it, although the defendant was aware that the deceased knew the plaintiff was carrying out such work: PJ [229].

The offers provided that the plaintiff would essentially bear one-third of his own costs by including a provision that the plaintiff’s costs assessed on the ordinary basis be paid out of the estate. By including an order that the defendant’s costs assessed on the indemnity basis be paid out of the estate, the offers would essentially relieve the defendant to the extent of one-third of his costs from the burden of bearing his costs from his share of the residue.

Overall, I do not accept that it was reasonable for the defendant to reject the offers.

Ms Fendekian submitted that, in this particular case, there are other factors beyond the defendant’s reasonableness that are capable of being probative and establishing grounds for ordering “otherwise”. She advanced three submissions in this regard: DWS [20]-[22].

I have already dealt with two of the matters Ms Fendekian advanced (namely that (1) the plaintiff succeeded on an estoppel case which was based on undocumented events to which the defendant was “a stranger” and that it was appropriate for him to uphold and defend the last Will, and (2) the offers did not constitute a substantial compromise of the plaintiff’s claim) in relation to whether it was reasonable for the defendant to reject the offers. I do not accept those submissions insofar as they are deployed to establish “other factors beyond the defendant’s reasonableness” as being a basis for ordering “otherwise”.

In relation to the remaining matter, Ms Fendekian submitted that considerable time and costs had been devoted to addressing the plaintiff’s construction and rectification claims, which wholly failed, and it would be “unfair” if the plaintiff were to obtain an indemnity for costs for the whole of the proceedings from the date of either of the offers. In light of the purpose of offers of compromise, I do not consider that it would be “unfair” for the plaintiff to obtain an indemnity in relation to his costs for the whole of the proceedings from the time of the offers.

Expenses properly incurred in the construction of a Will are testamentary expenses: Roy Allan Woodman, Administration of Assets (1964, Law Book Co.) at 10-11; Murdocca (No 2) at [41]. Generally, that is so whether or not they are incurred by the executor or by other parties, such as beneficiaries: Warton at [74] per Ward JA (as her Honour then was).

Application of that principle in this case is prima facie appropriate up to the time of the first offer. However, based on the provisions of s 46C(2) and Part 2 of the Third Schedule of the PAA regarding the bearing of the burden of expenses (which principles the parties accepted), that would mean that the defendant would bear two-thirds of his own costs, as the costs would be paid out of residue.

The plaintiff’s submissions on costs accepted that there was considerable evidence in the proceedings which addressed the construction and rectification issues. In light of that, and notwithstanding that the ordinary consequence of applying UCPR r 42.14(2) would be that the plaintiff is entitled to an order against the defendant for his costs in respect of the claim assessed on the ordinary basis up to the time from which the costs are assessed on an indemnity basis, Mr Birtles submitted that the plaintiff’s proposed partial otherwise order was an appropriate order for the Court to make. I agree.

I consider the overall justice of the proceedings is such that the plaintiff’s proposed partial otherwise order is an appropriate order for the Court to make, giving some recognition to the usual way that the burden of testamentary expenses is dealt with but also to the principles attending offers of compromise.

Ms Fendekian submitted that the character of the defendant’s representation “has at all times, for practical purposes, been akin to that of an executor”: DWS [29]. It was further noted that the costs out of the estate to which an executor representing the estate is ordinarily entitled are calculated on the indemnity basis, citing Re Jones; Christmas v Jones [1897] 2 Ch 190 at 197: DWS [35].

The particular matters to which Ms Fendekian referred in disputing the proposition that the defendant was effectively protecting his own interests, and justifying an indemnity for the defendant’s costs, were as follows:

In addition, Ms Fendekian referred to the decision of Kenneth Martin J in Lee v Australian Executor Trustees Ltd as trustee of the estate of the late Ronald William Lee (No 4) [2021] WASC 257, which also concerned the defence of an estate against a proprietary estoppel claim. She noted that the Court in that case held that it was perfectly appropriate to make an order that the costs of the proceedings of the first defendant, being the trustee, be paid from the estate on an indemnity basis: T 9.42-.49. However, in that case the first defendant was a professional trustee and there was no suggestion that it was personally interested in the property the subject of the claim.

In substance, Ms Fendekian submitted that there is a distinction to be made between cases where the representative pursues his or her own interests as opposed to protecting or defending the estate and upholding the Will: T 10.23-.30. Indeed, Ms Fendekian submitted that there was a stark contrast between the positions of the plaintiff and the defendant, indicating that, although they were both executors of the estate (strictly speaking, instituted or nominated executors), the defendant was “merely seeking to uphold the Will of the deceased” whereas the plaintiff “was actively pursuing his own interests against the estate”: T 11.21-.32.

A difficulty with that submission is that there is not the remotest suggestion that the plaintiff was pursuing his claims in a representative capacity, whereas there is a question as to whether, substantively, the defendant was defending the proceedings in his own interests while purporting to act in a representative capacity.

Mr Birtles submitted that the way in which the hearing was conducted was as an adversarial contest, rather than the defendant putting his position from a neutral representative context: T 8.30-.33.

In light of Ms Fendekian’s submissions regarding the defendant being indemnified out of the estate, I sought to understand the context in which the appointment had been made.

On the costs hearing, I enquired of counsel regarding the order made that the defendant represent the estate pursuant to UCPR r 7.10.

On briefly looking at the file, I located an email dated 28 February 2023 from Ms Nunn to the Associate to Hallen J, copying in Mr Wilson (the defendant’s solicitor). The email per se did not shed any particular light as to the relevant circumstances bearing upon the order of appointment. Mr Birtles observed that the appointment was made in a context in which the parties’ joint application for probate had not progressed due to the rectification issue and, in those circumstances, indicated that it was necessary for there to be an order. Ms Fendekian had recollection that the issue was first raised or agitated by the plaintiff and that, from the defendant’s point of view, the order “would merely formalise what was already the practical reality of the litigation”: T 2.

I have examined the Court file to see whether there are any further matters apparent from the orders made in the proceedings, or any agreed position as between the parties, which bear upon the UCPR r 7.10 appointment. In this respect I note the following.

As noted above, the proceedings were commenced by statement of claim filed on 27 May 2022. The statement of claim contained various claims for relief, including relevantly an order pursuant to UCPR r 7.10 that the defendant be appointed to represent the estate for the purposes of the proceedings (prayer 2 of the relief claimed).

On 18 July 2022, the defendant filed a defence which relevantly denied material allegations as I have referred to above.

The first formal listing of the matter before the Court occurred on 18 November 2022, approximately seven months after the proceedings had been commenced. During that seven month period, there was no formal order for appointment of anyone to represent the estate.

On that occasion, Mr Birtles appeared for the plaintiff and Ms Fendekian appeared for the defendant. No orders were made for formalising the appointment of any person to represent the estate.

The procedural orders included an order directing the parties to provide, by 4 pm on 25 November 2022, a joint memorandum stating how the interim administration of the estate was to be conducted pending the determination of the rectification suit: Order 1 Associate’s Record of Proceedings (ROP). The matter was adjourned to 16 December 2022.

On the Court file there is a joint memorandum, signed by the respective solicitors for the parties (Ms Nunn and Mr Wilson), which is self-evidently a document prepared pursuant to the above-mentioned order made on 18 November 2022 (Joint Memorandum).

The Joint Memorandum sets out the joint position of the parties regarding administration of the estate under ten headings, being: (1) general powers; (2) real property; (3) bank accounts; (4) estate income and expenses; (5) expenses pertaining to assets the subject of specific gifts, being cattle, plant and equipment; (6) interim distributions; (7) probate application costs; (8) defendant’s legal costs of the proceedings; (9) reimbursement of other expenses; and (10) resolution of any disagreements.

Certain terminology within the document indicates that the position set forth in the Joint Memorandum records a form of agreement between the parties. Thus, clause 1.4 states: “[t]he parties agree to the following protocol with respect to the interim administration and distribution”. Further, the terminology includes references to things the parties “will do”, including that they will open an estate bank account, instruct Doyle Wilson to pay funds into that account and instruct Gowing Advisory in respect of the estate financial accounts.

The provisions regarding the defendant’s legal costs of the proceedings were as follows:

Clause 10 of the Joint Memorandum addressed “Resolution of any Disagreements” and contained provision for resolving such disagreements. However, it expressly excluded any disagreement in relation to payment or reimbursement of legal costs referred to in paragraphs 7 and 8 of the Joint Memorandum.

In relation to the payment of the defendant’s legal costs, the contemplation was that the defendant’s solicitors would issue invoices to him which would be paid out of their trust account within five business days and, on each occasion that such a payment was made, the defendant’s solicitors would then provide to the plaintiff’s solicitors a summary of the total amount paid, identifying the professional fees and itemisation of disbursements.

On 16 December 2022, Ms Nunn and Mr Wilson filed with the Court proposed short minutes of order.

On 19 December 2022, Hallen J made a number of orders. Relevantly, his Honour made a form of interim grant of administration up to and including 19 June 2023 in favour of Ms Whitley, with specific but limited powers, and orders and notations providing for the recording of income of the estate and arrangements for payment of her fees: Orders 1-4 ROP.

In respect of the defendant’s legal fees in the proceedings, Hallen J’s orders relevantly contained the following notations:

On 30 January 2023, there was a further Court listing in which directions were made.

On 28 February 2023, Ms Nunn and Mr Wilson sent proposed short minutes of order to the Court which included an order that the defendant be appointed to represent the estate of the deceased for the purposes of the proceedings, pursuant to UCPR r 7.10(2)(b). There was also a proposed order (pursuant to order 5(b) of the orders made on 19 December 2022) for an amount of $220,000 to be paid from the estate of the deceased towards the defendant’s costs in the proceedings on terms.

On 2 March 2023, Hallen J made the following orders and notations in chambers:

On 20 March 2023, the defendant filed a notice of motion seeking an order that the Court grant leave to Ms Whitley to make an interim distribution to the defendant in the amount of $200,000. The notice of motion was supported by an affidavit of Mr Wilson affirmed 20 March 2023, in which he indicated inter alia that, based on information received from Ms Whitley, the balance of the estate trust account at 31 January 2023 was $1,378,675.51, with additional funds to be received from Westpac.

On 27 March 2023, the Court ordered as follows:

On the third day of the hearing (13 September 2023), it became evident that the hearing would not be concluded within the allotted five days. In that context, Ms Fendekian noted that the interim administrator had taken the position that she was not prepared to allow any distribution from the estate unless it was by the consent of both “executors” (i.e. the parties), and that the plaintiff had not consented to further distributions on a number of occasions. Ms Fendekian foreshadowed that a substantial amount of legal fees had been incurred since March 2023 and the defendant wished to put on an application for a further distribution in respect of expenses and legal fees to be made returnable in October 2023 when the hearing resumed: T 225.24-.50.

When I asked Mr Birtles about the position on that occasion, he indicated his understanding or contention that the order under UCPR r 7.10, that the defendant represent the estate for the purposes of the proceedings, was necessary for the estoppel part of the case as a contradictor, rather than any imprimatur for costs of the defence of the proceedings to be borne out of the estate: T 226.17-.29.

I indicated that Ms Whitley ought to be asked to give some indication of the amount of funds held, and the parties should confer and discuss whether some agreement could be reached regarding a distribution. If not, the matter would need to be formalised in some way by the filing of a notice of motion and any affidavits in support: T 226.33-.42.

I expressly indicated that no party should assume that there would be any necessary entitlement to costs: T 227.2-.3.

On 9 October 2023, the defendant filed a notice of motion seeking the following orders:

The notice of motion was supported by an affidavit of Rachel Gleeson (a solicitor for the defendant) affirmed 9 October 2023, in which she indicated inter alia that, based on information received from Ms Whitley, the balance of the estate trust account at 13 September 2023 was $1,061,563.73. The affidavit indicated that, due to the defendant’s financial situation, his legal costs of the proceedings remained unpaid since January 2023 and that his outstanding legal costs were, at the time of preparation of the affidavit, approximately $450,000 inclusive of GST.

On 10 October 2023, I made the following orders:

On 11 October 2023, I heard the notice of motion and made the following orders:

I delivered brief reasons for judgment for the orders granting the interim distribution.

In determining whether the defendant should be indemnified from the deceased’s estate in respect of his liability for costs, I have had regard to the above-mentioned discussion of principles and bear in mind that each case needs to be assessed on its own particular facts.

Ultimately, the issue is whether I ought to exercise the discretion under s 98 of the CPA to order the costs of the proceedings to be borne in such way that allows the defendant the requested indemnity for costs out of the deceased’s estate.

Further, whilst recognising that the effect of the exercise of my discretion under s 98 of the CPA may displace (to the extent described in the costs order) the statutory order provisions of s 46C(2) of the PAA concerning how testamentary expenses are to be borne, neither Ms Fendekian nor Mr Birtles made any application on behalf of their clients for any other variation of the applicable statutory order as to the assets of the estate which would bear the burden for the discharge of costs, if any, to be paid out of the estate.

The purpose of the defendant’s appointment pursuant to UCPR r 7.10(2)(b) was specified in the order as being “to represent the estate of the deceased for the purposes of these proceedings”.

It is apparent from the terms of the Joint Memorandum, and orders 5 and 6 of the orders of Hallen J made on 19 December 2022, that the following regime was set up in respect of the legal costs of the proceedings:

The regime acted as a form of direct exoneration of the defendant’s legal costs rather than a form of right of indemnity.

Further, it is clear that the orders providing for distributions of funds on account of the defendant’s legal costs did not give any presumptive right to indemnity. Thus, on 19 December 2022 the distribution, based on the parties’ agreement and permitting payment of $125,000 on account of the defendant’s legal costs, was made on the basis that the defendant (or the plaintiff) was obliged to reimburse the estate for any legal costs paid from the estate in the event that a different costs order is made.

By the time of the making of the order under UCPR r 7.10(2)(b), the proceedings had been on foot for a little over nine months. Thus, prior to that time:

The defendant’s approach to the defence was not neutral.

The defendant did not admit several aspects of the plaintiff’s claim which were entirely uncontentious, such as the facts that: the deceased had entered into leases of various lots (statement of claim [36]); the plaintiff had academic qualifications from the University of Newcastle (statement of claim [38], [39]); and the plaintiff had been offered a postdoctoral fellowship at Florida State University (statement of claim [40]). Why the defendant did not admit that the plaintiff had academic qualifications from the University of Newcastle and had been offered a postdoctoral fellowship at Florida State University is unclear.

Further, the defences filed by the defendant on 18 July 2022 and 17 February 2023 were verified and relevantly denied, rather than did not admit, significant allegations that I have referred to above. Thus, it was not the case that the defendant had insufficient information on his own account, after having made reasonable enquiries, to know whether or not the relevant allegations of fact were true or not. Rather, he made positive denials believing that the allegations were untrue.

The above context suggests to me that a purpose of the appointment was at least to ensure that any judgment or order in the proceedings would bind the deceased estate.

The permissive order made on 19 December 2022 that an amount of $125,000 be paid from the estate towards the defendant’s costs was made prior to any order for his representation of the estate under UCPR r 7.10(2)(b), and expressly included a term that he shall reimburse the estate for any legal costs paid from the estate in the event that a different costs order is made.

Further, the costs order on 2 March 2023 permitting an amount of $220,000 to be paid from the deceased’s estate towards the defendant’s costs of these proceedings, made on the same occasion as the actual order under UCPR r 7.10(2)(b), was unlike costs orders ordinarily attending a representative order. It expressly provided that the sum was, in the first instance, to be paid out of the defendant’s share of the estate, with liberty to either party to apply to the Court for a different costs order at the conclusion of the proceedings.

The defendant’s participation in the proceedings was such that, from the time of his defence on 18 July 2022, he had denied (rather than did not admit) material aspects of the plaintiff’s claim. Prior to the UCPR r 7.10(2)(b) appointment, significant forensic decisions had been made regarding the evidence to be adduced and the rejection of the first offer. I do not regard the r 7.10(2)(b) order as being a form of judicial recognition that the defendant was acting akin to an “executor”, as distinct from representing his own interests in the proceedings, so as to exclude the personal interest exception.

Leaving aside the form in which property was to be received by the defendant (by means of a trust), the defendant was, as a matter of substance, the only person entitled to the property the subject of the plaintiff’s claim.

I have addressed the defendant’s defence of the construction and rectification claims in my comments regarding the partial otherwise order.

In addressing the issue of indemnity, I have had particular regard to Ms Fendekian’s submissions in respect of things that the defendant did not do. Technically speaking, it is true that the defendant did nothing to seek to alter his position under the last Will; he did not commence the proceedings, he did not file any cross-claim seeking to enhance his position under the estate, and he did not make any family provision claim.

However, the final aspect of Ms Fendekian’s submission, namely that the defendant did not “otherwise do anything to pursue his own interest”, is more debatable. The choices of meaning to which the Macquarie Dictionary, online ed ascribes the verb “pursue” include:

The fact that a positive claim is not brought forward, in terms of seeking actual relief, does not necessarily deprive litigious engagement from being characterised as “pursuit of one’s interest”. There are various means of defending claims. Claims can be admitted or partly admitted. A defendant can file a submitting appearance. In the context of estate litigation, there are many examples of a representative party putting information in a neutral way before a court and otherwise playing a form of submitting role, permitting other parties who have the beneficial or other real interest in the subject matter of the proceedings to contest the claim.

Whilst it is true that, to some degree, the defence of the proceedings may be considered to be to the benefit of the estate in that it is consistent with the construction of the deceased’s last Will (as found by the Court), it is also true that the defence of the proceedings is in respect of a subject matter in which, subject to due administration of the estate, only the defendant has an interest: e.g. Zupicic at [44]; see also Stojanovski (No 3) at [117].

Thus, to say that the defendant was doing nothing more than “defending the estate and upholding the Will” does not quite capture the substance of what occurred in this case. The defendant engaged in the proceedings in a manner that was not neutral or indifferent to the outcome of the claims, in particular the estoppel claim. He pursued his own interest at least in the sense of proceeding in accordance with defensive strategies to defeat the claims, in particular the estoppel claim.

In obtaining the representative order, the defendant did not at that stage seek any orders in relation to an indemnity from the estate prior to proceeding with his defence of the claim. Rather, the orders that were made, as I have outlined above, permitted access to funds but on express terms which left open the question of any ultimate indemnity from the estate.

As I have indicated above, the opportunity to seek advice regarding the defence of estate proceedings may be available to a r 7.10(2)(b) representative defendant in appropriate circumstances.

In any event, the defendant did not seek any advice or direction of the Court in relation to aspects of his representation. Nor, if the defendant had had any doubt as to his standing to seek advice regarding the defence of the proceedings or acceptance of the second offer of compromise, did he seek appointment as an administrator ad litem.

However, I need not dwell on that. The issue regarding whether the defendant was able to seek judicial advice was briefly raised by me on the costs hearing with Mr Birtles, who did not submit that it was open to the defendant to obtain advice (at least not without a grant): T 8.47-9.12. In those circumstances, despite what I have observed above, I will address the indemnity issue on the basis that the possibility the defendant was able, or might have been able, to seek advice of the Court regarding his defence of the proceedings or acceptance of the second offer is put aside and is not a factor counted against the defendant in now seeking an indemnity.

Even if the defendant were unable to seek advice about his defence of the proceedings or acceptance of the second offer, in my assessment he contested the proceedings “essentially” in his own interest prior to and after the UCPR r 7.10(2)(b) appointment, and during the hearing, in an active and adversarial manner consistent with the denials of the material aspects of the plaintiff’s estoppel claim. I hasten to add that this is in no way a criticism of the defendant’s legal representatives.

Overall, looking at the matter holistically and substantively, I have concluded that the defendant’s conduct of the proceedings was essentially adversarial and in his own interest, and that the overall justice of the matter leads me to conclude that in the exercise of my discretion under s 98 of the CPA, no indemnity as sought ought to be permitted.

I am led to that conclusion by several aspects of the matter, including the context surrounding the litigation and its procedural history, the forensic choices made prior to and after the r 7.10(2)(b) order, the fact that no other person had any beneficial interest in the disputed lots apart from the defendant and the robust conduct of the hearing.

In light of the acceptance by counsel of the effect of the burden of estate expenses, any indemnity out of the deceased’s estate would at best have relieved the defendant of one-third of his costs. I accept that a one-third indemnity is better than none at all: T 11.38-.47. However, the burden of any indemnity, if given, would have to be borne in part by the plaintiff, who was substantively successful in the proceedings and served offers which I have found contained a genuine element of compromise, and which it was not reasonable for the defendant to reject.

In all of the above circumstances, I do not consider it appropriate or just that the defendant should be indemnified out of the deceased’s estate for his costs.

In making that determination, I make clear that I am exercising the discretion under s 98 of the CPA to order the costs of the proceedings to be borne in such way as I think just, and that the effect of the exercise of the discretion is to displace (to the extent described in the costs order) the statutory order provisions of s 46C(2) of the PAA concerning how testamentary expenses are to be borne.

In the principal judgment I adverted to the prospect that, in the event that there were cost orders favouring either side, contrary setting off of costs was appropriate: see PJ [827], citing Wang v Yu (No 2) [2024] NSWSC 4 at [187]-[189], in turn citing Riva NSW Pty Ltd v Key Nominees Pty Ltd [2023] NSWSC 711 at [221]-[224].

The parties each sought orders setting off costs and I consider such orders are appropriate.

In the above circumstances, the orders of the Court are as follows: