Bahamad v Wong

Supreme Court of NSW|2021-12-10|Before: Slattery J

Judgment

This is the Court's third judgment in the prolonged administration of the estates of Maureen and Dolf Huber, who died in 2010 and 2013 respectively. The Court's principal judgment, given on 6 November 2020, substantially upheld a decision of the Registrar in Probate allowing commission to the executors in both estates and allowing the executors' costs of passing estate accounts: The Estate of Maureen Leila Huber; the Estate of Dolf Paul Huber [2020] NSWSC 1539 ("the principal judgment"). The Court's second judgment, given on 9 June 2021, dealt with 10 ancillary costs issues: The Estate of Maureen Leila Huber; the Estate of Dolf Paul Huber (No. 2) [2021] NSWSC 187 ("the second judgment"). This judgment should be read with the Court's earlier judgments. Events, matters and persons are referred to in all three judgments in the same way. The executors and the Backhouse brothers continued with the same legal representation.
The parties have consented to the Court making orders in a specified gross sum pursuant to Civil Procedure Act 2005, s 98(4)(c) instead of assessed costs, in respect of the Court's costs orders. The parties agree that a gross sum needs to be fixed in respect of a limited number of the Court's previous orders, including orders made with the second judgment. These reasons fix a gross sum instead of assessed costs in respect of these various costs orders.

Applicable Legal Principles

The legal principles applicable to the making of gross sum costs orders are well-established and need not be repeated in these reasons. They are fully set out in authorities such as Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 and Hamod v New South Wales [2011] NSWCA 375. Specific issues concerning the making of gross sum costs orders were raised in submissions.
The Backhouse brothers submitted that in fixing a gross sum costs order that the Court should apply similar discounts to those that it had applied to the solicitors' professional costs and counsels' fees in Bahamad v Wong [2020] NSWSC 991 at [46] ("Bahamad"), which indicated that ordinarily solicitor/client costs are recoverable as a general rule of thumb in the range of 60% to 75%, which can be used as a discounting factor in making s 98(4)(c) orders. But the executors point out that the principal authorities Hamod v New South Wales and Harrison v Schipp, and Bahamad all involve parties who were entitled to costs on the ordinary basis, not the indemnity basis. They argue the present case is distinguishable on the basis that costs were awarded on the indemnity basis. They further submit that, as a result, were the costs to go to costs assessment, the costs assessor would only disallow costs that were unreasonably and improperly incurred and would not apply a general discount.
This submission is correct. When the Court makes a gross sum costs order, it looks to the standard that would have been applied had the costs gone to a costs assessment. It would be unjust to a party with the benefit of an indemnity costs order to apply a general fail-safe discount to that party's costs, which would never be applied upon a costs assessment for an indemnity costs order. Such an approach would contravene Von Doussa J's observation in Beach Petroleum NL v Johnson (No. 2) (1995) 135 ALR 160; (1995) 57 FCR 119 at [16] that the Court must be astute not to cause an injustice to the successful party by an arbitrary fail-safe discount on the costs estimates submitted to the Court.
Moreover, indemnity costs orders have been made the subject of gross sum costs orders without the application of any discounts; and in such cases where there is no evidence of unreasonableness, it may be inappropriate to apply a discount: see for example, Harvey v Barton (No. 4) [2015] NSWSC 809 at [48] ("Harvey") and Hancock v Rinehart (lump sum costs) [2015] NSWSC 1640 at [58] ("Hancock"). In neither of these cases did the party entitled to indemnity costs have a discount applied when a gross sum costs order was made. The critical issue for indemnity costs orders remains whether there has been any improper or unreasonable incurring of costs.

Overview of Relevant Time Periods and Claims for Costs

The executors' present claims for costs cover a near seven-year period between November 2014 and June 2021. But within that period, the three groups of motions, the motions before Lindsay J and the four motions for review, and the motions to set aside subpoenas, did not cover the whole period. And some of the motions for review cover costs also within the same period. The relevant time periods for the various motions are as follows: 1. Motions before Lindsay J: 14 November 2014 - 17 March 2015. The Backhouse brothers filed these motions on 14 November 2014, and Lindsay J made final orders on 17 March 2015. Thereafter, Lindsay J's orders were acted upon for a period of about three and a half years and the executors commenced accounts and commission proceedings for the passing of formal accounts in both estates, resulting in the Registrar making final orders on 18 September 2018. 2. The four motions for review: 8 October 2017 - June 2021. After the Registrar's decision, the Backhouse brothers filed two motions for review of that decision on 8 October 2018. On 15 November 2018, the executors filed two motions for review. These four motions were determined on 17 June 2021, in the Court's second judgment. 3. motions to set aside the subpoenas: 1 November 2018 - 6 March 2019. The executors filed motions to set aside the subpoenas to Belbridge Hague on 1 November 2018. The Registrar in Equity heard the motions on 15 February 2019 and made orders on 6 March 2019.
This summary shows that there is a gap of 3.5 years between the costs claimed at the conclusion of the motions before Lindsay J on 17 March 2015 and the first costs being incurred in respect of the four motions for review on 8 October 2018. During this 3.5 year period, the executors claim for administration costs. The making of that claim is controversial, and will be discussed immediately below. It is not determined by these reasons, which are confined to questions of the costs of the motions. The other feature of this overview is that the costs incurred in the four motions for review and the motions to set aside subpoenas cover overlapping periods. The parties indicated to the Court that it is not easy for them to isolate whether particular costs claimed by the executors are referrable either to the four motions for review or for the motions to set aside subpoenas. Consequently, the parties dealt with the quantum of those costs together.
Thus, the parties did not separate out the quantum of costs for the four motions for review, to distinguish them from the costs associated with the two subpoenas. They are quantified the same way in these reasons.
Some minor difficulties arose in comparing these composite costs due to the way that the parties had accounted for them. The Backhouse brothers claimed the total of the costs for the four motions for review and the motions to set aside the subpoenas was $153,324.75. The executors said the figure was $153,791.54. Mr Grant claimed the figures were inclusive of GST. Ms Catanzariti claimed that they were plus GST. This disagreement in the way the accounting has been presented should not impede the Court's present determination. The Court has granted almost all of what the executors seek by way of indemnity and the parties sensibly agree the Court can ignore the difference of approximately $400 between them, as it is not worthwhile to track down the entries for items that account for this difference. But it is safer to use the lower figure of $153,324.75.

The Executors' Administration Work

The executors have only sought to pass accounts in these estates up to 2016. But Mr Grant submits that, since that time, Belbridge Hague's Work-in-Progress ("WIP") Reports, including for the period of the four motions for review and the motions to set aside the subpoenas, includes administration work rather than litigation work in relation to the motions. Mr Grant invites the Court to use a "broad brush" and to discount the executors' claims for costs on the motions because they include this administration work. Some of the work in question overlaps with the period of the four motions for review, and some of it precedes the four motions for review and lies within the 3.5 years after the motions before Lindsay J were determined.
How are the executors' costs of that work to be considered? All sides agree that the executors should not have to bring a further application for passing of accounts, the last such application having led to years of litigation. So Mr Grant submits that the Court should either apply the broad brush of s 98(4)(c) because it is not litigation work, or disallow it.
Ms Catanzariti submits that if this work is removed from the present costs recovery on the motions as administration work then the executors would seek an indemnity for those costs anyway as executorial costs, as distinct from costs of the proceedings. Ms Catanzariti colourfully put it, "all that we are doing is taking it out of one bucket and putting it into another bucket".
If the executors had incurred proper and reasonable administration costs since the passing of accounts, they are entitled to an indemnity for those costs. Although they are not the subject strictly of the existing costs orders on the motions, the executors are entitled to an indemnity nevertheless to costs properly incurred.
Whilst it is true that this class or category of costs can potentially be criticised on a different basis from the executors' legal costs on the motions, it is difficult to see, given the overall reasonableness of the executors' lawyers' charges, whether the separate consideration of these charges will make much difference to the outcome of the executors' indemnity.
But if the Backhouse brothers wish to pursue this issue, they can do so but at their own risk as to costs. They wish to attempt to isolate the administration charges that are not related to the motions and to notify them to the executors, together with their criticisms of those charges they can do so. And the Court will endeavour to determine whether the executors are entitled to recover those administration charges for executorial duties when the Court finally determines the remaining issues on 9 March 2022.
For this reason, it would be inappropriate for the Court to permit the executors to proceed to enter judgment for any amounts in their favour as a result of today's reasons, and the Court's orders will reflect this. But the Backhouse brothers will need to have any challenge to these charges identified and ready for determination well before 9 March.

The Costs of the Four Motions for Review

The executors have the benefit of Orders (2) and (3) of the Court's orders made on 17 June 2021. These ordered the Backhouse brothers to pay the executors' costs of the four motions for review of the 18 September 2018 decision of the Registrar (Order 2); and then to indemnify the executors for any cost differential between the actual costs of the four motions and the amount of costs they will recover from the Backhouse brothers on the ordinary basis (Order 3), thereby giving them a full indemnity for all their costs incurred on these four motions. The Backhouse brothers have taken issue with the solicitors' professional costs, counsel's fees and other disbursements claimed by the executors as part of the fixing of a gross sum costs order.
The executors claim a total of $153,324.75 in costs for the four motions for review, and for the motions to set aside the subpoenas. This sum is divided into solicitors' costs of $78,086.04, counsel's fees of $43,969.50 and other disbursements of $31,269.21. The Backhouse brothers advance written submissions, supplemented by Mr Grant's oral submissions, opposing the recovery of those sums in full and contending for discounts to them.
The executors' submissions are unpersuasive. For convenience, they are set out here first: "Solicitors' costs [81] As noted above, no Tax Invoices appear ever to have been rendered for solicitors' costs of the 4 Motions for review (or of the Motions to set aside the Subpoenas). Rather, the solicitors' costs claimed for these are all (100%) WIP on the (changed, 76 page) WIP Report dated 13 October 2021. [82] For the reasons submitted at Paragraphs 45 - 56 above, much of this WIP Report is for work outside the scope of the costs orders under consideration. For those reasons, the value of the WIP for the solicitors' costs of the 4 Motions for review (and of the Motions to set aside the Subpoenas) are properly to be taken as (in principle) $78,086.04 (including GST) ($70,987.31 excluding GST)). [83] The work in question appears between pp 25 - 71 of 76 of the WIP Report (from the entries dated 8 October 2018 to the entries dated 17 June 2021). [84] Review of these pages shows, first, work performed by the Probate Clerk, Ms Jackson, concerning administration of either or both Estates (and not work concerning the Motions for review or the Motions to set aside the Subpoenas). Most (if not all) of this work is also executorial (not legal) work: see, eg, the entries for 'NLJ' (Ms Jackson) on pp 39, 40, 43, 44, 61, 69 of 76. [85] Second, as submitted earlier, where Counsel was briefed on the Motions for review (and the Motions to set aside the Subpoenas), it would have been reasonable for an employed solicitor to have had carriage of them (with some minimal supervision from the solicitor on the record). [86] This was understood to be the case by the Backhouse brothers (with Ms Paige Rolfe being the employed solicitor, supervised by Mr Robert Meers) (shown on the WIP Report as 'PR' and 'RNM', respectively). [87] However, pp 25 - 71 of 76 of the WIP Report also disclose other people working on (and charging for) the matter. In addition to Ms Jackson, these include 'SEH', 'VAB', 'GMC', 'LM' and 'CES': see, eg, pp 25, 28 - 34, 36 - 38, 41 - 42, 46 - 55, 60 of 76. [88] Most (if not all) of this work is administrative (or secretarial), not professional legal work on the Motions for review (or the Motions to set aside the Subpoenas). Some of it appears to be computer-related : see, eg, entries for 'LM' on pp 58, 66 of 76. Further, again there are charges for the various people speaking (or otherwise dealing) with each other and significant duplication. [89] Third, the Court should exercise great caution where no Tax Invoices have ever been rendered (and the sum claimed is all (100%) (unbilled) WIP). This is especially so where the solicitors otherwise (routinely) billed monthly (or even more frequently) (and even for small amounts) : see, eg, Index, p 1 - 2. [90] In Kostov v Zhang (No 2) [2016] NSWCA 279, the Court of Appeal applied a heavy discount where approximately 40% of the solicitors' fees had not been billed to the client: see Bahamad v Wong [2020] NSWSC 991 at [77]. Here, 100% have not been billed (and in a much larger amount). [91] This is also especially so where (in purported compliance with the Court's order to serve a further WIP Report that removed administration and executorial work) the (original) 55 page WIP Report (Bundle, 367) was replaced with the (changed, 76 page) WIP Report (containing changed entries, internal inconsistencies and an increased overall amount). [92] In the circumstances, the Court should exercise great caution as to the reliability of the (changed, 76 page) WIP Report. [93] In all of the circumstances, there should be a very heavy discount and an appropriate figure is $44,000 (including GST). Counsel's fees [94] For the reasons submitted at Paragraphs 58 - 60 above, Counsel's fees properly within the scope of the costs orders under consideration (in principle) amount to $43,969.50 (incuding GST) : Bundle, 540 - 558. [95] The submissions made above concerning Counsel's fees are repeated here. 85% of the sum claimed should be allowed. [96] Counsel's fees should therefore be allowed at $37,375.00 (including GST). Other disbursements [97] For the reasons submitted at Paragraphs 61 - 62 above, the other disbursements properly within the scope of the costs orders under consideration (in principle) amount to $31,269.21 (including GST): Bundle, 490 - 537. [98] Where Counsel was briefed, it was not necessary or reasonable for Ms Rolfe to travel from Albury to Sydney (and incur airfares, hotel accommodation and other expenses totalling $1,017.02) to instruct Counsel at the hearing of the Motions to set aside the Subpoenas (Bundle, 491). Transcript of a directions hearing on 11 March 2020 ($588.00) was also not necessary or reasonable (and was never tendered) : Bundle, 496. [99] It was also not necessary or reasonable for the Probate Clerk, Ms Jackson, to travel to Sydney (and incur airfares, hotel accommodation and other expenses totalling $1,045.48) for the hearing (when Ms Rolfe also did so) : Bundle, 492. [100] The Tax Invoice from DGT (and related costs) (totalling $17,246.14) were also not necessary or reasonable (Bundle, 517 - 524). As noted above, the Court suggested a gross sum costs order pursuant to s 98(4)(c) during the course of argument (to which the parties consented): Estate of Huber (No 2) [2021] NSWSC 187 at [79]. [101] There was therefore no occasion to incur the expense of a formal bill of costs. There is also no evidence of any attempt by the Executors to negotiate a sum concerning costs (and there was none) before the expense was incurred. [102] A formal bill of costs is also of no utility on as 98(4)(c) application (which, of its nature, is not the result of a process of taxation or assessment of costs and would defeat the purpose of the lump sum order) : Harrison v Schipp (2002) 54 NSWLR 738 at 743 [22]; Auspine Ltd v Australian Newsprint Mills Ltd (1993) 93 FCR 1; Bechara v Bates [2016] NSWCA 294 at [14]. [103] In any event, it is of no utility on this application. As noted above, the great majority of the solicitors' costs claimed are contained in the (changing) WIP Reports dated 13 August 2021 & 13 October 2021 (both of which significantly post-date the formal bill of costs). Its preparation was, of course, not necessary for Counsel's fees or the other disbursements. [104] Further, preparation of a solicitor's bill of costs is a solicitor's responsibility. If the solicitor engages a third party to do so, the expense is the solicitor's (not the client's) (and it is not recoverable from an opponent of the client on an asessment). [105] There is otherwise no objection to the balance of the other disbursements (totalling $11,372.57 (including GST)). Discount & total [106] This totals $92,747.57 (including GST). In all of the circumstances, a discount of 20% is appropriate. [107] This results in a figure of $74,198.05 (including GST). Costs on the ordinary basis [108] On the ordinary basis, 60 - 75% of solicitor/client costs are recoverable as a general rule of thumb : Bahamad v Wong [2020] NSWSC 991 at [46] (and cases there cited). [109] In all of the circumstances (including the matters submitted above concerning the solicitors' costs being 100% (unbilled) WIP), 60% is appropriate. 60% of $44,000.00 is $26,400.00 (including GST). [110] Together with Counsel's fees and the other disbursements (discounted by 20%), this totals $65,398.05 (including GST)."
These submissions bring several disputed issues into focus. First, the Backhouse brothers seek reduction in the solicitor's professional fees because they were not invoiced during the proceedings. The authority that in fixing a gross sum instead of assessed costs, the Court may take into account that a significant portion of the costs has not been billed and may never "ultimately be billed to the client": Kostov v Zhang (No 2) [2016] NSWCA 279 ("Kostov v Zhang").
But that is not the case here. Belbridge Hague has explained it is likely ultimately to invoice this client but that it has not already done so for good reason. The unbilled amounts involved are significant. Belbridge Hague says that it would immediately incur GST and be assessed for income tax on the billed items (which would be a significant sum) even though the law firm would be unlikely to recover the fees for some time. Given the protracted delay in these proceedings, Belbridge Hague took the decision therefore to defer issuing the memoranda of fees. Given that delay, this was a reasonable decision.
But importantly, the costs charged by Belbridge Hague are not excessive. Through its two existing judgments the Court has become closely familiar with the intricacies and complexities of the four motions for review. Belbridge Hague's charges for the preparation and appearances on those four motions over the almost 3 year period from 8 October 2018 17 June 2021 of just under $154,000 inclusive of counsel's are quite reasonable. Here, the executors' solicitors and counsel prepared for two hearings involving major contests over finely detailed financial issues, in which everything was questioned. Unless preparation was meticulous, anything could go wrong. The preparation of solicitors and counsel on the side of the executors was thorough and appropriate in advancing their case and ultimately successful.
Second, the Backhouse brothers argue that it was unnecessary to brief counsel on the motions. A moment's consideration shows this point is without merit. The Backhouse brothers themselves briefed counsel, who is experienced in relation to trusts and estates. Why the executors should be deprived of the benefit of representation by counsel in the same circumstances is not explained. As the Court's first and second judgments show, the trusts and estates issues raised by these proceedings are not straightforward and required the attention of experienced counsel. And that is what happened: Ms Catanzariti has closely attended to both the law and the facts concerning the motions and the administration of these two estates.
The Backhouse brothers' alternative argument is that if experienced counsel were in fact briefed, then a partner of Belbridge Hague should not have been heavily involved and should have delegated the work to an employed solicitor. With a matter of the intricacy of this one the Court does not agree that if counsel were briefed that the partner of the firm could step away from direct management of this case. But the criticism does not address the present facts. As the Belbridge Hague records show, an employed solicitor, Ms Paige Rolfe, had day to day carriage of these proceedings on behalf of the executors, with low levels of itemised and charged supervision from the solicitor on the record, Mr Rob Meers.
Third, the Backhouse brothers argue for a reduction in counsel's costs by 15%. But as earlier explained, this claimed discount is not applicable to an order for costs on an indemnity basis. For the high-quality work she has done in these proceedings, Ms Catanzariti's fees are quite modest. She is an experienced trusts and estates counsel. All her fees appeared to the Court to be proper and reasonable and clearly recoverable on an indemnity basis here and in the other disputed categories in these reasons. There is no basis for reducing her fees either here or in any of the other disputed categories in which counsel's fees have been charged.
Every case has its own features, when it comes to fixing costs. Even if indemnity costs did not apply here, given the reasonable nature of Ms Catanzariti's fees, this is not a matter in which even on the ordinary basis the Court would have applied any discounts to counsel's fees.
Fourth, the Backhouse brothers attack several specific disbursements. They contend Ms Rolfe did not need to travel from Albury to Sydney for the motion to set aside the subpoena. But in the Court's view she did. The subpoena involved the production of documents that the executors contended they had already produced to the other side. Ms Rolfe had prepared a detailed affidavit about the documents in question, and when and how they had been provided. It was reasonable for Ms Rolfe to be present to provide instructions, clarifications and explanations during the hearing of the motion. It was necessary for someone with her close knowledge of the documents to be present to identify precisely which documents were being requested and when and how they had been previously provided. The documents requested included Belbridge Hague's trust ledgers and on the hearing of the motion the Registrar sought an understanding of how Belbridge Hague's trust ledger process operated. Her absence would have placed an impossible burden on counsel for the executors.
The Backhouse brothers seek to reduce the reasonable disbursements by arguing it was not reasonable for the partner, Ms Jackson, to travel from Albury to Sydney for the hearing in circumstances where Ms Rolfe appeared at the hearing. But this contradicts the Backhouse brothers' stance at the same hearing when they had two solicitors present. Ms Jackson needed to be present because of the large volume of documents, and because she was involved in the matter before it became litigious. In fact, Ms Jackson did not ultimately attend because of COVID-19 risk. Belbridge Hague is attempting to obtain a refund of her airfares from Qantas.
The Backhouse brothers seek to disallow the costs of the costs consultant that the executors engaged. But the Court's last two judgments and the present judgment have primarily involved challenges to costs charged by the executors. It was logical, fair and reasonable for the executors to engage a costs consultant, whether or not the evidence of the costs consultant was deployed as expert evidence.
Finally, the Backhouse brothers argue for a further global discount of 20% on top of the reductions they otherwise seek in solicitors' and counsel's fees and disbursements on the four motions. This argument is rejected for two reasons. First, the application of a global discount of that amount is inconsistent with principles applied for the assessment of costs on an indemnity basis. And secondly, even if the Court had made orders for an assessment on the ordinary basis, the overall fees of the lawyers for the executors for the work they have done are so reasonable that the application of a global discount would risk causing injustice to the executors.

The Costs before Lindsay J

The executors claim total costs of conducting the proceedings before Lindsay J of $54,459.40. This claim consists of solicitors' costs of $41,632.59, counsel's fees of $10,876.25 and other disbursements of $1,314.07. These sub-components only sum to a total of $53,822.91. The parties agreed that the difference between $53,822.91 and $54,459.40 is substantially accounted for by two invoices (Invoice 5705 for $256 and Invoice 5664 for $326) which, for present purposes, represent minimal amounts. Those invoices can readily be identified in the materials before the Court, so the higher figure of $54,459.40 can be accepted.
The Backhouse brothers question the solicitor's costs, counsel's fees, other disbursements and the executors' total claim for costs incurred before Lindsay J. Supplemented by Mr Grant's oral submissions, the Backhouse brothers advanced their opposition to the executors' claim for costs incurred before Lindsay J through the following written submissions: "Solicitors' costs [66] The solicitors' costs claimed on the Motions before Lindsay J total $41,632.59 (including GST). [67] These comprise 2 Tax Invoices dated 16 January 2015 (for $11,536.69) (Bundle, 246- 8 at 247) and 4 March 2015 (for $30,095.90) (Bundle, 253-4). [68] As to the former, there is a narrative (but no indication of the person(s) performing the work, their rate(s) or the time taken for each item) : Bundle, 246 - 7. As to the latter, it is a (pure) lump sum bill for $30,095.90 (with no narrative whatsoever): Bundle, 253. [69] The solicitors' costs are almost 4 times those of Counsel's fees and are excessive. As Counsel was briefed on the Motions, it would have been reasonable for an employed solicitor to have had carriage of them (with some minimal supervision from the solicitor on the record). [70] However, (so far as can be ascertained) there appear to have been at least 3 people charging (including the Probate Clerk, Ms Jackson). There are also charges for discussions between them all, 'file preparation', uploading documents, reviewing the Trustee, Conveyancing & Probate and Administration Acts (and 'Read and consider 2 volumes of correspondence file Maureen Huber') (Bundle, 246, 247). [71] The narrative for the first Tax Invoice also does not justify a total of $11,536.69 (and much of the work disclosed is not properly work on the Motions). It is not possible to know the position with the second Tax Invoice for $30,095.90. However, it is clear that costs must have been unreasonably incurred (and are unreasonable in their amount). [72] In all of the circumstances, a proper and reasonable figure is $22,000 (including GST) Counsel's fees [73] Counsel's fees were $10,876.25 (including GST): Bundle, 251. [74] Counsel's fees are generally allowed at a costs assessment at 85 - 90% of what is claimed : Bahamad v Wong [2020] NSWSC 991 at [50]. [75] Given the 'broad brush' nature of a gross sum costs order application (and that a meticulous item-by-item review is not to be undertaken), this will not be done. Rather, 85% of the sum claimed should be allowed. [76] Counsel's fees should therefore be allowed at $9,245.00 (including GST). Other disbursements [77] The jewellery valuation fee of $484.00 (Bundle, 247) is not a cost of the Motions before Lindsay J. Airfares from Albury to Sydney on 25 February 2015 (Bundle, 253, 326) (totalling $505.52) for a directions hearing (at which Counsel appeared) (the Motions being heard on 16 March 2015) were also unreasonably incurred. [78] Otherwise, there is no objection to the balance of the other disbursements (totalling $324.55 (including GST)). Discount & total [79] This totals $31,569.55 (including GST). A discount of 10% is appropriate in all of the circumstances. [80] This results in a figure of $28,412.59 (including GST). This is the sum for which the Executors should be indemnified on the Motions before Lindsay J."
The executors' answers to these submissions are persuasive. The executors' fees incurred before Lindsay J are fair and reasonable in all their components.
As to the solicitors' costs, the Backhouse brothers do not provide a proper basis for saying or giving instances that show that the fees are excessive or unreasonable: Harvey at [48]. Counsel was properly briefed on the motions before Lindsay J. The Backhouse brothers' vague contention that the narrative of the solicitors' memoranda of fees "does not justify the work" is not an answer to a description of appropriate types of work done and where fees are not obviously excessive in relation to what are appropriate tasks in hand. The beneficiaries do not take specific issue with the quality or reasonableness of the work, the hourly rates being charged, or the number of hours being charged. It is not apparent what specific matters the Backhouse brothers say made the solicitors' costs anything other than logical, fair and reasonable and they bear the onus of proof: Hancock at [61].
As to counsel's fees, the Backhouse brothers seek to reduce counsel's fees on the costs before Lindsay J on the basis that "counsel's fees are generally allowed at a costs assessment at 85 to 90%". But as these reasons have already explained, Bahamad v Wong did not involve an award of indemnity costs. A discount of counsel's fees to 85 to 90% is not appropriate here.
The Backhouse brothers also seek to apply an overarching discount of 10% to the (already discounted) total of solicitors' and counsel's fees and other disbursements totalling $31,569.55. But such an overarching discount is not appropriate where indemnity costs have been ordered and where the Backhouse brothers have not demonstrated any instances of fees unreasonably incurred, either as to the rates charged or the amount or appropriateness of the work done: see Harvey at [48]. This overarching discount will not be applied, and the amount that the executors have claimed in respect of the costs before Lindsay J will be allowed in full.

The Costs Incurred in Settlement Negotiations

The way that the argument developed before the Court, it was not easy to discern this as a separate quantifiable item to be determined. But if the parties wish to contend otherwise this matter will be reserved for further consideration on 9 March 2021.

Costs Associated with the Two Subpoenas to Belbridge Hague

The parties dispute two costs issues in relation to the subpoenas to Belbridge Hague. The first is the quantification of the costs payable by the Backhouse brothers to the executors, as a result of the Registrar's orders made on 6 March 2019. The second is Belbridge Hague's own costs of compliance with the two subpoenas. But as earlier indicated, the overall costs of both these issues are included in the executors' total costs figure of $153,791.54.
The Backhouse brothers question the solicitor's costs, counsel's fees, other disbursements and the total claim by the executors for costs incurred in relation to the subpoenas. Supplemented by Mr Grant's oral submissions, the Backhouse brothers advanced their opposition to the executors' claim for costs in relation to the subpoenas through the following written submissions: "[111] The Court may order the party issuing a Subpoena to pay the amount of any reasonable loss or expense incurred in complying with the Subpoena (which the Court may fix): UCPR 33.11(1) & (2). [112] Unless the Court otherwise orders, an order as to costs is not to be made under UCPR 33.11 if the Court is not satisfied that the parties have attempted, but failed, to agree on the amount: UCPR 42.33. [113] The parties have attempted, but failed, to agree on the amount: correspondence at Annexure 'E' of the Bundle. Annexure 'E' is not a complete record (omitting letters from the Backhouse brothers' solicitors), but it suffices to establish this. [114] By their letter dated 11 March 2019, Belbridge Hague claimed $8,359.40 (p 3) (which was rejected: Walsh & Associates' letter dated 13 March 2019). Belbridge Hague subsequently reduced their claim to $5,574.42 (including Counsel's fees of $231.00 and GST) (which is their current claim): Index, p 2; Bundle, 336 - 338. [115] At the hearing of the Motions on 15 February 2019, the Registrar in Equity said that she would not allow more than $1,000.00. On 30 September 2019, the Backhouse brothers made an open offer in Court for this sum (which the Court formally noted on that date) : Orders made 30 September 2019, Notation 5. [116] On 17 June 2021, this Court also made directions for the exchange of Calderbank letters between the parties on the question. This has taken place, but Belbridge Hague's Calderbank letter dated 23 June 2001 has been included in the Bundle (as the last document of Annexure 'E'). The Associate to Slattery J will be requested to remove this (pending his Honour's determination). [117] The Subpoenas essentially sought 3 categories of documents (in each Estate): (a) trust account statements; (b) bank statements; (c) documents concerning Estate funds invested in term deposits with the ANZ Bank; and (d) (in Dolf's Estate only), documents concerning distributions made to the Swiss beneficiaries: see Subpoenas filed 23 October 2018. [118] These are routine documents which did not require any legal (or other) skill to collate. Collation ought to have been a simple administrative (or secretarial) task. There could also not reasonably be (and, in the event, was in fact not) any claim for privilege or confidentiality. [119] However, again, 4 people at Belbridge Hague appear to have been involved in the documents' production (Ms Rolfe, Mr Meers, 'GMC' & 'VAB'): Bundle, 337. Despite this, the documents were not produced on time (or in full) (requiring further orders of the Court in this respect). [120] As to the work charged for (Bundle, 337), on 15 March 2019 'GMC' (understood to be Belbridge Hague's Practice Manager, Mr Gregory Coulston: see Bundle, Annexure 'D') charged $1,074.98 for 'extraction' of the bank statements. On 15 & 18 March 2019, 'VAB' charged a total of $1,819.00 for 'redacting' the bank statements (and on 18 March 2019 Ms Rolfe charged $519.95 for apparently 'checking' this). [121] There are also charges of $199.98 (8 March 2019) to 'review costs of production' and $83.99 (18 March 2019) for 'registering for lodging subpoenaed documents'. Counsel's fees of $231.00 were also charged: Bundle, 336. [122] There was no basis for this work to be charged for in this manner or by this number of people (and most of it was completely unnecessary). Redaction of bank statements is misconceived. In any event, the Court of Appeal has recently confirmed that redaction should not occur without consent or a Court order (Lewis v Lewis [2021] NSWCA 168 at [95]-[98]) (neither of which was here obtained or sought). [123] The Backhouse brothers' open offer of 30 September 2019 was the maximum sum the Registrar in Equity said she would allow (and is more than reasonable in all of the circumstances). This should be the amount the Court orders in this respect."
Dealing first with the points made about the quantification of the costs orders against the Backhouse brothers, the executors' answer to the Backhouse brothers' submissions are persuasive. First, the claim for costs was not capped at $1,000. The Registrar did not make an order disallowing more than $1,000 in costs. The Court's orders on 30 September 2019 noted that the Backhouse brothers had made an open offer to pay $1,000. But the Registrar did not make $1,000 a maximum costs recovery figure. This open offer was not accepted and should merely be taken as an indication of what the Backhouse brothers were prepared to pay at the time.
The Backhouse brothers' complaint about the redaction of the documents produced on subpoena is without substance. The Registrar's orders on 6 March 2019 (Order (2)(b)) provide for the redaction of the bank account statements being produced. Order (2)(a) and (2)(b) provide as follows: "2. On or before 19 March 2019 the Applicant's shall produce to the Court:

(a) Belbridge Hague trust account ledgers for ESTATE MAUREEN LAILA HUBER 2010/118885 estate and testamentary trust from 1 January 2014 to 31 January 2016; (b) Bank account statements for the Belbridge Hague Solicitors trust account from 29 January 2010 to 31 January 2016, with entries related to the firm's other clients being redacted."

The redaction was necessary because the Backhouse brothers had requested that the executors produce Belbridge Hague's full bank statements for its trust account. The firm conducted a single bank account for its trust account. But the firm maintained individual trust ledgers for its clients. Production of unredacted bank statements would necessarily have meant that Belbridge Hague would have produced documents disclosing confidential and potentially privileged information relating to all its other clients if redaction had not occurred. Belbridge Hague raised this issue at the hearing of the motion as a basis for objecting to production of the documents. The firm was successful in persuading the Registrar that redaction should occur, if these original documents were required. The claim will not be reduced on this account.
Mr Grant argues that the Court should look past the Court's orders on 6 March 2019 and consider the limited nature of what was being requested, which was the Belbridge Hague accounts for the estates of Dolf Huber and Maureen Huber. He also points out that Order (2)(b) should have been interpreted as only requiring production of trust account bank statements for two estates, and not Belbridge Hague's other clients.
But in Order (2)(b), the words "with entries relating to the firm's other clients being redacted" show that the Registrar expressly contemplated dealing with Belbridge Hague's problem that if its bank statements were to be subpoenaed, redaction would be required. The need for this expense was occasioned by the Backhouse brothers' apparent distrust of Belbridge Hague's trust ledgers, so that they saw fit to subpoena the actual bank statements for the trust account. If the Backhouse brothers wanted to test the executors' evidence to that level of detail, this should be at their own expense. This is another reason for there to be no reduction in Belbridge Hague's fees on account of the redaction of the firm's bank statements.

A Final Hearing on 9 March 2022

These proceedings have now been adjourned for final hearing to 9 March 2022. On that occasion, it is anticipated that three remaining issues will be determined. First, the Court will finalise the appointment of trustees for the trusts to be established for the grandchildren. It is still necessary for the four affidavits of fitness of the proposed trustees to be filed for that purpose. Arms-length settlements have been negotiated to settle some of the funds of each of the testamentary trusts into trusts for the two grandchildren, who are not yet of full capacity.
An issue remains as to what orders should be made to indemnify the executors as to the costs associated with this litigation since 17 June 2021 and up to, and including, the conclusion of the proceedings. The executors need to provide evidence of those costs and estimates of those costs up to, and including, 9 March 2021 so that the proceedings can be finalised on that day with up to date costs estimates.
Finally, there is a residual issue as to whether there are any additional administration costs of the estate incurred between 7 March 2015 and 8 October 2018 and whether the executors are entitled to a simple order to recover those costs out of the estate. This issue arises because the executors submit that they have incurred administration costs since the passing of accounts since 2015 but prior to the filing of the motions for review on 8 October 2018 and thereafter and that they are entitled to recover them from the estate. Mr Grant submits that these costs have already been covered by the Court's previous orders. Ms Catanzariti disputes this. That issue has not been resolved by previous judgments and can be determined on 9 March 2022.
But the aim is for all remaining argument on that issue to be dealt with on 9 March so that these proceedings can finally be concluded, and the executors can soon thereafter retire from the administration of these estates. In order to facilitate the resolution of the remaining disputes, the executors should isolate their costs for any periods remaining in dispute as best they can into the following general categories: 1. General administration costs; 2. Settlement negotiations; and 3. The passing of accounts (distinguishing between WIP which the Executors contend is already covered by existing orders for the passing of accounts and WIP which is not so covered).
Directions were made on 10 December 2021 for this to occur.
There was considerable dispute between the parties as to how the Court should deal with those allocated costs that may arguably be referable to the motions now under consideration before the Court, or that may otherwise need to be classified estate administration charges. The Court has endeavoured to deal with this issue, as discussed above. But liberty to apply will be granted up to 9 March 2022 in relation to any aspect of the quantification of the Court's present orders that may arise including, for example, GST disputes.
The executors have been wholly successful in relation to the present argument in relation to costs. There is no reason why they should not have a costs order against the Backhouse brothers in respect of the costs associated with the present contest and hearing. That costs order should at least be on the ordinary basis, and arguably on the indemnity basis. If it is not on the indemnity basis, the executors should be entitled to recover out of the estate the difference between their actual costs and the costs recoverable against the Backhouse brothers. The parties can settle the final form of the order between themselves to recover these costs and the Court will make that order on 9 March 2022. The Court also expects to quantify those costs as a result of the argument on 9 March 2022. Evidence should be provided before that hearing of those costs so that this can be done to serve the objective of finalising these proceedings that day.

Conclusion and Orders

For these reasons, the Court makes the following orders and directions: 1. Note that for the purposes of these orders the following persons will be referred to in the following ways: 1. the first and second plaintiffs, as "the executors"; and 2. the first and second respondents as "the Backhouse brothers". 1. Order under Civil Procedure Act 2005, s 98(4)(c) that the following specified gross sums be fixed instead of assessed costs in respect of the following costs orders in favour of the executors and against the Backhouse brothers: 1. In respect of the costs before Lindsay J, covered by Order (5) of the Court's orders made on 9 June 2021, the sum of $54,459.40; and 2. In respect of the executors' costs of the four motions for review, covered by Orders (2) and (3) of the Court's orders made on 9 June 2021, together with the executors' costs associated with the two subpoenas to Belbridge Hague, covered by Order (6) of the orders made by the Registrar on 6 March 2019, together with Belbridge Hague's costs of compliance with those two subpoenas, the sum of $153,324.75. 1. Reserve for further consideration on 9 March 2022 the matters referred to under the heading in these reasons, "The Costs Incurred in Settlement Negotiations" and "A final hearing on 9 March 2022" ("the reserved issues"). 2. Order (2) of these orders is stayed to the extent necessary to prevent the executors from entering judgment against the Backhouse brothers for the sums specified until the Court determines the reserved issues. 3. The Court will grant liberty to apply to both parties in respect of the calculation of Order (2) of these orders up to 9 March 2022.

Amendments 27 January 2022 - [22] line 3 - decimal point corrected. [25] line 6 - duplicate "in" removed; line 7 - "proceedings" rather than "proceeding". [29] line 3 - comma removed after "work"; line 4 - "an" inserted after "is"; line 7 "is" inserted after "there"; "in" inserted after "or". [32] line 8 - "COVID-19" instead of "COVID". [35] line 5 - "of" removed before "between". [40] line 2 - apostrophe added to "solicitors". [41] line 1 - "the" inserted before "argument". [46] line 9 - "The firm" instead of "it". 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: 27 January 2022

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