Albecz v Bloom

Background

1. The background circumstances may be briefly noted. The testator died on 28 October 2020. On 28 January 2021 a grant of probate in common form was made in favour of the respondent, as executor of the 2018 Will. On 28 May 2021 proceedings were commenced in the Equity Division by Ildiko Rosenberg, asserting an entitlement under an agreement with the deceased, and propounding a will executed in April 2013. Other parties, including the applicant, joined as cross-claimants, propounding a total of seven wills or codicils. The proceedings have been listed for an estimated four-week hearing commencing on 4 November 2024.
2. As noted by the primary judge at [63], the applicant's May 2023 motion raised three issues, namely whether: 1. to appoint an interim administrator; 2. to prohibit the respondent from using estate funds for his legal expenses in the substantive proceedings in the future; and 3. to require reimbursement of moneys already paid to the respondent from the estate.
3. The applicant's primary submission before the primary judge was that the respondent "should not be entrusted with the management of the estate … by reason of his conduct and behaviour since the time he became executor", and that were he to remain the executor, this may "jeopardise the preservation of the assets of the estate". The applicant contended that: 1. the respondent's conduct called into question his veracity, credibility and fitness to administer the estate; 2. in paying his legal expenses out of the estate, the respondent had used estate funds for his personal legal expenses without authority to do so; 3. there was a conflict of interest in the respondent engaging a solicitor, Mr Arnott, to undertake tasks in the administration of the estate, he being the respondent's personal solicitor; 4. there was no reasonable prospect that the 2018 Will would be found to be valid and, to the extent the respondent had acted dishonestly or unreasonably, this would prevent the estate recouping his costs; 5. the respondent and Mr Johnson (one of the claimants in the proceedings) had a "common interest" in the proceedings; and 6. the repayment by the respondent of his personal legal expenses and a prohibition from using estate funds was necessary to preserve the assets of the estate and protect its beneficiaries.
4. The primary judge was not satisfied that there was "some necessity" or "sufficient reason" for the appointment of an interim administrator to advance the due and proper administration of the estate in the best interests of the ultimate beneficiaries: applying Ritossa v Ritossa [2023] NSWCA 14. Thus, it was not necessary or appropriate to appoint an administrator pendente lite.
5. As to the use of estate funds, the primary judge was satisfied that the respondent was entitled to pay the costs and disbursements of Mr Arnott in acting on behalf of the estate and, being a disinterested executor with a grant of probate, he was entitled to have his legal costs of defending the grant indemnified out of the estate: applying O'Brien v McCormick [2005] NSWSC 619 at [56]. The primary judge held the payments were not for the respondent's personal legal costs, rejecting the applicant's contention that the proceedings involved an attack on the respondent, so as to make his defence protective of his "personal interests". The primary judge held that the respondent was defending the proceedings in his capacity as executor representing the interests of the estate: applying Drummond v Drummond [1999] NSWSC 923 at [45], [47].

Leave to appeal - principles

1. The principles governing applications for leave to appeal are well-established. Generally, it is appropriate to grant leave where there is "an issue of principle, a question of public importance or a reasonably clear injustice going beyond something that is merely arguable": Cheng v Motor Yacht Sales Australia Pty Ltd t/as the Boutique Boat Company (2022) 108 NSWLR 342; [2022] NSWCA 118 at [15] (Bell CJ; Ward P and Basten AJA agreeing). Particular caution is appropriate in reviewing interlocutory rulings, such as this, on matters of practice and procedure: Dank v Cronulla Sutherland District Rugby League Football Club Ltd [2014] NSWCA 288 at [73] (Ward JA, Emmett and Gleeson JJA agreeing).
2. Unless they are likely to affect the final outcome, for example through failure to join a necessary party, appeals from procedural rulings tend to be disruptive of the orderly disposition of proceedings and not apt "to facilitate the just, quick and cheap resolution of the real issues in the proceedings": Civil Procedure Act 2005 (NSW), s 56(1). Interlocutory rulings are frequently made on incomplete evidence and may be revisited if circumstances change. Attempts to pre-empt findings on disputed issues should not be the subject of an interlocutory appeal.

Consideration

1. By her draft notice of appeal dated 2 May 2024, the applicant proposed 12 discursively pleaded grounds of appeal. In essence, they repeated each of the propositions referred to above as presented to the primary judge. Proposed ground 11 set out eight allegedly erroneous findings of fact. The applicant's written summary stated (par 11): "The Court should not accept these factual findings or consider them when considering the appeal. In any event, the factual findings must be set aside to avoid any uncertainty as to whether they are binding on the trial judge."
2. However, most of the "findings" were matters set out by way of background or had little or no material bearing on the orders sought by the applicant. This Court's role is neither to accept nor reject them: nor will a primary judge misunderstand the nature of facts found on an interlocutory application. The ground misapprehended the nature of the proceedings below and in this Court.
3. In her written summary of argument, (pars 28-31), the applicant advanced three reasons in support of her application for leave to appeal, namely: 1. "there are serious questions of principle that arise in the proposed appeal which are also questions of public importance", namely the proper approach to the utilisation of estate funds by an administrator to pay litigation costs and disbursements; 2. there being a seriously arguable and indeed "compelling" case that the 2018 Will was invalid and for a grant of probate with respect to a will in which she is listed as a residual beneficiary, and there was an "abundantly clear" injustice to the applicant in permitting the respondent to incur substantial legal expenses to be indemnified by the estate; and 3. it was "unfair and inappropriate" for Mr Arnott to continue to represent the respondent in the administration of the estate, the appointment of an independent administrator being the only way to rectify this unfairness.
4. In substance, the orders seeking the appointment of an interim administrator and challenging the respondent's entitlement to recoup his costs of the administration of the estate rested upon a challenge to the respondent's "honesty and veracity". Because, it was submitted, there were questions as to his honesty and veracity in defending the proceedings, he was not protecting the interests of the estate, but protecting his own personal interests; therefore, the costs of that exercise should not be borne by the estate.
5. In her written summary in this Court (par 14), the applicant noted that in determining that no order for recoupment should be made, "[t]he primary judge has effectively usurped the role of the trial judge in deciding this issue in favour of Mr Bloom". However, the submission inadvertently identified the problem underlying the application to the primary judge, namely that, whilst a refusal to order recoupment of costs from the estate did not require a finding of dishonesty or other reprehensible conduct, the application itself was predicated upon contentions that the respondent's conduct "call[ed] into question his veracity, credibility and fitness to currently administer the Estate" and had "jeopardised the preservation of the assets of the Estate", and that the respondent had provided "objectively and demonstrably false" evidence to the court. The applicant also submitted, before the primary judge, that the present was a clear case where "Mr Bloom's personal interests are involved".
6. The primary judge carefully considered those contentions, and the evidence relied upon in support, and was not satisfied that the allegations had been made good. The orders required an evaluative judgment dependent on limited evidence, and the applicant failed to establish any error beyond the merely arguable.
7. As to (1), accepting that the applicant wishes to question the respondent's "honesty and credibility", it was inappropriate to expect the primary judge either to assume, or to find on an "interim" basis, the existence of misconduct. Indeed, the primary judge expressly stated: "66 At the hearing, I also indicated that in determining the motion, I would not make any findings regarding Mr Bloom's credit or alleged professional misconduct. As I have already stated, Ms Albecz rightly did not seek any findings regarding the credibility of Mr Bloom, accepting that any such findings are matters for the trial judge after the conclusion of the hearing in the substantive proceedings."
8. On the facts here, the orders sought by the applicant were difficult to support in the absence of such findings. Neither the involvement of the respondent in drafting the 2018 Will, nor the other matters relied upon, gave rise to a personal interest in the probate case. The respondent remained a disinterested executor with no beneficial claim or financial interest under the 2018 Will.
9. The primary judge continued: "68 Unlike the plaintiff in Ritossa, there is no evidence before me to suggest that Mr Bloom has incurred personal expenses in his management of the estate so as to require the court to relieve him of this financial burden or risk further dispute as to his entitlement to be reimbursed. Unlike the circumstances in Ritossa where there had been no grant of probate, there has been such a grant in the present case. 69 Mr Bloom's actions in taking up the position of executor on the grant of probate in common form of the 2018 Will, acting as executor pursuant to that grant, and filing a cross-claim in the substantive proceedings for probate in solemn form do not amount to him acting in his personal capacity, nor can it be inferred that his actions in defending his removal as executor under the 2018 Will transform the nature of the substantive proceedings as ones in which he is acting in a personal capacity. In my view, in defending the substantive proceedings, Mr Bloom is acting in proper administration of the estate."
10. Ritossa involved a dispute between two brothers, one of whom was in de facto control of the estate; the circumstances were held to warrant the appointment of an independent administrator. The points of distinction noted by the primary judge were material: the respondent (i) had no financial interest under any of the wills; (ii) did not obtain a personal interest by defending the 2018 Will in which he was named as executor, and (iii) had obtained a grant of probate.
11. There was no error in the judge's statement of principles, nor any public interest in resolving some doubt as to the operation of s 73 of the Probate and Administration Act 1898 (NSW), where no doubt arose.
12. As to (2), the primary judge stated: "65 It is not within the scope of the determination of the motion for me to consider the validity of the 2018 Will or any of the other various testamentary instruments of the Deceased. Those are properly matters to be determined after the hearing of the substantive proceedings. With this in mind, I do not consider that it is necessary for me to consider the submissions that go to the reasonable prospects of the court finding the 2018 Will valid or any consequences as to costs which might arise from the determination of the substantive proceedings."
13. There is no reason to doubt the correctness of that approach. The fact that the respondent had incurred, and would continue to incur, significant legal costs and disbursements did not point to impropriety, but resulted from the complexity of the proceedings, involving the propounding of seven wills or codicils and inter vivos agreements. Further, the primary judge did not err in finding that there was a lack of practical utility in appointing an independent administrator, given the proceedings were ready to be heard, and that such an appointment would result in an extra layer of professional charges on the estate: [67]-[93]. By the time the motion was heard the preparation of and response to the pleadings, and the preparation of evidence, had been completed in anticipation of the trial.
14. At this stage, where the matter is listed for a four-week trial commencing in approximately three months, the concern of the primary judge as to the practical utility, and attendant costs, of appointing an independent administrator are strengthened, standing against a grant of leave to appeal.
15. Contrary to the applicant's submissions, it is not "abundantly clear" that there is injustice to her arising from the estate's indemnification of the respondent's legal costs. Indeed, there is no apparent injustice to the applicant where, (i) she is not herself a beneficiary of the 2018 Will; (ii) three testamentary instruments will need to be passed over before reaching the applicant's alternative claim (and four, in the case of her primary claim), and (iii) no other party (including those challenging, and those who are beneficiaries under, the 2018 Will) has joined in her attempt to remove the executor or deny his entitlement to indemnification from the estate, albeit that the plaintiff in the substantive proceedings had indicated that she supported the appointment of an independent administrator.
16. As to (3), an executor is entitled to an indemnity for legal costs properly incurred in administering the estate. His engagement of Mr Arnott to act in that capacity was not shown to be improper. In these circumstances, it was proper for the primary judge to find that the respondent was permitted to have his legal costs in defending the grant of probate indemnified by the estate (and that he was not required to reimburse the estate for legal costs already expended). There was no error of principle in this finding. This finding was not, as the applicant asserted, a final determination of the nature of the costs incurred, which must await final orders, and possibly a taxation, if doubts persist. Moreover, in circumstances in which the applicant had sought orders that the respondent be prohibited from paying his costs of the proceedings out of the estate and must reimburse the estate for his legal costs to date, the applicant cannot sensibly complain about the primary judge having made a finding, for the purposes of this application, that the respondent was properly incurring costs in the substantive proceedings as a proper incident of his administration of the estate.
17. The applicant's contention that before taking steps in the proceedings the respondent should have obtained judicial advice pursuant to s 63 of the Probate and Administration Act, as to whether to defend the claim, was properly rejected by the primary judge. The applicant sought to rely on principles as to obtaining judicial advice set out by the High Court in 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 at [74]. However, that case concerned claims made against a trustee, and the power to seek judicial advice under s 63 of the Trustee Act 1925 (NSW), and the principles stated are not applicable to an executor seeking a grant of probate in solemn form of a will. The costs and other practical consequences of imposing on executors some far-reaching obligation to seek judicial advice are not to be contemplated.
18. Finally, as to the adverse costs order, challenged by proposed ground 12, the applicant's motion having been unsuccessful, it was entirely orthodox for the primary judge to make an order that costs follow the event, thus requiring her to pay the costs of the motion.

Conclusion and orders

1. This application falls well short of the necessary threshold for a grant of leave to appeal. No question of principle has been raised; no material error of fact has been established; nor is there any reasonably clear injustice to the applicant. In the circumstances, the Court makes the following orders: 1. Dismiss the summons for leave to appeal filed 2 May 2024. 2. Order that the applicant pay the respondent's costs in this Court.

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