COSTS - Party/Party - General rule that costs follow the event - Proceedings discontinued or dismissed - Whether it was reasonable for the plaintiffs to commence the proceedings when they did
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COSTS - Party/Party - General rule that costs follow the event - Proceedings discontinued or dismissed - Whether it was reasonable for the plaintiffs to commence the proceedings when they did
Judgment (3 paragraphs)
[1]
Solicitors:
Elder Law (Plaintiffs)
Turner Freeman (Defendant)
File Number(s): 2017/234386
[2]
Judgment
The plaintiffs in this matter, Ms Carol Galea and Mr Reno Camilleri, are siblings of the defendant, Mr John Camilleri.
The parties and their siblings are children of the late Ms Patricia Camilleri, who died on 21 October 2014.
The deceased made a will on 20 September 2010 and a codicil on 15 November 2013. The first plaintiff and the defendant were nominated in the will as the executors of the deceased's estate, but the effect of the codicil was that only the defendant was named as the executor.
This Court granted probate of the deceased's will to the defendant on 14 August 2015.
These proceedings were commenced by the first plaintiff filing a summons on 7 August 2017. By statement of claim filed on 11 September 2017 the first plaintiff, and by an amended statement of claim filed on 20 December 2017 both plaintiffs, sought as their primary relief an order that probate of the will of the deceased to the defendant be revoked, and that one or more of the plaintiffs be granted administration of the deceased's estate with the will annexed.
Galea v Camilleri [2019] NSWSC 167 | Case summary | Zoe
The plaintiffs also sought a declaration that the deceased lacked testamentary capacity to make the codicil. If the codicil did not take effect, then both the first plaintiff and the defendant would be nominated executors under the will, and it would be open for the plaintiffs to argue, as they claimed in the amended statement of claim, that there were reasons why probate should be granted solely to the first plaintiff.
The matter was set down for hearing before me on 29 January 2019 for three days but, on the first day of the hearing, the plaintiffs sought, and were given, leave to file a notice of motion which sought the following relief:
Leave to the Plaintiffs pursuant to UCPR 12.1 to file a notice of discontinuance with an order pursuant to UCPR 42.19(2) that there be no order that the Plaintiffs pay the Defendant[']s costs.
The reason why the plaintiffs applied for leave to discontinue the proceedings was that, in essence, they had sought by the proceedings to have the defendant replaced as executor of the deceased's estate because he had been dilatory, they alleged, in executing the deceased's will, but, in the period before the commencement of the hearing, the defendant had in fact undertaken all of the tasks that were the basis of the plaintiffs' claim for appropriate orders replacing the defendant as the executor of the estate. For that reason, the further conduct of the proceedings had, so the plaintiffs said, become pointless.
The plaintiffs submitted that the events that have made their pursuit of the claim to replace the defendant pointless have also undermined the utility of their claim that the codicil was invalid. As the will is now substantially administered, according to the plaintiffs there is no longer any point in their seeking to establish that the first plaintiff should be appointed as the sole executor, if the codicil is declared to be invalid, and the plaintiffs establish that the defendant's conduct as executor has been delinquent. Subject to the qualification that I mention below, the defendant did not oppose the Court giving the plaintiffs leave to file a notice of discontinuance pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) rule 12.1. He did, however, oppose the Court making the further order pursuant to UCPR rule 42.19(2) that there be no order that the plaintiffs pay the defendant's costs. The defendant claimed to be entitled to an order that the plaintiffs pay his costs on the ordinary basis.
Thus, the only issue that remains for the Court to decide is the issue of the defendant's costs of the proceedings.
The qualification that I have mentioned above was that the defendant submitted that, in the particular circumstances of this case, an order should be made dismissing the plaintiffs' case because, as the defendant has now undertaken all of the significant steps required of him in the execution of the deceased's will, there is no reason why the notional possibility that the plaintiffs could commence new proceedings to seek the same relief sought in the present proceedings should be kept alive. Although, in practical terms, the distinction between a discontinuance and a dismissal of the proceedings may make little difference, the defendant submitted that dismissal would be preferable for this dispute, as it would finally end the matter. After the Court expressed some attraction to the approach suggested by the defendant because it appeared to be in conformity with common sense, counsel for the plaintiffs indicated that he would seek instructions as to whether the plaintiffs would agree to an order being made dismissing the proceedings, provided that the different outcome to the one that the plaintiffs sought in their notice of motion had no influence on the outcome of their claim that they should not be ordered to pay the defendant's costs. Subsequently, counsel confirmed to my Associate that he had those instructions. Accordingly, I will in due course make an order that these proceedings be dismissed. However, as I understand the position reached between the parties, they agree that I am to decide the question of costs as if the order made was for leave to the plaintiffs to discontinue the proceedings.
UCPR rule 42.19 relevantly provides:
42.19 Proceedings discontinued
(1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1.
(2) Unless the court orders otherwise or the notice referred to in rule 12.1 (2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued.
…
The question therefore is whether the Court should order otherwise for the purposes of rule 42.19(2), because if it does not then the rule will require that an order be made that the plaintiffs pay the defendant's costs of the proceedings.
I take the principle governing whether the Court should order otherwise on an application such as the present to have been authoritatively stated by Hodgson JA, with whom Tobias and Basten JJA relevantly agreed, in Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 as follows:
[53] It has been said that UCPR 42.19 does not give rise to a presumption that costs will be ordered against the discontinuing party: Fordyce v Fordham [2006] NSWCA 274; (2006) 67 NSWLR 497; Foukkare v Angreb Pty Ltd [2006] NSWCA 335 at [65].
[54] However, like UCPR 42.20, UCPR 42.19 states what the order for costs is to be unless there is a discretionary decision to order otherwise: Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [53]. This means there is an onus on the discontinuing party to make an application in respect of costs if it does not propose to pay the costs of the other parties: Foukkare at [65]. In my opinion, it also means that there must be "some sound positive ground or good reason for departing from the ordinary course": Australiawide Airlines at [54].
It follows that the plaintiffs have the burden of establishing that there is some sound positive ground or good reason for departing from the ordinary course, whereby they would be required to pay the defendant's costs of the proceedings.
It is significant, as Hodgson JA said at [56], that "…[d]iscontinuance both precludes full consideration of matters that could be relevant to previously undecided costs, and also provides a framework in which all undecided costs questions should be considered…". The first part of this observation means that one consequence of discontinuation will be that the parties do not litigate questions that would otherwise be relevant to the question of who would have been ordered to pay the costs in the absence of the discontinuance. Put another way, the fact of the discontinuance will preclude the Court from being able to decide some questions relevant to costs, which could only be decided on a proper evidentiary basis if the matter had continued to final determination following a hearing. As Hodgson JA said at [57], in applying rule 42.19(2) the Court should not make a finding on "…a question that could not be determined until the final hearing, which is precluded by the discontinuance…"
The rules that permit parties to discontinue proceedings, and that deal with the costs consequences of discontinuance, must be applied in a wide range of situations that extend from voluntary decisions not to proceed with a claim, which could involve a change of mind or a realisation of the improvidence of the proceedings, to the case where some event occurs that destroys the utility of the proceedings. What is a sound positive ground or good reason for departing from the ordinary course for the purposes of UCPR rule 42.19(2) will depend upon the reason for the discontinuance in the particular case.
The approach that the Court is required to adopt where the continuation of the proceedings would be futile has been determined by the Court of Appeal in Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of New South Wales [2006] NSWCA 129; (2006) 153 IR 386. Although Tobias JA dissented, Basten JA at [39] agreed with the following statement of principle by his Honour, and at [1] Mason P agreed with Basten JA. Tobias JA said:
[21] Although s 76 of the Supreme Court Act 1970 confers a wide jurisdiction upon the Court to award costs, that power is ordinarily exercised after a hearing on the merits. The general rule is that the successful party is entitled to his or her costs absent good reason to the contrary: Latoudis v Casey (1990) 170 CLR 534; Oshlack v Richmond River Council (1998) 193 CLR 72 at 96-97.
[22] However, as McHugh J observed in Re the Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 642, where there has been no hearing on the merits the court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
[23] In that case, McHugh J (at 624-625) considered that the following approach should be taken in circumstances such as the present (omitting citations):
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and a moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action.
…
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80% of the applicant's tax costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the costs discretion will usually mean that the court will make no order as to the costs of the proceedings. This approach had been adopted in a large number of cases.
[24] More recently, a similar approach was adopted by this Court in Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302. After referring to the observations of McHugh J in Lai Qin, Davies AJA, with whom Mason P and Meagher JA agreed, observed (at [5]):
When proceedings are brought to an end without a determination after a trial, the judge may find it difficult, even impossible, to make an award of costs. If the judge does make an award, it will generally be because the judge is satisfied that one party has had a substantial victory and the other a substantial loss, or that there has been a marked difference in the reasonableness of the actions taken by the parties, so that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in costs.
[25] His Honour then referred to the judgment of Burchett J in One Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548, who made the point in these terms:
It is accepted that, in a case which terminates before there has been a hearing, the court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624. But this does not mean that the Court never make an order for costs. Often, it will be unable to do so; but in other cases an examination of the reasonableness of the conduct of the parties, respectively, may provide the basis of an order, or a 'judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter has been fully tried', as McHugh J put it in Ex parte Lai Qin at 625.
…
The plaintiffs relied upon written submissions dated 21 January 2019 and the defendant responded by written submissions on 25 January 2019. After some argument on the costs question on 29 January 2019, the Court agreed to adjourn the argument at the request of the plaintiffs to 31 January 2019, in order to give the plaintiffs an opportunity to put on further material and additional submissions. The plaintiffs relied upon additional written submissions served on 31 January 2019, and further oral argument occurred on that date. The parties' written submissions and the transcript of the argument set out the respective submissions in full.
I will now set out as background the broad facts relevant to the resolution of this costs dispute, which may be derived from the evidence without entering upon contentious factual disputes that could only be resolved by undertaking a hearing.
The deceased's will made substantial specific gifts to each of the deceased's six children, and then divided the residue equally between them. The deceased's estate was valuable and consisted principally of a number of rural and semi-rural properties in western Sydney. As I understand it, there is no dispute that the residuary estate was worth in the order of $30,000,000, and one particular property at Arndell Park sold for roughly $20,000,000.
One consequence of the terms of the deceased's will was that the defendant, as executor, had an interest in the execution of the will that was approximately equal to each of his siblings.
The plaintiffs complained that it took the defendant about 10 months from the death of the deceased for him to obtain a grant of probate. The defendant explained that because of the nature and value of the deceased's estate, it took some time to determine the assets in the estate and their value, and required the assistance of the deceased's long-term accountant. A consideration of the assets in the deceased's estate suggests that the defendant could reasonably have needed some months, and professional assistance, before he was able to apply for a grant of probate. The defendant said that it was necessary for him to obtain valuations of the properties, and that, initially, there were not sufficient funds within the estate to pay for the necessary valuations. Martin Camilleri, one of the siblings, provided funds to allow for valuations to be obtained, but this resulted in delay in the making of the application for a grant of probate.
I do not make findings in respect of this evidence, but merely note that it was by no means obvious that the defendant was dilatory in obtaining a grant of probate.
The first plaintiff filed a summons on 20 October 2015, by which she sought an order pursuant to s 27 of the Succession Act 2006 (NSW) (Succession Act) that the deceased's will as varied by the codicil be rectified in order to amend a specific gift made to the first plaintiff, and also to amend a specific gift made to the first plaintiff's brother, Martin. In addition, or alternatively, the first plaintiff sought an order for further provision under s 59 of the Succession Act.
The evidence is not conclusive, but it appears that during the pendency of the first plaintiff's proceedings, the defendant deferred the substantial execution of the deceased's will, at least in relation to the transmission of the properties the subject of specific gifts, and the realisation of the properties that were in the residue. There is evidence that the defendant took a number of steps in the ordinary course of the administration of the estate, including dealing with a land tax assessment notice issued by the Office of State Revenue for $334,442.79. It appears that, following the provision of some funds by Martin, the defendant took steps to contest the land tax assessment, ultimately successfully.
It is of some significance that, on 30 October 2015, the first plaintiff's former solicitors wrote a letter to the defendant's solicitors, in which a request was made on behalf of three of the siblings, which included the two plaintiffs, that if the properties in the residue were sold, each of the three named siblings wished to have the opportunity to purchase particular, identified properties. The significance of this request is that the defendant ultimately decided to sell the Arndell Park property first, so that he could make interim distributions to the six beneficiaries, which would facilitate the beneficiaries who wished to do so to be able to bid for the properties that they wished to acquire.
I am not in a position to assert any general proposition, but I have discerned from experience that executors frequently do not administer the estates of deceased persons while an application for family provision relief is pending. It may be that the reasonableness of that course will depend upon the particular circumstances of the estate. Claimants for family provision relief almost invariably make a bare claim for relief, as the first plaintiff did in her first proceedings, without in any way identifying the nature and extent of the family provision order that would satisfy the claimant's claim. The executor will usually not know what family provision order will be made if the claimant succeeds. That often, and perhaps usually, causes executors to defer administering the estate until the outcome of the family provision claim is known. There may, however, be cases where the estate is sufficiently large in relation to the likely family provision orders that might be made, where there is in fact no particular reason why the executor should not administer the will in relation to some of the estate while the family provision claim is pending. Further, there may be no practical reason why the executor should not realise the estate, even if the pendency of a family provision claim is a reason for not distributing the estate.
It should also be borne in mind that where the executor is not a professional executor, the need for the executor to properly prepare the estate's defence to the family provision application will take up the executor's time and the resources of the estate, and the Court should not too readily assume that an executor who is distracted by the need to respond to a family provision application will be able to administer the estate with the same expedition as would be possible in the absence of the distraction.
In this case, I note that the plaintiffs have relied upon the fact that the defendant gave evidence that his solicitors had advised him that "distribution of the specifically devised properties would need to be placed on hold", which did not amount to advice that the defendant should not take any steps to administer the estate at all.
The first plaintiff's first proceedings were dismissed on 15 August 2016.
In November 2016, the defendant sent transmission applications and purchaser declarations to the beneficiaries for the purpose of being able to transfer to them the properties that were the subject of specific gifts in the deceased's will. Transmission of the properties the subject of those gifts occurred in January 2017.
In the meantime, certain correspondence took place between the first plaintiff's solicitors and the defendant's solicitors. Generally, the subject matter of that correspondence was some question concerning the assets in the estate.
On 19 December 2016, the defendant's solicitors wrote to each of the beneficiaries a letter that included the following information:
…
As you are aware, we act on behalf of the executor of the estate of the late Patricia Camilleri, John Camilleri.
We have been instructed to write to all of the residual beneficiaries of the estate prior to the Christmas period in order to provide an update as to the administration of the estate. Such administration has been delayed, in large part because of the litigation taken against the Estate.
We confirm that our client is in the process of transmitting all of the properties that were the subject of specific gifts to those persons entitled to them. We expect that this process will be finalised early in the New Year.
In relation to the properties which fall to the residue of the estate, to which all beneficiaries are equally entitled, it is the intention of our client to sell the property at Holbeche Road, Arndell Park in priority to the other residual properties. At this stage, the selling agent has not been confirmed.
The remaining properties will be sold by Public Auction following the sale of the Holbeche Road Property, and notice of such auctions will be given to all residual beneficiaries.
…
We are further instructed that the long-term accountant for the late Mr & Mrs Camille[r]i, Amanda Fischer will provide all beneficiaries with financial records relating to the Estate of Mrs Camilleri in due course.
…
The defendant entered into negotiations with a real estate agent about the sale of the Arndell Park property in January 2017, and on 28 February 2017 he signed an exclusive selling agreement. The evidence included a comprehensive 20 page information memorandum in respect of the sale of the Arndell Park property, which tends to show that the defendant took appropriate steps to market a property of the apparent value of that property properly. The initial selling price estimated by the agent was $16,000,000. An offer was made by a potential purchaser at this price, but the defendant was advised by the agent that a higher offer could be expected. By September 2017, the agent recommended a revision to the selling arrangements so that the property could be offered to the market in conjunction with other agents. The defendant signed a new exclusive selling agency agreement with a number of agents jointly on 28 September 2017.
The defendant received a sales report from the original agent on about 28 September 2017. The agent stated his selling aim as follows:
…
My sole aim is to drive up the market price.
Not to have a short campaign and take the commission
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The agent explained in some detail his selling strategy, which included:
…
8. Allow a twelve month campaign so that market is educated
The market is being educated through
i) my marketing strategy and
ii) the higher prices being achieved for smaller industrial land lots and completed building prices
…
It is not necessary to consider this document in any detail, as for present purposes it is sufficient to note that it suggests that the agent advised the defendant that, to obtain the best price possible for the Arndell Park property, a careful marketing campaign was required that could take some time to complete.
As I understand it, the Arndell Park property was ultimately sold for roughly $20,000,000.
As I have noted above, the first plaintiff commenced these proceedings by filing a summons on 7 August 2017.
The first plaintiff did not cause her solicitors to send to the solicitors for the defendant a letter of demand before she commenced the proceedings. A review of the correspondence that did occur between the parties justifies the conclusion that the first plaintiff did not warn the defendant of the impending suit, or explain in any detail her claim that the defendant had been dilatory, or ask for any specific and comprehensive information concerning the defendant's proposals for the administration of the estate.
By their amended statement of claim, the plaintiffs pleaded the relevant terms of the will and the codicil, the assets in the deceased's estate, and various steps that were taken by the defendant. They then alleged:
…
9. Despite in excess of two years having passed since the grant of probate, the defendant has not:
(a) sold any of the properties that make up the Residue; and further or in the alternative
(b) taken reasonable or substantial steps to sell those properties.
…
There was also an allegation that, as at 29 August 2017, the estate account had a balance in it that was in excess of what might reasonably be expected to be required to administer the estate. There was an allegation that there was a balance in the estate account that was available for distribution but that had not been distributed. There was also an allegation that the defendant had not demanded payment of the price that Martin Camilleri had agreed to pay for the transfer of a certain water licence owned by the estate.
The plaintiffs then alleged:
…
In the circumstances at [9]-[9E]:
(a) the defendant has failed in the due and proper administration of the deceased's estate;
(b) the grant of probate to the defendant should be revoked;
(c) it is appropriate to give the plaintiff or some independent person qualified to act as administrator, a grant of administration with the Will annexed.
At the hearing of the costs dispute, nothing was made by any of the parties about the significance of the failure to pay any part of the estate account to the beneficiaries, or any alleged delay by the defendant in pursuing Martin Camilleri for the price of the water licence. The Court does not know anything about those issues, and they appear to have nothing to do with the reason why the plaintiffs applied for leave to discontinue the proceedings, which is limited to the fact that the defendant has dealt with all of the real properties in the estate in accordance with the gifts made in the will.
As to the allegations in par 9 of the plaintiffs' amended statement of claim, it is true that the defendant had not sold any of the properties, but, as at the 7 August 2017 date when the summons was filed, the defendant had taken the steps to sell the Arndell Park property that have been outlined above. He had informed the beneficiaries that he would sell that property first so that money would be available for them to bid for the other properties in the residue. The defendant had taken that course in part because the plaintiffs were among the beneficiaries that had told the defendant that they wanted to have the opportunity to purchase particular identified properties in the residue.
The evidence does not disclose any communication by the plaintiffs, or any of the other beneficiaries, to the defendant informing him that they no longer wished him to sell the Arndell Park property first, before he took steps to sell the other properties in the residue. All that the plaintiffs said on this issue was that they thought all of the properties would be sold in a timely manner.
Martin Camilleri paid for the water licence in or around early 2018, and, on or around 20 February 2018, the defendant exchanged contracts for the sale of the Arndell Park property. The defendant set auction dates for the other properties in the residue in April 2018, and on 20 June 2018 he sold 430 Londonderry Road to "Martin or his nominee" for $3,000,000. The contract for the sale of the Arndell Park property completed on 5 July 2018. One of the four residuary properties was sold at public auction. In November and December 2017, the solicitors for the defendant communicated with the beneficiaries concerning the progress in selling the Arndell Road property, offers received for the other properties in the residuary estate, and raised the possibility that the beneficiaries may want some of the residuary properties to be distributed in specie.
As I understand the evidence, by on or around 8 November 2018, the defendant and the other beneficiaries, including the plaintiffs, executed an agreement for the transfer of a number of the residuary properties to the beneficiaries in specie. The agreement itself was not in evidence.
In their supplementary written submissions, the plaintiffs said that the commencement of the proceedings on 7 August 2017 was not unreasonable, for reasons connected with delay on the part of the defendant and failure by him to explain the actions he was taking. They said that, when the summons was filed, about two years had elapsed since the grant of probate and three years since the deceased's death. They said that the defendant had not given a reasonable explanation for taking 10 months to obtain the grant of probate, that he failed to take steps during the pendency of the first proceedings to sell the residuary properties, that he did not explain why resolution of the land tax dispute delayed the administration of the estate, and that he did not engage an agent to sell the Arndell Park property until January 2017, about 17 months after probate was granted, and about five months after the first proceedings were dismissed.
The plaintiffs also submitted that none of the beneficiaries communicated to the defendant that they wished the sale of the Arndell Park property to take place before any other properties in the residuary estate were sold. That submission is inconsistent with the evidence that I have discussed above. The plaintiffs may complain about the delay in the defendant effecting the transactions, but the evidence supports the conclusion that the plaintiffs asked the defendant to sell the Arndell Park property first, and, ultimately, a number of the other residuary properties were agreed to be transferred to the beneficiaries in specie.
Although, in their supplementary submissions, the plaintiffs acknowledged that criticism might be levelled at the plaintiffs for not writing to the defendant before the commencement of the present proceedings to complain about the delay or flag their intention to bring the proceedings, they submitted that it was still reasonable for them to have commenced the proceedings. The plaintiffs sought to level a similar criticism at the defendant, by submitting that the defendant did not write to the plaintiffs after commencement of the proceedings to explain why he was continuing to delay the sale of the residuary properties, to give them a timetable for doing so, or to try to resolve the proceedings on that basis.
In Parsons v Davison [2016] NSWSC 1491, I set out my understanding of the principles that apply to an application for the removal and replacement of an executor as follows:
…
[8] The principles that the court is required to apply on an application such as the present have been authoritatively confirmed by the Court of Appeal in Mavrideros v Mack (1998) 45 NSWLR 80; [1998] NSWCA 286 by Sheller JA (Priestley and Beazley JJA agreeing) at 101 and 102:
The principles to be applied are stated in the decision of this court in Bates v Messner. In that case, the appeal was from a decision of Myers J dismissing an application for the revocation of a grant of probate made to the respondent. Sugerman JA (at 189; 36) quoted from the judgment of Jeune P in In the Goods of Loveday [1900] P 154 at 156 and said the principle there stated had been consistently followed and no doubt cast on its correctness in point of principle. Jeune P in the passage quoted said:
After all, the real object which the court must always keep in view is the due and proper administration of the estate and the interests of the parties beneficially entitled thereto; and I can see no good reason why the court should not take fresh action in regard to an estate where it is made clear that its previous grant has turned out abortive or inefficient. If the court has in certain circumstances made a grant in the belief and hope that the person appointed will properly and fully administer the estate, and if it turns out that the person so appointed will not or cannot administer, I do not see why the court should not revoke an inoperative grant and make afresh grant.
Asprey JA said (at 191-192; 39-40):
… that the essential basis of the exercise of the court's inherent jurisdiction to revoke a grant of probate is that emphasised by Jeune P, namely, that the real object which the court must always keep in view is the due and proper administration of the estate in the interests of the parties beneficially entitled thereto on the part of the person to whom and by whose oath as to the faithful performance of his duties the court has been induced to entrust the office of executor. The terms used in some of the previously decided cases with relation to the circumstances which have given rise to the exercise of the jurisdiction of revocation, such as 'abortive', 'inefficient', 'useless' or 'ineffectual', are simply descriptive of a situation in which the court has been persuaded to the view that its grant, which was predicated on the oath of the executor named in the will that 'he will pay all the just debts and legacies of the said deceased so far as the estate of the said deceased will extend and the law shall bind him, and that he will otherwise well and faithfully administer the said estate according to law; and that he will render a just and true account of his administration' has been circumvented by a breach of that oath which is in effect an undertaking to the court making the grant. I shall make no attempt to define all circumstances which may attract the exercise of the court's jurisdiction, but where circumstances clearly appear to have arisen after a grant of probate which impel the court to the firm conclusion that the due and proper administration of an estate has either been put in jeopardy or has been prevented either by reason of acts or omissions on the part of the executor or by virtue of matters personal to him, for example, mental infirmity, ill health, or by virtue of the proof of other matters which establish that the executor is not a fit and proper person to carry out the duties which he has sworn to the court that he will perform, the court may exercise its inherent jurisdiction to revoke the grant.
[9] As Lindsay J has more recently said in Riccardi v Riccardi [2013] NSWSC 1655; (2013) 11 ASTLR 198 at [7]:
[7] Upon an application of the principles enunciated in Bates v Messner (1967) 67 SR (NSW) 187 at 189 and 191-192 and Mavrideros v Mack (1998) 45 NSWLR 80 at 107F-108C, I am satisfied that the plaintiff's substantive application should be granted. An executor or administrator may be removed where it appears that the due and proper administration of an estate has been put in jeopardy or has been prevented by reason of acts or omissions on the part of the executor or administrator, or by reason of matters personal to him, such as mental incapacity or ill health, establishing that he is not a fit and proper person to carry out the duties involved in the due administration of the estate. This is such a case.
…
Clearly, delay in the administration of the estate by an executor may provide a ground for the revocation of the grant of probate to that executor, but the question must always be whether the delay is inconsistent with the due and proper administration of the estate.
In the present case, although it took the defendant some time to complete the administration of this relatively large and complex estate, I do not see in the evidence that was available to the first plaintiff when these proceedings were commenced, or in the evidence that was available to the second plaintiff when he joined the proceedings, any indication that mere delay by the defendant suggested that he would not administer the estate with reasonable expedition and in a proper manner.
In the circumstances explained above, the defendant's need for some 10 months to obtain a grant of probate does not appear to be delinquent. As a matter of fact, he deferred administering the estate during the pendency of the first plaintiff's family provision application. That is a common response by executors, and does not suggest delinquency on the part of the defendant. The first plaintiff does not appear to have taken steps to facilitate the defendant administering the estate while the proceedings were on foot. The defendant appears to have dealt with the objection to the land tax assessment with reasonable efficiency and expedition. The defendant had caused the properties the subject of specific gifts to be transmitted to the relevant beneficiaries before the proceedings were commenced. It appears that it took the defendant about five months to initiate the process of selling the Arndell Park property, but given its significance and value it probably would have taken the defendant some time to satisfy himself concerning the selection of an agent and an appropriate sale process. While it took a year to complete the sale process, by and large it appears that the defendant acted on advice and ultimately achieved a satisfactory result for the estate. The defendant had not commenced the process of selling the other properties in the residuary estate, but he had been asked not to do so by the plaintiffs themselves. It is alright for the plaintiffs to say that they made the request on the assumption that all of the properties would be sold more quickly, but they did not inform the defendant of any change of mind.
The significance of these observations is that, in my view, there were not objective indications at the time these proceedings were commenced that the defendant was administering the estate in a delinquent manner. Significant time had passed, but the defendant may have had good reason to have administered the estate in the manner that he did.
It is in this context that, in my view, the failure by the plaintiffs to have an appropriately worded letter of demand sent to the defendant or his solicitors is significant.
I have stated my views on the importance of letters of demand before suit elsewhere, in Windgap Foundation Ltd v Solomons [2018] NSWSC 809, where I said at [65]-[66]:
[65] I acknowledge the principle relied upon by Ms Solomons that in the ordinary case, if a plaintiff does not seek appropriate relief from the defendant by writing a letter of demand before suit, the plaintiff may be at risk as to its costs, if in response to proceedings that the plaintiff institutes, the defendant immediately concedes the entitlement of the plaintiff to the relief claimed and establishes that the defendant would have accepted the plaintiff's right to relief without suit: see Bates v Lloyd [2005] NSWSC 1253 per Hamilton J at [12]:
[12] There was one point that Miss Cohen made that I thought at one stage had some force. That was that, although "a letter before action" was written threatening enforcement proceedings in 2002, the warning was not renewed before the motion was in fact taken out in 2005. In general terms, whether in respect of substantive proceedings or interlocutory motions, a letter before action should be written to permit the opponent, if so minded, to consent to what is sought without costs being incurred. If action is taken without such a warning, and it is demonstrated that the opponent would have consented, the party taking proceedings may be deprived of costs: Robertson and Son v Perkins and Co Ltd (1886) 2 QLJ 173 Lilley CJ; Kinsela v Metropolitan Mutual Provident Building and Investment Association (1887) 8 NSWLR 277 FC; Moore v Gannon (1915) 32 WN (NSW) 60 Harvey J; Glandon Pty Ltd v Strata Consolidated Pty Ltd NSWCA Kirby P 29 December 1988 unreported. The paucity of authority is probably explained by the axiomatic nature of the principle. The principle, although axiomatic, is important and current. However, only a little consideration leads one to the conclusion that that principle does not apply in this case.
[66] See also Melbourne University Publishing Ltd v Williamson [2005] FCA 1910 at [4] (Heerey J). This practice is not a rule of general application, and does not displace the general discretion that the Court has to make the costs order that is appropriate on the facts of the particular case: see for example Kardas v Kalliakoudis [2008] FCA 1913 at [15] (Finkelstein J).
It is a fundamentally important practical aspect of litigation that parties and their lawyers not lose sight of the need to send letters of demand before suit in appropriate cases. An example of an inappropriate case is Windgap Foundation Ltd v Solomons, in which giving notice to the defendant would have been incompatible with the plaintiff obtaining the remedy sought. In various ways, parties who do not give proper notice of their demands before they sue, so that the other party has proper time to comply or justify its position, may be at risk when the issue of costs comes to be decided. In the present case, while it may have been arguable that a considerable time had elapsed since the date of the deceased's death, it was not at all obvious that the defendant had been delinquent in the expedition with which he had administered the estate. A properly worded demand that set forth the plaintiffs' concerns, including their change of mind as to the order in which the residuary properties should be sold (if they had indeed changed their mind by that time), would have put the defendant on notice. It would have given the defendant an opportunity to explain the course of the administration, and the defendant could have explained his plans for completing the administration. The likely consequence would have been that the defendant would have demonstrated the absence of any need for the first plaintiff to commence, or the second plaintiff to join, these proceedings, if necessary by adjusting his approach to the administration of the deceased's estate. As it is, the plaintiffs took the risk that the defendant was administering the estate as quickly as circumstances enabled him to do, and that he would in the ordinary course complete the administration before these matters could be brought to hearing. That is what happened.
Where a plaintiff seeks leave to discontinue proceedings on the ground that the defendant has completed the tasks that the plaintiffs sought to compel the defendant to undertake, or, as here, the plaintiff has sought to replace the defendant so that tasks can be completed, but the defendant completes the tasks before the proceedings are heard, the Court is not obliged to look at the circumstances that have made the proceedings otiose as if those circumstances were an intervening event beyond the control of the parties. If it appears that the outcome that the plaintiff sought to compel has simply happened in the ordinary course, the Court may need to take the view that the commencement of the proceedings was not reasonable in the first place.
In my view, it is no answer to say, as the plaintiffs have said, that the defendant could have volunteered a full explanation and an assurance of the expeditious administration of the estate, after the plaintiffs had commenced the proceedings. In my view, in the circumstances of this case, it was the plaintiffs' obligation to warn the defendant that proceedings were impending. Moreover, it is not realistic to expect a defendant to resolve a plaintiff's concerns when the plaintiff has not articulated those concerns clearly, as was the case here.
I am of the view that, in this case, the plaintiffs have not established that it was reasonable for the first plaintiff, in the circumstances, to commence the proceedings when she did, or for the second plaintiff to join in those proceedings when he did, on the basis of the facts as they appeared when the proceedings were commenced or when the second plaintiff joined in those proceedings, and without giving the defendant an opportunity to respond to an appropriately worded letter of demand.
Consequently, I am not prepared to order otherwise for the purposes of UCPR rule 42.19(2), and I will make an order that the plaintiffs pay the defendant's costs of the proceedings.
The orders of the Court will be:
1. The plaintiffs' proceedings are dismissed.
2. The plaintiffs are ordered to pay the defendant's costs of the proceedings.
3. To the extent the defendant's indemnity costs are not otherwise satisfied by order (2), order the defendant's indemnity costs to be paid out of the estate of the deceased.
[3]
Amendments
21 March 2019 - Order (3) included
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Decision last updated: 21 March 2019