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[2020] NSWSC 1722

Rattigan v Hanly

The Court, in respect of the amended notice of motion filed 15 October 2020: (1) Orders that, within 35 days of the making of these orders, the respondents, or either of them, reimburse the estate of the deceased, the amount of $230,000, which amount is to be paid into Court, pending the determination of the substantive proceedings, or any appeal therefrom, whichever is later. (2) Orders the respondents to pay the applicant’s costs of the notice of motion.

Catchwords

SUCCESSION – Executors and administrators – Proceedings brought against executor alleging maladministration of deceased’s estate – Whether substantive proceeding is hostile litigation – Where substantive proceeding not yet determined and no costs order has been made in favour of the executor – No Beddoe order and no application for pre-emptive costs order sought by executor – Where no consent of beneficiaries sought or given for deduction of executor’s costs – Executor deducting costs and disbursements out of the estate – Plaintiff on behalf of the estate seeks order for repayment of legal costs deducted – Whether the executor, or his solicitor, required to repay to the estate the amounts taken out of the estate for legal costs of the substantive proceedings

Cases cited

  • Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220
  • Application of Uncle’s Joint Pty Ltd (2014) 12 ASTLR 487;[2014] NSWSC 321
  • Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199;[2001] HCA 63
  • Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57;[2006] HCA 46
  • BE Australia WD Pty Ltd (subject to a Deed of Company Arrangement) v Sutton (2011) 82 NSWLR 336;[2011] NSWCA 414
  • Blake v Norris(1990) 20 NSWLR 300
  • In Re Beddoe; Downes v Cottam [1893] 1 Ch 547
  • In the matter of Bevillesta Pty Limited[2011] NSWSC 1378
  • Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66;[2008] HCA 42
  • McLean v Burns Philp Trustee Co Pty Ltd(1985) 2 NSWLR 623; (1985) 9 ACLR 926
  • Miller v Cameron (1936) 54 CLR 572;[1936] HCA 13
  • National Trustees Executors and Agency Company of Australasia Limited v Barnes (1941) 64 CLR 268;[1941] HCA 3
  • Northey v Juul[2014] NSWSC 464
  • O’Brien v McCormick[2005] NSWSC 619
  • Palmer v Ayres; Ferguson v Ayres (2017) 259 CLR 478;[2017] HCA 5
  • Re Estate Schwartz, Deceased; Application of Gellert; Gellert v Bentwood and Schwartz[2015] NSWSC 1484
  • Schmidt v Rosewood Trust Ltd [2003] 2 AC 709;[2003] UKPC 26
  • Stamoulos v Constantinidis; Constantinidis v Constantinidis[2017] NSWSC 1808
  • The Estate of Frances Kedesch Michell[2020] NSWSC 1300
  • The Estate of Maureen Laila Huber, of Cobram VIC; The Estate of Dolf Paul Huber[2020] NSWSC 1539
  • The Estate of Wendy Gwynne Price; Lanigan v Price (No. 2)[2020] NSWSC 1518
  • Wishart v Castlecroft Securities Ltd 2010 SC 16;[2009] CSIH 65

Legislation cited

  • Corporations Act 2001 (Cth), § 180, 181
  • Probate and Administration Act 1898 (NSW), § 84, 85
  • Supreme Court Act 1970 (NSW), § 66
  • Supreme Court Rules 1970 (NSW), § 78 r 94
  • Uniform Civil Procedure Rules 2005 (NSW), § 54.1, 54.3

Judgment

Introduction

  1. [1]

    HIS HONOUR: On 18 November 2020, two notices of motion were heard. The first was one filed on 7 September 2020, which was superseded by an amended notice of motion filed on 15 October 2020, by the Plaintiff, Janice Merle Rattigan. In the amended notice of motion, the Plaintiff sought an order that the Defendant, Anthony Adrian Hanly, repay, to the estate of Haydon John Skudder (the deceased), amounts that had been paid out of the deceased’s estate, or from the deceased’s companies, in respect of his legal fees in the substantive proceedings (to which I shall refer).

  2. [2]

    One purpose of amending the notice of motion was to join the Defendant’s solicitor, Alexander Tees, as a respondent, as it was to him that the legal fees sought to be recovered had been paid. In the alternative to the first order sought, the Plaintiff sought an order that Mr Tees repay the amount of legal fees that had been paid to him. (There was another order seeking that the Defendant be restrained from paying any further legal fees, but, sensibly, at an earlier directions hearing, the parties agreed that the Defendant would not do so: Ex PNM2.) (Where necessary, I shall refer to both as the respondents, or otherwise as the Defendant or Mr Tees.) Finally, the Plaintiff sought the costs of the notice of motion.

  3. [3]

    The second notice of motion was one filed on 6 November 2020, by the Defendant, who sought an order that the Plaintiff pay his costs of a notice of motion that had been filed by her on 26 June 2020. That notice of motion was listed for hearing, before Lindsay J, on 30 March 2021, with an estimated duration of 3 days. When the notice of motion had been set down for hearing, in August 2020, the Registrar had noted that only prayers 3, 4, 6 and 7 of that notice of motion were to be pursued.

  4. [4]

    Mercifully, the Defendant’s notice of motion was resolved during the hearing before me, and the following orders were made, consensually, subsequently:

  5. [5]

    In the circumstances, it is, now, only necessary to deal with the Plaintiff’s amended notice of motion.

  6. [6]

    The Plaintiff did not read any affidavits in support of the amended notice of motion but tendered a number of documents. This was unsurprising as the basal facts for seeking the relief that had been sought were not really the subject of dispute.

  7. [7]

    The respondents read a number of affidavits going to, amongst other things, the conduct of each of them. More than once during the hearing, it was necessary for me to remind the respondents’ legal representatives that it was not necessary for me to analyse all of the evidence upon which they relied going to the conduct of the respondents, or either of them, as no findings could, or would, be made about the matters alleged in the Statement of Claim.

  8. [8]

    At the hearing of the notices of motion, Ms J Needham SC, with Ms T Catanzariti of counsel, appeared for the applicant/Plaintiff, and Mr T Hale SC, with Ms I Ryan, of counsel, appeared for the respondents.

Background

  1. [9]

    Because of the issues to be determined, it is only necessary to refer to some of the background facts, which were not the subject of any real dispute.

  2. [10]

    The deceased died on 3 June 2017, leaving a Will dated 6 August 2012 and Codicil dated 9 May 2016. This Court granted probate of the Will and Codicil to the Defendant, the executor named therein, on 13 July 2017: Ex PNM1.

  3. [11]

    Relevantly, after revoking all previous testamentary dispositions, the deceased, in Clause 11 of the Will (as amended by Clause 2 of the Codicil), bequeathed to the Plaintiff certain shares in the following companies: H J Skudder Pty Ltd; Gonville Investments Pty Ltd; Australasian Financial Management Pty Ltd (AF Management); AFM Advisors Pty Ltd (AFM Advisors) and Your Financial Partner Pty Ltd (YFP) (collectively, “the companies”) and certain other real estate and personal estate.

  4. [12]

    By Clause 11.5 of the Will (again, as amended by Clause 2 of the Codicil), the deceased gave to the Plaintiff a 25 per cent share of the residue of the estate, which residue included the shares in the company, Your Financial Wellness Pty Ltd (YFW).

  5. [13]

    (It should be noted that the Will is a complex document comprising many pages. There appear to be some 32 beneficiaries residing in six different jurisdictions, being NSW, Victoria, Queensland, the United Kingdom, the Republic of Fiji and California, USA.)

  6. [14]

    Because it was relied upon by the respondents, it is necessary to set out, verbatim, Clause 40 of the deceased’s Will (Ex PNM1):

  7. [15]

    Senior counsel for the respondents relied, particularly, upon Clause 40.2(b) of the Will. This sub-clause, of course, refers to the payment of “costs, charges and expenses of administering the estate or the relevant Trust”. There is a dispute, in this case, about what costs, charges, and expenses, have been paid in administering the estate or the relevant Trust. In addition, the Clause says nothing about legal costs and disbursements associated with contested hostile proceedings in which maladministration of the estate by the Defendant is alleged.

  8. [16]

    The value of the deceased’s estate in NSW, as disclosed in the Inventory of Property attached to, and placed inside, the Probate document, was in excess of $5.65 million: Ex PMN1. There are other assets, in other jurisdictions, the nature and value of which were not the subject of evidence.

  9. [17]

    The substantive proceedings were commenced on 19 October 2018, when the Plaintiff filed a Statement of Claim, in which she sought an order that the Defendant pay the bequest in Clause 11 of the Will to her pursuant to s 84 of the Probate and Administration Act 1898 (NSW); an order that Probate of the deceased’s Will and Codicil be revoked, and that letters of administration with the Will and Codicil annexed be granted to Stephen Chant, an accountant and the substitute executor named in the Will; or, in the alternative, to an independent solicitor (being either Gerard Basha of Bartier Perry, Richard Neal of Teece Hodgson & Ward or Jeremy Glass of Glass Goodwin).

  10. [18]

    In what might be an oversimplification, the Plaintiff made various allegations about the conduct of the Defendant as executor. In broad summary, the terms of the Statement of Claim, which comprises some 146 paragraphs, allege maladministration of the deceased’s estate in that the Defendant:

    1. (1)

      paid himself a legacy before paying any other beneficiaries, before finalising the administration of the estate and before filing an online notice of distribution;

    2. (2)

      removed the Plaintiff as a director of AFM Advisers and appointed himself sole director (and paid himself director’s fees);

    3. (3)

      appointed his personal company as a paid consultant to a number of companies, being YFP and YFW;

    4. (4)

      arranged for AFM Advisors to lend funds to YFP and YFW, where both companies may have been insolvent;

    5. (5)

      used funds from AF Management to pay estate expenses, when Clause 11.3 of the deceased’s Will allows those funds to be used only to be pay beneficiaries;

    6. (6)

      sold assets of YFP without consulting the Plaintiff as sole beneficiary; and

    7. (7)

      had not repaid a personal debt to the deceased’s estate.

  11. [19]

    Simply analysed, it appears that the allegations in the Statement of Claim fall broadly into three categories: significant delays in the administration of the estate; breaches of fiduciary duties owed by the Defendant to the beneficiaries (by preferring, his own interests above the interest of the beneficiaries) and, what might be referred to as, matters pertaining to the Defendant’s conduct (in shifting funds from solvent to insolvent companies).

  12. [20]

    In response, the Defendant denied that any conduct constituted a breach of his duty as an executor or trustee, or any breach of fiduciary duty; denied any breach of ss 180 or 181 of the Corporations Act 2001 (Cth); denied that he had jeopardised the administration of the deceased’s estate; denied any breach of duty, as executor, which constituted a devastavit (which is defined in John S James (ed), Stroud’s Judicial Dictionary of Words and Phrases (4th ed, 1972, Sweet & Maxwell) as “a mismanagement of the estate of a deceased person by his legal representatives ‘in squandering and misapplying the assets, contrary to the duty imposed on them; for which they shall answer out of their own pockets as far as they had, or might have had, assets of the deceased’”); and stated that he had acted in good faith and had not delayed the due administration of the estate.

  13. [21]

    Despite the commencement of the substantive proceedings over two years ago, there has been very little done to advance the case, although there have been nearly 20 prior appearances before the Court and several attempts made to resolve it. At the conclusion of the hearing of the notice of motion, I made directions in the hope that the parties could focus on the way in which the matter might progress, whether as a contested hearing or otherwise. I did so as there was the suggestion, made by Mr Tees, in his affidavit, affirmed on 26 October 2020, at par 27, that “[t]here does not appear to be any remaining utility in the proceedings” and otherwise that “the substantial part of matters put in issue by the Plaintiff … relate directly to the due administration of the Estate”.

  14. [22]

    On 19 December 2018, other proceedings, bearing proceeding number 2018/390211, were commenced by another beneficiary, Marilyn Ford, by Summons (the Ford proceedings). These were proceedings, described by Mr Tees, as dealing with the “transfer of properties bequeathed to Marilyn Ford”: Affidavit, Alexander Tees, 6 October 2020 at par 69a.

  15. [23]

    By the time of the hearing of the amended notice of motion, the Ford proceedings had been resolved, but how the costs of those proceedings are to be borne have not yet been determined.

  16. [24]

    There was no dispute that moneys had been paid out of the deceased’s estate, the quantum of which, on the Defendant’s, and Mr Tees’, own evidence, varied between about $309,000 and about $344,000. The variance depended upon the date of the relevant affidavit in which the evidence was given.

  17. [25]

    The Defendant, in an affidavit affirmed on 10 August 2020, at par 6, stated that:

  18. [26]

    In par 9 of the same affidavit, the Defendant added:

  19. [27]

    Mr Tees stated at par 64 of his affidavit, affirmed on 6 October 2020, to which he annexed “copies of Memoranda of costs and disbursements received … and paid”, that “many items are related to matters that are substantially intermingled and intermixed mediation and litigation matters that are inextricably linked with the due administration of the estate”.

  20. [28]

    At par 65 of the same affidavit, Mr Tees acknowledged:

  21. [29]

    Mr Tees stated that the Defendant, in his instructions to him, denied any allegation that, as executor he did not have “proper authority to have the estate, including the Estate companies, pay legal costs and disbursements”: Affidavit, Alexander Tees, 6 October 2020 at par 12.

  22. [30]

    Despite the evidence of Mr Tees, and the submissions made by senior counsel for the respondents (at Tcpt, 18 November 2020, p 2(38) – p 3(40)), it appears clear that many of the claims in the Statement of Claim are made against the Defendant, as executor, personally, and that the litigation may be described as “hostile litigation”.

  23. [31]

    Whether the Ford proceedings can be described in this way is not the subject of any evidence. The contentions of the parties in the pleadings, confirmed by the robust way in which the notice of motion was conducted, suggests that this litigation is like any other hostile litigation.

  24. [32]

    Undoubtedly, the hearing of the substantive proceedings will involve contests concerning allegations of the conduct, and behaviour, of the Defendant as executor of the deceased’s estate, and the Court will be required to determine the legal consequences, if any, of that conduct and behaviour, including whether, as sought by the Plaintiff, the grant of Probate to the Defendant should be revoked, or whether he should be removed if he has become a trustee.

  25. [33]

    During the course of the hearing, I made clear that it was not the purpose of the adjudication by the Court on this contested amended notice of motion, to determine whether the Defendant, after the substantive proceedings are determined, will be entitled to recover any amount for the legal costs and disbursements incurred by him in relation to the proceedings, or otherwise. It is clearly premature, on the present state of the evidence, which has not yet been tested, on either side, to do so.

  26. [34]

    The sole question for determination on the amended notice of motion is whether, pending an order of the Court dealing with the costs and disbursements of the substantive proceedings, or otherwise, the respondents, or either of them, should repay to the estate, all, or any part, of the amount that had been paid for legal costs and disbursements.

  27. [35]

    In reaching my conclusion on this question, it is neither necessary nor appropriate to express any view on the Defendant’s conduct or behaviour, or whether, at the conclusion of the substantive proceedings, an order will be made that he receive his costs of the proceedings, either as against the Plaintiff, or out of the estate of the deceased. Those will be matters for another time, or times, and will be determined after all of the allegations, on each side, have been properly tested.

  28. [36]

    In addition, if Probate accounts are ordered to be filed (see s 85(1AA) Probate and Administration Act), the Probate Rules confer on a registrar the powers of the Court in relation to, amongst other things, the passing of the accounts of executors and administrators. Conferral of power on the registrar referable to s 85 of the Probate and Administration Act is found in Pt 78 r 94(3)(c) of the Supreme Court Rules.

  29. [37]

    A Registrar has power to moderate disbursements “in whole or in part”. The process of moderation of legal, or other professional, fees, is distinct from taxation of those fees. “Taxation involves the determination of what amount is properly payable by the executor to the solicitor. Moderation involves a determination of what amount is proper to allow to the executor as an outgoing from the estate: In the Will of Kerrigan (1935) SR (NSW) 242; (1935) 52 WN (NSW) 79, at 251”: The Estate of Maureen Laila Huber, of Cobram VIC; The Estate of Dolf Paul Huber [2020] NSWSC 1539 at [60] (Slattery J). See also what I have written in The Estate of Frances Kedesch Michell [2020] NSWSC 1300.

Procedural Matter

  1. [38]

    It is necessary to digress here as there is one procedural aspect that should be referred to before proceeding further. The reason for mentioning this procedural matter is that senior counsel for the respondents, in answer to the proposition that there had not been any orders made, by the Court, for the Defendant’s costs of the administration of the estate, or otherwise, said that the only exception related to the order for the costs of the first mediation as had been made consensually by the parties.

  2. [39]

    There had been a number of appearances, in the substantive proceedings, before the former Senior Deputy Registrar in Probate, L Brown in the Probate List. On 18 March 2019, the Registrar made an order in the substantive proceedings, by consent of the parties, that “the matter be referred to private mediation on or before 30 April 2019”. Relevantly, an order was also made, consensually, that the “private mediation be paid out of the estate”. It was to this order that senior counsel for the respondents referred. The mediation had proceeded before the Honourable W V Windeyer AM RFD ED on 30 April 2019, and “was adjourned so as to permit accounting information to be collated and made the subject of a report or reports”. The mediation resumed on 10 June 2019, when it was, again, adjourned.

  3. [40]

    The matter was placed in Lindsay J’s list on 17 February 2020, when his Honour noted, amongst other things “that, subject to any orders of the Court the proceedings respectively 2018/320921 and 2018/390211 are to be heard, and mediated, together”.

  4. [41]

    The matter came into the Succession List on 27 April 2020 on which date, relevantly, I made orders in the following terms:

  5. [42]

    Ultimately, the parties were content for me to note (Tcpt, 18 November 2020, p 14(08) – p 15(40)), in relation to the amended notice of motion, that:

  6. [43]

    (It is difficult to know what to make of the order for costs of the first mediation to which senior counsel referred. Perhaps, in the future, the parties might be able to agree that the order made should be treated in the same way as the order that I made in relation to the continued mediation, namely that it be limited to the costs of the mediator and the mediation room. In this way, neither party will be prejudiced. Either, or both, may seek an order for such costs to be paid otherwise, if so advised. Ultimately, no doubt, that will be a matter for further debate.)

Some matters not seriously in dispute

  1. [44]

    There are a number of matters that are not seriously in dispute, which, in my view, are relevant to the determination of the amended notice of motion. These are:

Some legal principles

  1. [45]

    First, it is necessary to consider the foundation for the application made in the amended notice of motion. This was not the subject of the written submissions filed and served on the part of the Plaintiff. No reference was made to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 54.3(3)(d) or to r 54.3(4)(b) which, relevantly, provide:

  2. [46]

    UCPR r 54.1 defines “estate” to mean a deceased person’s estate.

  3. [47]

    At the commencement of oral submissions, senior counsel for the Plaintiff stated (Tcpt, 18 November 2020, p 18(41–47)):

  4. [48]

    The argument made on behalf of the respondents was that the amended notice of motion was not a “proceeding”: Tcpt, 18 November 2020, p 31(45) – p 32(07).

  5. [49]

    The respondents’ submission should be rejected. Apart from anything else, the amended notice of motion has been filed in the substantive proceedings. In any event, the submission is inconsistent with In the matter of Bevillesta Pty Limited [2011] NSWSC 1378, in which Barrett J (as his Honour then was), at [25]–[26], wrote:

  6. [50]

    In Blake v Norris (1990) 20 NSWLR 300 at 306 Smart J wrote:

  7. [51]

    In my view, the word “proceeding” relevant to r 54.3 refers to the means, or vehicle, by which the subject matter of a dispute is brought before a court for adjudication and includes, as in these proceedings, an interlocutory step brought by notice of motion. In other words, it covers any form of legal curial process.

  8. [52]

    The object of the jurisdiction set out in UCPR Part 54 is to enable questions to be settled between beneficiary and executor. In McLean v Burns Philp Trustee Co Pty Ltd (1985) 2 NSWLR 623 at 636; (1985) 9 ACLR 926 at 935, Young J (as his Honour then was) explained the right of a beneficiary to an order in the following way:

  9. [53]

    In Re Estate Schwartz, Deceased; Application of Gellert; Gellert v Bentwood and Schwartz [2015] NSWSC 1484, at [12], Lindsay J described UCPR Pt 54 as a “procedural expedient” that is “designed to provide [a] summary, cost-effective [alternative] to an application for general administration of a trust by the Court” (citations omitted).

  10. [54]

    In Stamoulos v Constantinidis; Constantinidis v Constantinidis [2017] NSWSC 1808, at [50]–[51], Parker J in discussing the rule, stated:

  11. [55]

    In any event, the Court has an inherent jurisdiction, as part of its equitable jurisdiction, to supervise the administration of trusts to make an order of the type that is sought: Palmer v Ayres; Ferguson v Ayres (2017) 259 CLR 478 at 510–511 [84]; [2017] HCA 5 at [84] (Gageler J), citing Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at 724 [36]; [2003] UKPC 26 at [36] (Lord Walker for the Board).

  12. [56]

    The respondents’ counsel put the claim being made in the amended notice of motion this way:

  13. [57]

    I do not accept that the description of what is being sought is as submitted. Had the Defendant threatened to have recourse to estate property for the purpose of conducting his defence, the procedure for determining that question might very well have been an application, by the Plaintiff, for an interlocutory injunction as was the subject of the additional relief sought in the amended notice of motion (which did not have to be determined because of the undertaking given before the hearing). Here, amounts were simply taken from the estate for legal costs.

  14. [58]

    In any event, there can be no doubt that the Court has power to grant an interlocutory injunction under s 66(4) of the Supreme Court Act 1970 (NSW), at any stage of proceedings, on terms, and, in any case, where “it appears to the Court to be just or convenient”. In this case, I am satisfied if what is sought is as submitted by the respondents, that it is both just and convenient to determine the claim made on this basis.

  15. [59]

    Then, as is well known, the Court must consider whether the Plaintiff’s case presents a serious question to be tried and whether the balance of convenience, hardship and related factors warrant the grant of an interlocutory injunction, the general principles of which were set out in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 216–218 [9]–[13], 231–232 [59]–[61], 239–248 [86]–[105]; [2001] HCA 63 at [9]–[13] (Gleeson CJ), [59]–[61] (Gaudron J), [86]–[105] (Gummow and Hayne JJ), and more recently affirmed in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 at 68 [19], 81–84 [65]–[72]; [2006] HCA 46 at [19] (Gleeson CJ and Crennan J), [65]–[72] (Gummow and Hayne JJ).

  16. [60]

    If it were necessary to deal with the matter in this way, based upon the factual matters to which I have referred, or shall refer, I am satisfied that each limb is satisfied.

  17. [61]

    I turn next to the legal principles with which the case is concerned. It was not suggested that there is any difference between an executor and a trustee in regard to the legal principles set out below.

  18. [62]

    In Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220, Lightman J identified three categories of litigation in which trustees may become involved. At 1223–1224, it was observed:

  19. [63]

    As I have stated above, having read the pleadings, I am satisfied that the substantive litigation falls within the second category, that is to say, “a beneficiaries’ dispute”, being one between the Plaintiff, who is one of the residuary beneficiaries, and the Defendant, who is the executor to whom Probate has been granted.

  20. [64]

    At 1224, Lightman J also observed, in relation to the question of costs in a beneficiary dispute:

  21. [65]

    This statement does no more than reflect the principle that an executor or trustee will not be able to rely upon the right of indemnity in respect of legal costs incurred in protecting only his, or her, personal interests. Thus, in Miller v Cameron (1936) 54 CLR 572 at 578–579; [1936] HCA 13, Latham CJ expressed the view that a trustee who defended an action for his removal was thereby representing his own interests and not those of the trust estate.

  22. [66]

    The rationale of indemnification, in respect of the expenses of litigation, as between trustees and the trust estate, or other fiduciaries and those on whose behalf they are acting, is that the party who has incurred the expense has not been acting for his, or her, own benefit but for the benefit of the estate or person in question: Wishart v Castlecroft Securities Ltd 2010 SC 16 at 46 [71]; [2009] CSIH 65 at [71] (Lord Reed for the Court).

  23. [67]

    In National Trustees Executors and Agency Company of Australasia Limited v Barnes (1941) 64 CLR 268 at 279; [1941] HCA 3, Williams J (Rich ACJ agreeing) observed:

  24. [68]

    (On the basis of these authorities alone, the concession made by the Plaintiff, referred to earlier as to the costs of administration, was properly made.)

  25. [69]

    However, that is not the end of the matter. Generally speaking, if, as executor, a defendant proceeds to defend proceedings without the authority of an order of the Court, or without an indemnity of the other residuary beneficiaries, he does so at his own risk as to costs. As the plurality of the High Court wrote in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at 93–94 [70]–[71]; [2008] HCA 42 at [70]–[71]:

  26. [70]

    In Application of Uncle’s Joint Pty Ltd (2014) 12 ASTLR 487 at 494 [24]–[25]; [2014] NSWSC 321, Brereton J (as his Honour then was) wrote at [24]–[25]:

  27. [71]

    Slattery J in Northey v Juul [2014] NSWSC 464 summarised the authorities, succinctly, at [74]:

  28. [72]

    Thus, there was a means, available to the Defendant, to be able to have resort to the estate property, pending the determination of the substantive proceedings, in order to pay the legal costs incurred in defending the claim, without fear of being found liable for breach of trust as a result of doing so. This was by obtaining the sanction of the Court by way of judicial advice, prior to the trial of the proceeding, to permit him to do so. Whether the Court would have provided such advice is unknown.

  29. [73]

    The respondents presented evidence seeking to justify their position, and, effectively, to refute the allegations in the substantive proceedings. It is not for the Court, in determining the amended notice of motion, to resolve the factual disputes that are likely to arise, or to determine the issue on the basis of the untested evidence of the respondents. Nor can the Court, in determining the issue raised by the amended notice of motion, construe the terms of the Clause 40 of the deceased’s Will to determine whether it provides a justification for the Defendant’s conduct in paying his own legal costs out of the estate assets. That will need to be determined at a final hearing.

  30. [74]

    Alternatively, as was accepted in the written submissions:

  31. [75]

    I dealt with the issue of what is required in filing and passing accounts, including in relation to legal costs, in The Estate of Frances Kedesch Michell at [99]–[137].

  32. [76]

    As I mentioned several times during the hearing, it is possible that the Defendant will be vindicated, but it is also possible that he will not be. I express no view on that matter. He may also be entitled to his costs in the defence of the substantive proceedings in the Court’s exercise of discretion as to costs.

  33. [77]

    As Campbell JA (with whom McColl JA agreed) in BE Australia WD Pty Ltd (subject to a Deed of Company Arrangement) v Sutton (2011) 82 NSWLR 336 at 387 [213]; [2011] NSWCA 414 at [213] wrote:

  34. [78]

    I also obtain support for the view expressed by what was written by Slattery J, this time in The Estate of Wendy Gwynne Price; Lanigan v Price (No. 2) [2020] NSWSC 1518, at [31]–[32]:

  35. [79]

    And at [34]–[35]:

  36. [80]

    Again, I express no view on that matter as the question with which I am dealing relates to money that the Defendant has withdrawn from the estate in order to pay legal costs that he has incurred. Put another way, is it appropriate to permit the payment, or more precisely, the retention, of the Defendant’s legal expenses, deducted from the estate, in advance of a determination, by the Court, hearing the question whether he, as executor, has engaged in the conduct alleged in the substantive proceedings?

  37. [81]

    I do not accept the submission made by the respondents that there is no evidence supporting the necessity to make orders “to keep matters in status quo” until the hearing: Tcpt, 18 November 2020, p 35(19) – p 36(10). I have set out the factual matters that provide a basis for the making of the orders sought.

  38. [82]

    In my view, the authorities do not support the submissions of the respondents that the Defendant, as executor, is entitled, without more, pending the determination of the substantive proceedings, to use estate funds, to meet the legal costs incurred in defending those proceedings which have been brought by the Plaintiff. To do so, in circumstances where he may be exposed to a personal costs order, would be to permit the Defendant to benefit when, ultimately, he may not obtain an order for costs and may be liable to the Plaintiff for her costs, or some of them.

  39. [83]

    An executor should not have the costs of defending allegations made against him in substantive proceedings met out of the estate property until after the allegations in the substantive proceedings have been considered and determined or until a Court has determined that he should receive those costs pending the determination of the substantive proceedings.

  40. [84]

    It would be particularly unsatisfactory to enable the Defendant, as executor, without prior reference to the Court, to effectively fund his defence of the substantive proceedings, thereby pre-empting the final determination of the trial Judge who hears the substantive proceedings and makes an order for the costs of those proceedings to be borne.

  41. [85]

    If the Defendant is successful in whole, or in part, as he confidently expects to be, he may receive an order that his costs be paid by the Plaintiff or out of the estate. As stated, it was not disputed that each has the financial capacity to satisfy any order for costs that may be made. Regrettably, whether the Defendant, or Mr Tees, would have the financial capacity to repay the legal costs deducted, in the event that he is ordered to pay costs, is not as clear, since there was no evidence provided by either the Defendant or Mr Tees on that topic.

  42. [86]

    Finally, on this point, if the substantive proceedings are dismissed, and an order for costs is made in the Defendant’s favour, it may not be the estate of the deceased which is to bear the burden of those costs. It may be the applicant/Plaintiff who is to bear the burden of those costs. In that event, it may also have been inappropriate to allow the assets of the estate to have been used in defending the substantive proceedings. It will be the estate that will have been deprived of the capital that has been used to pay the costs, as well as any interest that may have accrued on that capital.

  43. [87]

    I turn next to what amount should be ordered to be repaid. The Defendant and Mr Tees stated that the total amount of the costs, calculated on the indemnity basis, are $344,027.50 of which the amount of $327,528 has been paid: Affidavit, Anthony Hanly, 10 August 2020 at Annexure A; Affidavit, Alexander Tees, 6 October 2020 at pars 57–64. I note that a proportion ($69,901) of that amount relates to fees incurred after 1 January 2020, of which $17,709.25 relates to the period 10 August 2020 – 6 October 2020.

  44. [88]

    The Defendant and Mr Tees have estimated that between 70–75 per cent of the legal fees incurred since October 2018 were incurred in relation to these proceedings and associated proceedings commenced by Marilyn Ford, another beneficiary: Affidavit, Anthony Hanly, 10 August 2020 at par 9.

  45. [89]

    Using that as a guide, and the lower amount ($327,528), I propose to order that the respondents, or either of them, repay to the estate of the deceased an amount equal to about 70 per cent of the amount taken from the estate for legal costs, which equates to approximately $230,000.

  46. [90]

    The Court has not received any notification from senior counsel for the respondents as to the provision of security by the respondents to the applicant/Plaintiff, so I shall simply make the order for repayment.

  47. [91]

    Because of the possibility that the Defendant may obtain an order for his costs out of the estate, I propose to order that the amount be paid into Court. In this way, should he receive such an order, the fund could be available, reasonably promptly, to satisfy, in whole or in part, the order made.

  48. [92]

    There is no reason why the respondents should not pay the costs of the notice of motion in which they have been unsuccessful.

  49. [93]

    The Court, in respect of the amended notice of motion filed 15 October 2020:

    1. (1)

      Orders that, within 35 days of the making of these orders, the respondents, or either of them, reimburse the estate of the deceased, the amount of $230,000, which amount is to be paid into Court, pending the determination of the substantive proceedings, or any appeal therefrom, whichever is later.

    2. (2)

      Orders the respondents to pay the applicant’s costs of the notice of motion.

  50. [94]

    I note that the matter has been adjourned for further directions before me at 9:00 a.m. on Wednesday, 17 February 2021.

Unofficial copy. Source: NSW Caselaw. Refer to the official version for authoritative text.