Plaintiff v Defendant

Supreme Court of Victoria|2010-02-12|Before: KAYE J

TRUSTEES - Joint trustees - Indemnification - Costs and expenses incurred by one trustee without agreement of co-trustee - Requirement of unanimity of trustees - whether costs recovery as benefits to the estate.

1 The plaintiff and the defendant are respectively the daughter and son of Frances Tack ("the deceased"), who died on 6 January 2006. The deceased left a will dated 14 January 2003, by which she appointed the plaintiff and the defendant as the executors of her estate, and by which she devised the whole of her estate to them in equal shares as tenants in common. Probate of the will of the deceased was granted to the plaintiff and the defendant by order of the Supreme Court on 15 May 2006. In these proceedings, which were commenced by originating motion, the plaintiff seeks reimbursement of expenses which she claims were incurred by her for and on behalf of the estate of the deceased.

2 On her death, the deceased left assets which, in accordance with the inventory of assets filed in support of the application for probate, were valued in the sum of $1,134,863. They consisted of a property at 5 Cantala Crescent, Ringwood (valued at $320,000), a property at 24 Albert Street, Ringwood (valued $150,000), and personal estate valued at $661,863.00.

3 The deceased separated from her husband ("Mr Kousal") in February 2001, after a marriage which lasted for more than 50 years. In the ensuing Family Court proceedings relating to the property of the marriage, orders were made, the effect of which was to award to the deceased 50% of the matrimonial assets, which were worth approximately $3,000,000. Mr Kousal unsuccessfully appealed against those orders. He also unsuccessfully sought leave to appeal to the High Court. By the time of the deceased's death in January 2006, the Family Court proceeding had been on foot for more than four years, and had had a complex history. At that time, Mr Kousal had commenced an application seeking to set aside the orders of the Family Court based on a miscarriage of justice, and in turn the deceased had made an application seeking to have Mr Kousal's application dismissed.

4 After the death of the deceased, a directions hearing was scheduled in the Family Court on 3 April 2006, but it was adjourned pending the deceased's will being admitted to practice. In the meantime, Mr Kousal lodged a caveat opposing the grant of probate in favour of the plaintiff and the defendant. In response, the plaintiff initiated an application, as a beneficiary under the will of the deceased, for the removal of the caveat. After that application was served on him, Mr Kousal agreed to withdraw the caveat. The plaintiff incurred legal costs of $1,226.50 relating to that application.

5 Before her death, the deceased had been represented by Messrs Tolhurst Druce & Emmerson in the Family Court proceeding. In April 2006, the plaintiff suggested to the defendant that the estate continue to engage that firm of solicitors. However, the defendant did not agree. He proposed that, instead, the estate should engage Leddra Westmore as solicitors. The plaintiff did not agree to that proposal, but proposed that Mr Stephen Gregory of Kenna Teasdale Lawyers represent the estate. In the absence of any agreement by the defendant to that proposal, the plaintiff proceeded to appoint Mr Gregory to represent her as an executor of the deceased's estate in the Family Court.

6 In due course, the matter returned to the Family Court on 1 November. The plaintiff was represented by counsel, Dr Richard Ingleby, who was instructed by Mr Gregory. The defendant appeared in person. Dr Ingleby applied to have the plaintiff appointed as a party to those proceedings in lieu of the deceased. The defendant also submitted that he should be appointed in substitution for the deceased. In response, the Honourable Justice Brown, who heard the application, ordered that the plaintiff and the defendant both be substituted for the deceased as respondents in the proceedings.

7 The proceedings on 1 November 2006 also involved the return of the application which had been instituted on behalf of the deceased for summary dismissal of the application which had been commenced by Mr Kousal. Dr Ingleby made submissions in respect of that application. The defendant told the judge that he agreed with the submissions made by Dr Ingleby. After hearing argument, her Honour reserved judgment. On 23 March 2007, Brown J delivered judgment upholding the submissions advanced on behalf of the plaintiff. Accordingly, her Honour ordered that the application by Mr Kousal be summarily dismissed, and that he pay the costs of the plaintiff and the defendant.

8 Subsequently, Mr Kousal appealed from that order to the Full Court of the Family Court. At the hearing of the appeal on 14 September 2007, Dr Ingleby again appeared on behalf of the plaintiff, instructed by Kenna Teasdale Lawyers, and the defendant appeared in person. On 20 December 2007, the Full Court delivered judgment, allowing the appeal, and setting aside the orders made by Justice Brown. The Court ordered that the plaintiff and the defendant pay the costs of Mr Kousal in relation to the appeal and in relation to the application before Justice Brown.

9 Shortly after the delivery of judgment by the Full Court, Mr Kousal proposed that the parties enter into settlement negotiations. A mediation was held on 22 February 2008, but it did not conclude with the resolution of the dispute. Ultimately, on 28 April 2008 the Family Court proceeding was resolved by consent, and orders were made by consent giving effect to the settlement. On that day, Mr Gregory appeared on behalf of the plaintiff and the defendant appeared in person.

10 The plaintiff has paid Kenna Teasdale $32,116.70 from her own funds for legal services in representing her as an executor of the deceased's estate in the Family Court proceeding. She has also paid Messrs Tolhurst Druce & Emmerson Solicitors the sum of $766.08 for their legal services in providing information to Kenna Teasdale relating to the Family Court proceeding. In these proceedings, the plaintiff seeks reimbursement of those sums, as well as the sum of $1,226.50, which she paid in respect of the application for removal of the caveat lodged by Mr Kousal against the application by the plaintiff and the defendant for probate of the deceased's will.

11 In the course of the Family Court proceedings, Mr Kousal had also lodged caveats against the titles to three properties which, he asserted, formed part of the matrimonial estate. Two of those properties were registered in the name of the deceased, and the third property was the subject of orders made in favour of the deceased by the Family Court. The plaintiff instructed Hill Perkins, solicitors, to make an application to have the caveats removed, and incurred legal costs of $1,591.85 in respect of that application.

12 The plaintiff further claims a sum of $4,087 in respect of legal advice, which she obtained from Hill Perkins. That advice related to claims made by the defendant to the plaintiff that he be reimbursed in respect of a number of expenses, which he stated he had paid and incurred on behalf of the estate of the deceased. The plaintiff took the view that those expenses did not relate to the deceased's estate, and refused to pay them.

13 The plaintiff also claimed two other smaller sums in this proceeding. First, she claims a sum of $691 which she paid for a garden desk granite memorial at the Springvale Botanical Cemetery for her late mother. Secondly, she claimed a sum of $115.90, being the stamp duty which she paid on behalf of the estate to effect the transfer to the defendant and herself of the property at Albert Street, Ringwood. Those two amounts were added to the plaintiff's claim by way of late amendment at the commencement of the trial. In the course of the hearing before me, Mr Upjohn, who appeared on behalf of the defendant, indicated that the defendant did not dispute either of them.

14 The amounts which remain in dispute are not particularly substantial. However, the issues between the plaintiff and the defendant arise from a bitter and difficult relationship between them, particularly since the death of their mother. Although the circumstances of that relationship were adverted to in the materials before me, they are not directly relevant, and it is not necessary for me to pass any judgment on the rights and wrongs of what has occurred between the plaintiff and the defendant. Rather, the short issue which I must decide is whether the plaintiff, as the co-executor and trustee of the deceased's estate, is entitled to indemnity in respect of the amounts claimed by her.

15 The plaintiff claims each of the expenses on the ground that they were properly incurred by her in carrying out her duties as an executor of the will and as a trustee of the estate of the deceased. In response, Mr Upjohn on behalf of the defendant relied on the principle that joint trustees are not empowered to carry out any act, or incur any liability, on behalf of the trust, in the absence of the unanimous agreement of each of them. It was submitted that in respect of each of the claims advanced by the plaintiff, the defendant did not authorise or agree to the engagement of the solicitor to act for and on behalf of the executors and trustees. In each instance, Mr Upjohn submitted that the solicitor had acted solely on the instruction of, and for and on behalf of, the plaintiff in her capacity as a co-trustee and co-executor. Thus, it was contended that the plaintiff is not entitled to indemnity in respect of those expenses.

16 In reply, Mr Evans, who appeared on behalf of the plaintiff, submitted, first, that the plaintiff had the implied authority of the defendant in instructing Kenna Teasdale to act in the Family Court proceedings, and that she had the express authority of the defendant in instructing solicitors to act on behalf of the estate in respect of the application to remove the caveats over the three properties. Secondly, Mr Evans relied on the decision of the Court of Appeal in Nolan v Collie & Anor[1] in support of the proposition that the plaintiff was entitled to recover the solicitors' costs because they were incurred by the solicitors acting for the benefit of the estate of the deceased.

17 It is a basic principle that an executor or trustee is entitled to indemnity for expenses and liabilities properly incurred in carrying out the trust.[2] In Nolan v Collie & Anor[3], Ormiston JA considered that the test is better formulated in negative terms, namely, that a trustee is entitled to indemnity in respect of expenses and liabilities incurred in carrying out the trust, unless the trustee is demonstrated to have acted improperly in doing so.

18 In this case, there were two trustees, namely the plaintiff and the defendant. It is well established that where joint trustees are appointed, they must act unanimously. The act of one trustee may not bind a co-trustee in the absence of the unanimous concurrence of each trustee[4]. That principle was expressed by Street J in Sky v Body & Anor[5] in the following terms:

"Inherent in this basic system of trusts is the principle that trustees must act unanimously. They do not hold several offices - they hold a single, joint, inseparable office. If conflicting business considerations lead to such a divergence that the trustees are not able to act unanimously, then the simple position is that they cannot act."

19 In similar terms, in In the Estate of William Just deceased (No1)[6], Jacobs J stated:

"In the case of co-trustees of a private trust, the office is a joint one. Where the administration of the trust is vested in co-trustees, they all form, as it were, but one collective trustee and therefore must execute the duties of the office in their joint capacity. Sometimes, one of several trustees is spoken of as the active trustee, but the court knows of no such distinction: all who accept the office are in the eyes of the law active trustees. If anyone refuses or is incapable to join, it is not competent for the other to proceed without him ... ."

20 As I stated, Mr Evans submitted that the retainer of the solicitors in the Family Court proceedings, and the retainer of the solicitors in the proceedings for the removal of the caveats over the three properties, were the subject of either express or implied authority by the defendant to the plaintiff. He further submitted that in any event the plaintiff was entitled to be indemnified in respect of each item of expense claimed by her in this proceeding, on the basis that those expenses had been incurred for the benefit of the estate. In advancing that proposition, he relied primarily on a passage from the judgment of Ormiston JA in Nolan v Collie & Anor[7]. In that case, the Court of Appeal held that the trustee was entitled to be indemnified from the trust estate, on the basis that the liability which it had incurred to a third party had not been shown to be improperly incurred.[8] In addition, Ormiston JA, who delivered the leading judgment of the Court, held that if the liability had been "improperly incurred", nevertheless the trustee was entitled to be indemnified in respect of it, to the extent to which the trustee had thereby benefited the trust estate. His Honour based that proposition on a passage from the judgment of Brooking J in RWG Management Limited v Commissioner for Corporate Affairs & Anor[9]. In that passage, Brooking J having discussed the authorities relating to the right of a trustee to recover an expense or a liability properly incurred in the exercise of the trustee's powers, then expressed the alternative principle in the passage quoted by Ormiston JA, namely:

"A trustee is, however, entitled to be indemnified in respect of a liability improperly incurred to the extent to which, acting in good faith, he has benefited the trust estate."[10]

21 In considering the application of that principle to this case, it is relevant to observe that Brooking J expressed the principle in terms that the improper or unauthorised payment is recoverable "to the extent" that it benefited the trust estate. That limitation is important. It reflects the outcome of the two previous authorities relied on by Brooking J, namely Vyse v Foster[11] and Jesse v Lloyd[12]. In each of those cases, it is clear that the unauthorised expenditure by the trustee was demonstrated to have resulted in a measurable benefit to the trust estate.

22 In Vyse v Foster, the executors and trustees had expended £1,600 in constructing a villa on land which formed part of the testator's estate. The Vice Chancellor disallowed that amount in passing the trustees' accounts, on the ground that the building of the villa was not authorised by the terms of the trust.[13] On appeal, the Court of Appeal noted that the monies had been spent by the trustees bona fide in increasing the value of the land, that the house which was constructed had been let, and that the land had been realised at sale. Accordingly, the Court noted that any difference between the profit and the expense of the construction would be "so minute as to not justify the expense of any litigious inquiry in chambers ... ".[14] The Court overturned the disallowance by the Vice Chancellor of the sum so spent by the trustees on behalf of the estate. That decision was upheld on appeal to the House of Lords[15].

23 The decision in Vyse was referred to and followed in the other decision to which Brooking J referred in RWG Management, namely, Jesse v Lloyd[16]. In that case, the testator had devised his mansion house and other real estate to his trustees for a term of years. Shortly after the testator's death, the house burnt down. In addition to the insurance monies, the trustee also borrowed a further sum of ₤2,000 in order to rebuild the house. It was common ground that that borrowing was unauthorised, but that it was beneficial to the estate, in the sense that the value of the property was substantially improved by it. In upholding the claim of the trustee for reimbursement of the ₤2,000, Kay J noted that ordinarily the Court does not have inherent jurisdiction to authorise expenditure which is not within the terms of the trust. However, relying on the decision of the Court of Appeal in Vyse v Foster, his Lordship held that the trustee was entitled to be indemnified in respect of the monies borrowed by him to improve the house, since those monies had been expended bona fide for the benefit of the estate, and the estate had thereby benefited at least to the extent of the borrowing.

24 The foregoing review of the authorities, in my view, makes it clear that a trustee may only recover an "improper" or unauthorised payment or expense, if the payment or expense has resulted in a corresponding benefit to the estate of at least equivalent value. There was some discussion in the course of submissions whether the rule reflected the principles of unjust enrichment which have been developed in modern authorities. It is not necessary for me to enter in that debate. For, what is clear from the cases is that the "improper" or unauthorised expense, incurred by the trustee, is recoverable, because it has increased the value of the trust estate by at least an amount equal to the expense.

25 With those principles in mind, I turn to the four items of expense which were in dispute in the case.

(1) Costs incurred in the Family Court proceedings.

26 The major item of expense claimed by the plaintiff is the sum of $32,116.70, which she paid to Kenna Teasdale for legal services in representing her as an executor of the deceased's estate in the Family Court proceeding.

27 In order to deal with this question, it is necessary for me to set out, in a little detail, the exchanges between the parties which preceded their appearance in the Family Court on 1 November 2006. It is common ground that, before that date, the defendant did not expressly authorise the plaintiff to engage Kenna Teasdale as solicitors for the executors of the estate. However, it is submitted on behalf of the plaintiff that by his conduct the defendant subsequently impliedly authorised the retainer of that firm of solicitors for and on behalf of the estate.

28 As I have stated, the Family Court case was adjourned from 3 April 2006 for directions, pending the grant of probate of the estate of the deceased to the plaintiff and the defendant. Subsequently, there was a further adjournment of the proceeding. Ultimately, on 13 September the registrar listed the case for hearing on 1 November 2006. In the afternoon of 28 September 2006, the plaintiff sent the defendant an email stating:

"We need to appoint a solicitor to represent the Estate within the next week while I am here.

After much referring, I have managed to find a solicitor, Stephen Gregory, who may be prepared to represent the estate in the Family Court. I would like to try to get the matter dismissed at the next hearing on 1st November.

I have arranged an appointment to size him up at 11.00 am tomorrow at his office ... Please let me know if you can make it.

Until we are served we don't really know what Dad's application will be, so we can't really discuss how to handle it. All we can do at this stage is decide on a solicitor."

29 As stated in the email, there was some urgency on behalf of the plaintiff, since she was due to depart overseas on 6 October, and not to return until the end of that month. The plaintiff's email was not received by the defendant until after 10.30 am on the next day. He promptly responded by sending an email to the plaintiff, stating that he could not make the appointment on one half hour's notice, but would be available on the next Monday. In the email, he stated: "If you're happy with Gregory, I'll talk to him on being given his details. He won't be appointed of course until I agree".

30 The plaintiff proceeded to meet with Mr Gregory, and she subsequently emailed the defendant as to the outcome of that meeting. In response, the defendant sent to the plaintiff a detailed email dated 3 October 2006, in which he made the following points:

The defendant acknowledged that the plaintiff wished to appoint Kenna Teasdale as solicitors. He stated that his only disagreement with that proposal concerned the solicitor's charge rate. The defendant stated that he believed that the plaintiff and he could obtain a competent solicitor who would charge closer to the scale rates.
The defendant disagreed with the solicitor's assessment that the judge was likely to summarily dismiss the application made by Mr Kousal to set aside the previous orders of the Family Court. The defendant expressed his disagreement with taking such summary proceedings.
The defendant stated that he would not agree to the solicitors doing whatever they chose to do without active direction from him.
The defendant stated that he did not agree that the solicitors should pursue all costs awarded against Mr Kousal, since such a step would be counter-productive.

As a consequence of that message, the plaintiff sent an email to Mr Gregory dated 4 October, noting that the defendant was not prepared to appoint solicitors to act for the estate before she left the country. She stated:

"It seems to me that to protect my interests in the estate I am forced to act separately. I wish to appoint you to represent me as an executor of mum's estate in the Family Court."

31 Pausing there, it is clear - and indeed was accepted by Mr Evans - that before the plaintiff departed for overseas, the defendant had not agreed to the appointment of Kenna Teasdale as solicitors for the executors, and that, as a consequence, the plaintiff appointed those solicitors to act for her in her capacity as one of the two executors of the deceased's estate. While the plaintiff was absent overseas, the defendant sent to her an email dated 10 October seeking clarification as to "what your solicitors are instructed to do in this matter". Shortly thereafter, he sent a further email to her on the same date. He stated that Mr Gregory had told him that he acted solely for the plaintiff personally as an executor, and that he would not divulge to the defendant what the plaintiff's instructions were or what she proposed to do.

32 Thus it was that on 1 November, at the hearing before the Family Court, Dr Ingleby of counsel announced his appearance only on behalf of the plaintiff. The defendant appeared on his own behalf, and he addressed the judge separately. The defendant stated to Brown J that he had prepared applications, in which he sought orders "identical to that of the first respondent". He proposed to the judge that he should appear for himself and basically remain silent in the proceedings, because the orders which both respondents sought were identical. When asked by the judge whether he would join in instructing solicitors instructed on behalf of the plaintiff, he stated:

"Unfortunately that's been precluded to me by a passage of events, your Honour, ... I can't gain the terms of reference from the solicitor or from my sister. My sister left the country and left no instructions as to what the terms of instructions were to be. So I don't know what they are, your Honour, and I still haven't been provided with them."

33 Some discussion then took place between the judge and Dr Ingleby, in which counsel for Mr Kousal was also involved. As a consequence, her Honour made orders substituting both the plaintiff and the defendant as the respondents to the application made by Mr Kousal. Dr Ingleby then made submissions in support of the primary application, seeking summary dismissal of the application made on behalf of Mr Kousal to set aside the previous orders of the Family Court. The defendant supported those submissions, but did not advance any separate argument on his behalf in relation to them.

34 Mr Evans submitted that in those circumstances, although the defendant did not initially expressly agree to the appointment of Kenna Teasdale to act as the solicitors for the executors, nevertheless, by his subsequent conduct, he impliedly authorised the retainer of those solicitors to act for the interests of the estate. Mr Evans relied particularly on the conduct of the defendant at the hearing on 1 November, in lodging an identical application to that filed on behalf of the plaintiff, and in supporting the submissions made on behalf of the plaintiff. Similarly, Mr Evans relied on the subsequent conduct of the defendant in respect of the appeal by Mr Kousal to the Full Court of the Family Court. On that appeal, the defendant again appeared for himself, but supported the submissions made on behalf of the plaintiff by her counsel.

35 In my view, the matters to which Mr Evans referred do not establish that the defendant, at any relevant time, impliedly accepted the appointment of Kenna Teasdale to act for the executors in the Family Court proceedings, or impliedly authorised the plaintiff to appoint Kenna Teasdale so to act. The facts, to which I have already referred, lead inevitably to the contrary conclusion. It is clear that on 1 November Kenna Teasdale only acted for the plaintiff, and not the defendant, before the Family Court. Dr Ingleby took care to announce his appearance on behalf of the plaintiff only. The defendant appeared on his own behalf, and expressly stated that he did not join in instructing the solicitors who had been instructed by the plaintiff. Thus, at all times, both before Brown J, and on appeal, Dr Ingleby, and Kenna Teasdale, only acted for the plaintiff in the Family Court proceedings.

36 Mr Evans is correct in pointing out that, on both occasions, the defendant made common ground with the plaintiff, in relation to the applications which were made before each Court. He thereby took advantage of the submissions and matters put to both at first instance, and on appeal, on behalf of the plaintiff. It might be fairly stated that he thus gained the benefit of the submissions made on behalf of the plaintiff in each case. However, the fact that he supported the position taken by the plaintiff does not, of itself, bear the implication that the defendant thereby agreed to the representation of the executors by Kenna Teasdale. Nor does it give rise to the implication that the defendant thereby agreed to the plaintiff incurring, on behalf of the estate, the costs of the solicitors engaged by her. The plain fact is that the defendant did not agree to the engagement of the solicitors on behalf of the executors. Nor did he expressly, or by implication, agree to the estate bearing the costs of the solicitors, who had been instructed by the plaintiff in her own capacity as one of the two executors of the estate.

37 I turn, then, to the alternative proposition advanced on behalf of the plaintiff, namely, that the plaintiff should be entitled to recoup the legal costs spent by her in relation to the application before the Family Court, on the basis that the costs so expended by her benefited the trust estate of the deceased.

38 Mr Evans submitted that the costs so spent by the plaintiff redounded to the benefit of the estate in two particular respects. First, he submitted that the estate benefited because the application, made by the plaintiff at first instance before Brown J, ultimately precipitated the resolution of the Family Court proceedings in a manner which was favourable to the estate of the deceased. Secondly, he submitted that, in a broader sense, both the defendant and the estate gained the benefit of Dr Ingleby's submissions before Brown J and in the Full Court of the Family Court.

39 The first type of benefit contended for by Mr Evans is difficult to evaluate for two reasons. First, it depends on the plaintiff establishing that the representation of the plaintiff before Brown J, and on appeal, played a relevant causative role in bringing about the settlement of the Family Court proceedings in April 2008. Secondly, Mr Evans' submissions depend on establishing that the resolution of those proceedings resulted in a benefit to the estate of the deceased which was of at least equal value to the costs incurred by the plaintiff.

40 The two questions are inter-connected. The difficulty with the point made by Mr Evans can be demonstrated by the complexity of the Family Court proceedings, and in thus determining whether the "input" by the plaintiff's solicitors and counsel advanced the position of the estate of the deceased in the ultimate resolution of those proceedings. For the purposes of that argument, I was told something of the nature of the original Family Court orders, and of the alteration to those orders effected by the terms of settlement entered into by the parties in April 2008. As I have previously stated, the effect of the previous orders made by the Family Court was to provide that the deceased and Mr Kousal each have one half of the matrimonial assets. Those assets were valued taking into account, inter alia, property owned by Mr Kousal in Prague, worth $800,000. The application made by Mr Kousal before Brown J, and which was the subject of the proceedings before the Full Court of the Family Court, in essence was based on the proposition that the Prague property should not have been taken into account in the determination of the net pool of the matrimonial assets. The original orders made by the Family Court included a direction that a property at 71 Melville Drive, Ringwood be retained by Mr Kousal. However, Mr Kousal had an obligation to pay to the deceased $270,000. If he failed to pay that sum to the deceased, the property at Melville Drive would be sold, and the first $270,000 from the proceedings of that sale would be paid to the deceased. Another aspect of the original orders made before the Family Court was that the property at 5 Cantala Crescent, Ringwood would be transferred to the deceased.

41 To the extent to which they are relevant, the terms of settlement effected by the parties in April 2008 made three particular changes to the above dispositions originally determined by the Family Court. First, it was agreed (and by consent ordered) that the property at Melville Drive, Ringwood would be sold, and that the first $150,000 of the proceeds of that sale would be paid to Mr Kousal, with the estate of the deceased receiving the balance of the proceeds of that sale. Further, it was agreed (and ordered) that Mr Kousal would be entitled to have a life interest in the property at Cantala Crescent, Ringwood. Finally, it was agreed that all outstanding costs orders would be discharged.

42 It was argued on behalf of the plaintiff that the position achieved by settlement was more beneficial to the estate, than would have been the case if Mr Kousal had succeeded in his application to disturb the original orders made by the Family Court, so as to reduce the "pool" of matrimonial assets by an amount equivalent to the value of the Prague property. Unfortunately, on the materials before me, that question is impossible to determine without a significant degree of conjecture. First, it is not possible, on the evidence before me, to determine whether, and to what extent, the estate is in a more beneficial position, than it would have been if Mr Kousal had succeeded in his application to vary the original orders made by the Family Court. There is no evidence as to the sale value of Melville Drive, and thus it is not possible to determine whether the estate benefited, or lost, as a result of the alteration to the disposition of it. In addition, no evidence has been adduced as to the value of the life interest in the property at 5 Cantala Crescent, which was ceded to Mr Kousal as a result of the resolution of that proceeding. Further, the question as to what might or would have occurred in the Family Court proceedings, if the plaintiff had not expended funds on her solicitor in contesting the foreshadowed application by Mr Kousal, is entirely problematic. No evidence was put before me to enable me to assess whether the Family Court proceedings might have been similarly compromised, without the expenditure of the legal costs by the plaintiff, by earlier attempts to resolve them. Equally, the materials before me do not enable me to make any assessment as to what the ultimate net outcome for the estate would have been, if Mr Kousal had proceeded with his application to set aside the original orders of the Family Court, and the estate had not spent legal costs in opposing it or seeking to set that application aside.

43 In that context, it is important to return to the principle which was stated by Brooking J in RWG Management Limited v Commissioner of Corporate Affairs & Anor[17], and which was adopted by Ormiston JA in Nolan v Collie. As I have earlier stated, it is important to bear in mind that Brooking J expressed the principle in terms that the trustee is entitled to be indemnified in respect of a liability improperly incurred "to the extent to which" acting in good faith the trustee benefited the trust estate. The principle applies where a trustee has incurred a liability "improperly". In such a case, it would, in my view, not be enough for a court to determine that a trustee had improperly incurred a liability, which, in some undefined way, had benefited the estate, in order to justify the trustee being reimbursed for the whole of the liability so incurred. Ultimately, in order to apply the principle in the terms expressed by Brooking J in RWG Management, there must be some sensible measure of the benefit accruing to the trust estate which, as a matter of equity, might be thus recouped by the trustee, notwithstanding that the liability was not properly incurred on behalf of the estate. In the present case, it is not possible, other than by way of conjecture, to make any estimate, even in broad terms, of the "benefit" to the estate deriving from the expenditure of the legal costs and by the plaintiff, as compared to the ultimate resolution of the Family Court proceedings in April 2008.

44 The alternative argument advanced on behalf of the plaintiff, as to the benefit of the estate, was that in the hearing both before Brown J and before the Full Court of the Family Court, the estate gained the benefit of the arguments, which were made by Dr Ingleby in his capacity as counsel for the plaintiff, and that accordingly the plaintiff is entitled to recover from the estate the costs of conferring that benefit on the trust.

45 In a sense, the above submission has attraction. It was desirable, if not important, that the interests of the estate be represented in the hearings in the Family Court, and that arguments be made to protect its rights under the original Family Court orders. In that sense, it was "beneficial" for the estate that the plaintiff engaged legal representatives to protect the position of the estate under the original orders made in the Family Court. However, again, it must be borne in mind that, ex hypothesi, the payments, which are the subject of the claim for reimbursement, were unauthorised payments, which were beyond the power of the plaintiff in the absence of the agreement of the defendant. The principles, to which I have referred require some demonstration as to how the amount of the expenditure incurred by the trustee resulted in a benefit, at least to an equivalent extent, in the trust estate. In the absence of proof of a demonstrable benefit of equivalent value to the estate, I do not consider that the principles, stated by Brooking J in RWG Management, entitle the trustee to reimbursement of the legal costs expended by her in the Family Court proceedings.

(2) Costs of application by plaintiff to remove caveat on probate

46 The second claim by the plaintiff is for reimbursement of the sum of $1,226.50, being the costs incurred by her in the application to remove the caveat lodged by Mr Kousal in opposition to the application by the plaintiff and defendant for probate.

47 After the death of the deceased, the plaintiff and the defendant, in their capacity as executors of the will and trustees of the estate of the deceased, instructed Mr David Perkins of Hill Perkins & Co to represent the estate and make application to the Supreme Court for a grant of probate. In response, Mr Kousal lodged a caveat to prevent the probate being granted. The defendant refused to consent to the making of an application on behalf of the estate to set aside the caveat. In his evidence the defendant stated that he did not agree to the making of the application for removal of the caveat, as Mr Kousal's solicitor had told him that she would be advising Mr Kousal that he did not have any right to caveat the probate, and that he should remove it. Accordingly, an application was made by Hill Perkins, on behalf of the plaintiff as a beneficiary under the will, for removal of the caveat. That application was filed and served on 20 April 2006. On 27 April 2006, the solicitors for Mr Kousal advised Mr Perkins that their client would consent to the removal of the caveat. Consequently, the caveat was removed on 6 May 2006.

48 It is common ground that the defendant did not agree to the making of the application for removal of the caveat. The evidence does not enable me to assess whether, and to what extent, there was any benefit to the estate from the initiation of the application on behalf of the plaintiff for removal of that caveat. I am not satisfied that Mr Kousal would not have removed the caveat in the absence of the application instituted by the plaintiff. It was in Mr Kousal's interests that probate be granted to the plaintiff and the defendant, so that he could proceed with his application in the Family Court. The evidence does not permit me to infer, on the balance of probabilities, that he would not have removed the caveat, if the plaintiff had not commenced the application for its removal. For those reasons, the plaintiff has failed to establish a claim for reimbursement of the expense incurred by her in making that application.

(3) Legal costs incurred by the plaintiff in removing caveats on properties

49 The third item of expense claimed by the plaintiff consists of $1,591.85, which comprises legal costs incurred by her to Hill Perkins in making an application for the removal of caveats lodged by Mr Kousal over two properties registered in the deceased's name, and a third property, which was the subject of an order made in her favour in the Family Court proceedings. In her affidavit, the plaintiff stated that the defendant agreed that Hill Perkins be instructed to make an application to have the caveats removed. However, after Hill Perkins had sent a letter to the Titles Office regarding the caveats, the defendant decided that Hill Perkins should not do anything further. The accounts, which were rendered to the plaintiff in respect of that work, relate to research and instructions from the plaintiff to issue applications under s 89A of the Transfer of Land Act, and disbursements incurred by the solicitors in connection with that application.

50 The evidence of the defendant as to this item of claim by the plaintiff was not clear. In evidence in chief, he thought that Mr Kousal's solicitors had indicated, before probate was granted, that Mr Kousal would remove the caveats in any event. However, in cross-examination by Mr Evans he agreed that "at some stage" he agreed to the application for removal of the caveats. He stated that the position was a fluctuating one, and that he was trying to negotiate the position between his father (Mr Kousal) and his sister (the plaintiff).

51 The evidence is sufficiently clear that the defendant did agree to the institution of proceedings, under s 89A of the Transfer of Land Act, to remove the caveats from the properties. It would seem from the solicitors' accounts that most, if not all, of the costs and expenses in respect to that application were incurred in relation to the initial institution of it. The defendant is equivocal as to when, and how, he conveyed to the plaintiff that he did not wish to proceed with the application. In those circumstances, I am satisfied that the expenses were properly incurred on behalf of the estate, and that the plaintiff is entitled to reimbursement of them from the estate.

(4) Plaintiff's costs of obtaining legal advice

52 Finally, the plaintiff claims reimbursement of the sum of $4,087.13, in respect of the cost of various advices which she obtained, from time to time, from Hill Perkins relating to a number of issues which were raised by the defendant in relation to her duties and obligations, and in relation to the disposition of the estate. It is not contended that the advices were sought, or the expenses incurred, with the agreement of the defendant. Rather, it was submitted that the expenses were incurred in the course of the performance by the plaintiff of her role as the co-executor, and that she was entitled to reimbursement in respect of them.

53 It is trite that executors are entitled to reimbursement for the costs and expenses of legal advice obtained by them in relation to their duties and liabilities as executors. However, the amounts claimed by the plaintiff are in respect of advice sought by her without the agreement of the defendant. No authority was cited to me entitling one of a number of co-executors to reimbursement for expenses incurred by that executor in obtaining legal advice without the agreement of the co-executors. None of the materials, which were tendered, raised any issues, which required the advice of a solicitor in such circumstances of urgency, such as, in one form or another, to imply any form of authority on the plaintiff for seeking that advice, without the agreement of a co-executor. The advice which was obtained related to issues arising in the ongoing disputation between the plaintiff and the defendant. In those circumstances, the plaintiff has failed to establish that those expenses are recoverable by her from the estate of the deceased.

54 For the foregoing reasons, I have reached the following conclusions:

(1) The plaintiff is entitled to reimbursement from the estate of the deceased for the sum of $1,591.85 incurred by her as legal costs for withdrawal of caveats lodged on three properties to which the estate of the deceased was entitled.

(2) The plaintiff is also entitled to recover from the estate of the deceased the agreed amounts of $691 (being the net costs of the plaque in granite base for the deceased at the Springvale Cemetery) and the sum of $115.90 (being the lodgement fee for the transfer by the estate of the property at Unit 2, 24 Albert Street, Ringwood, to the plaintiff and the defendant).

(3) Otherwise the plaintiff is not entitled to recover from the estate of the deceased any of the amounts claimed by her in this proceeding.

55 While the above conclusions may, in one sense, be somewhat harsh, nevertheless they are a reflection of the application of the long standing principle that all trustees must concur in the exercise of powers conferred on them relating to a trust estate. The rationale for that principle is that, in appointing more than one executor or trustee, the testator or settlor intended to protect the trust property, by ensuring that any decisions in relation to it be made by each of the trustees so appointed.[18] Where there is disagreement between the trustees or executors, those differences are not to be resolved by them acting independently of each other, but rather by one or all of them making an application to this Court, under r 54.02 of the Rules of the Supreme Court, for appropriate directions and orders. In this case, given the ongoing level of disputation between the parties, it would have been appropriate for either of them to have approached the Court pursuant to that rule for the resolution of the issues which were at large between them.

[2] See for example In re Beddoe; Downes v Cottam [1893] 1 Ch 547, 558 (Lindley LJ), 562 (Bowen LJ); Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319, 335 (Dixon J).

[3] Footnote above at paragraph [50]-[51].

[4] Luke v South Kensington Hotel Company (1879) 11 Ch D 121, 125 to 126 (Jessel MR); Re Flower and Metropolitan Board of Works (1884) 27 Ch D 592, 596; Astbury v Astbury [1898] 2 Ch 111, 115-116 (Stirling); Pelham v Pelham & Braybrook [1955] SASR 53, 57 (Mayo J); Cowan v Scargill [1985] Ch 270, 297 (Megarry J).

[11] (1872) LR 8 Ch App 395; (1874) LR 7 HL 318.

[18] Re Flower & Metropolitan Board of Works (1884) 27 Ch D 592, 596 - 597 (Kay J); MEPC Australia Limited v The Commonwealth [1973] 2 NSWLR 848, 861 (Wootten J).

At a glance

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Before

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Judgment (85 paragraphs)

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Cases Cited (3)