Indyk v Wiernik [2006] NSWSC 868 | Case summary

2449/05 - INDYK v WIERNIK JUDGMENT 1 HIS HONOUR: This is a most unsatisfactory case between a brother and a sister over their mother's estate. It involves the estate of a person who died as long ago as 10 April 2003, having made a will on 24 April 1997, probate of which was granted to the defendant on 25 March 2004. The will was simple enough. It left the estate to the three children equally, save that, in the case of one child, he was to get a life estate only, and thereafter the other two were to have the remainder. 2 The assets of the estate consisted of a fairly expensive house at Darling Point, plus a debt owed by a related company, and a whole series of chattels, including paintings made by the deceased herself, of no real commercial value but of some sentimental value, and paintings done by other people and jewellery, which did have some value. 3 The proceedings commenced on 27 October 2004, that is, about eighteen months after the deceased's death, and after about six months of probate. 4 The proceedings came before various judicial officers at Master and Registrar level. Eventually a statement of claim was filed in May 2006, and the proceedings set down for hearing. However, they were mediated before the Honourable Mr Brian Cohen QC in July 2006, and basically settled as a result of that mediation. 5 I say "basically settled" because it was agreed that, subject to the defendant submitting to the plaintiff verified accounts of her administration from the period from date of death to 30 June 2006, the proceedings would be dismissed. 6 There was no mutual releases of claims one by the other involved in the settlement and there was no agreement as to how the costs of the present proceedings should be borne and paid. The latter issue is one which I am asked to decide today. 7 There may, or may not, be outstanding claims on the accounts. The accounts, which have been tendered as DX01, are relatively rough accounts prepared by accountants for business purposes and would not be accepted by the Court for the purpose of having accounts passed prior to an application for commission. They do not distinguish between capital and income payments and they do not properly identify the distributions that have been made to beneficiaries. 8 It is uncertain in my mind how far the settlement of these proceedings at mediation also amount to a settlement of issues that could arise on the accounts. The issues that could arise on the accounts include the valuation of the pictures and jewellery and the way in which the sale of the property was handled, and those matters may well have been concluded by the settlement of these proceedings. 9 On the other hand, it is arguable that they were not. However, one issue that will arise on the accounts is whether any order for costs of these proceedings, or indeed any costs which the defendant has to pay, she can claim against the estate assets. 10 As to the problems that arise in this connection, there has been discussion during the morning on the decision of Holland J in Adam v Mullen, 15 December 1976, quoted in Ritchie's Uniform Civil Procedure New South Wales at page 135,051. It is not usual for judges, on occasions such as the present, to make orders that the executor have an indemnity out of the estate, because, as Holland J said, it sabotages any right, as a matter of practice, of a beneficiary to raise the matter when the accounts are being passed by the Registrar. 11 In the instant case the third child has not had input as to what his attitude is as to whether the executor should have an indemnity. 12 The defendant executor intends to claim commission. She may have difficulty with that application because she was given one-third of the estate, and that often carries with it the presumption that her gift was to be part remuneration or full remuneration for her work. However, where her siblings are given the same gift, perhaps that presumption is very much weakened. 13 I have been presented with large bundles of papers by both sides setting out in meticulous detail every argument that has been had between the parties over the last three years about their mother's estate. To my mind the correspondence reflects no glory on anybody. It would seem that initially the parties agreed that there would be a period of mourning and no action would be taken with respect to the estate, but that seems to have expired by August 2004, when the correspondence starts turning nasty. 14 Now it would appear that the plaintiff's letters started the nastiness, but the situation was not helped by the defendant's previous solicitors replying in tones that the defendant just had to put up with the fact that his mother had named the defendant as executrix and the defendant has a discretion as to how she would administer the estate, and she would do, at least within the law, what she thought she should do, and not be harassed or badgered by the plaintiff. 15 That would have been all right had the defendant administered the estate in an efficient fashion. Even allowing for the fact that she was continually harassed by the plaintiff, it is hard to see how, in a simple estate such as the present, things took so long to be done, and why it was that, whenever the plaintiff made a suggestion or demand, there was merely an answer - yes, we will get around to doing that in due course. 16 The plaintiff has been trying to get satisfactory answers about the estate since two or three years ago. Unfortunately, in my view, he has always been asking too much. Now I realise in negotiations one always asks for too much and will settle for something a little less but it seems to me that, almost always along the line, the plaintiff was demanding a little too much of his sister. 17 On the other hand, the attitude that she would administer the estate as and when she felt like it, and she had some sort of discretion, was, again, not a satisfactory answer, and not an answer that a reasonable person would have made under all the circumstances. 18 I am indebted to Mr Ellison SC for the plaintiff, for setting out in a folder the leading cases on the question of costs for this sort of matter. The cases tend to suggest that the Court looks to see the reasonableness of the parties in commencing or defending litigation. As well the Court casts its mind as to the prospects of success in the sense of whether a proposition was hopeless, or not, rather than trying the case to see what the issue would have been had the case gone to a final hearing. 19 Mr Burchett of counsel, who appeared for the defendant, said that the proceedings had been a waste of time, money and emotional anguish, and the plaintiff was always bound to fail. To a great degree there was a tremendous amount of waste of time, money and emotional anguish, but I do not think the plaintiff was bound to fail. 20 To examine that proposition a little more closely, one has to look at the statement of claim that was filed on 18 May 2006. It is a fairly extraordinary document. It first seeks an order that there be an interim distribution. I will come back to that. 21 It then seeks that the defendant be directed to do 23 things, although the demand is not limited to those 23 things, and, if she does not do that, then that she be removed. The things include serving itemised valuations within 14 days and confirming in writing to the plaintiff that he may retain an Egyptian incense burner and four decanters and a couple of paintings. 22 So far as distribution is concerned, Mr Ellison SC put, under Part 68 rule 2 of the Supreme Court Rules, the Court can order an interim distribution and points to the decision of Barrett J in Romano v Romano [2004] NSWSC 775. It is true that an order was made in that case, but it was clear on all the facts that there was money available and there was really no answer to a claim that the beneficiary should have an interim distribution. 23 I have never made an order for interim distribution because I have never had a clear case where, on looking at all the predictions that can be made, it can be seen that in the ultimate, even after paying the costs of the litigation, there will be the sort of surplus that will justify an interim distribution, bearing in mind that the executor is entitled to retain sufficient funds as a buffer against unexpected expenses. 24 Accordingly, when one is asking for an interim distribution, a very clear case must be established and it would not seem to me, with respect, that the present amounted to one. Furthermore, as the defendant has pointed out on many occasions to the plaintiff, she was the executor, not him, and, although he had his rights, one of those rights was not to demand that certain things happen by certain times and that she administer the estate in accordance with his demands. Accordingly, although the matters set out in para 18(b) of the statement of claim are really particulars as to why she should be removed as an executor, it seems to me that they were far too detailed a demand and that the plaintiff had no right to insist on many of those things, putting aside the question as to whether, adding them altogether, they could justify removal of the executor. 25 Again, removal of an executor is something that the Court is reluctant to do, because the testatrix has made her choice of who is to administer her estate, and the Court does not lightly revoke it. As the Court of Appeal says in Mavrideros v Mack (1998) 45 NSWLR 80, such an order will be made in a proper case, and indeed it seems, with respect, that that case provides a far more lenient rule than pertaining before its decision. 26 Accordingly, we have a situation where, in the statement of claim, the plaintiff has demanded too much, even taking into account one is entitled to make an ambit claim, but neither party has really acted reasonably. In particular, the defendant appears to have been very slow, and not to have provided the beneficiaries with the sort of information that, had the plaintiff been provided with, it might have smoothed the wrath. 27 In making an order for costs the Court, under the legislation, has a discretion, but that discretion must be exercised judicially, and in accordance with principle. There is a lot to be said for the proposition that, where proceedings have been commenced and one can see that there was a reason for commencing them and the proceedings are settled without a hearing, that it may well be appropriate that there be no order as to costs: see Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622. 28 I have said I consider the plaintiff asked too much in these proceedings, and I have also said that some aspects of the plaintiff's conduct in and to the proceedings were not reasonable. However, it does seem to me that the way things were proceeding and with the reaction of the defendant's solicitors in telling him she would do things as she liked when she liked, that it was reasonable for him to commence proceedings, else one wonders when this estate ever would have got wound up. 29 So it seems to me that basically each party should pay his or her own costs. However, because the plaintiff's demands were too high, I think it is appropriate that he should pay 15 percent of the defendant's costs. 30 Accordingly, in my view, the appropriate order is the plaintiff should pay 15 percent of the defendant's costs and as to the other 85 percent of the defendant's costs the defendant should bear her own costs; and the plaintiff should bear his own costs. 31 That then raises the question as to whether the defendant is entitled to be indemnified out of the estate as to the 85 percent of her own costs, and the difference between solicitor and client and party and party costs as to the other 15 percent. Normally an executor would be entitled to that sort of indemnity, unless she has misconducted herself. However, one must also distinguish between costs which are paid to defend the fund constituted by the estate assets, and costs which are paid to defend the defendant's personal honour, or her own interests as a beneficiary. 32 One must also take into account the fact that often a person can defend the fund and coincidentally defend her honour and interests, and, in such a case, it is usually appropriate that the costs of both aspects come out of the estate. 33 It is difficult to apportion the costs, especially when I have not seen a detailed bill, but if one can assume that each letter costs so many dollars, and that proceedings in the Court are more expensive than writing letters, it would seem to me that the costs of the Court proceedings are probably more than the costs of the letters, but I just do not know. 34 Another point to take into account is that there has already been an order for costs made by the Prothonotary and I think one of the Masters or Associate Judges, dealing with the costs of interlocutory applications. They should not be disturbed. Furthermore, as I said earlier, one does not know the attitude of the third beneficiary, and he may well wish to be heard as to how the indemnity as to costs should take place. 35 It is impossible to get a precise figure, but I think fairness would be done if the defendant were permitted to be indemnified as to 60 percent of that 85 percent, and the difference between party and party costs and solicitor and client costs out of the estate. But that order should not preclude the beneficiary, Alfred Dorian Indyk, from making other submissions on the matter before the Registrar, should he be so inclined. 36 Accordingly, I think the formal orders should be as follows:

Indyk v Wiernik

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