PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –
COSTS – COSTS OUT OF FUND OR PROPERTY – DISENTITLING
CONDUCT BY
PERSONAL REPRESENTATIVE, TRUSTEE ETC – where the respondents were
Source
Original judgment source is linked above.
Catchwords
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS –COSTS – COSTS OUT OF FUND OR PROPERTY – DISENTITLINGCONDUCT BYPERSONAL REPRESENTATIVE, TRUSTEE ETC – where the respondents wereexecutors and trustees of a deceased estate –where the applicant was abeneficiary – where the respondents were also beneficiaries – wherethe applicant gave noticeof challenge to the validity of the will – wherethe applicant filed application for family provision – where therespondentstransferred the major asset of the estate to themselves beneficially– where the applicant sought the removal of the respondentsas executorsand trustees – where the applicant offered not to seek costs against therespondents if they resigned as executorsand trustees – where therespondents resisted the application – where the application wassuccessful and the respondentswere removed – whether the applicant should
have her costs on an indemnity basis from the estate – whether the
respondents
should personally reimburse the estate of those costs –
whether the respondents should lose their right of indemnity against
the
estate
Australian Securities and Investments Commission v Letten (No 17)
[2011] FCA 1420
(2011) 286 ALR 346
[2011] 87 ACSR 155, followed
Harrison v Cox
[2024] QSC
311, related
Judgment (23 paragraphs)
[1]
[1] This is the consideration of the issue of costs in relation to an application determined by orders made on each of 7 November 2024 and 10 December 2024.[1]
[2]
[2] The dispute concerns the administration of the estate of Raymond Paunovic who died on 5 October 2023, leaving a will.
[3] The second and third respondents, Stephen Paul Cox and Sharon Maree Turner, were named as executors and trustees in the will.[2] Probate was granted to them on 12 March 2024. The applicant, Renee Josephine Harrison, is the daughter of Mr Paunovic.
[4] Mr Paunovic left a house at Laidley estimated to be worth between $540,000 and $560,000. That is the principal estate asset. There is little else.
[5] Mr Paunovic's will is a simple one. It provides for his assets (in practical terms, the house) to be sold, all expenses paid and the residue to be divided in equal shares between Mr Cox, Ms Turner, and Ms Harrison.
[6] Mr Cox and Ms Turner were placed on notice that Ms Harrison disputed the validity of the will. Ms Harrison also sought relief by way of family provision pursuant to Part IV of the Succession Act 1981 (Qld). An application was filed by her in early July 2024.
[7] Mr Cox and Ms Turner transferred the house to themselves as trustees and executors in July 2024 and then to themselves beneficially by transfer registered in September 2024. The plan, apparently, was to acquire the house from the estate and then pay Ms Harrison her share. Notwithstanding the transfer of the house, no money was forthcoming to the estate. The transfer was effected in the face of Ms Harrison's pending family provision application.
[8] Ms Harrison objected to the transfer of the house. Her solicitors wrote to the solicitors then acting for Mr Turner and Ms Cox. In what was styled an "open offer of compromise", Mr Cox and Ms Turner were advised of Ms Harrison's intention to have them removed as executors and trustees in favour of the appointment of Ms Prudence Poole as administrator. Ms Poole is, as the open letter explained, an accredited specialist in succession law. The letter of offer went on to say that if Mr Cox and Ms Turner consented to the application no order as to costs would be sought against them personally.
[9] That offer was not accepted and the threatened application was made.
[10] On 7 November 2024, the application was heard and on that day the following orders were made:
[3]
"1. Steven Paul Cox and Sharon Maree Turner shall not transfer, sell, lease, encumber or in any other way create any interest in or dispose of any interest in the property of 209 Lakes Drive, Laidley Heights until further order.
[4]
Steven Paul Cox and Sharon Maree Turner pay the applicant's costs of the application limited to the costs of the appearance today.
[5]
(a) The final relief sought on the application.
(b) Save for the costs order made, the question of costs of the application."
[6]
[11] On 10 December 2024, declarations were made in these terms:
(a) the Transfer of the real property located at 209 Lakes Drive, Laidley Heights, Queensland (more particularly described as Lot 20 on Registered Plan 854930) (Property) to the Second Respondent and Third Respondent as joint tenants by transfer registered on 13 September 2024 (being dealing number 723533870) (Transfer) was made in breach of trust;
(b) the Second Respondent and Third Respondent hold their legal and beneficial interest in the Property on constructive trust for the Administrator (as that term is defined below); and
(c) the First Respondents are not entitled to be indemnified or reimbursed from the estate of Raymond Paunovic (Deceased) in respect of their costs and disbursements of and relating to the Transfer."
[9]
[12] On 10 December 2024, further orders were made:
[10]
(a) removing Mr Cox and Ms Turner as executors of the estate;
(b) revoking the grant of probate to Mr Cox and Ms Turner;
(c) granting letters of administration with the will to Ms Poole; and
(d) various ancillary orders.
[11]
[13] As to the question of costs other than those dealt with by the order made on 7 November 2024, these orders were made on 10 December 2024:
[12]
"11. By 4:00 pm on 16 December 2024 the Applicant file and serve written submissions on the questions of:
[13]
(a) costs of the application other than those costs already ordered; and
(b) whether the Respondents should have indemnity from the Estate for their own costs and for any liability they may have for costs they might be ordered to pay.
[14]
By 4:00 pm on 23 December 2024 the Respondents file any submissions in reply.
Each party have liberty to file and serve an application for leave to make oral submissions on costs and the Respondents' indemnity by 4:00 pm on 13 January 2025 failing which the questions of costs and the Respondents' indemnity will be determined on any written submissions and without further oral hearing."
[15]
[14] Written submissions were received from the parties but none sought leave to make oral submissions.
[16]
"1. The Applicant seeks the following orders with respect to the costs of the proceeding:
[17]
(a) The Applicant's costs of the proceeding (save as to the costs that are recovered by the Applicant from the Second and Third Respondent that are the subject of the order of Justice Davis made on 7 November 2024) be paid estate of the late Raymond Paunovic (Estate) as assessed on the indemnity basis;
(b) The First Respondents not be indemnified or reimbursed from the Estate for:
(i) their costs of the proceeding; and
(ii) the costs that are the subject of the order of Justice Davis made on 7 November 2024;
(c) The Second Respondent and Third Respondent reimburse the Estate in an amount commensurate to the applicant's costs of the proceeding (save as to the costs that are the subject of the order of Justice Davis made on 7 November 2024) as assessed on the standard basis."
[18]
[16] Mr Cox and Ms Turner, in their submission, explain that they acted on legal advice and always acted bona fide. They say they were in a position to purchase the house and finalise the estate from funds borrowed by mortgage. They say that they have little money and struggle financially. They both have medical conditions and high medical expenses. They resist any costs order where they are personally liable.
[19]
[17] If Mr Turner and Ms Cox received legal advice to transfer the property to themselves beneficially in the face of not only an indication of a possible challenge to the validity of the will, but also in the face of an application for family provision, then they may have some legitimate complaint against their solicitors. However, there may be reasons (which escape me at present) justifying such advice.
[18] For reasons explained in the primary judgment, Mr Cox and Ms Turner were in serious breach of their obligations as trustees and executors of the estate. They did not accept the open offer to resign as executors and trustees and facilitate the appointment of Ms Poole. The application for their removal was resisted by them.
[19] Ms Harrison's claim for her costs to be paid on an indemnity basis from the estate ought to be granted. The application was reasonably made by Ms Harrison. She ought to be indemnified from the estate.
[20] The respondents should lose their right of indemnity from the estate both for their costs of the proceedings and the costs ordered against them on 7 November 2024. In circumstances where they had transferred the property beneficially to themselves in the face of a potential challenge to the will and an application by Ms Harrison for family provision, the application for their removal as trustees and executors ought not to have been resisted. The costs of the respondents were not reasonably incurred in the execution of the trust. Those costs could easily have been avoided by adopting the course offered in the open correspondence.[3]
[21] Mr Cox and Ms Turner should pay Ms Harrison's costs of the application by reimbursing the estate. The application was necessary because, in breach of trust the primary asset of the estate was transferred to Mr Cox and Ms Turner personally. As I have already explained, the costs of all parties could have been avoided by Mr Cox and Ms Turner resigning, voluntarily, from their positions as trustees and executors of the estate.
[22] At present, Mr Cox and Ms Turner jointly have a two-third interest in the residue of the estate. That interest may be affected and diminished if Ms Harrison succeeds in her family provision application.
[23] No practical disadvantage will be suffered by the estate if the costs ordered to be paid by Mr Cox and Ms Turner are ordered to be satisfied from their share in the residue. In light of the financial and other difficulties faced by Mr Cox and Ms Turner, hardship will be caused if they have to raise the money.
[20]
[26] I make the following orders:
The applicant's costs of the proceeding (save as to the costs that are recovered by the applicant from the second and third respondents that are the subject of the order of Davis J made on 7 November 2024) be paid by the estate of the late Raymond Paunovic (Estate) as assessed on the indemnity basis;
The respondents not be indemnified or reimbursed from the Estate for:
their costs of the proceeding; or
the costs that are the subject of the order of Davis J made on 7 November 2024;
The second respondent and third respondent reimburse the estate in an amount commensurate to the applicant's costs of the proceeding (save as to the costs that are the subject of the order of Davis J made on 7 November 2024) as assessed on the standard basis, but that payment be made from the second and third respondents' share of the residue with liberty to apply to the Estate in the event that the costs exceed the sum to which the respondents are entitled under the Estate.
[24] The estate will only be out of pocket if, ultimately, Mr Cox and Ms Turner's share is less than the amount of the costs. Ms Poole should have liberty to apply in such circumstances.
[25] The costs of the application should be reimbursed to the estate from Mr Cox's and Ms Turner's share in the residue.