Foord v Brock

(1) Additional Administration Costs: 7 March 2015 - 8 October 2018

1. Background. During a directions hearing on 10 December 2021 it emerged that the executors were claiming to be indemnified for the costs of acting as executors apart from the orders for costs in the litigation and apart from the commission allowed to them in the Registrar's decision under review. The additional indemnity claimed was for the period 7 March 2015 to 8 October 2018. The period prior to 7 March 2015 was said to be already covered because all the solicitors' invoices to the executors prior to that date were included in the Registrar's consideration during the passing of accounts. The Backhouse brothers filed the motions for review of the Registrar's decision on 8 October 2018. Invoices during the period after 8 October 2018 and up to 21 June 2021 are fully encompassed within the Court's previous cost orders in the current proceedings.
2. Once this issue emerged, the Backhouse brothers disputed that the executors had any entitlement to deduct any additional costs or fees from the estates for this closed period beyond those already the subject of orders for costs in the litigation. The Backhouse brothers submitted that if the executors wanted reimbursement for their costs after 17 March 2015, then they could seek for their accounts to be passed for that period.
3. That was unacceptable given the length of the disputes between these parties. If the issue is not resolved now, it is open to the executors to seek to pass accounts for the period, which on the history of these parties is likely to take years. Mindful again of CPA, ss 56 and 57, the issue should be resolved within this litigation, so that the executors can finally be discharged from the duties without further delay. This means that this judgment deals with some relatively minor cost issues. But unless it does so the parties may suffer a much larger cost burden disputing these costs as well as delay.
4. To expedite consideration of this issue on 10 December 2021 the Court made directions to the executors to provide evidence of the additional costs that they claimed for the period 17 March 2015 to 8 October 2018, broken down into the categories where the costs were said to be incurred of general administration costs, settlement negotiations and the passing of accounts.
5. But the executors' costs for this period had not all been invoiced to them by their solicitors, Belbridge Hague. The executors say that they stopped invoicing the estates for a period. Registrar Brown was considering the passing of accounts as of 31 January 2016. The executors say that the Registrar indicated that invoices need not be issued by Bellbridge Hague to the executors during this litigation, so the executors say they ultimately stopped invoicing altogether. For this reason, the work that was done by the solicitors for the executors from 17 March 2015 to 8 October 2018 is mostly recorded as un-invoiced work-in-progress (WIP). There were a limited number of invoices issued until March 2017 but none after that.
6. The solicitors for the executors say they took this course because they were faced with a mixture of estate administration and litigation related legal work and the Registrar was only dealing with the estate related expenses. So, to save confusion the executors' solicitors reduced, then stopped invoicing. They claim that this was at the direction of the Registrar. They say that they could have issued separate invoices for the litigation and the estate administration, but they chose not to do so. Whether their claims about that Registrar's directions are correct or not, the Court accepts this is what happened.
7. The Court's 10 December 2021 directions to the executors to produce records of what costs they had incurred other than the strict costs of the proceedings before Lindsay J and on the appeal therefore resulted mostly in the production of un-invoiced work in progress (WIP). This led to several challenges to the executors claims for this period.
8. The Backhouse brothers submit that because these costs are costs of the administration of the estates and not related to the litigation the Court cannot undertake a costs assessment in respect of them or make a gross sum costs order under CPA, s 98(4)(c): Foord v Brock [2005] NSWCA 156 at [48] - [54]. The executors accept that this position is correct, and the argument was conducted on that basis.
9. A different task is underway here. The executors have proposed to deduct these costs from the estates in the exercise of their rights of indemnity as trustees. That right is subject to challenge on the basis that the costs were improperly or unreasonably incurred.
10. The starting point for analysis is the executors' money claims for the period. This is followed in this section by analysis of the claims including the Backhouse brothers' challenges. The Backhouse brothers have marked up the WIP reports for both periods the subject of claim to represent their objections as to the lack of reasonableness of the claims on grounds that (1) the charges are not for litigation (2) the charges are for executorial or secretarial work and (3) the charges involve duplication or are excessive in amount.
11. The Executors' Claim. The executors claim recovery of the following amounts: general administration costs of $1235.81; settlement negotiations cost of $17,241.23 and costs relating to the passing of accounts of $44,165.29. In addition, they originally claimed a further $994.45 in respect of the review of Registrar Brown's decision. This makes a total claim of $62,642.33. One preliminary issue is that all these amounts are recorded only in WIP and Belbridge Hague has not invoiced them to the estates.
12. The Treatment of WIP. Trustees' indemnity should not ordinarily be calculated based on WIP. It would be unsafe to treat unbilled WIP as the same as fees invoiced in accordance with a solicitor's costs agreement with those trustees. The executors' submissions tended to treat the two as the same in the task before the Court. But the Court should not automatically convert the WIP into billings, as is being requested here. Because of the unusual circumstances at the end of this long-running case the Court has decided to shortcut normal billing procedures slightly to allow the executors to retire.
13. Ordinarily the estates would only accrue a liability to pay legal fees after the solicitors for the estates, Belbridge Hague, had issued invoices for their professional fees, costs and disbursements. That liability would ordinarily only arise after the estates' solicitors had exercised their independent judgment as to whether all the WIP would be billed and included in final invoices to the client.
14. Practices differ between legal practitioners, but the Court can assume that after reviewing the WIP accrued to the estates, the solicitors would have discounted their final fees to the estates to reduce charges for work which in retrospect could have been done more efficiently when annexed as a whole, or which in the solicitors' judgment should be moderated to a degree, or simply to reflect the goodwill of the ongoing relationship between solicitor and client. If the Court allows the full value of the WIP, it will be potentially overcompensating the solicitors for the executors, who have not yet exercised these important judgments.
15. For this reason, the WIP here should be treated only as a guide to the amount that would have been invoiced to the executors after the exercise of those judgements. The WIP should be treated as a ceiling on the amount charged, as the exercise of that judgment, would be likely to have led to a reduction of the WIP. But the Court cannot here do the same kind of detailed review that solicitors who had done the work themselves would be able to do before issuing invoices.
16. The Court will in this case apply a discount of 20% to the WIP to allow for the factors that would probably have led to a reduction in the solicitors' charges because of such a review. This percentage has been reached for the WIP in this case after consideration of the detail of the WIP in question and takes account of the matters the Backhouse brothers raised. Although the Court cannot find that Belbridge Hague's charges are excessive or that there has been duplication in charges, nevertheless the matters raised by the Backhouse brothers do point to the kinds of charges that may well have been reduced upon Belbridge Hague issuing invoices.
17. Analysis of the Claim Including the Backhouse Brothers' Challenges. First, the Backhouse brothers argue that the executors need to apply to pass accounts before they are entitled to any costs of estate administration for the period after 31 January 2016. But this argument fails on several levels. Probate and Administration Act 1898, s86 read as a whole makes clear that executors may make a claim for the costs of legal practitioners undertaking non-professional work by way of estate administration where commission is renounced and without the passing of accounts, provided a cap equivalent to the appropriate level of commission that would have applied (if accounts have been passed on commission applied for) is observed. The executors have elected not to claim commission after 31 January 2016, but they are entitled to recover appropriately moderated professional fees for estate administration, after that date.
18. But here the executors' claims, although for aspects of estate administration, are generally to be classified as professional legal work chargeable as ordinary estate expenses, which can be reviewed by the Court and if necessary reduced under Probate and Administration Act 1898, s 86A if found to be excessive: see Shave v Shave, Re; Estate of Shave (2011) 5 ASTLR 320; [2011] NSWSC 1356. The executors' claim is not objectionable on this ground.
19. Second, the Backhouse brothers complain that some of the work done during this period was secretarial work, was performed by probate clerks and paralegals and not by qualified professional persons within Belbridge Hague and so was in substance the discharge of executorial duties. But the short answer to this argument is that in the period under consideration, dominated as it was by legal contests about the accounts of the estates, and looking at the work done as recorded in the WIP, the work was legal work which was more cost efficient for the estates if delegated to paralegals.
20. The Court ordered on 17 June 2021 (order (7)) that the executors should be indemnified out of Maureen's estate, or Dolf's testamentary trust, in relation to the cost of engaging in settlement negotiations or other ancillary costs in relation to the four review motions and the motion before Lindsay J. This order is another basis for the executors to recover both litigation and general administration costs for this period, if any further basis be required.
21. Third, the Backhouse brothers also submit that the administration should have all been done by 31 January 2016 when the accounts were passed. That submission is unrealistic given that a contest was still taking place before the Registrar about the Backhouse brothers' objections to the executors' accounts.
22. The point is also made that the executors' claim for administration costs for the period 17 March 2015 to 8 October 2018 was first raised only on 10 December 2021 but could have been raised earlier on the motions for review or even as one of the costs topics which the Court was seeking to identify in November 2020. The Backhouse brothers submit that the Court has in effect granted to the executors an indulgence allowing them a further opportunity to seek these costs which has occasioned the Backhouse brothers further expense and delay in having to address the subject.
23. But whenever the issue was raised, it was likely to involve much the same level of expenditure of costs on the part of the Backhouse brothers in responding to it and the Court will not disallow any of the executors' costs on this account.
24. Fourth, the Backhouse brothers further submit (in the alternative to their second submission) that the WIP reports mostly contain litigation charges and do not fully conform with the Court's orders of 13 October 2021, which requested the separation of estate administration work from work in relation to the present litigation.
25. But this is not a basis to object to the WIP reports. The Court's orders were made upon the assumption, which has been later proved incorrect, that all the litigation work had been invoiced and that it was only the administration work which was in the form of WIP. But the fact there is unbilled litigation related charges in the WIP does not make them objectionable. The executors have costs orders in their favour in respect of all relevant litigation costs and have conducted themselves reasonably in all the litigation concerning the expenses of both estates. The critical question is whether any unbilled WIP has already been brought to account in any of the Court's previous costs orders, or CPA, s 98(4)(c) orders. It is important to avoid double counting of legal costs to the executors.
26. Fifth, executors submit that the executors' claims for this period involve duplication or are excessive in amount. The Court is satisfied there has been no double counting. The Court sought assurances from the parties that there was no overlap between the WIP now being claimed and any invoices that Belbridge Hague have been issued. The parties undertook their own informal audit and did identify an amount of $2,900.30 in respect of August - September 2015 in the WIP, which had in fact been invoiced. The executors have now conceded this should be dropped from their claim.
27. Without the Court becoming a costs assessor, which is not the intent of the present task, it is not practicable to analyse all the examples of duplication that the Backhouse brothers rely upon. But they generally suffer from the same fundamental defect: looking at the WIP report does not on its own establish duplicated effort or excessive fees due to unnecessary work. The better general inference from the WIP reports is of cumulative effort on the part of the solicitors for the executors, adding value to previous work upon the same subject matter. And given the Backhouse brothers persistent questioning of the executors' conduct, a degree of double checking of work on the part of the executors would be reasonable.
28. Calculation of the Executors' Indemnity. For this first period the executors' indemnity can now be calculated. From the total claim of $62,642.33 the sum of $2,900.30 should be deducted as representing a concession of duplication, leaving a balance of $59,742.03. That should be reduced by 20% to produce a figure of $47,793.62.

(2) Costs related to this Litigation Since 17 June 2021

1. The executors claim indemnity in respect of their costs incurred since 17 June 2021. The Backhouse brothers challenge the reasonableness of the costs claimed by the executors.
2. The Court has not made any cost orders in respect of this litigation since 17 June 2022, either for or against the executors. The question is whether they are entitled to exercise their rights of indemnity against the estates for their legal work in relation to the proceedings since that date. They are entitled to an indemnity except in respect of costs that were improperly or unreasonably incurred.
3. Background to the post 17 June 2021 work. The executors say that they have incurred costs in this litigation in complying with various Court orders since 17 June 2021. Such orders have undoubtedly required the executors to incur significant legal costs.
4. The executors' costs since 18 June 2021 have largely been incurred in complying with the Court's orders rather than general administration. Cost orders have been made in the executors' favour for costs incurred during this period and they would be entitled to indemnity out of the estates in respect of any differential recovered from the Backhouse brothers. Because these costs are litigation related, the Court has full power under CPA, s 98(4)(c) to fix a specified gross sum instead of assessed costs and is here exercising that power in respect of this part of the executors' claim for legal costs.
5. The Court's orders of 17 June 2021 required the executors to undertake a range of work to assist the Court to bring these proceedings to an end and to limit costs. Order (9) required that Belbridge Hague Solicitors, and the Backhouse brothers each make a Calderbank offer "in respect of the reasonableness of expenses in complying with the subpoena" issued by the Backhouse brothers to Belbridge Hague. Order (11) required the parties to bring in short minutes of order to provide for the disposition of the remaining issues in these proceedings in accordance with the steps outlined in the Court's reasons of that date.
6. Then on 26 July 2021 the Court ordered the executors to file an affidavit deposing to an accurate and detailed statement of assets and liabilities of each estate; and the total amount paid in legal costs and disbursements from each estate. The same day the executors were ordered to file and serve on all respondents a paginated and indexed bundle of all invoices and associated financial statements rendered by legal representatives of the executors in each estate for which they claimed to be indemnified, together with relevant fee agreements and correspondence, together with a comprehensive financial summary by 13 August 2021.
7. Further, on 13 October 2021 the Court ordered that the executors serve on the other parties WIP reports separating estate administration work from litigation work. The executors were also ordered to provide submissions in support of their claim for gross sum costs order.
8. The Executors' Claim. The executors have claimed a total of $92,678.26 in costs and expenses incurred from 18 June 2021 to 17 March 2022, when the last hearing took place. They have not dealt with such limited costs as may have been incurred after 17 March 2022.
9. The sum of $92,678.26 is divided into the following amounts for the following periods: (1) $57,478.02 for the period from 18 June 2021 to 28 January 2022; (2) $14,506.13 for the period from 1 February 2022 to 28 February 2022; and (3) $20,694.11 from 1 March 2022 to 17 March 2022. The executors provided their evidence of their claims for costs from 18 June 2021 and the Backhouse brothers offered their criticisms of them.
10. Analysis of the Claim Including the Backhouse Brothers Challenges. The Backhouse brothers make similar general points in relation to the legal costs claimed during this period that they do in relation to the 2015 - 2018 period.
11. First, Belbridge Hague's costs are criticised on several bases as being excessive. The criticisms include questioning charges for non-legal, secretarial and other administrative work. Such charges are not inherently objectionable because they do not involve the time of professional lawyers. Legal work usually requires administrative support and charges for such administration are normal incidents legal billing.
12. Second, the Backhouse brothers' criticisms of solicitors' charges for scanning, printing, sorting, creating files, sending virtual links are not warranted. These are all normal incidents of legal practice often carried out by administrative staff to support legal practitioners. Neither are the criticisms of separating administrative charges from WIP warranted: such analysis is undoubtedly required before invoices can be issued and in this period were required because of the Court's orders. Other criticisms relate to employees communicating with one another and with partners of the firm. But communicating the current state of affairs of the administration of the estate between various employees is clearly a necessary element of estate administration in estates as complex and contentious as these two.
13. Third, some travel expenses are criticised. For example, Ms Rolfe's return travel expenses of $3,344.80 between Sydney and Albury for the hearing on 10 December 2021 are criticised. But having an instructing solicitor with knowledge of the case in the courtroom to give direct instructions is of assistance to counsel for the executors. Moreover, the complexity of the costs issues raised, and the fact that the Court was analysing her firm's documents and costs systems, it was highly desirable for Ms Rolfe to be present in Court. Her attendance and travel expenses were neither improper nor unreasonable.
14. Fourth, counsel's fees are criticised as excessive. The Backhouse brothers submit that counsel's fees should be reduced to 85% of the amount charged by counsel, partly because the memoranda of fees from counsel were not all available and partly because the WIP reports disclose that counsel was consulted frequently about matters that the Backhouse brothers allege did not warrant counsel's assistance. But counsel's memoranda of fees did become available and Belbridge Hague should not be criticised for seeking counsel's advice where the Backhouse brothers had launched so much unjustified criticism of the executors' conduct. The fees of Ms Catanzariti of counsel for the executors in this case have been reasonable throughout this litigation. Counsel's fees will be allowed to their full extent on both limbs of the executors' claim.
15. Fifth, the Backhouse brothers pursued several other specific fees that were claimed on the grounds they were excessive. 1. The affidavit of the executors of 13 August 2021 was said to be wrong and required to be replaced by an affidavit of Mr Coulston. 2. There were also said to be difficulties with the bundle of documents as originally served for the proposed hearing in late 2021, a matter that was criticised in a letter from the solicitors for the Backhouse brothers on 16 September 2021. 3. There was said to be delay in providing most of counsel's fee notes and removing WIP for administration work from the litigation files, as Mr Coulston had foreshadowed, and the Court had subsequently directed. 4. The two-volume bundle which was produced for the hearing was said to make no attempt to address the costs questions in issue but rather included every tax invoice ever rendered in both estates.
16. To the extent these criticisms have any validity involve very minimal additional costs to the estate, which can be brought to account in an overall discount of the kind that the Court will apply to the solicitors' WIP here.
17. Sixth, the Backhouse brothers alleged duplication in this period of the claim. But it is difficult to follow where the duplication is said to be demonstrated. One example relied upon by the Backhouse brothers in relation to this period is said to be some work by Ms Beames, a paralegal at Belbridge Hague in July 2021. She reviewed certain short minutes of order and then drafted the short minutes of order on both a "with consent" and a "without consent" basis. But the charges for her services are not particularly large and review before drafting is appropriate. Another example was in the same month between 20 and 27 July 2021 in relation to Ms Rolfe who read and considered emails in relation to short minutes of order and gave instructions to Ms Beames. When a solicitor and a paralegal are working on a file, such as was appropriate in a case such as this, some degree of briefing between them is necessary and well justified in a normal billing pattern. These examples do not warrant any finding of duplication.
18. Seventh, the Backhouse brother submit that the overall figure that the executors claim for this period is obviously excessive. They further submit that an appropriate amount for the Court to allow on account of the executors' costs for this period is $33,000 inclusive of GST. But this seems to be an unstructured figure that the Backhouse brothers did not attempt to justify other than on an impressionistic basis.
19. The Court now turns to the calculation of what costs should be allowed for the specific periods of time from 18 June 2021.
20. From 18 June 2021 to 14 March 2022. The executors have broken down their costs incurred between 18 June 2022 and 14 March 22 recorded as WIP to 3 periods, (1) between 18 June 2021 and 28 January 2022, between (2) 1 February 2022 and 28 February 2022 and between (3) 1 March 2022 and 14 March 2022. They are broken down into WIP (including GST) and disbursements (including counsel's fees) as follows: period (1) WIP of $49,650.85 and $7,827.17 in disbursements, period (2) WIP of $13,865.13 and $641.00 in disbursements, period (3) WIP of $16,123.95 and $4,570.16 in disbursements. These figures total $92,678.26.
21. The Court will allow the disbursements in full. They mostly consist of counsel's fees. The Court will discount the WIP inclusive of GST by 20% here, as was done in relation to the first claim. The result therefore is professional fees of $63,711.94 (being 20% of: $49,650.85 + $13,865.13 + $16,123.95) and disbursements of $13,038.33 (being $7,827.17 + $641.00 + $4,570.16). Thus, the total for this period is $76,750.27 (being $63,711.94 + $13,038.77).
22. From 14 to 17 March 2022. The Court's purpose in these reasons, as explained to the parties, is to provide a precise figure which will allow the executors to be appropriately indemnified and for releases to be given to them by the Backhouse brothers. At the hearing on 17 March 2020, the Backhouse brothers indicated they would give releases. The Court has attempted on several occasions to get progressive up-to-date costs figures from the parties, so that this could be done. But unfortunately, the proceedings were adjourned on several occasions and so the figures needed to be updated.
23. But final figures can be given that will allow the executors to be released upon payment of a definite sum, mainly to compensate Belbridge Hague, provided some relatively minor allowances are made.
24. The most recent figures from the executors only go to 14 March 2022. The hearing was adjourned on 9 March and was ultimately heard on 17 March. The Court indicated that rather than submit further bills it would make allowances based on previous bills for an appropriate rate of indemnity of the executors. This would save costs. Submissions on both sides accepted this approach. The additional fees for the period 14 to 17 March inclusive are calculated as follows.
25. Counsel's fees the period 14 to 17 March can be readily estimated. Ms Catanzariti was charging $350 per hour plus GST. At the 9 March 2022 hearing the application and a letter reporting took three hours and 30 minutes and she charged $1,225.00. The hearing time taken on 17 March would have been approximately one hour longer than 9 March, making a total of $1575.00. Using the lead up to the 9 March hearing as a guide for the lead up to 17 March would imply another 2.5 hours of preparation time, being $875.00. This makes a total of $2,450.00. GST should be allowed on top of that at the rate of 10%, making a total inclusive of GST of $2,695.00 for Ms Catanzariti for this period.
26. The Belbridge Hague charges for the same period can be readily calculated. The period represents another two preparation days of 14 and 15 March and hearing on 17 March for several different fee earners within the firm. In the lead up to 9 March, two preparation days were charged out at $4,255.17. This represented charges for a wide range of legal work including reviewing counsel submissions, consulting with counsel, preparation and travel to Sydney and updating the court book. Then on 9 March itself an additional $3,955.59 was incurred for attending the hearing, conferring with counsel, checking calculations and reporting.
27. The total of these two of $8,210.76 plus GST making $9031.84 should be discounted when estimating costs for 17 March. Much of the preparation had already been done before 9 March and reporting did not need to be duplicated. And reporting was already fresh. The Court will only allow a total of $5,000.00 inclusive of GST and inclusive of the general 20% discount applied to other unbilled WIP.
28. Thus, this the total of fees to be allowed the period from 14 to 17 March 2020 to the solicitors and counsel for the executors is $7,695.00 including GST.
29. From 17 March to Releases of the Executors. On 17 March the Court contemplated that the executors would be shortly released. But it has taken longer, and consent release orders will need to be executed involving some legal work. The Court indicated that it expected the lawyers to bear those relatively limited costs. But the additional time that has lapsed and the prospect of legal work involved in finalising the releases and corresponding about that subject means the Court will make allowance of an additional lump sum of $5000.00 for solicitors and counsel on that account.
30. Thus, the total that the Court will allow as proper and reasonable indemnity for the executors for the period after 18 June 2021 and up to the expected time that short minutes will be filed consequent upon this judgment and the executors' releases being executed is $89,445.27 (being $76,750.27 + $7,695.00 + $5000.00).

Conclusion and Orders

1. The total amounts that the executors are authorised to indemnify themselves out of the estates in respect of the period from 7 March 2015 to 8 October 2018 in the period from 18 June 2021 up until their retirement will be reflected in a declaration of right.
2. Once those fees have been met and the executors have received satisfactory releases, the Court will make orders in chambers for the executors' retirement. The Court will grant liberty to the parties to submit agreed short minutes of order for this purpose and to deal with any errors or omissions that are detected in the Court's calculations. But this is not grant of liberty to re-contest the Court's reasons.
3. For these reasons, the Court makes the following orders and directions: 1. Note that parties are referred to in these orders in the same way as they are in the Court's orders made on 17 June 2021; 2. Declare that the executors are entitled, in addition to all other remuneration allowed to them by previous orders in these proceedings, to be indemnified out of Maureen's estate and Dolf's estate in respect of their legal fees and disbursements 1. in the sum of $47,793.62 in respect of additional estate administration charges for the period from 7 March 2015 up to 8 October 2018; 2. in the sum of $89,445.27 for the period from 18 June 2021 up until their retirement as executors; and 1. Grant liberty to parties to apply to the Court in chambers for the making of orders for and associated with the retirement of the executors and to deal with any arithmetic errors or omissions in the Court's calculations.

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: 12 August 2022