Mark Gerard Ireland as Executor of the Estate of the late Charles Stuart Gordon v Sandra Jane Retallack & Ors - [2011] NSWSC 846 - NSWSC 2011 case summary — Zoe

NSWNSWSC

Mark Gerard Ireland as Executor of the Estate of the late Charles Stuart Gordon v Sandra Jane Retallack & Ors

[2011] NSWSC 846

Supreme Court of NSW|2011-08-01|Before: Pembroke J, John J, The J

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Court

Supreme Court of NSW

Decision date

2011-08-01

Before

Pembroke J, John J, The J

Source

Original judgment source is linked above.

Judgment (15 paragraphs)

[1]

Introduction 1This is a relatively straightforward will construction case that has been made unnecessarily complicated by a perplexing and diffuse summons that seeks a wide array of relief. It has been made worse by the tender of a large quantity of evidence that has no relevance or utility. I will say more at the conclusion of this judgment about the duties of executors and their legal representatives in the conduct of proceedings on behalf of an estate, particularly bearing in mind the mandatory obligations imposed by Section 56(3) and (3A) of the Civil Procedure Act, 2005 (NSW).

[2]

The Testator 2Over his lifetime Charles Stuart Gordon (the Testator) built up substantial holdings of pastoral land near Blayney in the Central Tablelands of New South Wales. His principal property was known as Glengowan on which the homestead was situated. Adjacent was another property known as Sunnyside. The Testator held Glengowan and Sunnyside through his company, Glengowan (Moorilda) Pty Ltd (the Company). I say "his company" advisedly because that is understandably the way the Testator would have seen it. The issued capital of the Company was 990 ordinary shares of which he owned 989. The sole remaining share was held by his late wife who died in 1997. At the date of the Testator's death, his wife's share was held by his daughter (Mrs Retallack) - although there is a minor dispute, which I was not asked to resolve, as to whether it was lawfully transferred to her by the executor of the late wife's estate. 3The aggregated holdings owned or controlled by the Testator also included two other properties which he held in his own name. They are known as Morris Vale and Fairview South. The name Glengowan was sometimes used collectively to refer to all of these holdings. 4The Testator made a will on 19 December 2007 and a codicil on 16 April 2008. He died on 11 September 2008. In his later years, after the death of his wife, and following a bout of pneumonia, he moved in with his good friend Mrs Johnstone who cared for him in her home in Blayney. As the homestead on Glengowan then became unoccupied, Mrs Retallack moved from Binnaway, where she and her husband conducted a farming business, to Glengowan. Mrs Retallack was obviously close to the Testator. Not only was she the holder of her mother's share in the Company, but following her mother's death, she and the Testator were the Company's only directors.

[4]

Manifest Intention 7The Testator's intention is made pellucid by the inclusion of the following additional provisions in his will: 16 I DECLARE that my said executors will be entitled to manipulate the assets of my estate in order to transfer real property detailed in Schedule One from Glengowan (Moorilda) Pty Ltd to SANDRA JANE RETALLACK and any other real property from Glengowan (Moorilda) Pty Ltd to GORDON FAMILY CORPORATION . 17 I DECLARE that the devise and bequest at Clause 4 to SANDRA JANE RETALLACK is given on the basis that it is not meant to necessarily represent equality in value but to secure her a viable grazing property being the property on which she has lived and has had the benefit for a number of years prior to my death. 8The property described in Schedule 1 to the will was Glengowan. The verb "manipulate" covers all manner of changes, alterations, stratagems and schemes. There is really no limit to what is encompassed by that expression so long as the executor acts reasonably and adheres strictly to the Testator's objective. That objective was clear from Clause 4 and 5 of the will. It was repeated and amplified in Clauses 16 and 17. The Testator's abiding wish was that his daughter should receive Glengowan unencumbered so as to secure to her a viable grazing property and to enable her to continue to live there. 9Before proceeding further, I should address two minor issues of construction arising out of Clause 16. Clause 16 is expressed as a declaration rather than as a power or authorisation. However nothing turns on the label that was used. The substance makes clear that Clause 16 constitutes a direction, power or entitlement. The second issue arises because the Testator stated that the entitlement to manipulate was in respect of "the assets of my estate". Strictly speaking, the assets of his estate do not include Glengowan and Sunnyside. The relevant asset of his estate is his 99.9% shareholding in the Company which owns those properties. However the language of the whole of the will, including the factual context which is evident from its terms, makes this question of construction clear. When the Testator used the expression "my estate" in his will, he referred, of course, to his shares in the Company and the land owned by himself. But he also intended to refer to the real property owned by the Company, namely Glengowan and Sunnyside.

[5]

Valid Gift 10This then leads to the challenge to the validity of the gift by the third defendant, Mr Richard d'Apice, who was appointed to represent the trustee of the trust created by Clause 5 of the will, namely the residuary beneficiaries. Mr d'Apice was appointed because the sole director of Gordon Family Corporation Pty Ltd could not be located and because the Testator's son, Hugh Gordon, either could not be contacted or could not provide instructions. 11There are two issues. The first is whether the purported gifts of Glengowan and Sunnyside are valid at all, given that they were not the Testator's property. The second is whether the mechanism for giving effect to those gifts, namely the "manipulation" contemplated by Clause 16 of the will, is ineffective because the exercise of manipulation may, it is said, result in an oppression of the minority shareholder in the Company. 12The first issue can be resolved by the reasoning in Hendry v The Perpetual Executors & Trustees Association of Australia Limited (1961) 106 CLR 256. The facts are somewhat analogous to this case. The testator owned no real estate and livestock of his own but was a member of a partnership that owned real estate and livestock. By his will, he left "all my real estate" to A and "all my livestock" to B. Taylor and Menzies JJ had no difficulty in concluding that the gifts were not meaningless or empty, as the appellant contended. They held that, properly construed, the will amounted to a disposition of the testator's partnership assets. They explained at 266: ...the enquiry is not what rights did the plaintiff have by virtue of the partnership upon the death of the testator nor even what were the testator's rights as a partner but what did he mean when in his will he used the words "my livestock" and "my real estate" when he had none of his own but he was a member of a partnership which had both livestock and real estate. This question is not to be answered by any strict legal analysis of the rights of the testator as a partner during his life and certainly not by considering the rights of his personal representative after his death. What has to be done is to determine what the testator meant by his words in his will and when the will is looked at in the light of the circumstances as they existed immediately before his death... ... these difficulties afford no reason whatever for construing the will as effecting no division of his estate and as disposing of the whole of his property to his sister under the phrase "the residue of my personal estate". To do so would simply be to defeat the testator's manifest intention. 13An even closer set of facts existed in Re Bowcock (deceased); Vox v Bowcock [1968] 2 NSWR 697. The testator purported to devise his property known as Kelvinside to his son. In fact the property was not owned by him, but by a company called Alabama Stud Pty Ltd. There were only two issued shares in the company. The beneficial interest in each share was held by the testator. Else-Mitchell J held that the manifest intention of the testator could readily be given effect having regard to the fact that the testator, and hence his executors, controlled the beneficial interests in the shares in the company that owned the property. He held at 699: In those circumstances it seems to me that the executors are quite capable of giving effect to the intention which the testator manifested and the position is not dissimilar from that envisaged by Section 23 of the Wills Probate & Administration Act where there is a devise of real estate in which a testator had no estate but only a power of appointment. 14To similar effect is Re O'Callaghan [1972] VR 248. The testator lived in a flat owned in company title. The shares that entitled him to reside in the flat were owned by a company which he owned and controlled. By his will he purported to devise "my flat premises" and certain shares. Neither amounted to property which he owned but both were the property of his company. Gowans J explained at 256: The case must, therefore, be regarded as one in which a person made a will disposing of certain flat premises and certain company shares, when he neither owned or had any interest in them, but a company in the shares of which he had the whole beneficial interest and whose actions he could control and direct did own or have an interest in the premises and the shares, and could dispose of them or control their disposition as it willed. 15Gowans J reached his conclusion by reference to the reasoning in Hendry v The Perpetual Executors & Trustees Association of Australia (supra). He also referred to Re Leigh's Will Trusts [1970] 1 Ch 277, a decision of the English Court of Appeal which recognised the duty of an executor to make a testator's intended disposition effective where the executor has the power to do so. Thus, Gowans J concluded: Aided by these authorities, my conclusion is that where a testator conveys to his executor a direction to reduce into possession an asset not owned by the testator and the executor is armed by the testator with the power to get it in, he is bound to do so, and to deal with it by way of disposition in the way that the testator directs. 16The reasoning in all of these cases is compelling. However, there is said to be a point of distinction in this case because the Testator does not hold the beneficial interest in all of the issued shares in the Company. He only holds 99.9% of the shares. For my part, I do not see why this should make a difference. The Testator, and hence his executor, controls the Company. By reason of that control, the executor is in a position to give effect to the manifest intention of the Testator. In my view, subject to what follows, he is under a legal duty to do so.

[6]

Effectiveness of Mechanism 17The third defendant says that there is a hypothetical possibility of oppression of the minority shareholder in the Company if the executor exercises his control (through ownership of the 998 shares in the Company) to give effect to the Testator's manifest intention. It was submitted that the ability of the Testator to arm his executor to give effect to his intention must be subject to the executor's duty to act reasonably, consistently with the obligations of a majority shareholder in the circumstances which pertained to the Company. It was submitted that if the executor could breach that duty in giving effect to the Testator's intention, then the gift would fail and the mechanism contemplated by the Testator would be ineffective. 18As a matter of theory, I am prepared to accept in general terms the validity of this statement of principle subject to the proviso that before the gift could fail, there must be a realistic likelihood of a breach of duty by the executor in giving effect to the Testator's intention. In a given case, depending on the facts, the principle may possibly have work to do. But its application to the facts of this case is so far removed from the realm of reality, that it can be discounted. There is no reasonable possibility of oppression. None was pointed to. None was explained in argument. Counsel studiously relied only on the theoretical possibility, not the practical reality, of a supposed oppression. No realistic likelihood was discernible to me or adverted to by counsel for the third defendant. 19I am not prepared to invalidate the gift on the basis of such a slender reed. I should add that the argument does not derive any greater force from the allegation that the single share in the Company should in truth be held by the Testator's son and daughter as to 50% each. This contention, which was unproved, simply makes no difference to the argument. 20In the circumstances of this case, it is impossible to see how there could be any oppression within the meaning of Section 232(d) or (e) of the Corporations Act , 2001 (Cth) . It has, for example, never been oppressive for those in control of a company to insist upon the adoption of policies on matters of business judgment on which there may be legitimate differences of opinion: Catto v Hampton Australia Ltd (in liquidation) (No 3) (2004) 89 SASR 234 at 251; Re Broadcasting Station 2GB Pty Ltd [1964-5] NSWR 1648; John J Starr (Real Estate) Pty Ltd v Robert R Andrew v (A/Asia) Pty Ltd (1991) 6 ACSR 63 at 66; Shirim v Fesena [2002] NSWSC 10 at [47]. 21In this case, there is no evidence of any discord or difference of opinion. Nor does any difference seem likely, given that the holder of the minority share and the beneficiary of the gift of Glengowan pursuant to Clause 4 of the Will, are the same person, namely Mrs Retallack. And even if Hugh Gordon were entitled to a 50% interest in the minority share, that would not be a sufficient platform by itself for the existence of any oppression in the particular circumstances of this case. 22The Company was effectively the alter-ego of the Testator. He caused it to acquire its assets. He was the principal borrower from the bank and the Company was his guarantor. The Company served his purposes. He made the decisions on its behalf. Whether or not the minority shareholder holds a different view, there could hardly be any oppression in this case if the executor exercises control of the Testator's former shareholding to give effect to the Testator's manifest intention. The inability in argument to postulate any actual oppression that could conceivably arise on the facts of this case tends to illustrate the artificiality of the submission.

[7]

Commercial Methodology 23The final issue is the one on which most energy was spent, evidence adduced and costs incurred. It has caused me concern, partly because of the expense involved and partly because it seemed misdirected. The executor commissioned a report from Mr Silvia, an accountant. The report set out nine separate commercial methodologies for giving effect to the Testator's intention that Glengowan go to his daughter. The nine options ranged across many combinations and permutations, with varying degrees of commercial sophistication, refinement and complexity. They included, but were not limited to, various forms of return of capital through the process of a members voluntary liquidation of the Company; a purchase of Glengowan by Mrs Retallack; a purchase of Mrs Retallack's share in the Company by the estate; a selective buy back of Mrs Retallack's share in the Company; a capital reduction in the Company; and an in specie distribution of Glengowan as an unfranked dividend. 24The intricacies of each option were laid out in Mr Silvia's report in excruciating and labyrinthine detail. Much attention was given to questions of interest, capital gains tax, income tax, stamp duty and other transactional costs that might be saved or shaved depending on which option was adopted. Unhelpfully, to put it mildly, Mr Silvia expressed a preference for the second option but then said that it did not strictly comply with the Testator's intentions in Clause 4 of the will. He then added that it was also contingent on both Mrs Retallack and the National Australia Bank agreeing to the assumption by her of a debt to the bank that exceeds $1.5 million. There was no evidence as to the likelihood of any such agreement. 25To add to the complexity, Mr Silvia attached to his report what purported to be another 87 page expert report from an accountant whose name is Mr Badger and whose expertise is taxation. He purported to address in greater detail, and supposedly with more authority, the multiple taxation issues that arise in connection with the options discussed in Mr Silvia's report. He noted, among many other things, that Mr Silvia's preferred second option was subject to the further complication that it had personal tax implications for Mrs Retallack; that their impact would depend on her personal circumstances; and that she should seek advice before deciding on this option. 26The unseemly parade of expensive and inappropriate expert reports did not stop there. The executor then put before me a further report from a solicitor, Mr Bobbin, whose expertise is taxation. He expressed the view that there was yet another available option that Mr Silvia had not considered. It involved the establishment by the Company of two subsidiaries; the transfer of Glengowan and Sunnyside to each subsidiary respectively; the de-merger of the subsidiaries pursuant to Division 125 of the Income Tax Assessment Act , 1997 (Cth); followed by subsequent transfers of shares without any incidence of capital gains tax. This process would result in Mrs Retallack obtaining the ownership of all of the shares in the subsidiary that owned Glengowan and the estate obtaining ownership of all of the shares in the subsidiary that owned Sunnyside. Among many other aspects of this proposal, it required an application to the New South Wales Office of State Revenue for corporate re-construction relief pursuant to Section 281 of the Duties Act , 1997 (NSW) and Revenue Ruling DUT 26. 27In support of the Bobbin report, Mr Badger was then requested to provide a second report setting out his opinions and conclusions, from his specialist taxation perspective. He made clear that he was not in a position to comment on the likelihood of a favourable ruling and that he was quantifying the potential income tax, capital gains tax, goods and services tax, stamp duty and other transactional costs that would apply if a favourable ruling were not obtained. On some specific matters however he disagreed with Mr Bobbin and noted that a private ruling in relation to the area of difference would be prudent. 28Disappointingly, Mr Badger's second report was not the last word. A final and unwelcome twist to the sequence of expert reports was still to come. It added to a picture that seemed to me to have become both surreal and disturbing. I have already mentioned that Mr Richard d'Apice was appointed as the third defendant to represent the trustee of the trust constituted by Clause 5 of the will, namely in effect, the beneficiaries entitled to the residue. On 12 April 2011 he wrote to the executor's solicitors stating that he would like to have the opportunity of "workshopping" the nine options canvassed by Mr Silvia. It was implicit that this would be at the estate's expense. Alarmingly, he even referred to other options "which come to mind". He said that he contemplated requesting the executor to commission a further report focussing on what (he thought) needed to be done to implement clauses 4 and 5 of the will. 29A workshop was apparently held on 15 June 2011. At the workshop Mr d'Apice provided a draft distribution proposal setting out yet another option. This was the eleventh option that was designed to give effect to the Testator's direction that his daughter have his property known as Glengowan. The eleventh option was provided to Mr Bobbin for his further report. Mr Bobbin's view was that the scheme contemplated by Mr d'Apice's proposal "was an artificial or contrived scheme to reduce or avoid liability for duty which would fall foul of Chapter 11A of the Duties Act , 1997". At the hearing, Mr d'Apice's forlorn proposal seemed to be quietly dropped.

[8]

Inappropriate Conduct & Undue Expense 30There are many disturbing aspects of this sorry sequence of events. Foremost among them is that all of the solicitors and accountants involved seek to have their fees paid on an indemnity basis out of the estate. One can only imagine the substantial amounts involved and what the Testator would have thought. Furthermore, none of the reports and proposals of Mr Silvia, Mr Badger, Mr Bobbin and Mr d'Apice was necessary for the resolution of the issues of construction that are required to be determined in these proceedings. I was taken to them by the plaintiff only in a cursory way at the hearing. I do not think that senior counsel for the first defendant or counsel for the third defendant even referred to them. In fact, the first defendant justifiably submitted that "the case turns on the deceased's will, not on the detailed reports of the experts". 31These are not judicial advice proceedings. Even if they were, one would expect far more discrimination and judgment in drawing the boundaries of the issue on which the court's advice was sought. And one would only expect an application for judicial advice to be made if the executor, properly advised, was genuinely unable to arrive at his own judgment on some relevant matter relating to the management or administration of the trust property, consistent with his duty to give effect to the Testator's wishes and having regard to his duty to preserve and maintain, and not to waste, the assets of the estate. In any event, it became patently clear that once I had resolved the questions of construction, the executor and the defendants would agree on the appropriate commercial methodology to give effect to the Testator's intention. 32Further still, scant regard appears to have been paid by some of the parties, especially the executor, to the statutory obligations imposed by Sections 56(3) and (3A) of the Civil Procedure Act , 2005 (NSW) . These duties apply to proceedings by the executor of a deceased estate just as much as they apply to any other proceedings: Section 4 of the Civil Procedure Act, 2005 (NSW). They are designed to buttress the overriding object of facilitating "the just, quick and cheap resolution of the real issues in dispute". The duties under Section 56(3) and (3A) to assist the court to further the overriding purpose and to take reasonable steps to resolve or narrow the issues in dispute, are mandatory ancillary obligations which the executor was bound to perform. 33Wherever possible, the performance of those duties requires brevity, economy and concision. It also requires judgment. I have referred elsewhere to the observation of the Hon Justice J D Heydon AC that every aspect of modern litigation has tended to become "sprawling, disorganised and bloated": McLaughlin v Dungowan Manly Pty Ltd (No 3) [2011] NSWSC 717 at [30] - [33]. The executor's conduct in this case appears to meet to that description. What is more, much of it was unnecessary. What concerns me most is the cost to the estate of the substantial professional fees that have been incurred by the executor - none of which was necessary for these proceedings and for all of which he expects to be recouped on an indemnity basis out of the estate.

[9]

The Summons 34I mentioned earlier that the summons was perplexing and diffuse. The first prayer is headed "Construction of the Will". Instead of seeking a declaration in the usual form that the gift of Glengowan in Clause 4 of the will, and the gift of the remainder in Clause 5 of the will, are valid and effectual, it sought multiple determinations, in the alternative, as to whether in the events which have happened the executor was entitled or required to take certain steps. Quite why it was qualified by reference to "the events which have happened" is unclear. 35The "certain steps" were as follows: (i)take such steps as may be necessary to cause an application to be made for a scheme of arrangement under s 411 of the Corporations Act 2001 (Cth) ("Corporations Act") for the purpose of getting in the real property and other assets of Glengowan (Moorilda) Pty Ltd (the "Company") in order to put the plaintiff in a position to give effect to clauses 4 and 5 of the Will, and if so, what terms of such an arrangement should be proposed; and/or (ii)take such steps as may be necessary, for the purposes of (i) above or otherwise, to request or require the first defendant (under Part 2J of the Corporations Act or otherwise), as a condition of receiving any benefit under the Will, to transfer her one share in the Company to the plaintiff in order to put the plaintiff in a position, if the affairs and financial position of the Company so permit, to give effect to clause 4 of the Will, and if so, what terms (if any) should attach to such transfer; and/or (iii)take such steps as may be necessary to call a meeting of shareholders of the Company to resolve under Part 2J of the Corporations Act to reduce its share capital and, if so, what terms of such a resolution should be proposed, with a view to distributing the real estate of the Company in specie to the plaintiff, if the affairs and financial position of the Company so permit, in order to put the plaintiff in a position to give effect to clauses 4 and 5 of the Will; and/or (iv)take such steps as may be necessary to call a meeting of shareholder of the Company to resolve to wind up the Company and appoint a liquidator with a view to distributing the real estate of the Company in specie to the plaintiff, alternatively its net assets to the plaintiff, if the affairs and financial position of the Company so permit, in order to put the plaintiff in a position to give effect to clauses 4 and 5 of the will; and/or (v)take such steps as may be appropriate in order to put the plaintiff in a position to give effect to the deceased's testamentary intentions, and if so, what other steps, or ... 36There was no obvious or direct correlation between the five series of steps described in the summons and the eleven options presented in the expert reports, proposals and opinions of Mr Silvia, Mr Badger, Mr Bobbin and Mr d'Apice. No attempt was made to demonstrate or explain any correlation. In fact the parties seemed to ignore the precise terms of the relief propounded in prayer 1(a)(i)-(v) of the summons. And there was only cursory reference to the detail of the eleven options. Even then, their relevance and utility in these proceedings remained elusive. 37The second prayer for relief in the summons is headed "Section 81 Application". It is expressed at a high level of irrelevant generality but its precise form of expression matters not because the executor made no application pursuant to Section 81 of the Trustee Act , 1925 (NSW). This is no doubt because Section 81 could only apply where there was an "absence of power" in the will relating to the management or administration of any property vested in the trustee. The executor did not submit that there was some particular absence of power. Nor did he postulate a particular power that was expedient which the court should confer. At the hearing, this prayer for relief also seemed to be ignored. 38The third prayer for relief in the summons is headed "Section 85 Application". It sought an order that the executor be relieved from personal liability for certain conduct. I need not explain the conduct because no matter what it might amount to, this prayer for relief was also ignored. Nothing was said in support of it.

[11]

Executor's Duty 41The essential legal issue thrown up by these proceedings was, as I have explained, one of construction. Yet the executor in this case, aided by solicitors who have advised him, and expert accountants and other solicitors (Mr Silvia, Mr Badger and Mr Bobbin) who have been retained by him, has conducted these proceedings as if they required a micro-analysis of every single possible commercial mechanism by which real estate owned by company A could be transferred to B - in accordance with the Testator's manifest intention. No discrimination was shown. No judgment was exercised. No preference was selected. Yet every avenue was explored in the confident expectation that the entirety of the costs of so doing would come out of the estate. 42It was always clear that none of the reports and proposals of Mr Silvia, Mr Badger, Mr Bobbin and Mr d'Apice was necessary for the resolution of the actual legal issue required to be determined in these proceedings. In this muddle of irrelevant evidence and expert reports, the obligations imposed by Sections 56(3) and (3A) of the Civil Procedure Act seem to have been left behind in a trail of myopic detail and unnecessary cost. Predictably, some of the most enthusiastic submissions were reserved for the question of the payment of costs on an indemnity basis out of the estate - as if the estate were nothing less than a milch cow. 43When the executor, as plaintiff, commenced these proceedings, he became subject to the strictures and limitations of the Civil Procedure Act , 2005 (NSW) . Section 56 of that Act has introduced a new dimension to the conduct of proceedings in this court. It has the potential to influence aspects of the hearing and determination of proceedings in ways that have not yet been fully absorbed or elucidated: McLaughlin v Dungowan Manly Pty Ltd (No 2) [2011] NSWSC 384 at [31] referring to Newmont Yandal Operations Pty Limited v The J Aron Corporation & The Goldman Sachs Group Inc & Ors (2007) 70 NSWLR 411 (CA). The reform of the conduct of civil proceedings by Section 56 and other related provisions of the Act represents a deliberate government policy designed to change past practices that have sometimes brought the law into disrepute: Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230 at [7]. 44Statutory obligations now apply to parties to ensure that they assist the court to further the overriding purpose of the Act and to ensure that they take reasonable steps to narrow the issues in dispute: Sections 56 (3) and (3A). And statutory sanctions now apply to the legal representatives of a party when the conduct of the legal representative has caused a party to be in breach of a duty identified in sub-sections (3) and (3A): Section 56(4). 45It is no longer possible, if it ever were, for civil proceedings to be conducted as a stately saraband: cf FAI General Insurance Co Ltd v Burns [1996] NSWSC 350 (CA), 15 August 1996 (Mahoney JA). The court and the parties are now jointly engaged in seeking to achieve the overriding statutory purpose, namely a resolution that is not only just (which goes without saying) but one that is also "quick and cheap". That will usually require, as I have already mentioned, brevity, economy and concision in both the selection and deployment of evidence and the presentation of argument. Proceedings commenced by executors are not exempt from the new regime. In fact, the possibility that excessive costs may be incurred unreasonably and charged to a defenceless estate, is all the more reason why proceedings such as these deserve close scrutiny.

[12]

Costs 46At the hearing, the parties' submissions were directed to their respective entitlements to recover these costs on an indemnity basis and whether the costs should be paid out of Glengowan or from the residuary estate. I will in due course address these issues, but for the time being I am more concerned by other questions that arise as a result of costs, fees and disbursements that may have been incurred unnecessarily by the executor and the third defendant. I should add that the first defendant's case was notable for its economy and clarity. 47A number of statutory provisions require consideration. Section 56(5) provides that the court may take into account any failure to comply with sub-section (3), (3A) or (4) in exercising a discretion with respect to costs. Section 98(1) provides that the court has full power to determine by whom, to whom and to what extent costs are to be paid. Section 98(6)(a) makes it clear that "costs" include the costs of the administration of any estate or trust; cf Foord v Brock [2005] NSWCA 156 at [49]. Section 3 makes clear that "costs" means, among other things, "fees, disbursements and expenses". Significantly, Section 99 permits the court, among other things, to disallow the whole or any part of the costs in the proceedings as between the solicitor and his client: Section 99(1)(b). 48Naturally I will hear submissions on the issues that I have adumbrated. And I will provide a full opportunity to the parties to be heard. But it will by now be clear that I have formed a prima facie view that in the conduct of these proceedings, the executor's solicitor, who is the solicitor on the record for the plaintiff, has caused the executor to be in breach of the duties identified in Sections 56 (3) and (3A). 49I should make clear that I am also concerned by the conduct of the third defendant. He is a solicitor. When I made consent orders that Mr d'Apice be joined as the third defendant to represent the trustee of the trust created by Clause 5 of the will and that he receive his costs out of the estate on an indemnity basis, I did not envisage that he would use the opportunity to agitate yet another proposal for the transfer of Glengowan to Mrs Retallack. As I have mentioned, Mr d'Apice's scheme was the eleventh proposal. At the hearing, I was not asked to rule on the validity, or give judicial advice as to the effectiveness, of any of the proposals. All I know about Mr d'Apice's scheme is that Mr Bobbin described it as "artificial and contrived" and that it would fall foul of Chapter 11A of the Duties Act , 1997. Understandably perhaps, it did not appear to be seriously put forward.

Mark Gerard Ireland as Executor of the Estate of the late Charles Stuart Gordon v Sandra Jane Retallack & Ors

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