First Plaintiff v Second Plaintiff

1 On 20 December 2024 I dismissed the second plaintiff's application for executor's commission. I did so primarily because she had not complied with the statutory requirements for making an application for commission. In addition, I found that the second plaintiff had engaged in disabling conduct.

2 The first plaintiff sought orders that the second plaintiff personally pay her own costs and, on an indemnity basis, the first plaintiff's costs of the application for executor's commission, without recourse from the assets of the estate. The claim for indemnity costs was based on the first plaintiff's offers, made in writing with the consent of the other beneficiaries, to resolve the application which were not accepted by the second plaintiff.

3 The second plaintiff sought her costs of her unsuccessful application for payment of executor's commission and an order that her costs and the first plaintiff's costs of that application be paid out of the estate.

4 On 2 May 2025 I heard from the parties on the issue of costs and, following my oral reasons, made the following orders:

1. The second plaintiff is to pay the first plaintiff's costs of the second plaintiff's application for executor's commission (application) on a standard basis, without indemnity from the deceased's estate, to be taxed in default of agreement.
2. The second plaintiff is to bear her own costs of the application without indemnity from the deceased's estate.

5 At the conclusion of the hearing counsel for the first plaintiff requested that I publish my costs reasons. These are those reasons.

6 The first plaintiff noted that, on 20 December 2024, the Court dismissed the second plaintiff's application for executor's commission on the following bases:

(a) the second plaintiff failed to comply with the requirements of s 65D of the Administration and Probate Act 1958 (Vic) (the Act). She did not notify the interested beneficiaries of her intention to claim commission as soon as reasonably practicable, nor did the contents of her purported notice under s 65D meet the requirements of the Act; and

(b) the second plaintiff had otherwise engaged in conduct which the Court found disentitled her from payment of executor's commission.[1]

7 Next, counsel for the first plaintiff turned to the offers made by the first plaintiff to the second plaintiff to resolve the issue of executor's commission.

8 On 25 January 2024, before the second plaintiff had filed her application, the first plaintiff indicated that he would consider making an offer of $25,000 to the second plaintiff in settlement of her claim. The first plaintiff noted that before making that offer he had consulted with the remaining beneficiaries of the estate who were agreeable to the offer but that the consent of the remaining beneficiaries would still need to be sought formally.

9 On 22 March 2024 , approximately three weeks after the second plaintiff had filed her application, the first plaintiff made a further offer to pay the second plaintiff the sum of $30,000 by way of executor's commission, again confirming that the formal consent of the other beneficiaries would be required. This offer was expressed to be made pursuant to the principles in Calderbank v Calderbank,[2] and stated that if the offer was not accepted and the second plaintiff received an award of executor's commission less favourable than the offer, the first plaintiff would seek payment of his costs on an indemnity basis.

10 The first plaintiff indicated that he had incurred costs of $32,031.23 from the date of service of the second plaintiff's application on 7 March 2024 to the conclusion of the hearing of that application on 29 August 2024. The first plaintiff sent the second plaintiff copies of all invoices.

11 The second plaintiff did not accept either offer but rather suggested the costs of both parties should come out of the estate on bases that included that the Court had dismissed her application for executor's commission on 'technical grounds' and that the deceased's Will provided for her remuneration. This was despite the second plaintiff having abandoned at the hearing of her application reliance on the terms of the deceased's Will as a source of her entitlement to commission. The second plaintiff sought costs of 'counsel and court fees totalling $31,250.00'.

12 The first plaintiff submitted that the second plaintiff, while an executor of the estate, made the application for executor's commission for her own benefit and not for the benefit of the estate. The first plaintiff said that the beneficiaries of the estate should not be disadvantaged by any of the costs of the second plaintiff's application coming out of the estate because it is not a proper estate expense. The first plaintiff pointed out that an application for executor's commission is to be contrasted with an application made by an executor in the carrying out of the executorial duties where they may be expected to be indemnified from the estate.

13 The first plaintiff identified the following circumstances which he said justified the Court making an order that the second plaintiff pay his costs on an indemnity basis:

(a) the Court's findings about the disentitling conduct of the second plaintiff;

(b) the fact that the second plaintiff is a practising solicitor who should have known that her application had no real prospects of success;

(c) the decision of the second plaintiff to abandon reliance on the terms of the Will as a basis for seeking commission at the hearing of her application, after both sides had filed affidavits addressing this issue and costs had been incurred by the first plaintiff in preparing submissions on this issue;

(d) the offers were made by the first plaintiff prior to incurring significant costs, including the second offer which foreshadowed an application for indemnity costs by the first plaintiff if the second plaintiff received a less favourable result at trial.

14 The second plaintiff asked the Court to order that the costs of both the first and second plaintiff be paid out of the estate, with the second plaintiff's costs being limited to disbursements because she represented herself with the assistance of counsel.

15 The second plaintiff conceded that the Court had dismissed her application on the basis that the second plaintiff failed to inform the beneficiaries as soon as reasonably as required by s 65D of the Act, but submitted that her non-provision of timely information and other disentitling conduct had no adverse impact on the beneficiaries, none of whom actively opposed her application.

(a) the mischief sought to be addressed by the inclusion of ss 65A-E in the Act was the depletion of an estate by excessive charges from professional executors such as solicitors, who sought to take advantage of vulnerable beneficiaries;[3]

(b) that mischief was not involved in this case because the second plaintiff was never the sole executor and so did not have the power or capacity to pay herself commission without the agreement of her co-executor and the other beneficiaries;

(c) each of the plaintiffs is a party to this proceeding in their capacities as trustees and are entitled to be paid their costs and disbursements from the estate;

(d) s 65D(5) of the Act, which sets out the consequences of non-compliance with the requirements of that section, does not disentitle a non-compliant executor from the costs of their application. Additionally counsel said the Court's decision that the second plaintiff was not entitled to commission was a harsh outcome such that it would be unjust to further burden the second plaintiff with costs;

(e) Rule 10.10 of the Supreme Court (Administration and Probate) Rules 2023 (Vic) provides that the costs of the applicant and any other person of and incidental to the application shall be in the discretion of the Court and may be allowed out of the estate. Rules 63.01 and 63.26 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (Rules) provide that unless the Court otherwise orders, an executor of a will and an administrator of an estate, shall be entitled to costs of a proceeding out of the estate. There is no basis for departing from this well-established rule;

(f) the second plaintiff acted honestly and in the interests of finalising the estate. In making an application for executor's commission she was not pursuing a personal interest but rather making an application that was necessary to finalise the estate;

(g) neither of the two offers made by the first plaintiff constituted a Calderbank offer. The letter containing the first offer referred to the first plaintiff 'considering an offer'. The second offer was made subject to the formal consent of the residual beneficiaries. There was no guarantee that if the second offer was accepted by the second plaintiff, the proposal would be accepted by the other beneficiaries. Accordingly, the second offer would not create a binding contract if accepted by the second plaintiff and so was not a Calderbank offer;

(h) the second plaintiff laboured for hours assisting in the administration of the estate and the first plaintiff conceded the estate was properly administered;

(i) the testator required the second plaintiff's professional assistance and consented to her being remunerated. A costs order adverse to the second plaintiff would have a chilling effect on the ability of testators to engage the assistance of professionals; and

(j) the estate is large and has the capacity to pay the first and second plaintiff's costs.

17 In Re Munro (Costs),[4] Derham AsJ usefully summarised the principles relating to costs in the Court's probate jurisdiction, including relevantly, the following:

(a) unless otherwise expressly provided by any Act or by the Rules, the costs of and incidental to all matters in the Supreme Court are in the discretion of the Court, and the Court has full power to determine by whom and to what extent the costs are to be paid;[5]

(b) the discretion regarding costs has been described as absolute, unconfined or unfettered, although that discretion must be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation;[6]

(c) in the exercise of the discretion, practices or guidelines have been developed.[7] These practices or guidelines are not legal rules that confine the exercise of the discretion;[8]

(d) there is a settled practice (sometimes called a general rule) that in the absence of good reason to the contrary a successful litigant should receive his or her costs.[9] It is not, however, a legal rule devised to control the exercise of the discretion.[10] Where the general rule applies, it has the result that the successful party should be entitled to the whole of its costs;[11]

(e) the purpose of a costs order is to compensate the successful party for the costs incurred, and not to punish the unsuccessful party. That purpose is a guide to the exercise of the discretion;[12]

(f) a special costs order, conventionally an order for indemnity costs, may be made in circumstances where unusual features or special circumstances are present. An award costs over and above the ordinary is reserved for cases where the losing party has engaged in unmeritorious, or deliberate or high-minded or other improper conduct such as to warrant the Court showing its disapproval and at the same time preventing the successful party being left out-of-pocket;[13]

(g) encompassed in unmeritorious or improper conduct is the unsuccessful party proceeding where, properly advised, they should have known that they had no real prospect of success, or allegations were made which ought never to have been made or the undue prolongation of a case by groundless contentions. In such cases, the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law.[14]

18 In Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (Hazeldene's),[15] the Court of Appeal endorsed the competing policy considerations underlying the availability of special costs orders where offers of compromise are rejected that had been identified in the authorities. These include:

(1) To encourage the saving of private costs and the avoidance of the inherent risk, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its "bottom line" will be revealed to the Court;

(2) To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by a plaintiff to a defendant;

(3) To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of the rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances that party should ordinarily bear the costs of the litigation.

...

At the same time, as Redlich J said in OCBC,[16] there are other competing objectives of equal importance.

...Potential litigants should not be discouraged from bringing their dispute to the courts. It is such considerations which underlie the general rule that an order for special costs should only be made in special circumstances.

19 The Court of Appeal held that these competing considerations could be sufficiently accommodated by applying a test of (un)reasonableness, in which the central question is whether the rejection of the offer was unreasonable in the circumstances. The Court of Appeal noted that deciding whether conduct was 'reasonable' was a matter on which judicial minds might differ. It then identified the following, non-exhaustive, list of matters a court should have regard to in considering whether a rejection of a Calderbank offer was unreasonable:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise offered;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed; and

(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it.[17]

20 The starting point in the exercise of the Court's very broad discretion to award costs is that, unless there is good reason to depart from the usual practise, costs should follow the event. In this instance the starting point is thus that the second plaintiff should pay the first plaintiff's costs of her unsuccessful application for executor's commission.

21 I do not accept that there is good reason among the circumstances of this case to depart from that course. I have reached that view for the following reasons.

22 First, r 10.10 of the Supreme Court (Administration and Probate) Rules 2023 (Vic) does not create a presumption that an executor's costs or the costs of a contradictor to an application for executor's commission will be allowed out of the estate. The rule does no more than confirm that costs are in the discretion of the Court and to permit the Court to order that costs be paid from the estate.

23 Second, rr 63.01 and 63.26 of the Rules entitle an executor to costs of a 'proceeding' out of the funds of an estate, subject to the Court ordering otherwise. In my view the 'proceeding' contemplated by r 63.26 does not include an application by an executor for commission but rather litigation undertaken or responded to in the name and for the benefit of the estate. If rr 63.01 and 63.26 were given the interpretation pressed by counsel for the second defendant, it is difficult to see why r 10.10 of the Supreme Court (Administration and Probate) Rules 2023 (Vic), would be required. Rule 10.10 is expressed (in r 10.01) to apply to applications for executor's commission. To the extent there is any inconsistency between the rules, which I do not accept exists, r 10.10 takes precedence.

24 Third, while I accept that ss 65A to 65E were introduced into the Act to protect vulnerable beneficiaries from the depletion of estates by excessive charges by executors, the language of s 65D(5) makes abundantly clear that an executor who contravenes s 65D is not entitled to payment of a commission or percentage of the assets of the estate or a fee. Faced with this express and clear indication of the results of non-compliance with s 65D, a solicitor executor cannot complain that their own non-compliance with that section leads to harsh results. Put another way, the language of the section is well capable of being understood by executors, particularly solicitor executors. The only barrier to her remuneration was compliance with the section and restraint from engaging in disentitling conduct. Had the second plaintiff complied with the requirements of the section and not engaged in what I found to be her otherwise disentitling conduct, the outcome of her application may well have been different. To have not complied with the legislative requirements so as to not be entitled to payment and to have engaged in otherwise disentitling conduct cannot fairly be described as a harsh outcome.

25 Fourth, I do not accept that the second plaintiff's disentitling conduct, including her non-compliance with s 65D, can in all the circumstances of this case, be described as a 'technical' breach of the legislation. Even if the second plaintiff's breach of the legislative requirements had been merely technical, that would not overcome her other disentitling conduct.

26 Fifth, the legislative requirements in s 65D of the Act of an executor seeking payment of commission are clear. So too is the wording of s 65D(5) which disentitles an executor who contravenes s 65D from payment of commission. In my view, faced with the clear and plain meaning of s 65D(5), it matters not whether an executor has toiled for many hours in the administration of an estate. While I accept the second plaintiff acted honestly, it is also the case that notwithstanding multiple attempts to articulate the basis of her claim for payment of executor's commission, the second plaintiff sought to recoup the costs of the preparation of administration accounts and the preparation of her application for commission.

27 Sixth, in making an application for executor's commission the second plaintiff was pursuing her own personal interests and was not representing the interests of the estate. This is not to suggest that a properly brought application for executor's commission is in any way improper. Indeed, absent the consent of the beneficiaries, such an application is required. The issue of executor's commission must be determined so that the administration of an estate can be finalised. That, however, does not mean that the application for commission itself is brought for the benefit of the estate. It is brought for the personal benefit of the executor.

28 Seventh, I do not accept that if a costs order is made adverse to the second plaintiff, it will have a chilling effect on the willingness of solicitors to be executors or impede the ability of testators to name professionals as executors. On the contrary, an adverse costs order for an unsuccessful applicant for executor's commission, where the application was unsuccessful because of non-compliance with the legislative requirements and because of other disentitling conduct, is likely to have a chilling effect on non-compliant and otherwise disentitling conduct.

29 I have decided that there is no reason to depart from the usual practise that costs follow the event. In my view it would not be appropriate to allow the second plaintiff's costs of her application to be paid from the estate. This is for two main reasons. First, the reasons that the second plaintiff was unsuccessful was because she did not comply with s 65D of the Act and otherwise engaged in disentitling conduct. Second, in all the circumstances of this case there is no reason to exercise the Court's discretion to order that her costs be paid from the estate. Rule 10.10 of the Supreme Court (Administration and Probate) Rules 2023 (Vic) does not create any presumption that an executor's costs of an application for commission will be ordered to be paid from the assets of an estate.

30 I turn now to the costs of the first plaintiff. As I have decided that costs should follow the event, the second plaintiff will be ordered to pay the first plaintiff's costs. Two questions remain: whether those costs will be on a standard or indemnity basis and whether the second plaintiff should be permitted to recoup those costs from the estate. Answering the second of these questions first, for the reasons I have already given, and because costs orders are compensatory and not to inflict punishment, it is appropriate that the second plaintiff bear the first plaintiff's costs without recourse to the assets of the estate. While the other beneficiaries did not seek to be heard on the second plaintiff's application, the evidence before the Court clearly demonstrated that they did not agree to the second plaintiff's request for commission in the sums then sought by the second plaintiff.

31 I accept the submissions of counsel for the second plaintiff that the offers made by the first plaintiff did not meet the requirements of Calderbank offers. Neither was capable of creating a binding contract given the absence of the other beneficiaries consent. I also accept that the first offer was not clearly expressed as an offer. It follows that in my view it was not unreasonable for the second plaintiff not to accept these offers.

32 Doing the best I can to do justice between the parties in all of the circumstances of this case, it is appropriate that the second plaintiff be ordered to pay her own costs and the first plaintiff's costs of the application on a standard basis and without recourse to the assets of the estate.

[1] Re the Estate of Diana Noelle Whiteman (deceased) [2024] VSC 793, [93]-[111].

[2] [1975] 3 ALL ER 333.

[3] Lissenden v Dellios [2021] VSC 520, [82] (Englefield JR).

[4] [2019] VSC 243, [4].

[5] Supreme Court Act 1986 (Vic) (SCA) s 24(1).

[6] See, eg, Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 537; cited with approval in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 86.

[7] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 86 (Oshlack).

[8] Norbis v Norbis [1986] HCA 17; (1986) 161 CLR 513, 537; Oshlack (n 7), 86.

[9] Ritter v Godfrey [1920] 2 KB 47, 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732, 809; Milne v Attorney-General for the State of Tasmania [1956] HCA 48; (1956) 95 CLR 460, 477.

[11] Lollis v Loulatzis (No 2) [2008] VSC 35, [26].

[12] Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 563 (Toohey J, Mason CJ agreeing), 567 (McHugh J); Ohn v Walton (1995) 36 NSWLR 77, 79.

[13] Australian Guarantee Corp Ltd v De Jager [1984] VicRp 40; [1984] VR 483, 502; PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24; Fountain Selected Meats (Sales) Pty Ltd v Int Produce Merchants Pty Ltd (1988) 81 ALR 397, 401.

[14] Fountain Selected Meats (Sales) Pty Ltd v Int Produce Merchants Pty Ltd (1988) 81 ALR 397, 401; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 233, 244.

[15] (2005) 13 VR 435, [21]-[22] (Warren CJ, Maxwell P and Harper AJA).

[16] Aljade and MKIC v OCBC (OCBC) [2004] VSC 351.