Steven Binetter as the representative of the Estate of the Late Ida Wolff v Ronald Binetter

Supreme Court of NSW|2020-05-08|Before: Beech-Jones J

Solicitors: Braddon Marx Lawyers (Plaintiff) Peterson Haines (Defendant) File Number(s): 2018/166618

Judgment

This is an application for security of costs against an executor of a deceased estate who brings proceedings on behalf of the estate to recover a loan. The proceedings are contested. The executor is an overseas resident although the assets of the estate are in New South Wales. Those assets are substantial. For the reasons that follow the application will be granted.

Power and Discretion to Award Costs

Ronald Binetter relies on r 42.21 of the Uniform Civil Procedure Rules 2005 ("UCPR"), specifically r 42.21(1)(a) and 42.21(e). The rule relevantly provides: (1) If, in any proceedings, it appears to the court on the application of a defendant - (a) that a plaintiff is ordinarily resident outside Australia, or … (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, or … (1A) In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant - (a) the prospects of success or merits of the proceedings, (b) the genuineness of the proceedings, (c) the impecuniosity of the plaintiff, (d) whether the plaintiff's impecuniosity is attributable to the defendant's conduct, (e) whether the plaintiff is effectively in the position of a defendant, (f) whether an order for security for costs would stifle the proceedings, (g) whether the proceedings involves a matter of public importance, (h) whether there has been an admission or payment in court, (i) whether delay by the plaintiff in commencing the proceedings has prejudiced the defendant, (j) the costs of the proceedings, (k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute, (l) the timing of the application for security for costs, (m) whether an order for costs made against the plaintiff would be enforceable within Australia, (n) the ease and convenience or otherwise of enforcing a New South Wales court judgment or order in the country of a non-resident plaintiff. (1B) If the plaintiff is a natural person, an order for security for costs cannot be made merely on account of his or her impecuniosity. (2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct. (3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed.
On this application the plaintiff, Steven Binetter, affirmed an affidavit dated 30 April 2020. His affidavit provides an address in New York. It was not disputed on this motion that he lives there. In that affidavit Steven Binetter does not provides any information concerning his personal financial position. However, he provides an estimate of the current net value of Mrs Wolff's estate as exceeding $25 million even without considering the claim against Ronald Binetter. This includes over $300,000 in cash in an estate account as well as full ownership of two companies which in turn have cash assets of at least $6 million (in addition to real estate). Steven Binetter confirms that, leaving aside legal costs and recurrent costs associated with the holding of assets, the estate has no liabilities and has not received notice of any claim. He also states that no distributions have been made and they will not be made until these proceedings are finalised.
Counsel for Ronald Binetter, Mr O'Neil, submitted that Steven Binetter's residency in New York enlivens the Court's power to grant security for cost under UCPR 42.21(1)(a). Counsel for Steven Binetter, Mr Freeman, submitted that the power was not enlivened because of the effect of the deeming provision in s 97(1) of the Probate and Administration Act 1898. Section 97 provides: (1) Every executor or administrator: (a) named in any probate or letters of administration granted by any court of competent jurisdiction in any portion of Her Majesty's dominions and making application under the provisions of Division 5 for the sealing of such probate or administration, or (b) appointed under this Part, shall be deemed to be resident in New South Wales. (2) Where not actually so resident, the executor or administrator shall, before the issue or sealing of any probate or administration, file with the Registrar an address, as prescribed by the rules, within New South Wales, at which notices and processes may be served upon the executor or administrator; and all services at such registered address shall be deemed personal service.
In Muller v Dalgety & Co Ltd (1909) 9 CLR 693 at 696; [1909] HCA 67, Griffith CJ observed that the word "'deemed' … is … commonly used for the purpose of creating ... a 'statutory fiction'… that is, for the purpose of extending the meaning of some term to a subject matter which it does not properly designate" and with such terms "it becomes very important to consider the purpose for which the statutory fiction is introduced". To similar effect in Wellington Capital Ltd v ASIC (2014) 254 CLR 288; [2014] HCA 43 at [51], Gageler J observed that such "legal fiction[s]" are "not construed to have a legal operation beyond that required to achieve the object of its incorporation".
Mr O'Neil submitted that the deeming provision in s 97(1) does not operate to render Steven Binetter a resident within Australia for the purposes of UCPR 42.21(a) especially where he acquired the status of plaintiff through a Court order rather than his appointment as executor per se. He referred to In Estate de Wild, deceased [2019] NSWSC 1128 at [24], in which Lindsay J described the purpose of s 97(1) as "ensur[ing] that a non‑resident executor or administrator is amenable to court process issued in NSW by a person who has a claim against an estate, without an independent requirement to establish a connection with the State to ground jurisdiction in a NSW court". With respect to his Honour, that conclusion appears consistent with s 97(2) which requires overseas and interstate executors to provide an address for service within NSW. While his Honour may not have exhaustively described the scope and purpose of s 97(1), I am satisfied that the "legal fiction" of deeming residency in NSW for persons who reside outside of NSW, given effect to by s 97(1), does not extend to rendering such a person ordinarily resident in Australia for the purposes of UCPR 41.21(1)(a). The two provisions appear directed to entirely different subject matters. In particular, neither s 97 nor any other provision of the Probate and Administration Act 1898 provides any means for the recovery of costs by a successful defendant to proceedings brought by an overseas based executor on behalf of a local estate. It follows that the power to order security is enlivened.
For the sake of completeness, I will address Mr O'Neill's reliance on UCPR 42.21(1)(e). He contended that Steven Binetter was not suing for his or her own benefit "but for the benefit of some other persons", namely, the beneficiaries of Mrs Wolff's estate "and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so". Mrs Wolff's will was tendered on this application. It provides a modest legacy to the widow of her former accountant and otherwise provides for the establishment of five discretionary testamentary trusts that will each receive an equal share of the residuary of the estate. There is one trustee of each of the five trusts being Margaret Binetter, three of her sons, Andrew, Peter and Ronald, and Suzanne Binetter respectively. The beneficiaries of the testamentary trusts include Suzanne Binetter (as the primary beneficiary), Michael Binetter, his spouse, his children and their offspring, his siblings, siblings' children and their offspring. It follows that Steven Binetter is one of the discretionary beneficiaries of these testamentary trusts. It further follows that it cannot be said that he is suing "not for his own benefit"; ie only suing for the benefit of others and not himself (Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd [2008] NSWCA 148 at [45]). Accordingly, UCPR 42.21(1)(e) is not satisfied.

Enforcement of a Costs Order

If the first part of UCPR 42.21(1)(e) had been made out it would then it would have been necessary to address whether there was "reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so". Regardless of the basis on which the power to order security arises the (relative) "impecuniosity of the plaintiff" must be addressed (UCPR 42.21(1A)(c)). In this case, it is also necessary to consider the capacity of Ronald Binetter to extract his costs from the plaintiff and Mrs Wolff's estate if he is ultimately successful in defending the proceedings (UCPR 42.21(1A)(m) and (n)).
As noted, the plaintiff is the executor of a deceased estate, is resident outside of Australia and proffers no information concerning his personal assets. His position is to be addressed in the same manner as if he was a trustee with, at most, only a right of indemnity out of the trust (estate) assets. In Funds First Pty Ltd & 2 OR's v Owners Corporation Strata Plan 66609 & 10 OR's (No 2) [2008] NSWSC 428 at [5], Brereton J summarised the approach to be adopted in such cases as follows: "…... Where a plaintiff is a trustee and its only asset is its right of indemnity as trustee against the trust assets, an applicant for security will be taken to have satisfied the onus of establishing that there is reason to believe that the plaintiff will be unable to pay a costs order if so ordered, unless the plaintiff can establish that it will have recourse to property or assets held by it on trust [Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] 1 VR 150, 154; see also Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) ATPR 40-584; Prestige Sunglasses Pty Ltd v Bernhaut Nominees Pty Ltd (1985) 9 FCR 13; World Class Alpacas Pty Ltd (ACN 056 236 947) v Ostrich Farms (Cook Islands) Ltd; De Vere & Chanesman [1997] FCA 1193]. As explained by Smithers J in Laundry Coin-Wash (at 46,729), this is because, where the only tangible assets of the plaintiff are held on trust for another entity, so that the plaintiff's solvency depends on its right of indemnity, the Court must bear in mind the difficulty which a successful defendant may encounter in attempting to execute in respect of an order for costs [see also Lagarna (at 154, Tadgell J); and Street v Luna Park Sydney Pty Ltd [2006] NSWSC 1317, [9]."
Mrs Wolff's will does not expressly confer on her executors, including the plaintiff, an express right of indemnity for a costs order he may incur on behalf of the estate. Nevertheless, it was accepted that in ordinary circumstances he could call on the estate's assets to meet any costs order made against him (see Trustee Act 1925, s 59(4)). However, if he chose not to do so then the means by which a third party such as Ronald Binetter could enforce the right of indemnity against the estate's assets are not straightforward. If availed of, they would most likely be disproportionately expensive when considered against the likely amount he would be owed in costs.
Mr Freeman sought to address this by pointing to the Court's power under s 98(1)(b) of the Civil Procedure Act 2005 to "determine by whom, to whom and to what extent costs are to be paid". The difficulty with this provision is that it requires the identification of a juristic person to make a costs order against. A deceased estate is not such a person. If an order was to be made against the other executor of Mrs Wolff's estate it would create the same problem. The only other persons against whom an order might be made are the beneficiaries. However, as noted, at this point there are only potential beneficiaries being members of a class who might receive the favourable exercise by a trustee of a power of distribution under a discretionary trust. There would be formidable obstacles in the way of a Court making a costs order against any such persons if it is not known at the time of the making of the order whether they will receive any funds from any of the testamentary trusts.
The difficulty in the enforcement of any costs order against Steven Binetter is a strong factor in favour of the making of an order for security for costs in favour of Ronald Binetter.

Other Factors

Uniform Civil Procedure Rule 42.21(1A)(a) enables the Court, in determining the exercise of the power to order security, to consider the "prospects of success or merits of the proceedings". At the time the motion for security was filed, Robert Binetter was yet to file his evidence. There was not placed before the Court on this application sufficient material to enable even a preliminary assessment of the relative strengths or weaknesses of the respective parties' cases. In the end result both counsel submitted that this factor was "neutral". [1]
Given the assets available to the estate, it follows that the making of an order for security will not "stifle" the proceedings (UCPR 42.21(1A)(f)). The amount of security that is sought is addressed next but suffices to state that it is proportionate to the amount in dispute and what can be ascertained at this point about the complexity of the proceedings (UCPR 42.21(1A)(j) and (k)). The factors listed in UCPR 42.21(1A)(m) and (n) have largely been addressed. Although a costs order against Steven Binetter could most likely be enforced in New York, the cost and inconvenience of doing so would be significant and it is not known whether he has assets. In any event, he brings the proceedings on behalf of an estate the assets of which are located in Australia. Otherwise, even though Stephen Binetter is not conducting these proceedings solely on behalf of persons other than himself, they are mostly being brought for their benefit. In those circumstances, it is just that, through their interest in Mrs Wolff's deceased estate, they bear the risk of the proceedings failing as well as potentially benefiting from their success.
Otherwise, I note that UCPR 42.21(1A)(l) enables the Court to consider the timing of the application for security for costs. This application was made around 10 months after the substitution of an overseas resident as the plaintiff and at a time when there were outstanding orders for the filing of the defendant's evidence. There was no explanation for the delay in making the application. However, Mr Freeman did not contend that this delay disentitled Ronald Binetter from making the application as it could not be said that, had the application been made at the outset, the proceedings would not been commenced or continued (see Litmus Australia Pty Ltd (in liq) v Canty [2007] NSWSC 670 at [26] per White J). [2] However, Mr Freeman contended that the Court still had a discretion to not grant security in respect of past costs [3] (see In the matter of Colorado Products Pty Limited (in prov liq) [2013] NSWSC 611 at [69] per Black J; In the matter of 77738930144 Pty Limited (in liquidation) (ACN 103 983 777) (formerly known as Commercial Indemnity Pty Limited) [2019] NSWSC 626 at [42] per Rees J). To an extent, I accept that encapsulates the correct approach, although it can only relate to costs incurred after Stephen Binetter's appointment as plaintiff and some allowance must be given for the period in which Ronald Binetter and his advisers had to consider their position after that appointment.
Having regard to the above matters, I am satisfied that an order for security should be made. For the sake of completeness I note that such an order is not being made "merely" on account of Stephen Binetter's possible impecuniosity. Instead, it is being made as a consequence of the difficulties in enforcing a costs order given his overseas residence and the fact that he brings the proceedings on behalf of a deceased estate (cf UCPR 42.21(1B)).

Quantum of Security

Ronald Binetter's solicitor, Carrie Peterson, swore an affidavit estimating the past and future costs in respect of which an order for security is sought. The total estimate is approximately $190,000 comprised of $50,201.04 for past costs, current work in progress of $14,527.15 and an estimate for the future cost of the proceedings of $128,826.50. The figure for past costs excluded the costs attributable to the notice of motion that lead to the appointment of Stephen Binetter as plaintiff. The estimate of the future costs was based on the retention of senior and junior counsel, an estimate of two days hearing, the necessity for some discovery, a dispute over a subpoena and the taking of evidence via audio visual link. It did not account for any dispute over expert evidence or the retention of an expert which may be necessary in light of the matter noted in [6] above.
Both counsel agreed that the proper approach in relation to any assessment of the quantum of security is to take a "broad brush" approach and not undertake a form of costs assessment (In the matter of Felan's Fisheries Pty Limited [2016] NSWSC 1351 at [40]). Although there was some dispute about whether the estimate of Ms Peterson's costs and other fees was based on an estimate of what might be recovered on a party/party or solicitor/client basis, I am satisfied it was the former. Mr Freeman did not suggest that the retention of senior counsel was not appropriate, although he pointed out that senior counsel's rate exceeded the "Costs Assessment Rules Committee" guidelines for what is usually allowed, albeit marginally. At this point, I am not persuaded that any allowance for the giving of evidence by audio visual link should be allowed for. The basis for seeking that amount was because of an apprehension that something in Ronald Binetter's evidence might require a response from one of his brothers who are apparently based overseas. That contention is pure speculation at this point. However, the scope for extra costs to be incurred in light of the plaintiff's position concerning expert evidence must be considered. Allowing for what I have stated in relation to past costs I consider that the appropriate amount to order by way of security is $145,000.

Orders

It follows that I will make orders for the provision of security for costs by the plaintiff in the amount of $145,000. Given that the plaintiff is overseas and the restrictions imposed by the current pandemic I will allow 35 days for the security to be provided. I will not yet order that the proceedings be stayed in the absence of provision of security, although that will follow if it is not provided. The parties should confer over the form of security that is appropriate and exercise liberty to apply if it cannot be agreed.
I will order the plaintiff to pay the defendant's costs of the motion. If either party contends for a different costs order then they should apply within the period provided for in UCPR 36.16(3A) to vary it.
Accordingly, the Court orders that: (1) The plaintiff is to give the defendant security for its costs of the proceedings in the amount of $145,000 within 35 days; (2) The parties confer in relation to the form of security; (3) Grant the parties liberty to apply on 2 days notice in relation to the form of security or such other orders as are necessary to give effect to the Court's judgment; (4) The plaintiff pay the defendant's costs of the notice of motion filed 8 April 2020. (5) The defendant's notice of motion filed 8 April 2020 be otherwise dismissed.

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: 13 May 2020

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