Smilevska v Smilevska

The Court's Approach to Resolving the Final Distribution of the Funds

1. The Port Kembla property is the only remaining estate asset of any significance. The net purchase price that will result from the sale of the Port Kembla property is $685,000. From this sum, the estate's current outstanding liabilities (exclusive of legal fees) should be deducted which the parties have agreed at $148,718.49. This leaves after settlement of the sale of the Port Kembla property a net sum available for distribution to the parties before the deduction of legal fees of $536,281.51 (being $685,000 less $148,718.49). This sum is presently held under the control of the legal representatives of the plaintiff and the first defendant and will be referred to in the balance of these reasons as "the Fund".
2. The Court's additional orders here are designed (after some further minor calculations by the parties) to enable dealing with the whole of the Fund of $536,281.51. The order of deduction of legal fees from the Fund is controlled partly by the Court's existing orders and partly by the further orders made in this judgment.
3. The parties debated the proper approach to the final distribution of the Fund. The starting point for the Court's reasoning is the orders for costs and for distribution of the residue of the Fund made on 4 December 2018. On that occasion the Court made Orders 1 to 4 as follows: 1. Declare that the plaintiff and the second defendant are jointly entitled to the Port Kembla property (or proceeds of sale of that property) but only following the satisfaction of all the first defendant's just debts (including any costs ordered in relation to these proceedings funeral and testamentary expenses). 2. Order that the defendants pay 60% of the plaintiff's cost of these proceedings. 3. Order that the plaintiff's claim for indemnity costs based upon a Calderbank letter dated 4 November 2015 be dismissed. 4. Order that the second defendant bear his own costs of these proceedings.
4. On 4 December 2018, the Court also made machinery orders for the net proceeds of sale of the Port Kembla property to be held under the Court's supervision in an account controlled jointly by the legal representatives of Temjana and of Blaguna's estate. The parties now want to resolve: whether their various claims for costs can be satisfied out of the Fund; what the relative priorities of the parties' claims are to the Fund; and whether any residue of the Fund can now be distributed to Blagoja and Temjana, and if so, in what relative priority.
5. The Court addresses these issues in the following order. First, the Court considers whether any party has priority access to the funds in Court for payment of that party's costs. Secondly, the Court addresses whether a specified gross sum costs order should be made in respect of any party's costs that may be paid out of the fund and what the quantum of any specified gross sum costs order should be in respect of any party's costs. Thirdly, the Court considers whether existing costs orders made up to 4 December 2018 in Temjana's favour should be paid out of the Fund, before it is distributed to Temjana and Blagoja. Fourthly, the Court considers the priority as between Temjana and Blagoja of (a) Temjana's costs incurred after 4 December 2018 and (b) Temjana's costs that are not otherwise directly recoverable from the Fund through existing Court orders. Fifthly, the Court considers the mechanics of distribution of the fund. The Court will now consider these questions under these headings. The result will not in all cases be a full calculation but will set out the principles by which that calculation can readily be done.

(1) Priority Payments Out of the Fund

1. Mr Emmett submitted that Mitre and Gorica's costs and Blaguna's costs should be paid out of the funds in Court first, before any other claims for costs or other claims were made over the funds in Court. The logic of Mr Emmett's argument was ultimately not opposed by any other party and the Court accepts it as persuasive. His argument, as it emerged in submissions to the Court, has been adopted by the Court on this issue and is described in summary below.
2. Mr Emmett's argument first addressed Mitre and Gorica's costs, followed by Blaguna's costs (including the costs of her estate). The basis for the claimed priority for each is said to be slightly different. The Court directed a separate statement of account to be produced for each of these sets of costs, and for the plaintiff's costs.
3. Mitre and Gorica's Legal Costs. The costs of Mitre and Gorica have been entirely incurred as attorneys for Blaguna, and then in Mitre's case as tutor for, her. They were attorneys for Blaguna before the proceedings commenced and Mitre became tutor in the course of the proceedings. Once their decision as Blaguna's attorneys to defend the proceedings was attacked, they obtained judicial advice as to whether they were justified in defending the proceedings as her attorneys. It has not been demonstrated that the work they did for Blaguna before judicial advice was obtained was other than in accordance with their power of attorney. And the giving of judicial advice, that they were justified in further defending the proceedings, neutralises any suggestion that they were at any time improperly incurring costs on Blaguna's behalf thereafter.
4. They obtained judicial advice as attorneys under the Powers of Attorney Act 2003, s 38. The analogy of trustee advice assists here. A trustee who defends proceedings with approval through judicial advice, is entitled to an indemnity out of the trust estate for so doing, in priority to other unsecured creditors with claims against the trust estate: Octava Investments Pty Ltd v Knight (1979) 144 CLR 360; (1979) 27 ALR 129 and J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia (8th Ed, 2016, LexisNexis) ("Jacobs"), (at [2104]).
5. A trustee's right of indemnity over trust assets has priority because creditors have no direct claim at law against trust assets, which cannot be reached by any process of execution. But a trustee can contract and deal with third parties. The law has long held that in order for beneficiaries to obtain the gratuitous service of trustees, they would have to pay the price for those services by saving the trustees harmless from the obligations attaching to their performance of their office as trustees: Hardoon v Belilios (1901) AC 118, at 125, and Jacobs, (at [2102]).
6. The position of an attorney is now similar by statute. Family members should be encouraged on a voluntary basis to act as attorneys and indemnities given in their favour should be effective against their principals: G.E. Dal Pont, Powers of Attorney (2nd Ed, 2015, Lexis Nexis) ("Dal Pont"). Under the Powers of Attorney Act 2003, an attorney under "a reviewable power of attorney", such as the power in this case, may apply for "advice or direction by a review tribunal [that includes the Supreme Court] on any matter relating to…the exercise of any function by the attorney under a reviewable power of attorney". The protection afforded by the giving of advice is that no proceedings lie against an attorney "for or on account of any act, matter or thing or omitted to be done by the attorney in good faith and in accordance with any approval, advice or direction given under this section": Powers of Attorney Act, s 38(3). Mitre and Gorica obtained advice under s 38(3).
7. The Court has not been given any basis to conclude that Mitre and Gorica acted other than in good faith upon the Court's judicial advice that advised them they would be justified in defending the proceedings.
8. The power of attorney that Blaguna executed on 5 November 2010 appointing Gorica and Mitre as her attorneys did not expressly provide them with an indemnity against their principal, Blaguna. The position at general law therefore applies. The general law recognises that an agent is entitled to an indemnity from his or her principal for expenses and liabilities properly incurred in carrying out the terms of the agency: Dal Pont, at 8.90. The right of indemnity in contractual agencies is implied in law, if it is not clearly excluded: Clune, Re; Ex parte Verge v Isabella Nominees Pty Ltd (in liq) (1988) 14 ACLR 261; (1989) 7 ACLC 1 ("Re Clune"), at 266. Even if the power of attorney is not contractual, the attorney has a right of reimbursement to the extent that the payment confers a benefit on the principal: Re Clune, at 266, and Dal Pont, at 8.90. There is no exclusion of the attorney's implied right of indemnity in Blaguna's 5 November 2010 power of attorney.
9. The right to indemnity or reimbursement also founds a security interest in particular property of the principal acquired in the course of the agency or attorneyship. Where an attorney has an entitlement to remuneration or an indemnity from the principal and that right is yet to be satisfied by the principal, the attorney has a right of lien recognised by the general law, as security as between the attorney and the principal for the fulfilment of the entitlement: Dal Pont, at 8.92. The lien (a particular lien) may be exercised over all property of the principal of which the attorney has secured lawful possession in the course of the attorneyship: Dal Pont, at 8.92.
10. Here, Mitre and Gorica's conduct as attorneys, and Mitre's as tutor, in defending the proceedings have led to this fund being paid into Court and now becoming the subject of administration on behalf of Blaguna's estate. The Fund presently held is in law the funds of Blaguna's estate to which the particular lien applies. In my view, Mitre and Gorica have a security interest in the fund on the basis of the principles stated here.
11. The Court will therefore allow first priority to Mitre and Gorica to indemnify themselves out of the Fund, in order to satisfy their right of indemnity as Blaguna's attorneys.
12. The position of the costs incurred by Blaguna and the further costs incurred by her estate after her death are in a different category. The costs Blaguna had incurred by her solicitors for their conduct of these proceedings on her behalf were, when assessed on a solicitor/client basis, in accordance with any relevant costs agreement were payable by her to those solicitors. At her death, this was an existing liability of her estate. Similarly, after Blaguna died in March 2018, some further limited costs (separate from the costs of Mitre and Gorica) were incurred by the estate in defending these proceedings. These costs incurred by the estate are also current estate liabilities.
13. For the orderly administration of Blaguna's estate, all these estate liabilities will need to be paid out of the fund that Blaguna's estate realised from the sale of her house. The Court's orders of 4 December 2018 contemplated that the net proceeds of the sale of the Port Kembla property should be distributed after Blaguna's proper liabilities were met. Mitre and Gorica's right of indemnity qualifies as an estate liability.
14. It follows from the Court's orders made on 4 December 2018 (Order (1)) that Blaguna's and her estate's legal costs, and Mitre and Gorica's legal costs incurred to assist Blaguna in her conduct of the proceedings, should first be deducted from the Fund. Blaguna's legal costs, including those incurred by her estate, total $240,570.09. Mitre and Gorica's legal costs are $103,945.49. Combined these legal costs total $344,515.58. If after all Blaguna's non-legal liabilities are satisfied, these legal costs were to be deducted first from the Fund, the net amount of $191,765.93 ($536,281.51 less $344,515.58) would be available for further distribution to Temjana or Blagoja, in accordance with the Court's orders of 4 December 2018.
15. But Temjana submits that less than the full amount of these costs should be deducted from the Fund. She submits that upon an assessment of costs, or the making of a specified gross sum order, instead of assessed costs, the deduction from the fund before distribution to her would be considerably less than $344,515.58 and that the distribution to her (and possibly Blagoja) from the Fund would be correspondingly greater than $191,765.93.

(2) Assessing Specified Gross Sum Costs

1. Mr Emmett accepted that both Mitre and Gorica's costs and the estate's costs could be made the subject of a specified gross sum instead of assessed costs under Civil Procedure Act 2015, s 98(4)(c) order. The process of fixing a specified gross sum costs order will differ slightly in respect of the two groups of costs: Mitre and Gorica's costs, and the estate's costs. Mitre and Gorica's costs are the subject of an indemnity. Were they to go to a costs assessment, they would be assessed on the indemnity basis rather than on the ordinary basis.
2. Applicable Legal Principles. The Court's power to make a specified gross sum costs order instead of assessed costs was established in New South Wales Supreme Court rules by 1970: Supreme Court Rules 1970. These rules were initially enacted as the Fourth Schedule to the Supreme Court Act No. 52, 1970. Part 52, Rule 6(2)(c) of the Fourth Schedule was in turn based on a rule to similar effect in the English Rules of the Supreme Court (Revised in 1965) Order 62 Rule 9 (4) (b) "Fractional or gross sum in place of taxed costs". One early example of the application of the English predecessor is Silva v Czarnikow Limited (1960) 104 SJ 369 in which, after an action lasting eight days, the managing clerk for the defendant's solicitor estimated the total legal costs at over GBP 2,000 and the judge fixed under O 62 r 9(4)(b) a gross sum in lieu of assessed costs at GBP 1,250.
3. But reported Australian case law on the topic of specified gross sum costs orders is scant until the early to mid-1990s, when in cases such as Beach Petroleum NL & Claremont Petroleum NL v Johnson (1995) 57 FCR 119; (1995) 135 ALR 160 (von Doussa J), judges began commonly to apply analogous provisions. Part 52A (Costs) was inserted into the Supreme Court Rules 1970 in 1994, which provided in what was subrule 6(2) that the Court could make a gross sum costs order. This Part was repealed in 2005, upon the passing of the Civil Procedure Act and replaced by s 98(4)(c) of that Act.
4. But in the interests of justice, Courts have long exercised the power to fix a specified gross sum instead of assessed costs as one part of the Court's broad costs discretion, without the need for any specific authorising rules. One early example of the High Court exercising such jurisdiction is Edgar & Walker v Mead (1916) 23 CLR 29; (1916) 23 ALR 259; [1916] HCA 70 in which Isaacs J, (at [46]), applied the practice adopted and described by Jessel MR in Willmott v Barber (1881) 17 Ch D 772: "But taking everything into consideration, including the several findings in favour of the respective parties, and realizing the desirability of putting an end to unnecessary further expense, I act on the principle laid down or recognized by the Court of Appeal in Willmott v. Barber. It was there stated that the discretion of the Judge as to costs is very large and extends even to the course which Jessel M.R. said he sometimes adopted, and generally found the parties were grateful to him for so doing. He thus described the course: "fix a definite sum for one party to pay to the other, so as to avoid the expense of taxation, taking care in doing so to fix a smaller sum than the party would have to pay if the costs were taxed."
5. In New South Wales, this Court's specified gross sum costs jurisdiction is now embodied in Civil Procedure Act, s 98(4)(c) which relevantly provides as follows: "(4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: … (c) a specified gross sum instead of assessed costs, or ..."
6. It is to be noted that the jurisdiction is only available before a matter is referred for the assessment of costs. Referral to costs assessment has not occurred in this case, so the specified gross sum costs jurisdiction is available.
7. The principles for the making of specified gross sum costs orders instead of assessed costs are now well settled. Civil Procedure Act, s 98(4)(c) is expressed in general terms and is not limited to cases of that type: Australasian Performing Rights Assoc Ltd v Marlin [1999] FCA 1006 (Burchett J). The power to award a Civil Procedure Act s 98(4)(c) specified gross sum instead of assessed costs is exercised whenever circumstances warrant its exercise; the purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119 (von Doussa J).
8. Probable inability to pay a costs order will usually provide a proper basis for the making of a s 98(4)(c) order. If the unsuccessful party ordered, to pay costs is unlikely to be able to pay the amount of costs ordered then the successful party is further aggravated by having to fund the additional costs of taxation, those costs also being unrecoverable: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 ("Schipp"), (at [21]) (Giles JA), and Hadid v Lenfest Communications Inc [2000] FCA 628 ("Hadid") (Lehane J).
9. The specified gross sum under s 98(4)(c) can be fixed broadly, having regard to all the information available to the Court: Schipp, (at [22]) and Hadid, (at [27]). The approach taken to the estimation of costs must be "logical, fair and reasonable" and the powers should only be exercised when the Court considers it can do so "fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available": Schipp, (at [22]), per Giles JA.
10. I further summarised the law regarding the powers available in Civil Procedure Act, s 98(4)(c) in Starr-Diamond v Diamond (No. 4) [2013] NSWSC 811.
11. Should a Gross Sum Costs Order be made in this Case? This is an apt case for the making of a specified gross sum order instead of assessed costs. Several factors weigh in favour of the Court making such an order here.
12. First, this has been bitterly fought litigation. It is highly likely that the parties will be further aggravated by having to fund the additional costs of a taxation if a gross sum costs order is not made. The Court has given four judgments in the proceedings already. It could be expected that a costs assessment would lead to further, costly, contests. These will lead to further delay in the distribution of the limited Fund, further costs diminishing the Fund, and will further engage Mitre and Gorica in proceedings in which they are only volunteers assisting Blaguna.
13. Secondly, the net Fund is limited. After all costs are paid to keep open at least the possibility of distribution of some funds to Temjana and possibly Blagoja. No party can afford contested assessments of the estate's costs, of Gorica and Mitre's costs and Temjana's costs. Full costs assessment would wipe out the potential for distribution of any potential residue.
14. Thirdly, the making of specified gross sum costs orders is attractive when all the parties are required to submit to that regime, so that full costs containment is possible. This approach should mean that this will become the Court's last judgment in these proceedings. The Court told the parties on 15 May that all parties would be subjected to this regime so that no further hearings would be required.
15. In my view, this is a textbook example for the exercise of the Court's beneficial jurisdiction to make a specified gross sum costs order, in respect of the estate's costs, in respect of Gorica and Mitre's costs and in respect of Temjana's costs. No order is required in respect of Blagoja's costs, because he was ordered to bear his own costs of the proceedings. If he receives any part of the Fund it will only be a residual not calculated by reference to his own legal costs.
16. What is the Approach to the Quantum of the Order. At the Court's direction, Temjana, the estate, and Mitre and Gorica set out all the invoices and memoranda for the professional fees that solicitors and counsel had rendered to each of the parties in these proceedings, together with disbursements. The parties provided schedules totaling these invoices and memoranda. The applicable costs agreements were supplied as well.
17. The solicitor/client costs incurred by Blaguna and by her estate would be assessed, not on the indemnity basis but nevertheless as between solicitor/client. This is a basis of assessment that is more generous than the ordinary basis between party and party. Assessment of each of Blaguna's and the estate's costs would take place on the basis of the costs agreements made between Blaguna and Messrs Sachs Gerace Broome Lawyers, and between them and her estate. The Court will therefore approach these assessments separately and differently in this section.
18. These reasons consider below the fixing of a specified gross sum order instead of assessed costs in respect of Mitre and Gorica's costs and in respect of the estate's costs.
19. But first, an incidental dispute concerning the quantum of the costs of Blaguna, Mitre and Gorica arises. For a brief period in April and early May 2019, differences arose between Mitre, Gorica and Blaguna's estate on the one hand, and Messrs Sachs Gerace Broome Lawyers on the other, concerning the legal fees of that firm. That led to the separate representation of the firm by Mr Emmett at the directions hearing on 7 May 2019. The firm and Mr Emmett have not included any fees on account of work done in relation to this dispute among their memoranda of fees.
20. But ER Solicitors, the independent firm of solicitors who engaged Mr Eardley to appear on behalf of Mitre, Gorica and the estate have charged an additional $5,000 in respect of this period, to cover their fees and Mr Eardley's fees. The Court indicated to Mr Emmett that it would be difficult to claim these fees because they were really only the product of an internal dispute and in no way caused by other parties to the proceedings and should therefore not increase the amount subtracted from the Fund.
21. Mr Emmett sought to justify the inclusion of this amount among the estate's legal costs on the basis that it was necessary expenditure that was incurred towards the overall objective of ascertaining the estate's, Mitre's and Gorica's fees.
22. But the Court will adhere to its primary view. Although the expenditure was incurred on the pathway to ascertaining Mitre, Gorica, and the estate's fees, the Court is not prepared to allow this amount to be deducted from the Fund. The Court knows nothing of the reasonableness of the dispute between these clients and their solicitors and has no basis to determine that these fees were not unreasonably incurred. The fees were generated during a dispute that has now apparently resolved. If unreasonable stances were taken leading to the dispute, then the costs incurred during the dispute may also have been unreasonably incurred. The Court will take no account of ER Solicitors' and Mr Eardley's fees in fixing a specified gross sum, instead of assessed costs for Mitre and Gorica.
23. The Court will also make a specified gross sum costs order in respect of Temjana's costs. These costs are split into two components. The first component is Temjana's costs up to and including 4 December 2018. Her costs incurred up to that date are the subject of an order that 60 per cent of them be paid by the defendants. The Court will order a specified gross sum in lieu of assessed costs in respect of all the plaintiff's pre 4 December 2018 costs. At the Court's direction the post 4 December 2018 costs have been isolated at a figure of $48,087.85. This sum should be excluded when the 60% of Temjana's costs is being calculated for deduction from the Fund.
24. Mr Liebhold argues that a beneficial approach should be given to the assessment of a specified gross sum costs order for the 60 per cent of costs to reflect the justice of the case. But it is difficult to see how that could be done. Section 98(4)(c) does not allow more than reaching approximately accurate substitute for assessed costs. It does not allow costs orders to be varied.
25. The Court will separately consider Temjana's costs between 4 December 2018 and the date of this judgment. Mr Liebhold argued that the circumstances that applied between these two dates were different from those that applied as at 4 December 2018 from earlier costs. For example, Mr Liebhold argues that Blagoja delayed obtaining legal advice, despite earlier warnings that he should. She says this has unnecessarily increased the costs that Temjana has incurred. Temjana's costs in this period are largely associated with realising the proceeds of sale. The Court accepts that costs orders for this period are open to be calibrated differently. The Court must consider whether different costs orders should be made for this period and what approach should be brought to bear in the fixing of a specified gross sum order in lieu of assessed costs for that period.
26. It is now necessary to examine each of these classes of costs in more detail.
27. Mitre and Gorica's Costs. Mitre and Gorica are entitled to a full indemnity in respect of their costs in the sum of $103,945.49. Their schedule of costs and supporting evidence shows that all of their costs were incurred during the proceedings and were properly billed in respect of legal work done in respect of the proceedings. Having reviewed the material in evidence, as to the incurring of their legal costs, the Court has no reason to doubt that Mitre and Gorica have incurred these actual liabilities for legal costs. The plaintiff has not taken issue with particular claimed costs of Mitre and Gorica, as having been unreasonably incurred, or as having not been incurred in respect of their acting as attorneys or as tutor for Blaguna in the proceedings.
28. Temjana submits that upon the making of a gross sum order instead of assessed costs that Mitre and Gorica's costs should be reduced to 80% of the amount that they have claimed. But as none of their individual costs have been questioned, I see no reason why they should not have a full indemnity for their costs, as would ordinarily be implied from their respective offices as attorneys and tutor for Blaguna respectively. In these circumstances therefore, no question of making a specified gross sum order instead of assessed costs needs to arise, as that would give Mitre and Gorica less than the full indemnity to which they are entitled. The orders below will reflect this.
29. Blaguna's and her estate's legal costs. The situation is otherwise with Blaguna's costs and the costs of her estate. Were a specified gross sum order not to be made but instead, if costs were to be assessed as between Sachs Broome Gerace and their client, Blaguna and her estate, legal costs would be assessed as between solicitor and client before any deduction from the Fund, as Mr Emmett has submitted on their behalf. Ordinarily upon such an assessment as between solicitor and client counsel's fees and other disbursements would be allowed in full, but some discount for solicitor-client profit costs may be appropriate.
30. It should be noted that in undertaking the task of fixing a specified gross sum for Blaguna's and the estate's costs, the Court is entering upon a task that does not arise out of a costs order made in the proceedings. But the Court is entering on this task only to facilitate the efficient distribution of the Fund.
31. Temjana has submitted that both Blaguna's and her estate's legal costs should be reduced by 20% across-the-board, when fixing any specified gross sum instead of assessed costs. But in my view, that does not reflect the true nature of the likely outcome of an assessment of their costs as between solicitor and client. And that probable outcome is the best guide to what should happen upon the making of a specified gross sum costs order, instead of assessed costs.
32. The correct calculation of the appropriate amount for Blaguna's and the estate's costs is substantially, but not entirely, in accordance with Mr Emmett's submissions. The Court will allow counsel's fees and other disbursements in full, as Mr Emmett submitted. It should be noted this context that senior counsel's fees were capped in this case at well below their true value. But some discount for solicitor-client profit costs is nevertheless appropriate. Mr Emmett submits this should be no more than 2 to 3%. But such a limited discount virtually gives a complete costs indemnification to Blaguna and her estate out of the Fund, which is not warranted. The Court will require a discount of 15% on all other costs incurred by Blaguna and her estate. The resulting net amount will be the specified gross sum instead of assessed costs. It has not yet been calculated, but can readily be derived by the parties and agreed. When the parties do that final calculation they should ensure that none of the fees of ER Solicitors are included.
33. Temjana's Costs Up to 4 December 2018. Temjana's costs up to the date of the Court's judgment on 4 December 2018 have been ordered to be paid as to 60% by Blaguna's estate and Bagoja and have been quantified through the affidavit evidence of Mr Nikolovski, especially in his affidavit of 13 May 2019. These costs cover the period up to the conclusion of these proceedings.
34. Temjana's total legal costs and disbursements invoices as at 7 May 2019 are $322,754.10 inclusive of GST. This sum consists of $108,171.80 in solicitor client costs, $182,635.00 in counsel's fees and $31,947.30 in other "hard" disbursements. The plaintiff paid $46,863.85 early in the proceedings so that $275,890.25 was outstanding as at 7 May 2019. Mr Nikolovski says in evidence that to facilitate the making of a specified gross sum costs order he and counsel are prepared to discount their legal costs by 20%, giving a total net figure for Temjana's costs of $273,592.74. Against this figure she would presumably be credited with her earlier payment of $46,863.85.
35. Mr Nikolovski calculates the net discount or costs the following way: a. Solicitor costs up to 7 May 2019 (at 80% of $108,171.80) $86,537.44 b. Counsel's fees up to 7 May 2019 (at 80% of $182,635) $146,108.00 c. Estimated future costs and disbursements of $10,000 - $15,000 (at 80%) $9,000.00 d. "Hard" disbursements $31,947.30 Total: $273,592.74

1. Mr Nikolovski's conceded discount can be accepted. It is both reasonable and in his client's interests.
2. Temjana's Legal Costs After 4 December 2018. Temjana's submits that her legal costs after the Court's judgment in December last year should be treated differently from her costs up to that date. Those post 4 December 2018 costs have been isolated from Mr Nikolovski's affidavit of 13 May 2019 from the total costs at a figure of $48,087.85. Costs orders for that period have not yet been made. Temjana submits that much of her legal costs incurred since December 2018 have been occasioned by attempting to encourage Blagoja to obtain representation and put on submissions in relation to his potential claim to a share of the proceeds of sale.
3. This submission has some force. Notwithstanding Blagoja's submitting appearance, some of the costs incurred since that time as between Blagoja and Temjana have certainly been occasioned by his delay. There have of course been other matters to be dealt with, mainly reporting to the Court about the sale of the Port Kembla property. But in my view, Blagoja should also bear 75% of Temjana's costs for this period and the Court will so order. No other costs order is made against the estate for this period. Should further calculation of priority of payment as between Temjana and Blagoja be required, she should have 75% of her costs for this period out of the Fund before Blagoja.
4. If required, a separate specified gross sum for her costs for this period can be calculated by applying the same methodology as the Court has used for her costs before 4 December 2018.

(3) Priority Between Temjana's Costs and Splitting the Fund

1. Should any of Temjana's costs be further deducted from the Fund before the Fund is split between Temjana and Blagoja? In the Court's view they should, at least to the extent that a costs order exists in Temjana's favour against the defendants.
2. Judgment has been given against Blaguna's estate for costs representing 60 per cent of Temjana's costs. No equivalent order was made for Blagoja, who was ordered to bear his own costs up to 4 December 2018. No other costs order has been made in his favour for costs incurred after 4 December 2018. The differential costs position of Temjana and Blagoja in relation to Blaguna's estate means, in my view, that Temjana's judgment for costs up to 4 December 2018 should be satisfied out of the Fund of proceeds of sale, before the remainder of the Fund is split between Blagoja and Temjana. This should happen at least because her costs are an estate liability of Blaguna's estate and estate liabilities are caught by Order (1) of the Court's orders made on 4 December 2018. The same logic applies to the costs order just made in respect of her costs incurred after 4 December 2018.

(4) Other Legal Costs of Temjana Out of the Fund

1. Apart from the costs ordered in Temjana's favour against Blaguna and Blagoja, or just Blagoja, for her costs incurred up to and after 4 December 2018, Temjana argued she has a case for the distribution of monies from the Fund ahead of Blagoja in any event. Temjana argues that she is entitled to a contribution from the Fund, on account of her efforts to secure the fund that is now available for distribution. This generated a further round of submissions between the parties, which will be briefly considered here.
2. Temjana submits that the proceedings that she brought were also brought on behalf of Blagoja and can thereby properly be characterised as "trust proceedings": MF Global Australia (in liq) (No. 2), Re [2012] NSWSC 1426 ("MF Global Australia"). She says her conduct of the proceedings was an essential step in the ultimate distribution of the trust assets to the persons beneficially entitled and that the costs so incurred by her should be deducted before the distribution of those assets as an expense of realising the Fund. She submits that principle has been applied in a different context, for example in relation to liquidators' realising assets and seeking reimbursement from the fund recovered: MF Global Australia, (at [8]). Temjana also referred the Court to other trustee cases where an executor or an administrator seeks the assistance of the Court to decide questions of costs and will normally be paid out of the fund in question for that purpose: NSW Trustee & Guardian v Hull (No. 2) [2011] NSWSC 1361, per Hallen J.
3. Blagoja advanced reply submissions on this issue, through Mr Cornish. He submitted Blagoja did not consent to Temjana's action in bringing the proceedings. He has already been made liable for part of her costs. And a concurrently entitled party who does not wish to participate in proceedings (including proceedings which may have the result, if successful, of establishing that party's rights), is under no obligation to join in the proceedings as a plaintiff but may become part of those proceedings by being joined as a defendant. A party in that position, who is joined as a defendant and makes a submitting appearance, incurs no equitable obligation to indemnify or contribute to a concurrently entitled plaintiff's costs. In fact, such a party may be entitled to an indemnity and security for his costs: Rajski & Anor v Computer Manufacture and Design Pty Ltd [1981] 2 NSWLR 798 ("Rajski").
4. Blagoja has been made the subject of an adverse order for costs for the reasons given in the Court's last judgment and another one in this judgment for her costs incurred after 4 December 2018. To that extent, she is already entitled to a distribution ahead of him from that fund. But in respect to the balance of her costs, not the subject of express costs orders, cases such as Rajski do not apply because Blagoja did not conduct himself in accordance with his submitting appearance. Rather, the appropriate analogy are the trustee cases such as MF Global Australia, as this fund would not be available but for Temjana's efforts. Should an order be needed, if there is any residue left for distribution to Temjana and Blagoja after implementation of the earlier orders, she can have priority for the balance of her costs.
5. There is one exception to this. Mr Cornish, in the best traditions of the Bar, acted on a pro bono basis for Blagoja when a request was made by the Court for pro bono assistance. I see no reason why, having volunteered to do this, he should not be paid, at least some reasonable fee, for his assistance, should he charge for his assistance, in what has helped to bring the proceedings to an end more quickly than otherwise. The Court will allow up to $2,500 for this.

(5) Mechanics of Distribution

1. Temjana, Mitre and Gorica, and Blaguna's estate all now have definite sums that can be calculated for their costs out of the Fund, up to the present and for the future. Any balance of the Fund that may exist can then be split between Temjana and Blagoja. A sum of approximately $66,000 may yet increase the estate's assets, depending upon the outcome of the review of the nursing home fees. There may be further funds for distribution to Temjana and Blagoja. If these further funds became available, they can be distributed in accordance with these orders.
2. Should any further dispute arise, the parties and their legal representatives are strongly encouraged to try and resolve it consensually. If they cannot do so, they may take advantage of the liberty to apply granted by the orders below. But the Court seeks to avoid dissipation of the slender sum that may be available to the parties at the end of this litigation. For that reason, the Court is likely to make costs orders against any unsuccessful party upon a relisting.
3. To the extent that recent costs are not covered by this judgment they can be dealt with by the same principles.

Conclusion and Orders

1. The Court makes the following orders and notations: 1. Note that for the purposes of these orders the fund held mutually between the parties being the proceeds of sale of the Port Kembla property as defined in the Court's previous orders will be referred to in these orders as "the Fund"; 2. Pay the sum of $103,945.49 from the Fund to Mitre and Gorica on account of their legal costs incurred as tutor and attorneys for the first defendant and otherwise on behalf of the first defendant's estate in relation to these proceedings; 3. Pay a sum calculated in accordance with these reasons from the Fund to Messrs Sachs Gerace Broome Sachs on account of legal fees incurred by Blaguna and by her estate in relation to these proceedings; 4. Pay the sum of up to $2500 from the Fund to Mr A.M.B.Cornish of counsel on account of his assistance to the second defendant with oral and written submissions on 15 and 17 May 2019; 5. Pay a sum calculated in accordance with these reasons from the Fund to Messrs Nikolovski lawyers on account of legal fees incurred by the plaintiff, Tenjana, and by her estate in relation to these proceedings; 6. Pay the balance of the Fund to the plaintiff, Temjana and if any funds remain to Blagoja; 7. Order that 75 per cent of Temjana's costs incurred after 4 December 2018 will be paid by Blagoja; 8. Direct the parties to bring in within 14 days Short Minutes of Order of the final calculations of distributions in accordance with these orders; and 9. Grant liberty to apply.

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: 06 August 2019