Schuhmacher v Emmerson (No 2)
[2013] QSC 235
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- Unreported Judgment
- Schuhmacher v Emmerson (No 2)[2013] QSC 235
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Schuhmacher v Emmerson (No 2)[2013] QSC 235
Schuhmacher v Emmerson (No 2)[2013] QSC 235
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO: | |
Trial Division | |
PROCEEDING: | Originating application |
ORIGINATING COURT: | |
DELIVERED ON: | 6 September 2013 |
DELIVERED AT: | Brisbane |
HEARING DATE: | On the papers |
JUDGE: | Daubney J |
ORDER: |
|
CATCHWORDS: | PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – ORDER FOR COSTS ON INDEMNITY BASIS – where, in respect of the originating application, counsel for the applicant submitted that the applicant should bear its own costs and that the first respondent’s costs ought to be paid out of the estate – where there was an application to remove the first respondent as trustee of the trust – where there was a cross-application concerning the monies held in the Disputed Account – where the applicant opposed the relief sought in respect of the Disputed Account – where the applicant unsuccessfully opposed the cross-application – where the applicant’s conduct in pursuing then abandoning its argument about the purpose of the trust was not sufficiently egregious to justify the award of costs against it on the indemnity basis – whether costs should be awarded against the applicant on an indemnity basis. |
COUNSEL: | ME Steele for the applicant DM Favell for the first respondent RT Whiteford for the second respondent |
SOLICITORS: | Slater and Gordon for the applicant Richard Gray and Associates for the first respondent The Estate Lawyers for the second respondent |
[1] Consequent on my judgment in this proceeding,[1] the parties have now provided their submissions on costs. This judgment on costs should be read in conjunction with my principal judgment in the proceeding.
[2] In respect of the originating application, counsel for the applicant submitted that:
(a)the applicant should bear his own costs, and
(b)the first respondent’s costs ought be paid out of the estate.
[3] It was submitted that it was appropriate for the application to be brought because of the concerns about the proper construction of clause 3(b) of the Deceased’s Will. It was argued that the application by the applicant was necessary because the first respondent “did not take any steps to obtain directions, to transfer the shares, or otherwise to finalise the administration”.[2] While accepting he was unsuccessful, the applicant nevertheless submitted that, until the appointment by the first respondent of himself as trustee of the Trust, the construction of the Will contended for by the applicant was consistent with that determined in the principal judgment.
[4] In relation to the applicant’s application to remove the first respondent as trustee of the Trust, it was submitted that the applicant had relied on the statutory declaration which the Deceased had made some years previously and when “the evidence at trial made it plain that the statutory declaration did not determine the issue, the applicant properly conceded that he was not the sole beneficiary of the Trust”.[3] The applicant argued that, on these grounds, the litigation had effectively been occasioned by “complexities and ambiguities” in documents prepared by the Deceased, that it was necessary for the applicant to seek directions in circumstances where the first respondent had not done so, and that the applicant “should not bear a further costs burden merely because he precipitated the course that the first respondent would have taken in any event”.[4]
[5] In relation to the cross-application concerning the monies held in the Disputed Account, the applicant submitted that the first respondent’s costs and the second respondents’ standard costs ought be paid from the Deceased’s estate and that the applicant should bear his own costs. It was submitted:
“17.The applicant did not bring the application in relation to Kayrelle’s trust and was not the proper respondent to it. It was an appropriate exercise of the executor’s discretion to seek directions about it from the court. As beneficiaries of the estate, the applicant and the second respondents were entitled to, and did, make submissions about it. There is no basis for any costs order against the applicant.”
[6] I will deal first with the costs of the cross-application concerning the Disputed Account. The inference from the applicant’s submissions is that he ought not be exposed to the costs of that cross-application because he was, in effect, a disinterested bystander to the cross-application. That position is untenable.
[7] As it apparent from the principal judgment:
(a)by late 2010, the applicant had told the first respondent that the applicant did not accept that the money held in the Disputed Account was not part of the Deceased’s estate;
(b)the first respondent took advice from counsel and made other enquiries, and then wrote to the applicant on 3 February 2011 noting the dispute about whether the monies were held on trust for Kayrelle, foreshadowing the necessity to apply to the court if the applicant did not agree that the money had been set aside for Kayrelle, and asking the applicant to take his own independent advice and inform the first respondent of the outcome;
(c)in the first letter written by the applicant’s solicitors to the first respondent of 17 May 2011, an undertaking was sought that “the estate will not be distributed until the issue regarding the Bendigo Bank Building Account is resolved”;
(d)the applicant’s solicitors’ first substantive response to the first respondent’s letter of 3 February 2011 did not come until 17 January 2012, when the applicant’s solicitors asserted that there was insufficient certainty of intention or certainty of subject matter to support the creation of an express trust in Kayrelle’s favour, and also asserting that it was incumbent on the first respondent to transfer the funds from the Deceased’s bank accounts to the first respondent, transfer the Deceased’s shares in the company equally to the applicant and Kay, transfer the residue of the estate to the applicant and Kay (after payment of the estate’s liabilities), and then resign as a director of the company.
[8] The further chronology of dealings leading up to the filing of the application and of the cross-application is set out in the principal judgment at [71].
[9] The applicant vigorously opposed the relief sought in respect of the Disputed Account. He adduced evidence to seek to contradict the factual foundation for the trust in favour of Kayrelle. He advanced comprehensive legal argument in an attempt to persuade me that a trust had not been created. And, as I noted at [21] of the principal judgment, determination of the questions raised in respect of the Disputed Account necessarily impacted on the relief sought in paragraph 5(d) of the applicant’s originating application.
[10] The applicant was an active contradictor in respect of the cross-application concerning the Disputed Account. Given his evinced opposition to the monies in the Disputed Account being treated as held on trust for Kayrelle, the cross-application was necessary. The applicant unsuccessfully opposed the cross-application. There is no reason, in my view, why he ought not pay the costs in respect of that cross-application.
[11] As to the costs of the applicant’s originating application, in respect of which the applicant was wholly unsuccessful, it is necessary to take a step back and remind oneself of the practical forensic context in which the applicant brought and pursued that originating application. That context was set out in the principal judgment as follows:
“[87]From January 2012,[5] Trevor asserted that:
(a)clause 3(b) of the Will did not effect a gift of the land held in the Trust, and
(b)the money in the Disputed Account was not held on trust for Kayrelle. The consequence of this assertion was that, under clause 3(e) of the Will, Trevor would receive all of the cash in the Deceased’s estate (apart from the specific request of $25,000 to Michael Powers).
[88]From mid 2012, Trevor asserted that he was the sole beneficiary of the Trust. This assertion was apparently made in a letter from Trevor’s solicitors dated 27 July 2012 containing an “open offer” to settle the dispute between the parties. That letter was not in evidence before me, but the “open offer” element was referred to in a letter from Kay and Kayrelle’s solicitors dated 14 September 2012, which was in evidence, in which it was said that Trevor’s “open offer contained in your correspondence dated 27 July 2012 was prepared on the basis of your client’s incorrect assumption that he is the sole surviving beneficiary of the Trust”. In any event, in a letter to Kay and Kayrelle’s solicitors dated 14 September 2012, Trevor’s solicitors expressly asserted that Trevor was the sole surviving beneficiary of the Trust.
[89]The net effect of these claims by Trevor was that the position he adopted against the other beneficiaries of the Deceased’s estate and the other beneficiaries of the Trust was that:
(a)Apart from the proceeds of sale of the deceased’s vehicle being split (it was purchased by Trevor for the grand sum of $2,500), the specific bequest to Michael of $25,000, and Trevor and Kay receiving the Deceased’s non-cash assets as tenants-in-common in equal shares (noting that these consisted of the shares in the Company, which of themselves were of minimal value, and the Deceased’s personal goods and chattels), Trevor would receive all of the cash in the Deceased’s estate, totalling some $281,000 (being the amount in the Disputed Account plus the amount in the term deposit), and
(b)Trevor would receive all of the real property held in the Trust. This position was confirmed by his call on 29 October 2012 for the Trust to be terminated and for the Trust property to be transferred to him.
[90]Indeed, this contention that Trevor was personally solely entitled to the bulk of the Deceased’s estate, to the exclusion of the other beneficiaries, and to whole of the Trust’s assets, to the exclusion of the Trust’s other beneficiaries, was maintained at trial,[6] at least to the point when, after the evidence had concluded, counsel for Trevor informed the court that Trevor no longer maintained that he was the only beneficiary of the Trust.
[91]Having regard to these claims asserted by Trevor against the Deceased’s estate and the Trust’s estate, it was clearly in contemplation that, upon achieving a majority shareholding position in the Company, Trevor would effectively compel the Company as trustee to distribute all of the Trust’s assets to Trevor personally, to the exclusion of the other beneficiaries.”
[12] It was in that context that a significant component of the originating application concerned the argument that the applicant was the sole beneficiary of the family trust. This was the argument that was abandoned by him in the course of the trial after evidence had been led from the solicitor who prepared the deed of trust which had been lost.
[13] The sole basis for the applicant making this contention was the statutory declaration made by the Deceased, referred to in the principal judgment at [12].
[14] It is notable, however, that the evidence from the solicitor who had prepared the deed of trust, Mr Worthington, was not fresh news for the applicant at trial. In fact, the applicant’s solicitor had spoken to Mr Worthington on 4 December 2012, and he told her that his recollection was that the beneficiaries of the family trust included the deceased, the deceased’s wife, the applicant and a wide range of family members similar to another of the deceased’s trusts known as the “Tredel Trust”. For reasons which were not explained to me in the course of the hearing, the applicant’s solicitor did not tell the respondents that she had received this information from Mr Worthington. The applicant did not put any evidence by Mr Worthington before the court. It was the first respondent who was put to the expense of having to call Mr Worthington to give evidence at trial. Mr Worthington was required for cross-examination by the applicant. In the end, Mr Worthington gave evidence completely consistent with the information he had given the applicant’s solicitors some two months previously. Despite that, it was only after Mr Worthington had given that evidence at the hearing that the applicant decided to drop the case that he was the only beneficiary of the family trust.
[15] In those circumstances, all of the respondents submitted that the applicant ought bear the respondents’ indemnity costs in respect of this issue, at least from the date upon which the applicant became aware of the substance of Mr Worthington’s evidence (i.e. 4 December 2012).
[16] Otherwise, the applicant actively pursued the relief sought in respect of removal of the first respondent as executor and trustee of the Deceased’s estate and removal of the first respondent as trustee of the family trust. For the reasons stated at length in the principal judgment, the applicant was simply unsuccessful in persuading me that it was appropriate for either of those items of relief to be granted.
[17] It is clear that the applicant ought pay the respondents’ costs in respect of the originating application. The only real question is whether there should be an order for costs on an indemnity basis in respect of the question of who were the beneficiaries under the trust. The applicant’s conduct in pursuing, and then abandoning, that case at trial, already having knowledge of the evidence which would be given by Mr Worthington, can hardly be described as meritorious. On the other hand, the point occupied only a relatively minor part of the evidence at trial. The evidence was able to be taken on teleconference. Had it been necessary for Mr Worthington to travel from his home in England to give personal evidence at the trial, I may well have had an even more dim view of the applicant’s conduct in respect of that part of the case. Upon reflection, however, I am not persuaded that the applicant’s conduct in pursuing, and then abandoning, this aspect of the case was sufficiently egregious to warrant the making of an indemnity costs order in respect of that part of the case.
[18] Otherwise, as I have said, there is simply no reason why the applicant ought not pay the other parties costs in respect of the originating application. He was seeking to engineer an outcome which was completely for his own benefit. He was unsuccessful in that attempt.
[19] The net effect of the orders to be made will be that the applicant will not be entitled to recover any part of his costs out of the Deceased’s estate, the applicant will pay the standard costs of all of the respondents, but the differential between the standard costs and the indemnity costs for the first respondent will be paid out of the Deceased’s estate and the Trust. I acknowledge that this means that the second respondents, as beneficiaries under the estate, will effectively bear part of the burden of the difference between the first respondent’s standard costs and indemnity costs – the first respondent, as executor and trustee of the Deceased’s estate is entitled to be indemnified in respect of his costs out of the estate, and is also entitled, insofar as the litigation concerned the family trust of which he is trustee, to be indemnified for his costs in that capacity out of the Trust assets. That, however, is a regrettable practical consequence of what I perceive to be appropriate costs orders against the unsuccessful applicant.
[20] Accordingly, it will be ordered that the applicant pay the first respondent’s and the second respondents’ standard costs of and incidental to the originating application filed 30 October 2012 and the application filed 31 January 2013.