The primary judgment in this matter was delivered on 27 September 2019: Carrington v Wallace [2019] NSWSC 1301.
The only issue that was decided on the merits was a dispute between the parties concerning the proper construction of the will dated 18 April 2015 of the late Edward Joseph Carrington.
At par 115 of the primary judgment, I set out orders that I proposed to make subject to such comments as the parties provided to the Court in response to an invitation that I made in that regard.
The Court made orders on 28 November 2019 after hearing from the parties. Orders 1 to 4 consisted of declarations and orders that determined the proper construction of the will and how the will, as so construed, was required to be performed by the defendants, who are the executors of the will.
There were a number of subsidiary disputes between the parties concerning the proper administration of the deceased's estate. During the course of the hearing, various parties indicated positions that appeared to involve reasonable ways to resolve the disputes in a manner that would obviate the need for judicial determination in the course of an administration suit. Orders 6 to 11 were made without any determination by the Court of the merits of those disputes on the basis of the agreed position of the parties and had the effect of resolving those disputes. For completeness, I should mention that there was no order 5, as the parties agreed that the order 5 that I proposed in the primary judgment should not be made.
At the time the primary judgment was delivered, it was unclear whether the plaintiffs would decide to pursue additional complaints that they had concerning the manner in which the defendants had administered the estate of the deceased. Proposed orders 12 and 13 required the plaintiffs to inform the defendants whether they wished to pursue any additional disputes. By the time the orders were made on 28 November 2019, it had become clear that the plaintiffs did wish to make additional claims, and consequently on that date further orders 3 and 4 were made that required the plaintiffs to file and serve a statement of claim and the defendants to file a defence within stated periods. The plaintiffs filed a statement of claim on 31 December 2019. It is only necessary to record that the relief claimed includes orders that the defendants account personally for certain aspects of their administration of the estate of the deceased. The plaintiffs may succeed in their claim, wholly or in part, or they may fail. The nature of the claims is such that it is likely that, depending upon the outcome, any costs orders will be made for and against the parties in their personal capacities. That is, at least at the level of likelihood, any future costs orders that are made will not be ordered to be paid out of the estate of the deceased.
Carrington v Wallace [2020] NSWSC 5 | Case summary | Zoe
It is appropriate to set out the note made by the Court as part of the orders made on 28 November 2019 in par 16, which is in the following terms:
Note that the plaintiffs did not pursue, at the hearing, their application for an order replacing the defendants as executors and trustees of the will of the deceased (or any alternative order that may be required, such as the revocation of the grant of probate to the defendants and the issue of a new grant as may be appropriate), but that, with the agreement of the defendants, the plaintiffs reserve the right to renew their application in respect of any new circumstances that arise out of the further administration of the estate of the deceased by the defendants.
In par 3 of their summons by which they commenced these proceedings, the plaintiffs sought an order that the defendants be removed as executors and trustees of the estate of the deceased, and that the plaintiffs, or any other suitable person or persons, be appointed as administrators and trustees of the estate of the deceased. The basis of this application was not pleaded, but it appeared from the evidence that the plaintiffs asserted that the defendants had not properly performed their duties as executors and trustee in respect of a number of aspects of the administration of the estate, which included the sale of a property owned by the deceased to the second defendant, the recovery of a debt owed by the first defendant to the deceased, the realisation of the value of the deceased's opal collection, and the fact that the defendants had paid a total of $150,000 to the second defendant without making any commensurate payments to the plaintiffs.
It appeared during the course of the hearing that a technical issue might be required to be resolved concerning whether the defendants should be treated as executors or trustees, and whether in the circumstances the Court had power to replace them, or whether it was necessary to revoke the grant of probate to the defendants and make an alternative grant to suitable administrators. It did not become necessary to resolve this issue.
Given the relatively limited value of the deceased's estate, and the possibility that the declarations that the Court would make as to the proper construction of the will of the deceased, as well as consequential orders to give effect to that construction, might simplify the completion of the administration of the estate, the Court expressed reservations about the appropriateness and cost effectiveness of the replacement of the defendants as executors and trustees of the estate. As explained in the primary judgment at [42] to [48], the parties adjusted their positions, which led to the plaintiffs taking the course recorded in the note in par 16 of the orders, which has been set out above.
The position therefore is that the plaintiffs initially sought orders for the replacement of the defendants as the executors and trustees of the estate of the deceased. Part of the evidence and the preparation by the parties must have related to this issue. In practical effect, an agreement was reached during the course of the hearing that resulted in the plaintiffs deferring their pursuit of the relief claimed in prayer 3 of their summons. This is not a case where the parties made a compromise that involved the plaintiffs abandoning this claim. It has been deferred without prejudice to the right of the plaintiffs to revive it. They may or may not do so. If they do not, a question will arise as to whether or not the circumstances justify the Court in making an order that they pay the costs of this aspect of their claim. If the plaintiffs do revive the claim, noting that they have not yet done so in their recently filed statement of claim, the plaintiffs may succeed or fail. In either event, any appropriate costs order is likely to be made for and against the relevant parties in their personal capacities.
As recorded in the primary judgment at [6], the defendants filed a cross-summons, which sought the advice of the Court concerning the proper construction of the will of the deceased, and how the defendants may be justified in administering aspects of the will. For the reason given in the primary judgment at [114], I concluded that it was not necessary for the Court to give the judicial advice sought in the cross-summons, because I took the view that the application for judicial advice had the practical effect of mirroring that part of the plaintiffs' claim that consisted of a construction suit. I concluded that it was not necessary for the Court to provide the judicial advice that was sought, because the orders made concerning the proper construction of the will had the effect of substantively determining the issue. The defendants would therefore be adequately protected by acting on the basis of the proper construction of the will, and did not need the additional protection of judicial advice. While there is scope for argument whether it was reasonably necessary for the defendants to incur the costs of drafting and filing their cross-claim, it appears to me that the cross-claim did not require any additional evidence or other preparation or legal costs to that which was required for the determination of the construction issues. I would not conclude on the material that is now before the Court that it was unreasonable for the defendants to file the cross-claim, to an extent sufficient to justify an order that the defendants personally pay the costs of that application.
Order 14 of the orders proposed in the primary judgment and order 5 made on 28 November 2019 required the parties to provide the Court with their submissions as to the orders for costs that should be made by the Court at this stage of the proceedings.
The plaintiffs provided submissions and proposed orders on 16 December 2019. The defendants responded on 24 December 2019. The plaintiffs replied by email of their solicitor dated 24 December 2019.
The plaintiffs' position was in substance that: (a) the plaintiffs' costs should be paid out of the estate of the deceased on an indemnity basis, fixed as a gross sum of $90,000 (including GST); (b) the defendants' costs in response to the plaintiffs' claim should be paid out of the estate of the deceased on an indemnity basis, fixed as a gross sum of $45,000 (including GST); and (c) the defendants should be ordered to bear their own costs of the cross-claim.
I assume that the plaintiffs' reference to the parties' costs is to their costs in the proceedings to date. That assumption is not entirely clear, as in par 6 of their initial submissions the plaintiffs note that the defendants have advised that their costs as at 11 December 2019 were $39,000 to that date, including GST, and projected future costs of $15,000. The total of those two amounts is $54,000, so the gross sum of $45,000 suggested by the plaintiffs must include a component for future costs. It is to be noted that the plaintiffs state in par 8 of their initial submissions that their total costs to date are $121,494.10.
The defendants' position was in substance that: (a) the plaintiffs' costs of the proceedings relating to the construction of the will should be paid from the estate on an indemnity basis; (b) the balance of the plaintiffs' costs should be reserved; (c) the whole of the defendants' costs of the proceedings to date should be paid from the estate on an indemnity basis; (d) the costs payable to all parties out of the estate should be determined by the Court on a gross sum basis pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW); and (e) directions should be made for the filing and service of evidence and submissions concerning the determination of the appropriate gross sums.
It is to be noted that one difference between the positions of the parties is that the plaintiffs requested the Court to determine the appropriate gross sums on the basis of bare statements given by the plaintiffs as to the total amount of the costs they have incurred, while the defendants submitted that the Court should act on detailed evidence and submissions to be provided.
I conclude that the Court should take the following approach to the issue of the costs of the parties in these proceedings to date.
The parties are agreed that the costs of all parties of the construction issue should be paid out of the estate of the deceased on the indemnity basis, subject to those costs being fixed at a gross sum.
In addition to the position being agreed that the costs of the construction issue should be paid out of the estate of the deceased, I am satisfied that an order to that effect would be appropriate in any event. There was a genuine construction issue that required resolution by the Court and the arguments were relatively finely balanced.
Against the possibility that there is some doubt as to the position adopted by the parties, the Court could only at this time make costs orders that deal with the costs that the parties have incurred to date. It is self-evident that the Court cannot foresee the future course of these proceedings or what costs orders will eventually be appropriate.
As recorded above, the plaintiffs submit that all of their costs to date should be paid out of the estate of the deceased, while the defendants submit that all of their costs should be paid on the same basis, but the costs of the plaintiffs that are paid out of the estate should be limited to the costs related to the construction issue.
As there is no agreement between the parties that the whole of each side's costs to date should be paid out of the estate of the deceased, it would not be proper for the Court to make either of the orders sought by the parties, in so far as they extend beyond the costs of the construction issue. As the Court has only finally determined the construction issue, all of the other issues relate to rights and liabilities of a personal nature, and, subject to the qualification in the following paragraph, claims that were deferred or the determination of which has not otherwise been completed. Consequently, it is premature for the Court to make costs orders now in relation to the questions that have not yet been determined.
The qualification relates to the sundry claims discussed under the heading "Preliminary matters" in the primary judgment at [13] to [47]. As there were no pleadings, the issues the subject of these claims were not precisely defined, but they arose out of the evidence and the way in which the hearing was conducted. As noted above, some of them were resolved in a practical and sensible way by the positions taken by the parties that lead to orders 6 to 11 as proposed in the primary judgment.
The parties did not in their submissions specifically address the question of how the costs of these issues should be treated. In a practical sense, they have been determined by the orders that have now been made. That occurred without the Court being required to make any determination on the merits of any of the claims. That approach saved costs. It may be appropriate that the costs of these issues be dealt with on the basis commonly attributed to the judgment of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6. That is so because the orders were made on the basis of the de facto agreement of the parties; the Court was not required to deal with the issues on the merits; and it was not clear that one or the other side would succeed. It follows that it may be appropriate that each side should bear its own costs of these issues. In the absence of agreement between the parties that the costs of these issues be paid out of the estate of the deceased, the only alternative is to leave those costs unresolved to be dealt with later at the conclusion of the proceedings.
I do not know the proportion that the costs of these issues will bear to the parties' total costs to date, so I do not know whether it is worthwhile to the parties to attempt to deal with the costs of these issues separately at this stage of the proceedings.
There is also a question concerning the wisdom of the Court going beyond the making of such costs orders as the parties may agree to require each of them to incur the costs of quantifying the costs payable, if the proposal is that the amount of the costs payable to the parties will actually be paid out of the estate of the deceased. The costs in total already incurred by the parties appear to amount to a substantial proportion of the value of the deceased's estate. It appears from the issues raised by the plaintiffs' statement of claim that the parties may incur considerable further costs in completing these proceedings. Ultimately, the Court may be required to make costs orders against one side or another that the successful party may have difficulty in recovering if the unsuccessful party has already been paid part of the costs incurred to date out of the deceased's estate.
It follows from what I have said above that the parties have not yet fully addressed all of the issues that arise in relation to the Court making costs orders at this stage of the proceedings.
This matter has been listed for further directions on 5 February 2020. The parties should be in a position to address the outstanding issues raised by these reasons at that hearing.
It is also appropriate that I make the following observations concerning the joint desire of the parties that the Court make a gross sum costs order in respect of any costs orders that are finally made at this stage of the proceedings.
One issue that the Court is entitled to take into account in deciding whether it should embark upon the process of determining a gross sum costs order is the complexity of the process that will be involved, and the practicality of the Court being able to make an appropriate and fair order given the nature of the process to be adopted (including the fact that it is usually appropriate for the Court to adopt a relatively broad brush approach) which is likely to involve a discount on the amount of the costs that would be awarded following a formal assessment of costs. The Court is not obliged to assess costs on a gross sum basis simply because the parties join in requesting the Court to determine costs on that basis. The Court is entitled not to do so, if the matter appears appropriate for the assessment of costs in the conventional way, and the exercise of the Court determining the costs on a gross sum basis is likely to require the Court to devote an unjustifiable amount of time to the exercise.
The parties have not to date satisfied me that this is an appropriate case for the Court to determine any aspect of the costs on a gross sum basis, if the parties are unable to agree as to what amounts should be paid out of the estate to meet the parties' costs of the determination of the construction issue, or any other relevant costs question.
The particular concern that I have is that it appears that any costs that the parties seek to have determined by the Court on a gross sum basis will only relate to some of the issues in the proceedings, which will probably give rise to contention about the proportion of the evidence and the work done by the parties' legal representatives that related solely to, or may reasonably be apportioned to, the issues the subject of the determination. The attractiveness of the gross sum approach that may be realisable where the exercise relates to the whole of the costs of the proceedings may become illusory when it is necessary to apportion the costs as between different issues in the proceedings, particularly where the relevant parts of the evidence and the work done by the legal representatives may overlap as between issues for which the costs are being determined and issues that are not under determination.
If the parties wish to pursue the possibility that the Court will determine the costs of issues payable on a gross sum basis, I would probably require the parties to take the risk of preparing the evidence in support of the application and their submissions before I finally agreed that it was appropriate to embark upon a gross sum costs determination. It is likely that the only way the parties will assuage my scepticism is by making their respective applications in a way and on a basis that objectively demonstrates that it will not be an unwarranted imposition on the Court's resources for the Court to assess the costs payable in the manner desired by the parties.
I am personally sceptical that it will be worthwhile for the parties to incur the costs of preparing gross sum costs applications in the absence of certainty that they will be able to persuade the Court to determine the costs on that basis.
[2]
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Decision last updated: 17 January 2020