Justyn Marcus Ng v Neville Mark Morgan & Anor; Selena Natanie Ng v Morgan; Commonwealth Bank of Australia v Neville Mark Morgan in his capacity as Administrator of the estate of the late Dell Smith

Supreme Court of NSW|2014-05-20|Before: Slattery J

Judgment 1This is my second judgment in these proceedings. In the Court's principal judgment it found in favour of the plaintiffs in the two family provision proceedings, Selena Ng and Justyn Ng, and made orders for provision under Succession Act, Part 3.2 out of the estate of the late Vera Dell Smith: Ng v Morgan & Anor Ng v Morgan; Commonwealth Bank of Australia v Morgan in his capacity as Administrator of the estate of the late Dell Smith [2014] NSWSC 536. The Court reduced Selena's claim on account of the legal costs that the estate had incurred due to her propounding a forged will of the deceased. 2In related common law proceedings the Commonwealth Bank of Australia ("the Bank") brought against the estate, the Court stayed the execution of the Bank's writ of possesion over 89 Bowden Street for a further 60 days from 8 May 2014, upon the terms of the interim stay, pending the Court making final orders in the family provision proceedings. 3At the time of the principal judgment the Court directed the parties to bring in agreed or competing short minutes of order within seven days. The proceedings were listed for further argument on costs and supplementary issues on 20 May 2014. This judgment decides those remaining issues, and should be read with the Court's principal judgment. Both judgments refer to events, matters and people the same way. 4Some matters are agreed and are reflected in the orders at the end of these reasons. But a number of issues remain for determination. They are dealt with under the headings below.

Calculation of 15 Per Cent of the Estate's Costs or Selena's Repayment 8The parties contested what the Court meant in paragraph [221] of the principal judgment, which was as follows: "221. The Court will also require Selena to repay to the estate that portion of the estate's costs of these proceedings attributable to the forged will issue which the Court assesses at 15 per cent of the estate's total costs of these proceedings. Selena will not be allowed to recover from the estate 15 per cent of her own legal costs of these proceedings on the same basis." 9The issue raised is whether Selena had an obligation to pay 15 per cent of the estate's costs of her proceedings or 15 per cent of the costs of the whole proceedings. Mr Bolster submitted on Selena's behalf that Selena should only have to pay 15 per cent of the estate's costs of her proceedings. 10But Mr Ellison SC's answer to this submission was persuasive. The Court's reasons in paragraph [221] are clear: the Court assessed the estate's costs of the proceedings attributable to the forged will issue "at 15 per cent of the estate's total costs of these proceedings". That refers to the estate's costs of the family provision proceedings. And reflects the significance of this forgery issue in the parties' total contest. Moreover, attempts to divide the estate's costs between the two sets of family provision proceedings would complicate and unnecessarily burden any cost assessment process. And the submission put on Selena's behalf fails to take into account the full impact of the forgery issue. The case that Justyn advanced in his own family provision proceedings invited cross-examination on his credit as to what he knew about the forgery issue. Although the Court ultimately made findings in his favour on that issue, Selena's forgery had costs implications well beyond her own action. 11But Selena's forgery did not have any relevant additional effect on the estate's costs Bank's possession proceedings. Selena should not have to pay 15 per cent of the executors' costs of those proceedings.

Encumbrances on 89 Bowden Street 12The Court found in the principal judgment (at [203]) that the appropriate provision out of the deceased's estate was for each of Selena and Justyn to be given "a half interest in 89 Bowden Street, free of any mortgage liability". The parties debated on 20 May whether the transfer should also take place free of any land tax liability. 13The Court has not dealt in the principal judgment with any other encumbrances upon the title to 89 Bowden Street. The formulation (at [203]) "free of any mortgage liability" was a reference to the principal encumbrance upon which the parties focussed in the proceedings before the principal judgment. But if 89 Bowden Street is liable to be assessed for land tax that is a liability that the estate should also bear. 14The order for provision should be in the form that Selena and Justyn will have 89 Bowden Street free of encumbrances. The order for provision will speak at the date of death of the deceased and the estate should bear all encumbrances, including land tax and statutory liability for council rates and other statutory encumbrances consistent with them receiving a clear title to the property without financial complications. As the Court's orders speak, at the date of death they should also have recorded a right of occupation of the property from that date, to give effect to the Court's reasons within the background of the Succession Act.

The Plaintiffs' Costs of the Possession Proceedings 15A not insignificant portion of the plaintiffs' costs of the proceedings related to hearing days after 28, 29 and 30 August and 2 September. Specifically 13, 18, 19 and 25 September were almost wholly concerned with stays on the writ of possession in the Bank's proceedings. 16The parties take strongly contrasting positions on what should be done with the plaintiffs' costs of dealing with stays on the Bank's writ of possession ("the possession issues"). Mr Blackburn-Hart SC and Mr Bolster submit that they should have their costs out of the estate on the indemnity basis. Mr Ellison SC for the estate submits that they should bear their own costs of the possession issues. 17The Court's reasons in the principal judgment guide to the answer on this issue. The Court made the following observations at paragraph [216]: "216. Yet the executors did not take the initiative. They seemed strangely content to allow default to the Bank leading to Selena and Justyn's inevitable eviction. Co-operative action with the other parties to see what could be done to prevent mortgage default or individual action to try and re-finance were not taken. It should be said though in the administrators favour that they were defending hard fought litigation over this estate which they could reasonably have anticipated would continue to be expensive. And it can be said that both Selena and Justyn could have been more proactive in offering some contribution to the mortgage liabilities over 89 Bowden Street to prevent default to the Bank." 18To require Justyn and Selena to bear their own costs of the possession issues takes insufficient account of the Court's observations in paragraph [216] that the executors bore the main practical responsibility for inaction on this issue. On the other hand, to make an indemnity costs order against the executors takes insufficient account of Selena and Justyn's own failure to be more proactive than they were, despite the executors' significant failures to act. The Court must make a discretionary judgment on this issue, mindful that the executors had the principal legal responsibility to deal with the Bank after the deceased's death. In my view an appropriate exercise of the Court's discretion is that the estate be required to pay 80 per cent of Justyn and Selena's costs of all the possession issues in the proceedings. 19Should this matter go to assessment, there were very few possession issues dealt with on 28, 29, 30 August and 2 September but almost the whole of the Court time spent on 13, 18, 19, 20 and 25 September dealt with possession issues. The Court heard final submissions unrelated to the possession issues on 8 November.

Proceeds of Sale of Justyn's Shares 20In the course of dealing with the possession issues the Court made orders for the sale of some of Justyn's shares, some of which were held individually and some of which were held jointly with the estate, to enable the estate to raise funds to meet the estate's financial obligations to the Bank. Because the estate's assets had been run down in the way the Court has described in the principal judgment, it was necessary to raise these funds urgently as a condition of the Court granting the stay of the Bank's writ of possession. Approximately $26,000 was paid to the Bank in September 2013 on this urgent basis of which approximately $20,000 came from the sale of Justyn's shares. Justyn seeks the return of those monies. 21In my view those monies should be repaid to Justyn. The Court's orders really required Justyn to make a short-term compulsory unsecured loan to the estate so that the estate could meet its obligations to its secured creditor. The sale proceeds of Justyn's shares assisted the estate to manage its way through a financial crisis largely of the executors' making. Justyn should be reimbursed for these amounts. But the Court will not make any special order for lost interest on the capital he provided, consistent with the Court's judgment that a small part of overall responsibility for this situation belonged to Justyn and Selena.

The Quantum of the Estate's Costs In Relation to the Forgery Issue 22The parties cannot agree in relation to the quantum of the estate's costs on the forgery issue. In the principal judgment the Court referred to the cost of these issues as being in the order of $60,000. Since then by closer analysis Mr Ellison SC was able to reduce them down to about $49,000. But even this amount is in issue. The Court has been asked to resolve the parties' differences about the amount of estate costs attributable to this issue. 23To aid the efficient administration of the estate, it is highly desirable that an issue such as this should not have to go to a taxation of costs. So the Court invited the parties to provide a summary of the relevant bills of costs and to lodge some short submissions about the issue. That was done. The Court can decide the question now, under its power to make consequential and ancillary orders under Succession Act, s 66, or to make specific costs orders under Succession Act, s 99. 24The issue of the forged will costs has narrowed in recent days. The estate's contention in Court on 20 May was that the relevant costs amounted to $49,858.61. On 21 May 2014 Selena's solicitors explained their basis for asserting that the correct figure strictly attributable to the forged will issue was only $28,199.01. She made an open offer at that time to fix the relevant sum at $30,000. On 22 May 2014 the solicitors for the defendants made some countervailing concessions contending that the correct figure was $41,655. They made an open offer of $40,000. In response Selena made an open offer of $35,000 before commencing to spend funds on arguing this issue. 25Both sides accept that under this jurisdiction, which is a not dissimilar exercise of jurisdiction to that which applies for gross sum costs orders under Civil Procedure Act, s 98(4)(c): on the material submitted the Court can take a broad brush and impressionistic view. That is what I propose to do. But I wish to explain at least one important theme in reaching the broad brush view that I have. 26One remaining difference between the parties on these fees is the costs of senior counsel's fees on behalf of the estate in appearing before White J on 12 September 2011. There is no doubt that Mr Willmott SC appeared for Justyn and Selena before Registrar Studdert in the probate list on 25 July 2011 and sought leave for them to withdraw the caveat and retire from the proceedings, such that from that point on, Selena submits, it was questionable whether a grant in solemn form was necessary at all. It is true that thereafter Selena and Justyn did not appear in the probate matter and Mr Willmott SC did not appear on 8 August 2011, or when the matter was adjourned to 12 September 2011. 27But I do not accept that the briefing of senior counsel was not necessary nor was the charging for a full senior counsel's brief fee for an application made after 25 July 2011. The fact is that senior counsel had been properly engaged before 25 July 2011 because of that fraud and was entitled to stay in the matter even with a renewed brief for 12 September. The transaction costs of re-briefing junior counsel in the circumstances probably would have been greater than senior counsel's fee in any event. The same view can be taken for many of the other costs at this time. Not all the consequences of the fraud issues just disappear when Justyn and Selena withdrew. A degree of momentum had built up on the estate's side which incurred costs and which in all fairness should be compensated. Taking these considerations into account I assess the estate's costs in respect of this issue at $38,000.

Conclusions and Orders 28The Court has determined the remaining supplementary issues in these proceedings the following way. Selena must pay 15 per cent of the estate's costs of all the family provision proceedings but not the possession proceedings. The estate should deliver 89 Bowden Street to Selena and Justyn free of all encumbrances not just the Commonwealth Bank's mortgage. The estate should pay 80 per cent of Justyn and Selena's costs of all possession issues in the proceedings. The estate should reimburse Justyn but without interest, for all share sale proceeds that he contributed to the estate, so that it could meet the Bank's mortgage liability. And the estate's costs in relation to the forgery issue are fixed under Succession Act, ss 66 and 99 in the sum of $38,000. 29The parties are directed to bring in short minutes of order to give effect to these reasons. If the parties believe any issue remains undetermined then I will determine it when the parties return to Court. 30The parties then drafted orders by agreement with the exception of Order 7 below, that order relates to whether Selena Ng should pay 15 per cent of the cost of the defendants of both family provision proceedings (1) on the indemnity basis, or (2) on the ordinary basis. After considering the parties' submissions the Court determined that the order should be made on the indemnity basis, to give effect to the Court's principal judgment, especially at [221]. The estate should be fully indemnified against Selena's fraud.

Conclusions and Orders 31Accordingly, the Court makes the following orders and directions:

The date by which proceedings 2013/82538 by Selena Ng are to be commenced be extended to 18 March 2013.
The Plaintiffs receive provision out of the estate of the deceased by way of a devise of the realty at 89 Bowden Street, Ryde ("the realty") being the whole of the land contained in Folio Identifier 18/111/4346 such property to be received by the Plaintiffs as tenants in common in equal shares free of any mortgage or other encumbrance (including land tax).
The Plaintiffs have the right to reside in the realty from the death of the deceased.
The benefit passing to Selena Ng under order 2 herein is charged with the payment to the Executors of - (a) $38,000.00. (b) Interest on $38,000.00 from 9 November 2011 until the date of payment pursuant to the rates fixed under Civil Procedure Act, s.100.
The costs of Justyn Ng on the ordinary basis are to be paid out of the estate of the deceased.
85% of the costs of Selena Ng on the ordinary basis are to be paid out of the estate of the deceased.
Selena Ng to pay 15% of the costs of the Defendants of both family provision proceedings herein on the indemnity basis.
The Defendants' costs on the indemnity basis are to be paid out of the estate of the deceased.
In respect of proceedings 2013/135797 (the possession proceedings): (a) The Defendants (in the proceedings herein) pay 80% of the costs of the Plaintiffs (in the proceedings herein) on the ordinary basis, and (b) The Defendants (in the proceedings herein) are to account to Justyn Ng for all share sale proceeds he paid to the estate for the purposes of the reduction of the Commonwealth Bank mortgage, such moneys accounted for to be free of interest.
That exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.
List the matter before the Registrar in Equity at 9am on 29 July 2014 to deal with any remaining possession proceeding issues.

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: 28 May 2014

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