Grizonic v Suttor; Grizonic v McDonald [2006] NSWSC 1359 | Case summary

6141/03 CLAUDIO GRIZONIC v SUZANNE RANKEN SUTTOR & ANOR 2475/05 CLAUDIO GRIZONIC v GEOFFREY McDONALD & ORS JUDGMENT - Ex Tempore 1 HIS HONOUR: Two Notices of Motion are before me today. They are both brought by accountants, who were appointed as trustees for the sale of a suburban property located at 9 Magdella Road Ryde. They were appointed under orders that I made on 27 February 2004: Grizonic v Suttor [2004] NSWSC 137. 2 Mr Grizonic and Ms Suttor were at one stage in a de facto relationship. They were also business partners. There was dispute about the circumstances in which, and time at which, the de facto relationship had come to an end. 3 Mr Grizonic applied for the appointment of trustees for sale, at a time when Ms Suttor had not been acting promptly in achieving a consensual sale. At the time of making the appointment, I authorised the trustees to charge at a rate not exceeding $450 per hour, and in a total sum not exceeding $7,500, and I authorised them to deduct all such expenses from the proceeds of sale. At the time that order was made, it looked like being trustees for sale of this property would involve nothing out of the ordinary. 4 The trustees for sale encountered some difficulties, that arose in part from ongoing disputation between Mr Grizonic and Ms Suttor. They engaged Yates Beaggi Lawyers as their solicitors. Yates Beaggi Lawyers acted in connection with the conveyancing, and also in connection with other matters that the trustees became embroiled in, as a consequence of ongoing disputation between Mr Grizonic and Ms Suttor, and also as a consequence of some financial difficulties that Mr Grizonic later underwent. 5 The order that I made, capping the fees of the trustees, was varied by some orders made by consent on 14 July 2004 by the Chief Judge. He varied the orders so as to make the total sum not exceeding $10,000. 6 The Notice of Motion that is before me today seeks a variation of that order of 14 July 2005. It also seeks an order fixing the trustees remuneration, in the sum of $76,942.12, in accordance with a certificate of determination issued on 22 November 2005 by Mr Graham Ellis, costs assessor. The trustees seek to have that amount of remuneration paid from an amount of $80,000 that is held in the trust account of Yates Beaggi Lawyers. That $80,000 is an amount that has been retained from the proceeds of sale, of the suburban property, as an estimate of the possible expenses of the trustees for sale. 7 There have been some costs assessment proceedings, of two different types. First, there has been an assessment of the legal costs and disbursements that are owing by the trustees for sale to Yates Beaggi Lawyers. Those costs and disbursements have been quantified, by a certificate given by Mr Ellis, costs assessor, on 17 March 2005. He quantified an amount of $33,781.37, plus interest of $1,376.25, and the fees of the assessment of $624.55, and some fees of the costs assessor in a further amount of $1,001. 8 The second costs assessment proceedings are ones where the trustees for sale applied to have their own costs and disbursements assessed. The bulk of the claim made there was for the legal costs and disbursements, that I have just mentioned. The total of the costs and disbursements claimable by the trustees for sale was assessed by Mr Ellis, in another certificate in November 2005, in an amount totalling $76,942.12, inclusive of the costs of assessment. 9 Mr Ellis gave an opportunity to Mr Grizonic to make submissions to him, but that opportunity was not availed of. One of the reasons for that was because of the financial difficulties that Mr Grizonic has undergone. 10 The second Notice of Motion that is before me is one where the trustees for sale seek security for costs in proceedings 2475 of 2005. Those proceedings are ones that Mr Grizonic brings against the trustees for sale, alleging that they have been derelict in their duties in three different ways. 11 One of those ways concerns the manner in which they incurred expenditure for the costs of the conveyancing. The Statement of Claim alleges that there was open to the trustees for sale a lump sum costs agreement for the conveyancing, that would have resulted in a lesser amount being paid than was in fact charged by the solicitors that the trustees for sale in fact engaged. 12 The second alleged dereliction of duty is that the trustees for sale are alleged to have sold the house for less than the market value it had at the time Mr Grizonic alleges they ought to have sold it. In fact, the trustees for sale sold it for $600,000, to Mr Grizonic. Mr Grizonic, some months later, and after doing some work on the property, on-sold it, for $640,000. It is his contention in the proceedings, I gather, that the market value at the time the sale should have been effected, was more like $700,000. He contends that he has suffered loss, as a consequence of the true market value not being achieved. 13 The third dereliction of duty that is alleged against the trustees for sale is that they did not charge an occupation fee to Ms Suttor, who continued to reside in the house until the time it was sold, or until shortly before then. 14 Mr Grizonic has entered into a personal insolvency agreement with his creditors. That personal insolvency agreement was entered on 9 February 2006, under the new provisions of Part X of the Bankruptcy Act 1966. Under it, a fund is established that comprises all the net proceeds from three pieces of Supreme Court litigation to the extent that it is sufficient to pay the creditors 100c in the dollar in respect of their provable debts. Those three pieces of Supreme Court litigation include the claim that Mr Grizonic brings against the trustees for sale. It is not clear, on the evidence, what the provable debts are, but in the statement of affairs that was submitted by Mr Grizonic the total amount acknowledged by him as owing was a little less than $800,000. 15 In those circumstances, Mr Johnson, for the trustees for sale, submits that Uniform Civil Procedure Rule 42.21(1)(e) is attracted, namely, that Mr Grizonic is suing not "for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so." 16 It is uncontested in the action before me that Mr Grizonic has no assets worth speaking of, beyond whatever the causes of action might be worth. The cause of action against the trustees for sale, if allowed at its full value, would result in him receiving, at the maximum limit that he claims, an amount of the order of $50,000 in connection with the house, $7,500 in connection with the failure to obtain the occupation fee, and the making available to him of one half of whatever was the amount that was held to be unreasonably incurred by the trustees for sale for their own remuneration and legal expenses. At its highest limit, the maximum he could recover on that score would be an additional $40,000, namely, half of the funds, that is presently held as security for the trustees costs for sale. And he would recover that only if he were able to establish that they should receive absolutely nothing for their costs and disbursements. Thus, the total amount of his claim is, at best, $97,500. 17 Mr Locke, for Mr Grizonic, submits that the provisions of Rule 42.21(1)(e) are not attracted, because if there were to be enough recovery, in all of the actions that Mr Grizonic has on foot, to pay all the creditors, Mr Grizonic would receive whatever the surplus was. 18 There is no evidence before me that suggests that the other actions are ones of any substance. I am not satisfied that any of the benefit of the action against the trustees for sale would ultimately flow to Mr Grizonic rather than to his creditors. 19 Mr Johnson, for the trustees for sale, concedes that he would not be able to obtain a summary striking out of the action against the trustees for sale. 20 A court is often reluctant to order a litigant who is a natural person to provide security for costs, if there is a likelihood that so doing will stifle the action. However, that reluctance does not apply when the litigant is not really suing for his own benefit. When a litigant is suing for the benefit of others, the question arises of why it is that those others are not funding the action from which they will benefit. No information concerning that question is provided in the present case. 21 In my view, it would not be appropriate to permit the action against the trustees for sale to continue, unless security were provided. It is quite clear that Mr Grizonic himself does not have the means to provide that security. There is no evidence whatever about whether there might be any other means, such as from friends, or creditors, or other litigation funders, whereby the amount might be provided. 22 There is some difficulty for the trustees for sale, in that this is a late application. However, the uncertainty concerning Mr Grizonic's financial situation has gone on for some time now. Before the personal insolvency agreement was entered, he had attempted to enter another arrangement for the benefit of creditors, which was ultimately held by the Federal Magistrate's Court to not have been validly entered. I do not regard the delay there has been in making application as a reason for denying the provision of security. 23 There is no dispute that, if it is otherwise appropriate to order security, $20,000 is an appropriate amount. 24 In proceedings 2475 of 2005, I order that the proceedings are stayed until the plaintiff provides security for costs in the sum of $20,000. 25 In the course of argument, Mr Johnson came to accept that it might not be possible, at this stage, to make an order for payment to the trustees for sale of the amount of their fees and disbursements. The principle upon which a trustee is entitled to indemnity for expenses from the trust fund is that he is entitled to indemnity for expenses reasonably and honestly incurred: In Re Beddoe; Downes v Cottam [1893] 1 Ch 547; Mead v Watson as liquidator for Hypec Electronics [2005] NSWCA 133; (2005) 23 ACLC 718 at [12]. The decision of the costs assessor, concerning the quantum of legal fees and disbursements, was one concerning the reasonableness of those fees as between solicitor and client in light of whatever costs agreement they might have entered. It is not necessarily determinative of the reasonableness, as between trustee and beneficiary, when there is an allegation that engaging a different solicitor, on a different basis, would have lead to lower expenses being incurred. I do not see that it is possible for there to be an order for payment of the fees and disbursements of the trustee when there is an unresolved question about whether they have acted reasonably in incurring certain of those fees and disbursements. 26 On the Notice of Motion in 6141 of 2003, the existence of Mr Ellis' costs assessment, as between trustees and beneficiary, at least provides a basis upon which it is possible to fix a new cap to the fees of the trustee. It would be appropriate, at this stage, to vary the order of the Court made 14 July fixing the applicant's remuneration as statutory trustees to an amount not exceeding $76,942.12. I so order. However, it would be premature to make an order for actual payment of any sum to them at this stage. I stand over the notice of motion in proceedings 6141 of 2003 before the Registrar at 9.30am 27 February 2007. 27 I reserve the costs of each notice of motion. 28 I note that documents in relation to which a claim for privilege was made were produced pursuant to a notice to produce. I grant leave for those documents to be returned to Mr Johnson's instructing solicitor. **********

Grizonic v Suttor; Grizonic v McDonald

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