The Estate of Arthur Michael Falco; Falco v Lambert

EX TEMPORE Judgment 1HIS HONOUR: These proceedings were originally commenced by the filing of a summons for an order for the passing of accounts and for commission by Peter John Lambert as administrator of the estate of Arthur Michael Falco. 2Subsequently, Joseph Peter Falco and two other members of the Falco family filed a Statement of Claim in those proceedings seeking orders that the grant of probate to Mr Lambert be revoked and that probate of the late Mr Falco's will be granted to Patricia Jean Falco. 3At all material times the solicitor to the estate, taking instructions from Mr Lambert, was Peter Kenneth White. 4A dispute arose between the parties in relation to fees which had been charged to the estate by Mr White. It appears that Mr Lambert authorised the payment of those fees to Mr White out of the estate. 5The plaintiffs took issue with that course. Their primary complaint was that because the will did not contain a charging clause, it was inappropriate, and indeed it was put as high as unlawful, for Mr White to be paid out of the assets of the estate. A secondary complaint was that some, and possibly much, of the work for which Mr White was said to have charged, was not in fact solicitor's work but was rather work in the nature of general administration that should have been undertaken by Mr Lambert. 6These concerns led to correspondence passing between the parties where it was asserted by the plaintiffs that, in the circumstances, Mr White had a serious conflict of interest and would inevitably have to give evidence in the proceedings explaining and, to the extent necessary, justifying his conduct. It was said that there was a clear case, having regard to the provisions of r19 of the Revised Professional Conduct and Practice Rules 1995, that Mr White should cease to act on behalf of the estate. 7Mr White did not agree. Neither did Mr Lambert. They responded to the plaintiffs' correspondence by seeking to explain what had occurred and contesting the proposition that the payments to Mr White from the estate were inappropriate and that it was now necessary for Mr White to cease to act. 8Matters were brought to a head when the plaintiffs filed a Notice of Motion on 13 May 2013 for the following relief: 1. Order that Peter Kenneth White of White and Associates of 80 Main Street, Blacktown, NSW, 2148, cease to act as solicitor for the Defendant in these proceedings. 2. Order that the said Peter Kenneth White pay the plaintiffs' costs of this Notice of Motion on an indemnity bases. 3. Such further or other Orders as this Honourable Court thinks fit. 9It is that Notice of Motion, and in particular the costs consequences arising from what has occurred since it was filed, with which I am concerned today. 10The motion came before me for hearing on 27 June 2013. During the course of the hearing it became apparent that the matters of complaint which underpinned the plaintiffs' concerns about Mr White and which were said to give rise to the necessity for him to cease to act were not to any degree, if at all, raised by the pleadings as constituted by the Statement of Claim then before the Court. It was ultimately, and properly, accepted by the plaintiffs that if the question of Mr White's continued role in the proceedings was properly to be considered, it would be necessary for the Statement of Claim to be amended so that the issues said to excite the problems relied upon by the plaintiffs would be properly before the Court. As a result of that realisation, the hearing before me on the last occasion did not proceed to final determination of the issues raised in the motion. Rather, orders were made by consent for, among other things, the plaintiffs to have leave to serve an Amended Statement of Claim by 1 August 2013. Some consequential case management orders were also made, with the motion itself being adjourned for further hearing before me today. 11On 12 August 2013, a little late but nevertheless pursuant to the leave granted on 27 June, the plaintiffs filed an Amended Statement of Claim. This raised in clear terms complaints against the first defendant as administrator of the estate in relation to matters including the payment of Mr White's contested fees and, for the first time, joined Mr White to the proceedings. It is accepted by all parties appearing today that prior to the joinder of Mr White in the Amended Statement of Claim, there had been no earlier notice by the plaintiffs to any other party (including Mr White) of the prospect that he would be joined to the proceedings. I record that matter not by way of criticism of the plaintiffs, but rather simply to note it as a fact which I consider to be one of the matters relevant to the exercise of my discretion in relation to the costs of the motion. 12As an unsurprising and entirely appropriate consequence of having been named as a defendant in the Amended Statement of Claim, Mr White ceased to act for Mr Lambert. 13The consequence of the filing of the Amended Statement of Claim and Mr White's subsequent ceasing to act is that the relief sought in the motion has been rendered otiose. In due course I will dismiss the motion. The live question debated before me today has been what is to happen in relation to the costs of the motion. 14The Court's discretion in relation to costs is a wide one, which nevertheless must be exercised judicially and on a reasoned basis. The Court's rules make it clear that the usual costs order is that costs should follow the event. However, where a matter is ultimately not required to be determined by reason of an agreement between the parties or, as has happened here, an intervening event, then the event which would normally determine, at least prima facie, what costs order should be made (if any) does not occur. In those circumstances, I consider that the principled approach to the exercise of the Court's discretion is as set out by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Quin (1997) 186 CLR 622, where his Honour said at 624-625: In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in The South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. 15It was submitted by Mr A.J. Bulley of Counsel for the plaintiffs that this is one of those cases referred to by his Honour where it is possible for the Court to find that the respondent to the motion, Mr White, acted so unreasonably that notwithstanding what would otherwise be the usual position (being no order as to costs so that costs lie where they fall), the Court should order Mr White to pay the plaintiffs' costs of the motion and on the indemnity basis. I shall return to the submissions put in support of that proposition in a moment. 16On the last occasion before me Mr C.F. Hodgson of Counsel appeared, instructed by Mr White, for both Mr Lambert as first defendant in the proceedings and for Mr White as respondent to the motion. I am not to be taken as suggesting there was anything wrong in that at the time. Today, however, given what has occurred Mr Hodgson has appeared again this time but solely in the interests of Mr Lambert as administrator of the estate. Mr T.J. Morahan of Counsel has appeared for Mr White. 17Mr Hodgson has submitted on behalf of the first defendant that, in the first instance, the appropriate order in accordance with Lai Quin, would be that each party ought to bear their own costs of the motion. However, Mr Hodgson's submissions also contend that if the Court were to examine the matter further, it would be appropriate for the administrator to have his costs of the motion out of the estate on the trustee basis. 18Mr Morahan, for Mr White, adopts Mr Hodgson's submissions, to the effect that I understand Mr White's position to be that there should be no order as to costs of the motion. 19Mr Bulley has submitted that Mr White's conduct was so unreasonable that what I have referred to as the usual position set out in Lai Quin should not follow. He has taken me, again, through the correspondence between the parties which led to the filing of the motion and has submitted that the outcome (success for his client) was clear, Mr White's correspondence disclosed a complete lack of insight into the depth of the conflict to which Mr White was alleged to be subject and that, in all the circumstances, not least taking into account the relevant Professional Conduct Rules, it should have been obvious at all times that Mr White should have ceased to act. In those circumstances, Mr Bulley submitted, it was equally unreasonable for Mr White to have continued to resist the motion up to the point at which the Amended Statement of Claim was filed. 20In determining the outcome as to the costs of the motion I take into account that it was reasonable in the circumstances for the plaintiffs to have brought their motion. Nevertheless, I am not persuaded that the issue was as necessarily clearcut as Mr Bulley suggested. In saying this I am in no way seeking to prejudge the ultimate outcome, to the extent there will be further consideration of Mr White's position in these proceedings by reason of the Amended Statement of Claim. Given the difficulties with the unamended Statement of Claim, there was something to be said for Mr White's position that he was not compelled to cease to act. For this reason I decline the plaintiffs' application that any costs of the motion which they are awarded should be on the indemnity basis. 21Notwithstanding the reasonableness which I find informed the filing of the plaintiff's motion, the fact remains that the grounds relied upon by Mr Bulley for the suggested unreasonableness of Mr White's conduct really do invite the Court to come to a view as to what would have in fact occurred had the motion gone to a final hearing. That is normally something which a Court is reluctant to do and I decline to do so in this case. 22Furthermore, I must take into account the plaintiff's proper acceptance at the hearing on the last occasion that the matters about which they complain were not articulated in the pleadings as they then stood and that there should be an opportunity, which they have since taken up, to amend the Statement of Claim. 23The fact that the Amended Statement of Claim has now been filed is to my mind a very important matter which takes this case out of what might be described as the more usual situation where the result of the motion will never be known. It is that consideration which is a fundamental matter supporting the outcome proposed by Lai Quin that costs should lie where they fall. 24With the exception, perhaps, of some of the debate between the parties in relation to the veracity of some affidavit evidence filed by Mr White, the basic matters which excited the plaintiff's concerns have now become part of the substantive proceedings by reason of the filing of the Amended Statement of Claim. Therefore, whether or not the plaintiffs were ultimately justified in the position they took will, if the Amended Statement of Claim proceeds to a hearing, be fully argued and determined by the Court. That feature sets this case apart from one where the outcome of a settled motion will never be known. 25For that reason, I am firmly of the view that a just outcome in relation to the costs of the motion will be for the costs of the motion to follow the costs of the proceedings. I have considered whether an order ought to be made now in relation to the administrator's costs incurred on the last occasion in his capacity as administrator, as opposed to costs that are properly Mr White's incurred then in defending the motion. I do not think I have to do so because, if I make an order that the parties' costs of the motion be the parties' costs in the proceedings, that particular issue will be worked out as part of the final outcome. That is to say, to the extent the ultimate proceedings result in an order in favour of the administrator for his costs out of the estate on the indemnity basis, then insofar as any costs incurred by the administrator in defending the motion are concerned, to the extent they are able to be identified and are properly incurred, then they will go the way of whatever order is made in favour of the administrator at the end of the proceedings. 26As between the plaintiffs and Mr White, if the plaintiffs are ultimately successful, then whatever costs order is made in their favour will take up such costs as they have incurred in relation to this motion given, as I have said, that it does appear that the issues between them and Mr White will be fully litigated. The same must apply in relation to Mr White's costs now that he is a party. 27Accordingly the Court's orders are: (1)The plaintiff's notice of motion filed 13 May 2013 is dismissed. (2)The parties' costs (for the avoidance of doubt being the plaintiffs, the first defendant and Mr White) of the motion be the parties' costs in the proceedings. 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: 11 November 2013