Muir v Winn

Andrew Muir (Plaintiff) PARTIES : Peter Winn (1st Defendant) Kathryn Muir (2nd Defendant)

Pl: Ms Needham SC COUNSEL : 1st Def: Mr Ellison SC 2nd Def: Mr Maitland

Pl: Atkinson Vinden SOLICITORS : 1st Def: Macpherson & Kelley Lawyers 2nd Def: Teece Hodgson & Ward

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

SC 2008/282164 Andrew MUIR v Peter WINN as Executor of the Estate of the Late Vida Mary Muir JUDGMENT 1 HIS HONOUR: These reasons relate to questions of costs which I reserved when I gave judgment on 27 August 2009 - [2009] NSWSC 857. On 10 September 2010 I heard argument on costs supported by counsels' written submissions. My earlier Order 5 reserved further consideration of Claim 4 and Claim 5 in the cross-claim; the parties did not ask me to embark on further consideration as they expect to resolve these issues by agreement. The present reasons should be read with the Will and my earlier judgment. 2 The affidavit evidence of the first defendant, the Executor and Trustee, shows that he has agreed to sell "Meadowvale" for $5,300,000 in a contract which provides for settlement on 3 November 2010. He has engaged valuers whose opinions will assist him as he makes the determination about value referred to in [29] of my earlier reasons. He may seek judicial advice as to what he should do. Assuming that the sale of "Meadowvale" is completed, there has been significant but uncompleted progress towards ascertaining the amounts of the interests of the plaintiff and of the second defendant. 3 Consideration of costs begins with UCPR 42.1. The simple application of this rule would mean that the first defendant's costs would be ordered to be paid by the plaintiff, and the plaintiff would be left to bear his own costs. The rule can and should be departed from if there is a sound discretionary ground for doing so. The second defendant filed a submitting appearance but did not take an active part in the proceedings, so her costs as a submitting defendant cannot be substantial, in the context of the value of "Meadowvale". 4 As is often the case, the terms of the Will are at the source of the controversy. I said at [17] of my reasons "The difficulty with construction of the Will is that if one attempts to apply all the words in it literally, the internal logic of the document does not work." 5 Where the terms of a will give rise to a question of construction the Court from time to time orders payment of the costs of interested parties out of the estate. This is far from being a general rule. The present case was not a simple dispute about the meaning of the will but a whole-hearted contest about entitlement to the proceeds of the testatrix's most significant asset: I am unable to see the litigation as merely something which the testatrix imposed on the parties by poor will drafting, and I do not regard the will construction issues as sufficient grounds for departing from the ordinary rule that costs follow the event. 6 The plaintiff's claims, which occupied by far the greater part of the hearing, relate almost entirely to interests in "Meadowvale". He claimed that the second defendant obtains nothing from any gift related to "Meadowvale". The cross-claim related to several questions which the Executor needed to have resolved, but were only small parts of the controversy and debate. The issues did not affect the many relatively smaller gifts in the Will. It would be unjust if the costs of the litigation were imposed on entitlements to the smaller gifts. The other entitlements were not subject to real challenge and the attention given to them was incidental. Costs and expenses which have a close relation to a particular identifiable asset or benefaction should be borne by that benefaction, while those which do not have such an association should be borne rateably. The parties have adopted the pragmatic position that if expenses are to be borne rateably by beneficiaries they should be borne rateably by the assets passing to the plaintiff and the second defendant, and that there should not be an attempt to impose small proportions on minor benefactions, many of which have already been distributed. In most cases their proportion would be extremely small in any event. 7 I have been referred to correspondence amongst the solicitors relating to the burden of costs, but that correspondence had not produced a position to which all three, beneficiaries and executor, agree. 8 I do not regard the gift in clause 1.9 as a residuary gift. In my opinion it refers only to the benefits derived from "Meadowvale" which passed to the plaintiff under the Will, particularly clauses 1.6.15 and 1.7. The gift in clause 1.12.4 of "the remainder of my estate" to the plaintiff would have the effect of requiring that debts and liabilities including expenses of administration be paid out of that remainder, as the gift falls within Class 2 of Part 2 of the Third Schedule to the Probate and Administration Act 1898. However, as the parties joined in telling me, no assets pass under that gift of remainder and no assets fall into any of classes 1 to 5 in Part 2. In the application of Part 2 the expenses of administration fall on Class 6, "Assets specifically disposed of by will, rateably according to value." 9 The true subject of the litigation was interests in "Meadowvale" and the litigation costs of the Executor and of the second defendant should fall on the subject of dispute; that is to say, on the net proceeds of the sale of "Meadowvale", before those proceeds are apportioned, using the ratio to be derived from the valuation process, between the part attributed to the "back 92 acres" which passes to the plaintiff under clause 1.9 and the part entitlements to which are calculated under clause 1.6.15. The Executor's costs should be paid, on the indemnity basis, out of the net proceeds of sale of "Meadowvale" before those proceeds are apportioned. The second defendant's costs, which can only be a small amount, are to be paid from the same source. 10 Expenses incurred by the Executor in relation to the sale of "Meadowvale" and to determination of interests including obtaining valuations, are also chargeable against the net proceeds of sale before apportionment. The costs of the executor relating to the subdivision application which did not succeed are, as I observed at [35] of my earlier reasons, part of the general costs of administration of the Estate. They too should be charged against the proceeds of sale prior to apportionment. 11 In my earlier judgment (at [35]) I said: "In my opinion the expenses associated with the maintenance of "Meadowvale" are chargeable out of "Meadowvale" and should be met out of the remainder of the proceeds referred to in the last direction in clause 1.9."

That is, I expressed the opinion that they should be charged against proceeds otherwise distributable to the plaintiff. An assumption of this opinion was that the expenses associated with the maintenance of "Meadowvale" related entirely or almost entirely to the what the testatrix spoke of as the "… back 92 acres of the property including the homestead and other buildings, all household furniture…and all remaining possessions located on the "Meadowvale" property." 12 I see now, however, that there may be some basis on which some of these liabilities such as land tax and council rates might be apportioned between the back 92 acres notionally passing to the plaintiff and the remainder, the relatively unimproved front portion, to proceeds attributed to which the plaintiff and the second defendant are entitled under clause 1.6.15. My earlier assumption that these outgoings related to the homestead and other buildings and improvements may not cover the position entirely. All expenses referrable to the plaintiff's occupation should be borne by him and if he occupied the whole he should bear the outgoings of the whole for the period of his occupation..

13 Expenses of administration which are not borne by "Meadowvale" before apportionment are to be borne rateably by the assets which pass to the plaintiff and to the second defendant. This involves ascertaining the value of the gift of the Rose Bay property, as at the time of distribution. 14 If I were to award the plaintiff any costs out of the Estate, his recovery would be severely limited. His costs should not be assessed on the indemnity basis, and should not include any costs relating to aspects of his case which were not relied on at the hearing, including a body of affidavit evidence which was not read or which was rejected. Then too, a special direction would be necessary to ensure that the burden of costs payable by him fell on the real subject matter of the controversy - entitlement to "Meadowvale", the greater part of which passes to him in any event. In my opinion, justice would not be well served by embarking on these complexities. 15 The plaintiff has not succeeded and should not recover an order for costs payable out of the estate. He should be left to bear his own costs of the proceedings. Notwithstanding that the plaintiff failed, the just disposition in my judgment is that the costs of litigation of other parties should be paid out of "Meadowvale". 16 My costs orders are: 1. The plaintiff is to pay and bear his own costs of the proceedings.

2. The costs of the first defendant of and incidental to the proceedings are to be paid or retained by him out of the proceeds of the sale of "Meadowvale".

3. The costs of the second defendant as a submitting defendant are to be paid by the first defendant out of the proceeds of the sale of "Meadowvale". **********

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