Epov v Epov

These proceedings concern the enforcement of orders made by Hallen J arising from his Honour’s judgment in Epov v Epov; Epov v Epov [2014] NSWSC 1086 (the “Principal Judgment”). Without disrespect, I shall refer to the various members of the Epov family by their given name.

The Principal Judgment determined claims for family provision from the estate of Konstantin by his wife, Maria, and one of his children, Gennady. The defendant in each claim was Peter, who is Konstantin’s son, Maria’s stepson and Gennady’s brother. Peter is the executor of Konstantin’s estate.

One of the outcomes of the Principal Judgment was that Maria was to receive a legacy from part of the proceeds of sale of a property at Lidcombe (the “Lidcombe Property”). The present proceedings were commenced by Maria because Peter refused to give effect to the Principal Judgment by paying her the legacy to which she was entitled pursuant to Hallen J’s orders.

When these proceedings came on for hearing before me, Peter (who appeared for himself) conceded that the relevant funds should be paid to Maria’s solicitor. Peter informed the Court that the reason for his delay in making the payment was his concern about Maria’s capacity and how the funds would be applied. While his concerns may have been well intentioned, they provided no excuse for his failure to comply with Hallen J’s orders. In the absence of any legally cognisable excuse, the Court accedes to Maria’s application that Peter should personally pay Maria’s costs of these proceedings on the indemnity basis assessed in the sum of $21,936.93.

At all times Peter appeared for himself. At the two short hearings before me Maria was represented by her solicitor, Mr D J Cossalter. Maria’s written submissions on the issues determined by these reasons were prepared by Mr P W Bates of Counsel.

The facts were not in dispute.

Hallen J delivered the Principal Judgment on 14 August 2014.

On 28 August 2014, his Honour made orders to give effect to the Principal Judgment which included (emphasis added):

Those orders gave effect to this conclusion in the Principal Judgment:

Order 8 made by Hallen J required the “legacy” to be paid within 7 days after completion of the sale of the Lidcombe Property, otherwise interest would run. However, as appears from Order 5(b), the legacy was a function of the “net proceeds of sale”, which included (by the definition in Order 1) an allowance for the “costs and expenses of probate, and administration costs”. In practical terms, this meant that payment of the legacy to Maria could not be finalised until the estate’s costs had been determined.

The Lidcombe Property was sold at auction on 7 February 2015 with completion the following month. On 3 July 2015, Konstantin’s estate made a partial distribution of the legacy to Maria in the sum of $200,000.

There was then a dispute between the parties concerning Maria’s costs of the proceedings before Hallen J. Those costs were ultimately assessed, with the certificate of determination being sent to Maria’s solicitor on 30 March 2016 and received by Peter’s solicitor no later than 4 April 2016.

By 4 April 2016, Peter (or, in practical terms, his solicitor) now had all the information required to make the final calculations to distribute the estate, including the balance owing to Maria of $192,748.58 (the “Amount”).

On 14 April 2016, Maria’s solicitor wrote to Peter’s solicitor. After referring to the assessment of Maria’s costs, Maria’s solicitor wrote that “we note that with this determination the Estate should be in a position to finalise same and move towards distribution”. He then sought various information relevant to understanding how the balance of the estate would be distributed. The letter concluded “We also request confirmation as to when you anticipate distribution will take place so that the writer may make arrangements to be confirmed as joint signatory on the proposed account holding the 16.67%.”

On 9 June 2016, Maria’s solicitor wrote to Peter’s solicitor:

Maria’s solicitor had received a “plan of distribution” for Konstantin’s estate as at 6 June 2016 that showed the Amount as payable to Maria.

On 26 September 2016, Maria’s solicitor again wrote to Peter’s solicitor:

On 12 October 2016, Peter’s solicitor wrote to Peter informing Peter that the joint account documentation had been received. The email included this to Peter from his solicitor: “The balance of the legacy needs to be paid to Maria… I need to hear from you very soon”.

Shortly after this correspondence, the joint account to hold the loan referred to in Order 5(c) of the orders made by Hallen J (see paragraph [8] above) was opened and $196,433.21 was deposited.

Maria’s solicitor spoke to Peter’s solicitor on 20 January 2017 and 21 February 2017 inquiring as to why the funds owing to Maria had not been paid. On each occasion, Peter’s solicitor confirmed that he held the Amount in his trust account but that he had not yet received instructions from Peter as to the distribution of the funds.

On 3 November 2017, Maria’s solicitor wrote to Peter’s solicitor:

On 16 November 2017, Maria’s solicitor sent a reminder to Peter’s solicitor that the 14 day period referred to in the letter of 3 November 2017 was shortly to expire and that, in the absence of a response, the summons would be filed on 20 November 2017. The reminder elicited this response from Peter’s solicitor:

The summons in these proceedings was filed on 27 November 2017, claiming this relief:

The summons was returnable on 12 February 2018. However, by that date Peter had not yet been served. The summons was stood over to 26 March 2018.

Peter was served with the summons and affidavit in support on 14 February 2018.

The proceedings were next before the Court on 26 March 2018. Peter did not appear and Maria was ordered to notify Peter of the further directions hearing fixed for 11 April 2018.

On 4 April 2018, Maria’s solicitor emailed Peter’s solicitor (although as it turns out the latter was never formally instructed to act for Peter in these proceedings but was clearly in contact with Peter from time to time):

On 5 April 2018, Maria’s solicitor sent this letter to Peter at three different addresses, including his home address (and a similar letter to his solicitor):

On 9 April 2018, Peter’s solicitor wrote to Maria’s solicitor, including:

On 11 April 2018, the proceedings were again before the Court and there was no appearance for Peter. The matter was fixed for hearing before me on 6 September 2018.

In the expectation that Peter’s solicitor would receive instructions to represent Peter in these proceedings, Maria’s solicitor emailed Peter’s solicitor on 12 April 2018 to inform him the proceedings had been fixed for hearing on 6 September 2018.

On 30 August 2018, Maria’s solicitor spoke to Peter’s solicitor. The latter informed Maria’s solicitor that Peter was aware of the hearing on 6 September 2018 but that he had not instructed him (Peter’s solicitor) to appear at the hearing.

At 12.47pm on 4 September 2018, Peter emailed my Associate:

The “attached letter” to Maria’s solicitor included:

At 12.55pm on 4 September 2018, my Associate wrote to Peter and Maria’s solicitor:

On 5 September 2018, I heard Peter’s adjournment application. Peter appeared by telephone. In the course of the application, it became apparent that Peter was unable to identify any reason which could be regarded as a proper reason not to have paid the Amount. I decided that Peter should direct his solicitor to pay the Amount to Maria’s solicitor, but that Peter should be given one last opportunity to demonstrate why the Amount should not be released to Maria. To deal with that and the other outstanding aspects of the proceedings, I made these directions:

The Amount (recalculated to allow for the passage of time) was transferred to Maria’s solicitor in accordance with Order 1 set out in the preceding paragraph.

When the matter came before me again on 4 October 2018, I had this exchange with Peter:

After hearing the parties, and bearing in mind that Peter was a self-represented litigant, I determined that he should have a final opportunity to provide written submissions as to why he should not pay interest and costs as sought by Maria. The parties agreed that I should then deal with the matter on the papers. To that end, I made the following orders and directions:

The parties have provided the Court with their submissions in accordance with the directions which were made on 4 October 2018.

For the purposes of these proceedings, it is sufficient to note that Peter has at all material times been subject to at least two, overlapping duties: his duty as a litigant to comply with Hallen J’s orders and his duty as executor of Konstantin’s estate to administer the estate in a timely way. The Court’s conclusions in what follows as to both interest and costs are based upon the Court’s finding that Peter has clearly failed to fulfil those duties and has not demonstrated any, let alone any sufficient, reason for that failure.

The essence of Peter’s explanation is set out in this paragraph of his affidavit sworn 28 September 2018:

In responding to Maria’s solicitor’s affidavit, Peter repeated his concerns in paragraph 8 of his affidavit sworn on 5 November 2018:

In paragraph 33 of that affidavit, Peter also says — with some insight — that “perhaps, I have been over zealous, but at all times I have been concerned that Maria’s interests were protected and her money was not exhausted through legal fees and associated disbursements”.

The difficulty for Peter in the present application is that while he may have genuinely held the concerns to which he deposes, he has completely failed to demonstrate that those concerns have any basis in fact.

While Peter’s evidence does not even rise to the point of moving the evidentiary onus onto Maria, Maria’s solicitor did address the question of Maria’s competence in at least two ways which I find persuasive. First, he informed me that he had conferred with Maria with the assistance of an interpreter and had satisfied himself that she was competent for the purpose of instructing him and understanding what was happening in connection with enforcing the orders made by Hallen J in the present proceedings.

Second, there was tendered for Maria (and Peter also included in his evidence) a certificate from Maria’s general practitioner dated 19 September 2018 stating that “Maria Epov has normal mental capacity, understands legal advice, can provide legal instructions and managing her own financial affairs in a capable way”.

In addition to failing to demonstrate any reason for not paying the Amount in accordance with Hallen J’s orders once the provision of the costs assessment had enabled the final calculations to be done, I am satisfied (see, in particular, paragraphs [18] and [22] above) that Peter was advised more than once by his solicitor that he had to get on with administering the estate and paying the Amount. By reference to the same evidence I also find that he was in contact with, or could have been in contact with, his solicitor as required. Furthermore, if he had concerns about Maria’s mental capacity, I have no doubt that he could have sought advice from his solicitor about what action he could take. That advice would undoubtedly have canvassed the possibility of an application to the Guardianship Division of the NSW Civil and Administrative Tribunal. There is no suggestion that Peter ever made such an application in relation to Maria or that he ever contemplated doing so.

Maria seeks leave to amend her summons to claim interest from 11 April 2016 (being 7 days after Peter’s solicitor was provided with the costs assessment certificate — see paragraph [12] above) until 10 September 2018 (when the recalculated Amount was paid in accordance with Order 1 which I made on 5 September 2018 — see paragraph [8] above). That leave will be granted. Order 8 made by Hallen J (see paragraph [36] above) was for interest to run on the legacy 7 days after completion of the sale of the Lidcombe Property if the legacy was not paid. The intent of Order 8 is clear, namely that interest should run 7 days after the amount of Maria’s legacy became ascertainable.

I accept Maria’s submission that the amount of her legacy (and the amounts required to distribute Konstantin’s Estate finally) became ascertainable once the costs assessment issued. That occurred on 4 April 2016.

I do not accept Peter’s submission that, insofar as calculating interest is concerned, the estate was not able to be settled until October 2016 when his solicitor had received the information required to open the joint account (see paragraph [17] above). The Amount was ascertainable in April and was set out in the distribution plan prepared in June 2016 (see paragraph [16] above). There was no reason why the Amount could not have been paid from April 2016.

Similarly, Peter relies on Maria’s solicitor’s letter of 26 September 2016 (see paragraph [17] above) for the submission that Maria’s solicitor was “content with the conduct of the estate thus far and he states, recognises and acknowledges that after the filing of account opening authorities and specimen signatures, there is no reason why the estate should not be finalised. In my view this was confirmation from Mr Cossalter that he was satisfied that up to 26 September the estate could not be settled and the balance of the legacy funds paid out”. I do not accept that submission. Maria’s solicitor clearly expected payment of the Amount and the completion of administration of the estate from April 2016 (see paragraph [14] above). There is again no basis to suggest that payment of the Amount had to await the establishment of the joint account into which the loan amount was to be paid (see Order 5(c) made by Hallen J set out in paragraph [8] above).

I accept Maria’s submission that no new information was required after provision of the certificate of costs assessment on 4 April 2016 to enable the Amount to be paid and the estate to be administered. There is nothing in the June 2016 distribution plan (see paragraph [16] above) that on its face appears to be information that was not available to Peter on 4 April 2016. Conformably with Hallen J’s Order 8, interest calculated in accordance with s 84A(3) of the Probate and Administration Act 1898 (NSW) should run 7 days after that date (11 April 2016) up to and including the date of the payment of the recalculated Amount (10 September 2018). Because interest on that basis is not strictly in the terms of Order 8 made by Hallen J, the Court will, for the avoidance of doubt, make a further order for payment of interest calculated by reference to that date.

Maria’s solicitor has calculated the amount of interest payable on that basis as $16,410.94. While opposing the order, Peter has not suggested that Maria’s calculation is wrong as a matter of mathematics. There will be an order for payment of that amount of interest.

Maria’s summons made it clear from the outset that Maria would be seeking orders that Peter should pay the costs of these proceedings personally on the indemnity basis. The summons had been provided to Peter’s solicitor before the proceedings were commenced. While giving a party prior notice of an intention to seek indemnity costs is not essential, it is certainly good practice and will weigh in favour of the discretion being exercised.

Peter ultimately agreed that the recalculated Amount should be released unconditionally to Maria. At no point was he able to demonstrate any reason why that should not occur then or at any time since April 2016. That payment is the relief which Maria sought and costs should follow the event.

Insofar as costs on the indemnity basis are concerned, the Court is satisfied that Peter has been unreasonable in his conduct of the proceedings because he knew, or ought to have known given the availability of legal advice, that he had no proper basis to refuse to pay over the Amount. Properly advised, Peter should have known that he had no chance of successfully resisting these proceedings. In the exercise of its discretion, the Court will order Peter to pay Maria’s costs on the indemnity basis for that reason: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397.

The Court is also satisfied that this an appropriate case for a gross sum costs order: s 98(4)(c) of the Civil Procedure Act 2005 (NSW) (the “CP Act”) and Bechara v Bates [2016] NSWCA 294 at [12]–[18]. This is because the matter has been relatively confined and Maria’s costs are readily ascertainable. Furthermore, these are proceedings which Maria should never have been required to commence and there should be no further delay in bringing them to a definitive conclusion. This last consideration becomes even more important when it is realised that Maria is nearly 91 years old.

Maria’s solicitor provided to the Court his fee agreement with Maria and an itemised tax invoice in relation to her costs of the proceedings. That invoice discloses costs of $16,197.27 (excluding GST) and disbursements of $6,746.75 (excluding GST) up to and including the directions hearing before me on 4 October 2018 (see paragraph [38] above). Maria’s solicitor also confirmed that no claim was made for counsel’s fees up to that date, nor for solicitor’s or counsel’s fees in relation to preparing the evidence and submissions relied upon for the costs argument which is the subject of these reasons.

Where a gross sum costs order is made in relation to costs on the ordinary basis, the Court usually makes a discount to reflect both the broad brush approach which the Court has adopted and the fact that costs on the ordinary basis necessarily involve a discount from indemnity or solicitor/client costs. In an assessment of costs ordered to be paid on the indemnity basis, all costs are allowed “other than those that appear to have been unreasonably incurred or appear to be of an unreasonable amount” (UCPR Part 42, r 42.5(b)). Without in anyway attempting to lay down an extra-statutory rule or fetter the Court’s general discretion as to costs (see s 98(1)(b) of the CP Act), in my respectful view an order for gross sum costs on the indemnity basis should usually be approached in accordance with r 42.5(b), but otherwise not be discounted unless a discount is required to achieve a just outcome in the particular case.

I have carefully reviewed Maria’s solicitor’s itemised tax invoice in the context of the background to, and history of the proceedings as set out in paragraphs [7] to [39] above and the issues involved. I do not propose to make any deductions in the costs claimed. However, there will be two deductions from the amount claimed in the tax invoice for disbursements:

The gross sum costs amount that Peter will be ordered to pay to Maria will therefore be $21,936.93 (comprising the costs claimed of $17,816.99 (including GST) and the adjusted disbursements of $4,119.94 (including GST)).

As I understood his submissions, Peter advanced four reasons why Maria’s claim for a gross sum costs order on the indemnity basis should be rejected. He submitted that each party should pay her or his own costs. For the reasons which follow, the Court rejects each of those submissions.

Peter submitted that “costs have been materially increased by reason of the refusal of the plaintiff’s solicitor to communicate directly with myself notwithstanding my request that they should do so… In the course of the current proceedings the plaintiff’s solicitor has engaged in an elaborate charade based on the fallacious proposition I was difficult to find and to serve with court process”.

I do not accept that submission. Peter was personally served on 14 February 2018. Having been served, he took no steps to engage in the litigation. He offered no evidence why that was so. Close to the September hearing date he suggested that he had been unwell, but even that contention was never supported by evidence (see paragraph [33] above). Insofar as Maria’s solicitor attempted to communicate with Peter in more than one way and at several addresses which Peter was known to frequent, Maria’s solicitor was acting entirely reasonably given Peter’s apparent unwillingness or refusal to participate in the proceedings.

Peter’s second submission was that the proceedings were unnecessarily commenced because the liberty conferred by Hallen J in Order 12 (see paragraph [8] above) should have been used. I do not agree. I accept the submission made on behalf of Maria that it was entirely appropriate to commence these proceedings by way of a fresh summons in the nature of an administration suit having regard to the observations of Brereton J (as his Honour then was) in Liprini v Liprini [2008] NSWSC 423 (“Liprini”):

In Liprini, Brereton J was considering the effect of s 14 of the Family Provision Act 1982 (NSW). However, there is no relevant difference between that section and s 72 of the current legislation, being the Succession Act 2006 (NSW). His Honour’s conclusion as to how an order for provision may be enforced therefore applies equally to Hallen J’s orders, which were made under the latter legislation.

Peter’s third submission was:

I do not accept this submission for the reasons given in paragraphs [41] to [48] above. Furthermore, to the extent that Peter’s attempts to inquire about Maria’s welfare could be in any way relevant, there is no basis upon which the Court could conclude that they were frustrated by Maria’s solicitor in the way Peter alleges.

Peter’s final submission was that Maria’s solicitor had “a history of claiming excessive costs”. Peter referred to the amount by which the costs assessment had reduced Maria’s costs of the proceedings and other matters concerning Maria’s costs. Whatever may have been the case in relation to earlier amounts of costs claimed by Maria’s solicitor (and I express no conclusions on that issue), I have reviewed Maria’s solicitor’s tax invoice for her costs in these proceedings and reached the conclusions set out in paragraphs [59] to [61] above.

The final question is whether Peter should be ordered to pay the interest and costs personally. It could be said for Peter that his conduct which has led to him incurring those liabilities was in his capacity as the executor and trustee of Konstantin’s estate. In the ordinary course Peter would therefore be entitled to indemnity out of the estate for those costs. However, for the reasons set out in paragraphs [41] to [48] above, I am satisfied that Peter has been derelict in his duties both as a litigant and an executor in relation to payment of the Amount.

Because Peter’s obligation to satisfy the Court’s orders in relation to interest and costs arises from his failure to fulfil his obligations as a litigant and executor, the Court concludes that he is not entitled to an indemnity from the estate for those liabilities. The Court will make a declaration to make it clear that Peter is personally liable for those amounts without recourse to Konstantin’s estate.

The orders of the Court are that the Court: