Brock v Foord

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

107681/01 ADRIAN BROCK and ORS -v- BRONWYN SUE FOORD JUDGMENT 1 MASTER: These proceedings relate to the estate of the late Joyce Isabel Holyhead (to whom I shall refer as "the Deceased"), who died on 26 December 1999. 2 There are presently before the Court two opposing applications in respect to costs, one by the Plaintiffs, the other by the Defendant. I shall shortly set forth details of each of those applications. It is appropriate, however, that I should at the outset recount, at least in summary, the factual background to and the procedural history of this matter. 3 The proceedings were precipitated by the lodgement by Bronwyn Sue Foord of a caveat against the grant of probate of the will of the Deceased dated 22 March 1994. 4 In consequence, the Plaintiffs, Adrian Brock, Jennifer Brock, and Rosalyn Donohoo, on 23 October 2001 filed a notice of motion for an order that the caveat cease to be in force. Pursuant to orders made by Justice Windeyer on 10 December 2001 those Plaintiffs filed a statement of claim in the Probate List of the Equity Division on 21 December 2001.

5 By that statement of claim the Plaintiffs sought a grant of probate in solemn form of the will of the Deceased executed on 22 March 1994, of which the Plaintiffs were three of the four executors named therein. The Defendant, Bronwyn Sue Foord, was also an executor named in that will. The First Plaintiff, Adrian Brock, is the husband of the Second Plaintiff, Jennifer Brock. The Second and Third Plaintiffs and the Defendant are the three daughters of the Deceased. By the terms of the will and in the events which have happened, those three daughters of the Deceased are entitled to the entirety of their mother's estate in equal shares. 6 The Defendant filed a defence and cross-claim on 28 February 2002. 7 By that defence the Defendant in response to the allegation contained in paragraph 2 of the statement of claim (that paragraph asserting that on 22 March 1994 the Deceased executed her last will and testament by signing the same in the presence of R.W. Monahan and J. Hartley who then attested and signed the said will in the presence of the Deceased) pleaded that she (a) admits that the document exists dated 22 March 1994; (b) otherwise does not know and cannot admit the allegations contained therein. 8 By paragraph 3 of the defence the Defendant states that in answer to the whole of the statement of claim the Defendant relies upon the matters pleaded in her cross-claim and says the Plaintiffs should be denied the relief sought. 9 By her cross-claim the Defendant raised various complaints concerning the conduct of the First Plaintiff, Adrian Brock, in relation to the Deceased and her financial affairs and in relation to the conduct of the First Plaintiff concerning the will of the Deceased and the estate of the Deceased after her death, and in particular concerning the conduct of the First Plaintiff in relation to a company Holyhead Pty Limited of which the Deceased had been the sole shareholder. 10 The cross-claim contains various allegations by the Defendant concerning alleged dilatory conduct on the part of the Plaintiffs (and, in particular, the First Plaintiff) regarding the application for a grant of Probate of the will of the Deceased. 11 By her cross-claim the Defendant seeks an order for an account, and an order for an inquiry concerning property being part of the estate which may have been lost, misappropriated or used. Additionally or alternatively, the Defendant seeks an order for the appointment of an administrator of the estate, a trustee of the estate, or a receiver and/or manager of the estate. 12 A defence to cross-claim was filed by the Plaintiffs on 26 March 2002. By that pleading the Plaintiffs, without admissions and subject to the reservation of costs, consented to an order that there be a grant of Probate to the parties jointly, coupled with an order for the appointment of a receiver/manager; or, in the alternative, an order that there be a grant of administration to a trustee company or some other fit and proper person. The Defendants admitted certain of the paragraphs of the cross-claim and denied other paragraphs thereof. 13 The substantive proceedings were ultimately resolved. That resolution was effected by consent orders made on 25 March 2002 by Justice Young, Chief Judge in Equity, and a notation, which included the following: 1. Order that, subject to their consent, letters of administration with the will dated 22 March 1994 annexed be granted to Kevin Richard Shirlaw and John Peter Smith, of Howarth & Howarth, 1 Market Street, Sydney, without security.

2. Order that the proceedings be referred to the Registrar to complete the grant. 3. ….

5. Note that "on the basis that the Administrators will be retaining confidentiality of information they will not disclose it to either party; any party or their lawyers may disclose any confidential information to the Administrators". 14 The foregoing orders were made without admissions by any party. 15 Subsequently, Mr Smith not being able to act as an administrator and not consenting so to act, orders and notations to the following effect were made by consent on 22 April 2002: 1. Order that the order for a grant of letters of administration (made on 25 March 2002) be varied to remove John Peter Smith as a joint administrator of the Estate.

2. Note that Kevin Shirlaw, as Administrator of the Estate, be remunerated in accordance with the rates set by the Insolvency Practitioners of Australia and such fees are to be paid out the Estate.

3. Note that the reasonable fees of Mr Shirlaw's solicitors, Coudert Brothers, are to be paid out of the Estate. 16 Letters of Administration with the will dated 22 March 1994 annexed thereto were granted to Kevin Richard Shirlaw on 2 May 2002. 17 On 10 February 2003 a notice of motion was filed by the Defendant, by which she seeks the following substantive orders: 2. That the Defendant's costs of these proceedings be paid by the Plaintiffs: a. On an indemnity basis; b. Alternatively, as assessed

3. Additionally or alternatively, that the Plaintiffs pay the Defendant's costs of the Plaintiffs' Notice of Motion dated 12 December 2001.

4. That the Plaintiffs pay the Defendant one third of the Administrator's costs. 18 Subsequently, the Plaintiffs on 1 August 2003 filed a notice of motion seeking the following substantive orders: 1. An order that the Defendant pay the Plaintiffs' costs.

2. Alternatively to paragraph 1, an order that the Defendant pay the Plaintiffs' costs from 29 November 2001 until determination of this Motion.

3. An order that the Defendant pay the costs of Kevin Shirlaw, including any legal costs as Administrator of the Estate of Joyce Holyhead.

4. An order that the Defendant pay the costs of this Notice of Motion. 19 Those two notices of motion came on for hearing before me on 16 September 2003. 20 Pursuant to directions made by me on 28 July 2003 each party provided a written outline of submissions concerning their respective applications. Those written outlines of submissions will be retained in the Court file. 21 The essential questions which the Court must determine are, firstly, what costs order should be made in respect to the proceedings generally; and, secondly, how the remuneration charged by Mr Shirlaw ("the administrator") for his administration of the estate and the costs incurred by him in connection with the proceedings should be borne. 22 The Plaintiffs do not dispute that the administrator is entitled to his remuneration and costs. (They could hardly do otherwise in the light of the consent orders made on 22 April 2002.) They submit, however, that the liability for that remuneration and costs should be borne by the Defendant, and not by the estate or by the Plaintiffs themselves. 23 The Plaintiffs submit that the necessity for the administrator's appointment arose from the refusal by the Defendant to join in the application for Probate. It will be appreciated that the three Plaintiffs alone could not seek or obtain Probate, they being only three of the four executors appointed by the will of the Deceased. The Plaintiffs submit that had the Defendant joined in the application for Probate it would not have been necessary for the administrator to be appointed. Therefore, so it was submitted on behalf of the Plaintiffs, the costs and remuneration of that administrator should be borne, not by the estate of the Deceased, but by the Defendant personally. 24 The Defendant, on the other hand, submits that if the First Plaintiff had not been guilty of what was described as mixing his own family funds with those of the Deceased, there would have been no need for the institution of the present proceedings or for the appointment of an independent administrator. The Defendant submits that the appointment of the administrator was rendered necessary because of the conduct of the First Plaintiff. 25 Further, the Defendant submits that she should not be required to pay the costs of the Plaintiffs, since the Plaintiffs were not successful in the proceedings, and that, indeed, it is the Plaintiffs who should be required to pay the costs of the Defendant, and that such costs should be paid on an indemnity basis. 26 The Defendant points to the fact that it was she who had throughout sought the appointment of an independent administrator, and that that appointment is what ultimately occurred. Therefore, so the Defendant submits, she should not have to bear the costs of that appointment of the administrator. She submits that the responsibility of the First Plaintiff for the necessity for the proceedings and for the appointment of the administrator, is underlined by the delay from the death of the Deceased until the resolution of the proceedings. It is the basic submission of the Defendant that her position has been vindicated by the appointment of the administrator. 27 The Plaintiffs do not accept that the Defendant and her stand in the matter have been vindicated in the present litigation or that the outcome of the proceedings can properly be characterised as success for the Defendant. The Plaintiffs point to the fact that the substantive proceedings were resolved by way of compromise, without admissions, which recognised a genuine dispute as to costs, once the administrator had performed his function. The Plaintiffs submit in that regard that the administrator's report constituted an exoneration of the First Plaintiff. They point to the fact that there was no loss to the estate, and no evidence of misappropriation by the First Plaintiff. Any mixing of funds was, so it was submitted on behalf of the Plaintiffs, effected at the instigation of the Deceased and her late husband during the lifetime of the Deceased. 28 In summary, the Plaintiffs submit that the appointment of the administrator at the instance of the Defendant came at a price, that price being the liability of the Defendant for the costs of the Plaintiff and for the costs and remuneration of the administrator. 29 It will be appreciated that the foregoing outlines of the respective submissions of the parties which I have just set forth are intended only to summarise, and at times to paraphrase, the written outlines of submissions which I have had the benefit of receiving from Counsel for the respective parties. 30 The parties were in agreement that the two notices of motion, seeking entirely opposing orders in respect to costs, should be heard together. That course was adopted at the hearing.

31 The complaints of the Defendant concerning the information communicated to her by the Plaintiffs, in particular by the First Plaintiff, and concerning the alleged mixing of funds of the First Plaintiff with those of the Deceased and, subsequently, of the estate may at the outset have had some substance. Further, the Defendant may have had a genuine grievance arising from a lack of appropriate communication by the First Plaintiff concerning the estate and the progress of the application for Probate. 32 However, those original complaints and grievance, even if legitimate, appears to have been subsequently inflated into an attempt on the part of the Defendant to conduct a suit for general administration of the estate, and to embark upon a general investigation not only of the financial dealings of the Deceased in the latter part of her lifetime but also of the personal affairs of the First and Second Plaintiffs. For that purpose, the Defendant served, inter alia, a notice to produce (dated 6 November 2001) addressed to the Plaintiffs and a subpoena for production addressed to the firm of accountants of which the Plaintiff was at all material times a member and of which he remains a member. The Plaintiffs made application by way of notice of motion filed on 13 December 2001 to set aside parts of the notice to produce and parts of the subpoena. Ultimately, it was unnecessary for that motion to be determined, because, on 25 March 2002, the parties agreed to a grant of administration being made to the administrator on terms that recognised that he could conduct inquiries, including confidential inquiries, on behalf of the estate. 33 In approaching the present applications in respect to costs, it must be appreciated that, following his appointment, the administrator formally administered the estate (and also wound up the Deceased's family company, Holyhead Pty Limited), in the course of which administration he made distributions from the estate. In consequence, apart from the outstanding questions of costs which are the subject of the present applications, the estate is fully administered. 34 By a report dated 3 October 2002 and a subsequent report dated 4 March 2003 the administrator considered the conduct of the First Plaintiff in regard to the mixing of funds and in regard to the administration of the estate after the death of the Deceased. 35 The Plaintiffs rely upon those reports as exonerating the Plaintiff from any suggestion of misappropriation or impropriety. The Defendant, however, disputes that such was the effect of the reports of the adminstrator. 36 Despite that construction placed upon them by the Defendant, it is quite apparent from the following passages in his reports that the administrator did, in fact, exonerate the First Plaintiff from any suggestion of misappropriation or impropriety: Report of 3 October 2002

1. EXECUTIVE SUMMARY A number of allegations have been raised in relation to the management of the Estate during the period from the Deceased's death up until my appointment on 25 March 2002. By reason of my role as Administrator, I am required to investigate and account for the funds and assets of the Deceased as at the date of her death and between that date and the date of my appointment. I have reviewed documents provided by the Beneficiaries, including personal documents and accounts of Mr and Mrs Brock. These documents account for the funds and assets belonging to the Estate from the date of the Deceased's death to the date of my appointment. I have maintained records of transactions to the date of this report. My investigations have not revealed any misappropriation of the Deceased's property, however, there had been a temporary shortfall of funds relative to a deposit with Deloitte Touche Tohmatsu ("Deloitte"), after bringing into account interest to which the Deceased was entitled, resulting from payments made on behalf of the Brock family. The funds and interest were replaced without any discernable loss to the Estate. 2. ESTATE ASSETS 2.8 Shares held in Holyhead Pty Ltd I have requested all books and records of the Company from Mr Brock. I have reviewed payments drawn from the moneys held on deposit by the Company and I cannot detect any misappropriation of funds. I have also reviewed documentation regarding other assets belonging to the Company and I am not aware of any misappropriation of these assets. 3. INVESTIGATIONS 3.3 Adrian Gerald Brock Bronwyn Foord further states in her affidavit that she is concerned that Mr Brock has already admitted that he has mixed the Deceased's moneys with his family trust money held at Deloitte in his affidavit of 6 December 2001. The extent of the "mixing" of moneys is discussed above. From my investigations, there are no financial consequences to the nature or size of the Estate or the entitlements of the Beneficiaries arising from any "mixing"… As observed above, I can find no evidence of assets of the Deceased or the Company that are unaccounted for. No assets appear to have been improperly dealt with by anyone. In a meeting with the Administrator on 22 May 2002, Mr Brock allowed the Administrator, among other things, to review his personal tax return for the year ended 2001.

Report of 4 March 2003 1. FOREWORD In addition to my roles as Administrator of the Estate and Liquidator of the Company, I was required by the Plaintiffs and the Defendant to investigate the affairs of the Estate. After considerable discussion and correspondence with the Beneficiaries and their respective counsel and/or legal advisers, the results of my investigations were circularised in the October 2002 report. I attach a copy of the October 2002 report as Annexure A. My investigations have not revealed any misappropriation of the Deceased's property, however, there had been a temporary shortfall of funds relative to a deposit held with Deloitte Touche Tohmatsu ("Deloitte") after brining to account interest to which the Deceased was entitled. This shortfall was later replaced without any discernable loss to the Estate. I refer to section 3.1 of the October 2002 report.

37 The Defendant has made no application to the Court challenging the foregoing findings of the administrator favourable to the First Plaintiff, or seeking directions to the effect that the administrator undertake some further action in the matter. On the contrary, the Defendant has acquiesced in distributions from the estate which have been made by the administrator, those distributions being predicated upon the correctness of the foregoing reports of the administrator. 38 It is submitted by the Plaintiffs that, in these circumstances, the Defendant should bear the costs of the proceedings (and also the costs of the administrator's administration) which proceedings had been made necessary by the Defendant's unfounded allegations of misappropriation levelled against the First Plaintiff. 39 I have already observed that it was the submission of the Plaintiff that the necessity for the appointment of the administrator arose solely from the refusal on the part of the Defendant to join in the application for Probate of the will of the Deceased. 40 That will was, both in form and in substance, a relatively simple document. The Deceased had three children, being her three daughters, Rosalyn Joy Donohoo, Jennifer Robin Brock and Bronwyn Sue Foord. By clause 1 of her will the Deceased appointed those three daughters and Mrs Brock's husband, Adrian Gerald Brock, to be the executors and trustees of her will. Clause 2, the dispository clause, in the events which had happened, gave to her trustees the entirety of her estate "to divide the capital among such of my daughters Rosalyn Joy Donohoo, Jennifer Robin Brock and Bronwyn Sue Foord as shall survive me and if more than one in equal shares." 41 Clauses 4 and 5 of the will related to circumstances which had not arisen at the time of the death of the Deceased. Clause 5 was in the following terms, I DECLARE that the expression "my Trustees" shall where the context so admits refer to and include the Trustees or Trustee for the time being and I DIRECT that in the event of any disagreement between my Trustees the decision of the majority of my said daughters shall prevail. 42 It must have been appreciated by the Defendant that unless and until there were a grant of Probate or of administration of the will of the Deceased, firstly, the administration of the estate would be stultified; secondly, there could not be any distribution of the assets in accordance with the terms of the will; and, thirdly, the provisions of clause 5, which expressly contemplated the possibility of any disagreement between the trustees, could not be brought into operation. 43 In approaching the question of which party should be liable for the costs of the proceedings, it seems to me that it is appropriate to consider the reasonableness of the conduct of the Plaintiffs on the one hand and of the Defendant on the other hand. 44 The Defendant considered that she had a legitimate complaint concerning the mixing by the First Plaintiff of his family funds with the assets of the Deceased and of the estate. In the event, the First Plaintiff was exonerated from any suggestion of impropriety or misappropriation of assets of the Deceased. However, whether or not the Defendant was justified in making the original allegations, or in seeking an opportunity to ventilate those allegations, her concerns could not have been appropriately met by conduct on her part which, in effect, stultified the administration of the estate, and made necessary the institution of the present proceedings by the Plaintiffs, and, ultimately, the appointment of Mr Shirlaw as administrator. 45 The Defendant appears totally to have misconceived the distinction between, on the one hand, proving the will of the Deceased and, on the other hand, establishing the substance of her complaints concerning the conduct of the First Plaintiff before and after the death of the Deceased. By participating in the former, she was not precluded from the latter. 46 The refusal of the Defendant to join in the application for Probate, and the lodgement by the Defendant on 11 October 2001 of the caveat against a grant of Probate of the will made inevitable the institution of the present proceedings by the Plaintiffs. 47 A more reasonable course on the part of the Defendant (although the Court recognises that in expressing this view it has the benefit of hindsight) would have been for the Defendant to allow a grant of probate to have been made to the executors named in the will, and then to have relied upon the provision of clause 5 of the will, which would have allowed, in the case of disagreement among the trustees, a majority decision by two of the three daughters. Or, alternatively, the Defendant could have renounced probate, thus allowing the remaining three executors to obtain a grant. The adoption by the Defendant of either of the foregoing courses would not, of course, have precluded her from making, and litigating, her complaints concerning conduct of the First Plaintiff in respect to the mixing of funds. I do not consider (although it is not necessary for me to arrive at a concluded view in this regard) that the provisions of clause 5 could have had application to the conduct of the First Plaintiff before he embarked upon the administration of the estate. That is, a majority decision by the three daughters could not have resolved a complaint by the Defendant against conduct on the part of the First Plaintiff which had taken place during the lifetime of the Deceased. 48 The reports of the administrator ultimately exonerated the First Plaintiff. 49 The fact that the Plaintiffs consented to the appointment of an administrator (who, as I have already observed, ultimately found that the allegations of the Defendant against the First Plaintiff were without substance) does not of itself support the assertion on the part of the Defendant that she was successful in the litigation. Had the Plaintiffs not consented (and it should be emphasised that that consent was made without admissions of any kind) to the appointment of an administrator, the administration of the estate of the Deceased would have remained in abeyance until the determination of what in all likelihood would have been protracted litigation. The practicalities of the situation required the consent of the Plaintiffs to the appointment of the administrator. 50 It has already been recorded that the present application of the Plaintiff seeks in the alternative an order that the Defendant pay the costs of the Plaintiff and an order that the Defendant pay the costs of the Plaintiff from 29 November 2001 until the determination of the present application. The significance of the date 29 November 2001 is that on that date the solicitors for the Plaintiff sent to the solicitors for the Defendant a letter which clearly and concisely set forth the position of the Plaintiffs; responded to any suggestions of impropriety on the part of the First Plaintiff (which ultimately became the subject of the reports of the Administrator, exonerating the First Plaintiff); addressed the matter of delay in the administration of the estate; and proposed a course for the future conduct of the administration of the estate ("The Way Forward"). 51 Despite that letter of 29 November 2001, the Defendant maintained her stand, and the appointment of the administrator thus became inevitable. That appointment, as I have already observed, required the administrator to conduct an investigation into the conduct of the First Plaintiff which was the subject of the complaint of the Defendant, and that investigation totally exonerated the First Plaintiff. 52 I am in agreement that, as was submitted on behalf of the Plaintiffs, the administration of this estate was simple. There were three beneficiaries, who were, in the events which had happened, to share the entirety of the estate equally. In the normal course, the administration would have been concluded within a period of several months from the death of the Deceased. As it was, the Deceased died on 26 December 1999, and it was only on 2 May 2002 (almost two and a half years later) that a grant of administration was made to the administrator. That delay was due not only to the conduct of the Defendant in failing to join in the application for Probate and in lodging the caveat. The delay was also due to the fact that, at the suggestion of the First Plaintiff, the application for the grant was placed in the hands of a non-practising solicitor who was a colleague of the First Plaintiff in the firm of accountants where the First Plaintiff was a partner. Had the services of a competent and experienced legal practitioner been retained at the outset, it is unlikely that the dispute between the Plaintiffs and the Defendant would ever have come to its present pass. 53 It seems to me, in all the circumstances, that it is appropriate that the Defendant should pay the costs of the Plaintiffs of the proceedings after 29 November 2001. There remains, the question of whether those costs, which normally would be payable on the party and party basis, should, as submitted on behalf of the Plaintiffs, be paid on the indemnity basis. 54 An award of indemnity costs presupposes some relevant delinquency, or unreasonable conduct, in relation to the conduct of the proceedings, by the party against whom the order is made (see, for example, Oshlack v Richmond River Council (1998) 193 CLR 92). These include situations where a party has maintained proceedings that had no real prospect of success (see, for example, Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Pty Limited (1988) 81 ALR 397); where proceedings were maintained for an ulterior purpose (see, for example, Cultus Petroleum NL v OMV Australia Pty Limited BC 9902283; [1999] NSWSC 435); where the conduct of proceedings has caused unreasonable delay and expense (see, for example, Wentworth v Rogers BC 9907174; [1999] NSWCA 403 at [85]). 55 In the instant case, as I have already observed, the First Plaintiff whose conduct was the subject of the complaints of the Defendant was totally exonerated of wrongdoing. Nevertheless, the First Defendant after the letter of 29 November 2001 maintained her stand. She even caused to be issued the notice to produce and the subpoena to which I have already referred. Although, in the event, it became unnecessary for the application of the Plaintiffs to set aside that notice to produce and that subpoena to be determined, nevertheless, the submission of the Plaintiffs that the width of the material sought by the Defendant concerning the personal financial affairs of the First and the Second Plaintiffs was so wide as to arouse suspicion as to the motives of the Defendant in pursuing the allegations of misconduct and impropriety on the part of the First Plaintiff is not without substance. 56 Further, the persistence of the Defendant in maintaining the allegations of impropriety and misconduct on the part of the First Plaintiff after the letter of 29 November 2001 (allegations which were found by the administrator to be without substance), and the determination of the Defendant to require the appointment of an administrator and not herself to participate in the obtaining of a grant of Probate, have had the effect not merely of unnecessarily delaying the administration of the estate of the Deceased, but also of causing delay in the present proceedings. 57 Whilst there may at the time have been grounds for the attitude and stand taken by the Plaintiff before she received the letter of 29 November 2001, I consider the maintenance by her of that attitude and stand thereafter was without justification. Her conduct after the date of that letter in refusing to join in the application for Probate (thereby making necessary the appointment of the administrator and delaying the administration of what was essentially a very simple estate) and in persisting in her cross-claim, were such as should in my conclusion attract an order for indemnity costs against her. 58 It seems to me, therefore, that it is appropriate that the costs of the Plaintiffs after 29 November 2001 should be paid by the Defendant on the indemnity basis. 59 Since, in my conclusion, the appointment of the administrator was unnecessary, and the concerns of the Defendant regarding the conduct of the First Plaintiff could have appropriately been met after a grant of Probate to the executors named in the will, I consider it appropriate that the costs and remuneration of the administrator should be paid not by the estate, but by the Defendant. 60 Accordingly, I make the following orders:

(1). I order that the Defendant pay the costs of the Plaintiffs of the proceedings after 29 November 2001, such costs to be on the indemnity basis.

(2). I order that the Defendant pay the remuneration and the costs of Kevin Richard Shirlaw, including any legal costs as administrator of the estate of the late Joyce Isabel Holyhead ("the Deceased").

(3). I order that the Defendant pay the costs of the Plaintiffs of the notice of motion filed by the Plaintiffs on 1 August 2003.

(4). I order that the notice of motion filed by the Defendant on 10 February 2003 be dismissed.

Last Modified: 12/05/2003 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.