Attenborough v Solomon

ex tempore Judgment 1This is my second judgment in these proceedings. In my first judgment, on 22 July 2013, I gave my reasons for advising the trustee, Mr Henley, that he was entitled to distribute the "A" and subdivided "B" class shares to Amiram Weinstock ("Ami") in accordance with the request made by Ami; and I made directions in relation to the submissions as to costs; and I made some recommendations about mediation: Michael Victor Henley; In the Estate of Hedy Jadwiga Weinstock and Leo Arie Weinstock [2013] NSWSC 975. Persons events and things are referred to in this judgment in the same way that they are in my first judgment and the two should be read together. 2As a result of my first judgment, the parties agreed on some matters and disagreed on others. The matters on which they agree are: (1) the essential form of the orders constituting the advice; and (2) that they will undertake mediation. What they disagree about is: (1) whether the judicial advice should be given now or not; and (2) how the costs of the proceedings should fall on the beneficiaries. I have decided, as a result of the debate which has taken place before me this morning, and for the reasons that follow to make the first three orders requested by the trustee, and to make no additional order in relation to the costs of the beneficiaries. 3The full text of the orders the trustee proposes are: 1. that the plaintiff is required to make an in specie distribution of half of "A" class and half of the "B" class share capital owned by him in Zipor Pty Ltd (Zipor) in his capacity as the trustee of the estate of Hedy Jadwiga Weinstock to the beneficiary Amiram David Weinstock; 2. that the plaintiff is required to convene a general meeting of Zipor and vote in favour of such resolutions as are necessary or convenient to subdivide the "B" class shares in Zipor to facilitate the transfer of half of the "B" class share capital in Zipor to Amiram David Weinstock in accordance with order 1 of these orders; 3. that the plaintiff is justified (but, unless he is directed to do so by Tamar Rivqa Beck, is not required) to make an in specie distribution of half of the share capital owned by him in Zipor in his capacity as the trustee of the estate of Hedy Jadwiga Weinstock to the beneficiary Tamar Rivqa Beck; 4. that, subject to order 5 of the orders made on 26 July 2012 (costs of paragraphs 1 and 2 of the summons), the Plaintiff's costs of these proceedings are costs in the administration of the estate of the late Hedy Jadwiga Weinstock. Those costs are payable from (or may be reimbursed from) that estate on an indemnity basis. The Court notes that Amiram David Weinstock and Tamar Rivqa Beck have agreed to participate in mediation with a view to resolving all disputes between them. 4The contest about whether or not the judicial advice orders should be made now, and about the costs of the beneficiaries are inter-related. I will give a brief summary of the contest before I give my reasons for decision on each of these two disputed issues. 5Mr McHugh SC for Tami submits that the consensus upon which the proceedings were conducted until the first day of the hearing before me was essentially one that the costs of the beneficiaries would be costs in the administration of Hedy's and Leo's estates. There is undoubtedly correspondence passing between the trustee and the beneficiaries from May and November 2012, which represents a general consensus of this kind. Mr Jackman SC for Ami submits that the basis of the underlying consensus changed when Mr Henley sought advice in Leo's estate from Nicholas J and there was thereafter no reason to seek advice in Leo's estate. And on the first day of the hearing before me Mr Coles QC for Mr Henley indicated that he was only seeking judicial advice in Hedy's estate, for the reasons which are set out in my principal judgment, and that he was no longer seeking advice in Leo's estate. Mr McHugh contests this and says until the beginning of the hearing there were issues in relation to Leo's estate. It is not a matter that has to be resolved now. 6Mr McHugh says that the early consensus about costs of beneficiaries being borne by both estates should be reflected in the orders which are now made. He seeks an order that the costs of both beneficiaries be paid out of Hedy's and Leo's estates. Mr Coles, in a submission which is agreed in by Mr Jackman, says the preferable course here for the future administration of Hedy's estate is for the trustee's costs but not the beneficiaries' be paid out of Hedy estate. The essential argument for that course, is that any other course will involve the expenditure of further fees and expenses by Mr Henley in assessing or participating in the assessment of Ami and Tami's costs, which will diminish the fund ultimately available for administration purposes and for distribution, and in a worst case scenario may even result in the subject matter of the judicial advice, the Zipor shares, having to be sold. There is certainly, on the history of this matter, immense potential for disputation between these parties. 7Mr McHugh responds by saying: that once Mr Coles raises such issues, that means that the estate is not ready for distribution; that Mr Henley is not purely a trustee; and that now throws into doubt the assumption which the Court made on his Trustee Act 1925 s 63 application, that Hedy's estate is ready for distribution, an assumption reflected in paragraph [20] of my first judgment. Mr McHugh says that the Court should not proceed to make orders by way of judicial advice today, because, that will inevitable itself lead to further disputation. He says that the trustee should now file further evidence about the capacity of Hedy's estate to fund its present and future liabilities without resorting to the Zipor shares, and to explain Mr Henley's current proposal that Hedy's estate should bear all the costs of the proceedings. 8It seems to me that on that first issue Mr McHugh's argument mostly fails, for this reason. Firstly, Mr Henley is entitled to put to the Court such statement of facts as he believes to be true, which he asks the Court to assume for the purposes of the advice. If the Court gives advice and the facts turn out to be different, it is Mr Henley who bears the risk of acting upon advice that is not supported by correct facts. That is a matter for him. But his counsel, here, says to the Court that he wishes for the judicial advice to be given upon the factual assumption offered to the Court reflected in paragraph [20] of my first judgment. And it seems to me that should happen, because among other things: (1) it is being requested by the trustee from the Court; and (2) the alternative seems to be far worse. Mr McHugh has raised the spectre of litigation arising out of the correctness of that assumption. But it seems to me the spectre of litigation, if I do not give the advice is potentially even worse; for example, what has been argued before me would probably have to be recontested in inter partes litigation. 9I have decided to give the advice requested for another reason. Mr Coles points out that Mr McHugh's reasons for asking the Court not now to give the judicial advice point really do not have force. He submits that on Attenborough v Solomon [1913] 1 AC 76 principles, if there an inadvertent shortfall arises in Hedy's estate, the trustee can call the necessary funds back from the beneficiaries; and that circumstance would not undermine the correctness of the assumption made in paragraph [20] of my first judgment. 10But there is one limited respect in which Mr McHugh's argument has persuasive force. There has undoubtedly been a degree of expenditure in both Leo's and Hedy's estates, particularly at the front end of these proceedings. 11It seems to me that if I were to make an order along the lines of the trustee's proposed order 4, that would make all Mr Henley's costs of these proceedings, costs of the administration of Hedy's estate. That would foreclose consideration by Mr Henley in his two capacities - one as trustee of Hedy's estate and the other as trustee of Leo's estate - of any apportionment that should properly occur in respect of the costs of the proceedings between those estates. I will therefore not make proposed order 4. But, as Mr Coles suggests, the ordinary provisions of Uniform Civil Procedure Rules 2005 r 42.25 will still govern the recovery of Mr Henley's costs from the two estates. The trustee will no doubt take advice and decide how to apportion his costs of these proceedings between those two estates. 12I turn now to the final question of beneficiaries' costs. It seems to me to be the overwhelmingly correct result that the beneficiaries should bear their own costs of these proceedings. I draw that conclusion notwithstanding my acceptance of Mr McHugh's argument that there apparently was a general consensus about the question of how the beneficiaries' costs would be borne until the first day of the hearing. The Court is not bound by that consensus. 13But it seems to me that if the Court does make the order Mr McHugh requests, that order on its own has immense capacity to disrupt and lengthen the administration of the estate and to create expansive areas of contention between the parties. And the prospect of delay, the prospect of further litigation generated by those orders, and of a risk to the subject matter of the estate, are sufficient reasons for not making the orders Mr McHugh seeks. 14Nor in my view do the circumstances of this case really require any other solution as a matter of justice between the parties. There was extensive argument by these beneficiaries in respect of their own interests. They freely chose to be involved to defend their interests as beneficiaries, in circumstances where there was no inherent problem with the construction of the trust instrument. Rather it seems to me to have been in the nature of semi-hostile litigation, in which the Court could well have been minded to make an ordinary costs order against a beneficiary. But that has not been invited; and it is not a course I will pursue. The best course seems to be this: I will note that I will make no order as to costs among the beneficiaries, to the intent that they will each bear their own costs of these proceedings. 15I will make orders 1, 2, 3 in accordance with the short minutes of order which were proposed by Mr Coles on behalf of the trustee. And I will note that Amiram David Weinstock and Tamar Rivqa Beck have agreed to participate in mediation with a view to resolve all issues between them. I will not make proposed order 4. 16The Court orders: (1)that the plaintiff is required to make an in specie distribution of half of "A" class and half of the "B" class share capital owned by him in Zipor Pty Ltd (Zipor) in his capacity as the trustee of the estate of Hedy Jadwiga Weinstock to the beneficiary Amiram David Weinstock; (2)that the plaintiff is required to convene a general meeting of Zipor and vote in favour of such resolutions as are necessary or convenient to subdivide the "B" class shares in Zipor to facilitate the transfer of half of the "B" class share capital in Zipor to Amiram David Weinstock in accordance with order 1 of these orders; (3)that the plaintiff is justified (but, unless he is directed to do so by Tamar Rivqa Beck, is not required) to make an in specie distribution of half of the share capital owned by him in Zipor in his capacity as the trustee of the estate of Hedy Jadwiga Weinstock to the beneficiary Tamar Rivqa Beck. 17And the Court also notes that: (4)Amiram David Weinstock and Tamar Rivqa Beck have agreed to participate in mediation with a view to resolving all disputes between them; and (5)It will make no order as to the costs of the beneficiaries, to the intent that each will bear his and her own costs of these proceedings. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 August 2013