Winn v Harding

Supreme Court of NSW|2017-05-16|Before: Darke J

Introduction

These proceedings concern the estate of the late Karen Winn. The plaintiff is the executor and a beneficiary of the estate. The defendant is a beneficiary of the estate.
By her Statement of Claim the plaintiff sought: 1. declaratory relief as to the operation of s 145 of the Conveyancing Act 1919 (NSW) in relation to the will of the deceased; 2. declaratory and other relief as to her rights of reimbursement or recovery from the estate; and 3. orders for possession and sale of a property in Fairfield West that is occupied by the defendant.
The Court delivered judgment on 15 March 2017 (see Winn v Harding [2017] NSWSC 239). It was held (at [32]) that declaratory relief would be given to the effect that the will of the deceased signified an intention that the residuary estate be primarily liable for payment of a certain mortgage, but that in circumstances where the residuary estate was insufficient, the mortgaged properties remained (as between the persons claiming through the deceased) primarily liable for payment of the mortgage in accordance with the respective values of the properties. The Court also held (at [28]-[29]) that the plaintiff had a prima facie entitlement to be indemnified out of the assets of the estate for the amount of various payments made by her since the death of the deceased on account of the mortgage. As noted by the Court (at [8]) certain claims made by the plaintiff for recovery in respect of debts said to have been incurred by the deceased in her lifetime were not pressed. Further, the plaintiff deferred the seeking of orders for sale of the Fairfield West property to give the defendant an opportunity to find a way to meet her share of the burden of the mortgage that is to be borne by the Fairfield West property (see at [31]).

Submissions

The plaintiff submits that she was successful on the principal issue in the proceedings, namely, the issue concerning s 145 of the Conveyancing Act, and also on the ancillary issue of reimbursement of amounts paid on account of the mortgage. The plaintiff submits that there is no reason why the ordinary rule that costs follow the event should not apply. The plaintiff submits that the only issue she did not succeed on was the claim, which was not pressed, for recovery of debts that she says arose during the deceased's lifetime. She submits that the general rule against apportionment of costs on an issues basis should be applied. Accordingly, the defendant should be ordered to pay the entirety of her costs of the proceedings on the ordinary basis. In addition, the plaintiff submits that, as executor, she should be paid her costs out of the estate on an indemnity basis.
The defendant submits that the plaintiff has had only limited success, effectively confined to a declaration in accordance with paragraph 2 of the Statement of Claim. She further submits that the late abandonment by the plaintiff of much of her claim had the consequence that a large amount of costs was wasted. The defendant submits that such abandonment must be reflected in an award of costs against the plaintiff in favour of the defendant, or otherwise a reduced costs award in favour of the plaintiff. The defendant did not suggest that any of her costs should be paid out of the estate. The defendant further submits that it is relevant to the exercise of discretion concerning costs that the proceedings are not yet complete, as the claims for orders for sale of the Fairfield West property have not been dealt with (and ought not be made). Finally, the defendant submits that there should be no order for indemnity costs in circumstances where no Offer of Compromise or Calderbank offer was made.

Determination

The main issue between the parties concerned the operation of s 145 of the Conveyancing Act. The outcome of that issue determined how the burden of a mortgage debt would be borne as between the Fairfield West property and a property in Bathurst. Under the will, the Fairfield West property was given to the plaintiff and the defendant equally, and the Bathurst property was given to the plaintiff alone. In practical terms, the outcome determined the values of the gifts to the plaintiff and the defendant.
The plaintiff was in substance successful on that issue over the opposition of the defendant, albeit that the plaintiff failed to obtain a declaration in accordance with paragraph 1 of the Statement of Claim. Contrary to the plaintiff's position in that regard, the Court found that there was a relevant "contrary or other intention" signified by the will. However, the Court found that the two properties the subject of the mortgage remained primarily liable for payment of the mortgage in accordance with their respective values. That conclusion accorded with the position that had been advanced throughout by the plaintiff. It should be noted that the "contrary or other intention" found by the Court was not one advanced by the defendant (see at [22]). The Court did not accept that there was a "contrary or other intention" as contended by the defendant (see at [22]-[23]).
The plaintiff was also successful in establishing a prima facie entitlement to be indemnified out of the estate for the payments she made towards the mortgage after the death of the deceased.
The plaintiff did not succeed on her claims for recovery of debts said to have been incurred by the deceased in her lifetime. That lack of success was due, not to a rejection of those claims, but rather to the fact that the claims were not pressed at the hearing and thus not determined by the Court. This lack of success, whether viewed alone or together with the deferral of the question of sale of the Fairfield West property, does not in my opinion warrant a conclusion other than that the plaintiff is the successful party which won "the event" (see Uniform Civil Procedure Rules 2005 (NSW) r 42.1).
Nevertheless, it seems to me that the nature of this aspect of the case, coupled with the abandonment of it, renders it inappropriate for the plaintiff to recover her costs in respect of those claims, whether from the defendant or out of the assets of the estate. The essential nature of the claims is adverse to the estate. The claims were not brought by the plaintiff in her capacity as the executor of the estate. On the contrary, the claims were brought by her against the estate, as an alleged creditor of the deceased. To the extent that the defendant took a stance in opposition to the claims, she assumed the role of a contradictor. The defendant did not, however, seek to become the representative of the estate for that purpose. As already noted, these claims were not determined. Moreover, it is not clear that all or any of the claims were very likely, or very unlikely, to succeed (see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625). The Court will not, of course, determine the claims in order to decide the question of costs. In all the circumstances, it is my view that, as between the plaintiff and the defendant, it is appropriate that each party be left to bear her own costs of those claims.
Otherwise, it seems to me that the plaintiff's costs of the proceedings to date should be paid by the defendant on the ordinary basis. (Indemnity costs were not sought by the plaintiff against the defendant, so the lack of any Offer of Compromise or Calderbank offer is not relevant.)
Further, it is my view that insofar as the plaintiff's costs (other than her costs of the claims for recovery of debts said to have been incurred by the deceased in her lifetime) are not paid by the defendant, the plaintiff is entitled to have those costs paid out of the assets of the estate. That accords with general law principles as well as applicable legislative enactments such as s 59(4) of the Trustee Act 1925 (NSW) and UCPR r 42.25 (see Segal v Osborne (No 2) [2016] NSWSC 1328 at [7]-[9] and [15]-[22]). Despite the element of personal interest involved, I do not think that the plaintiff, in bringing the proceedings, should be held to have in substance acted for her own benefit rather than for the benefit of the estate (see UCPR r 42.25(2)(b)). Due administration of the estate required resolution of the issue concerning s 145 of the Conveyancing Act. The issue of the plaintiff's right to indemnity for payments made on account of the mortgage, and the yet to be determined issue concerning sale of the Fairfield West property, are also matters the resolution of which can be seen to be of benefit to the administration of the estate. Further, the plaintiff has not acted unreasonably in bringing the proceedings (see UCPR r 42.25(2)(a)). Neither UCPR r 42.25(2) nor the general law exceptions (as to which see, for example, Lewis v Nortex Pty Ltd (in liq.); Lamru Pty Ltd v Kation Pty Ltd [2006] NSWSC 480 at [46]-[47] and [53]) operate in this case to deny the plaintiff's entitlement to look to the assets of the estate to the extent that the costs are not paid by the defendant.
For the above reasons, the Court will order that: 1. the defendant pay the plaintiff's costs of the proceedings to date, other than the plaintiff's costs of her claims for the recovery of debts said to have been incurred by the deceased in her lifetime, on the ordinary basis; and 2. to the extent that the plaintiff's costs to date (other than the costs of her claims for the recovery of debts said to have been incurred by the deceased in her lifetime) are not paid by the defendant, the plaintiff is entitled to have those costs paid out of the assets of the estate of the late Karen Winn.

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: 16 May 2017

Uniform Civil Procedure Rules 2005(NSW)rr 42.1, 42.25, r 42.1).

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