Supreme Court New South Wales Medium Neutral Citation: Estate of Nitopi (No 3) [2021] NSWSC 1136 Hearing dates: 6 September 2021 Date of orders: 6 September 2021 Decision date: 06 September 2021 Jurisdiction: Equity Before: Parker J Decision: See [45]-[46] Catchwords: SUCCESSION – executors and administrators – application for removal of executor – executor charged with criminal offences – executor has no financial interest in the estate – plaintiff has a direct pecuniary interest in the estate and has pursued a successful claim on behalf of the estate – executor removed and replaced as administrator by plaintiff JUDGMENTS AND ORDERS – form of final orders to give effect to principal judgment – interest – defendant found liable to repay six payments received by deceased prior to his death – whether statutory interest should run from the date of each payment or from the date the judgment is entered COSTS – party/party – scope of costs order where plaintiff only partially successful – whether part of the costs should be awarded on an indemnity basis due to an offer of compromise made prior to the trial Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), r 42.1 Cases Cited: Akierman Holdings Pty Ltd v Akerman (No 3) [2021] NSWSC 869 Newton v The Grand Junction Railway Company (1846) 153 ER 1133 Tjiong v Tjiong (No 2) [2018] NSWSC 1981 Category: Procedural rulings Parties: Giuseppe Nitopi (Plaintiff) Cristina Antonina Lucia Nitopi (Third Defendant) Motion filed 3 August 2021 Giuseppe Nitopi (Applicant) Christina Francesca Pirrello (Respondent) Representation: Counsel: LJ Ellison SC/D Liebhold (Plaintiff/Applicant) C Harris (Third Defendant/Respondent) Solicitors: Hunter Lawyers (Plaintiff/Applicant) Byrnes Legal (Third Defendant/Respondent) File Number(s): 2014/327528 Publication restriction: Nil Judgment – EX TEMPORE Revised from transcript; issued 9 September 2021 1. On 25 June this year I delivered a judgment in which I made findings on the plaintiff's claim against the third defendant, who is the only remaining active defendant in the proceedings: Estate of Nitopi (No 2) [2021] NSWSC 748. Following delivery of the judgment, it remained necessary to prepare orders giving effect to my conclusions and to deal with costs. I adjourned the proceedings to allow the parties to see whether they could agree on these issues. 2. The parties have been unable to agree, and the matter has come before me today to resolve the issues arising from my judgment. This judgment assumes familiarity with my June judgment (to which I will refer as "J2") and uses the same abbreviations as are used in that judgment. Application for removal of executor 1. Before turning to the form of final orders, I must address a new application by the plaintiff ("Giuseppe"), consequential upon my June judgment. As explained at J2 [9], Giuseppe brought the claims in these proceedings on behalf of the estate of his late father ("the deceased"). Under the deceased's will his widow, the first defendant ("Tina"), was his executor. The residuary beneficiaries were Giuseppe and his sisters, the second defendant ("Rosaria"), and the third defendant ("Cristina"). 2. In the ordinary course, the pursuit of a claim on behalf of the deceased's estate would have been undertaken by Tina as executor, but she did not do so. Instead Giuseppe obtained leave from the Court to bring the claims (which at that stage included claims against Tina and Rosaria as well as Cristina) on the estate's behalf. The grant of leave was the subject of a judgment of Lindsay J delivered on 17 October 2018: Estate of Nitopi [2018] NSWSC 1560 ("J1"). 3. The course of events up to May 2018 was summarised by Lindsay J at J1 [11]-[34]. The proceedings were commenced by Giuseppe in 2014. At that stage, the only defendant was Tina. Giuseppe's complaint was that she was not administering the estate properly, and in particular had delayed in distributing the estate's available assets. This particular complaint was the subject of agreed orders made by White J, as his Honour then was, for the distribution of most of the $20 million in the estate. 4. In 2017, while the proceedings were still pending, Giuseppe became aware of the payments which later became the subject of the claims pursued in these proceedings. Rosaria and Cristina were joined as defendants in November 2017 as a result. There followed a contested application in which, on the one hand, Giuseppe was seeking leave to pursue the claims on behalf of the estate, and on the other hand, the three defendants as recipients were contending that the claims against them were unsustainable and should be dismissed or summarily struck out. It was this dispute which resulted in the judgment delivered by Lindsay J in October 2018 to which I have already referred. 5. As described at J2 [13], the claims against Tina and Rosaria were dropped at the beginning of the hearing, which took place in March of this year. The balance of the hearing concerned only the claims against Cristina. Now that Giuseppe has succeeded in his claims against Cristina (at least partially), he seeks to be appointed as the administrator of the estate for the purpose of enforcing the judgment which has been obtained and dealing with any other matters which arise in the completion of the estate's administration. 6. In support of his application to have Tina removed as executor and have himself appointed as administrator in her place, Giuseppe led evidence of communications with the New South Wales Police Force. That evidence shows that earlier this year, or last year, Tina was charged with a number of offences associated with breaking and entering. Amongst the offences charged were ones which involved allegedly breaking and entering Giuseppe's own home. 7. The evidence shows that Tina has been found guilty of at least some of these offences (although precisely which is not clear). No formal convictions have been entered and she is awaiting sentence. 8. In reliance on this evidence, counsel for Giuseppe submitted that Tina was not a suitable person to conduct the remaining administration of the estate. In response, counsel for Tina submitted that the evidence did not establish that there had been any failure on Tina's part to comply with her duties as executor, nor, in counsel's submission, was there any reason to think that the mere fact that Tina had been found guilty of some offences meant that she would be unable to discharge her duties as executor in the future. Counsel pointed out that if the charges resulted in the imposition of a custodial sentence, and if that had an impact on the administration of the estate, a further application could always be made. 9. These submissions are valid, so far as they go, but an application such as the present invokes the court's supervisory administrative jurisdiction over the affairs of the estate. The overriding consideration for the Court is what course is most likely to promote the proper and efficient administration of the estate. An order removing a person as executor is not necessarily a condemnation of that person's character or abilities in that office. 10. In the present case, the executor, Tina, has no actual financial interest in the estate. I assume that she has completed, or substantially completed, the administration and distribution of the available assets of the estate pursuant to the orders made by White J. The remaining steps in the administration are to obtain satisfaction of the judgment to which I have found the estate is entitled, to distribute the proceeds, and deal with any consequential matters which may arise from those tasks. 11. Although the way ahead is clear, the task may not be straightforward. Given the course of events to this point, which have involved a number of changes of representation of Cristina in the period since the trial, and given the antipathy between the parties, it seems likely that formal enforcement action will be required. It is also possible that the costs of the claim against Cristina, or some of them, will fall on the estate; and in that event, the assessment of the costs and the enforcement of the costs order may well also fall within the purview of the administration. 12. In these circumstances, it seems to me that it would be much more convenient for the plaintiff, whose solicitors are of course familiar with the course taken in the proceedings, and who has a direct pecuniary interest in the outcome, should be responsible for the completion of the process. Although I make no finding that Tina is necessarily disbarred by her guilty findings from acting as executor, the fact of those findings only reinforces the conclusion which I have reached. 13. As a result, I will make the orders sought. As the successful applicant, Giuseppe will receive an order for the costs of the application in his favour out of the estate. As I consider that Tina was entitled to be heard on the application, and the submissions made on her behalf were not unreasonable, an order for costs of the application out of the estate will also be made in her favour. Form of judgment 1. In my judgment I found that Cristina is liable to repay to the estate six payments which she received from her father totalling $1.26 million. There is no dispute that there should be judgment in favour of Giuseppe as administrator against Cristina in that sum. 2. Giuseppe seeks to include in the judgment interest at statutory rates, running from the date each payment was made down to the date of judgment. This is resisted by Cristina. Counsel for Cristina pointed out that the payments in question go back to 2009 and 2010; that the proceedings were not begun until 2014; that the claim against her was not made until 2017; and that it has taken from 2018 until now to resolve the claims. Counsel submitted that in the circumstances interest should run only from the date judgment is entered against Cristina. 3. It is unusual for the Court not to award statutory interest going back to the accrual of the cause of action when entering judgment in a monetary sum. Interest is awarded, not to punish the defendant for unsuccessfully defending the proceedings, but in recognition of the fact that where the defence is unsuccessful, it can be seen that the money has been "fructifying in the wrong pocket": Newton v The Grand Junction Railway Company (1846) 153 ER 1133 at 1134; see also Tjiong v Tjiong (No 2) [2018] NSWSC 1981 at [21]. Delay in bringing the claim, or in prosecuting it to judgment, is therefore only very rarely an answer to a claim for statutory interest. 4. Furthermore, in the present case, Giuseppe cannot be blamed for the extended time it has taken for the claims to come to judgment. He was not the executor of the estate and is not responsible for the delay in pursuing recovery of the amounts which I have found were wrongfully received, or at least wrongfully retained, by Cristina. As I have already pointed out, he only became aware of those payments in 2017 and upon doing so, he acted promptly so as to enable the proceedings to be pursued. That course was vigorously resisted by Cristina, as was her right, but in my view there is no warrant from departing from the usual approach which the Court takes to the award of statutory interest. 5. Giuseppe's legal representatives have calculated the interest from the respective dates of payment down to today as $959,335. This amount will, accordingly, be included in the judgment which will be entered in Giuseppe's favour as administrator. 6. In the course of these proceedings, an application was made in July 2017 for a freezing order against Cristina and a firm of solicitors, Streeter Law. As a result of orders made by the Court on 24 July 2017, a sum of approximately $600,000 in a bank account held by Streeter Law for the benefit of the estate was frozen. Giuseppe now seeks an order that this money be paid out to him as administrator, and there is no resistance to that course. I will make an order accordingly. 7. An earlier freezing order was made by the Supreme Court of Queensland in order to preserve the proceeds of the last payment by the deceased to Cristina which was the subject of the claims in these proceedings. That payment was one of the payments which I found Cristina was liable to repay to the estate. Accordingly, it would seem that the moneys held pursuant to that order should likewise be paid to Giuseppe as administrator of the estate by way of partial satisfaction of the judgment which is to be entered. 8. There is, however, a practical problem. As I have mentioned the order was made by the Supreme Court of Queensland and the moneys are held in Queensland. The proceedings in which they were obtained were proceedings brought by Tina as plaintiff against Cristina as defendant. Giuseppe is not a party. No application has been made to have the Queensland proceedings transferred to this Court. 9. Counsel for Giuseppe accepted that as a matter of comity, either an application should be made to the Supreme Court of Queensland or, at least, a formal application should be made to this Court for the proceedings to be cross‑vested here. The latter course may present a difficulty as Giuseppe's standing to bring a cross‑vesting application without first having been joined as a party is unclear. 10. In these circumstances, I propose to leave it to Giuseppe to make the necessary application. It may be that consent orders can be made to finalise the Queensland proceedings and deal with any questions of costs. Alternatively, the Supreme Court of Queensland may choose to transfer the proceedings to this Court to allow them to be finalised. Costs 1. As the result of the success of his claim against Cristina, Giuseppe sought an order for costs of the proceedings. In the course of the application, counsel for Giuseppe made it clear that the order is sought only as between Giuseppe and Cristina. It will, therefore, not include any costs solely referable to the claims against Tina and Rosaria and, in particular, will not include any costs of the proceedings predating the joinder of Cristina as a defendant in November 2017. Counsel also acknowledged that some interlocutory costs orders have already been made and that any order the Court might make now would not affect those orders. 2. In advance of the hearing of the application, Giuseppe's legal advisers also notified Cristina's legal advisers that Giuseppe would seek an order that he should be entitled to the costs of the claim against her (to the extent not recovered from her) out of the estate on an indemnity basis. Counsel for Giuseppe was, however, unable to demonstrate that notice of this application had been served on Rosaria's solicitors, and she would be a party affected by such an order. Therefore, in this judgment I propose to deal only with the costs inter partes as between Giuseppe and Cristina, leaving any further application concerning the recovery of costs out of the estate to be made later. 3. So far as costs inter partes are concerned, two issues arise. One is the scope of the costs order, and the other is whether, as Giuseppe seeks, part of the costs should be awarded on an indemnity basis in consequence of an offer of compromise made by Giuseppe just prior to the trial. I will deal with those issues in turn. 4. Counsel for Cristina opposed the making of a costs order in the form sought by counsel for Giuseppe, namely, that Cristina pay the whole of the costs (not already the subject of costs orders) of the proceedings as between her and Giuseppe. Counsel made three points. 5. First, counsel noted that the statement of claim on which the claim ultimately succeeded was the fourth version of Giuseppe's pleading, the final amendment only having been made at the beginning of the hearing before me in March this year. Second, counsel noted that initially the claim had been made on the basis of alleged undue influence on the part of Cristina over the deceased. It was only in the final version of the statement of claim that the claim was expanded to rely on the doctrine of unconscionable bargains. This was the basis on which the claim succeeded and, indeed, counsel for Giuseppe abandoned the undue influence claim in final submissions. Thirdly, counsel pointed out that the claim had been only partially successful. In the statement of claim Giuseppe challenged payments totalling approximately $3.2 million, but as I have already noted, only the claims with respect to the last six payments, totalling approximately $1.26 million, were successful. 6. Counsel for Cristina submitted that the costs order made by the Court should reflect Giuseppe's failure to succeed on all points and also the twists and turns in his case. Counsel submitted that I should not make differential costs orders in favour of the parties, but rather that I should make an overall assessment which would result either in there being no order as to costs or in my making an order that some percentage of Giuseppe's costs be paid by Cristina. 7. These submissions parallel submissions which were made in a recent costs decision of mine: Akierman Holdings Pty Ltd v Akerman (No 3) [2021] NSWSC 869. Counsel for Giuseppe submitted that the facts of that case were distinguishable, and counsel for Cristina was inclined to agree. Nevertheless I think that some of what I said in that case has some relevance here and I will refer to it in what follows. 8. Dealing with the first point by counsel for Cristina, there can be no doubt in principle that the costs thrown away by reason of the amendment which took place at the trial should be paid by Giuseppe. As I understand it, the earlier amendments are already the subject of orders made by the Court which will not be affected by this judgment. 9. As to the second point, the form of a costs order in a case where a plaintiff succeeds on some but not all of the claims made in the proceedings was something which I discussed in Akierman (No 3) at [54]-[87]. As I there pointed out, there is some tension in the authorities between two propositions. One proposition, which is based on the terms of r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW), is that in general costs should follow the event, and that rule has been interpreted as operating distributively according to the claims made in the proceedings. The other proposition, which I referred to in Akierman (No 3) as the "traditional rule", is that the Court should not generally make orders for costs by reference to success or failure on a specific issue raised by the parties unless an issue on which the overall unsuccessful party has succeeded is "clearly dominant or separable". 10. In Akierman (No 3) I sought to reconcile this tension by pointing out that the two rules could operate together if the rule that costs follow the event is applied distributively to claims made in the proceedings and the "traditional rule" is applied to separate issues of fact or law which arise in the course of determining those claims. Applying that approach here, it seems to me that each payment which was the subject of the proceedings gave rise to a separate claim for the purpose of distributive application of the rule that costs follow the event. Of course in a general sense each of the payments formed part of a factual continuum, but the question of liability to repay each payment depended upon Giuseppe demonstrating with respect to that specific payment that at the time it was made his father was in a position of special disadvantage, and also that Cristina was aware or should have been aware of that. The very fact that the claims with respect of some payments succeeded and others failed underlines that they were discrete claims. 11. As I described in Akierman (No 3), the course I consider is usually appropriate where some claims succeed and some fail is that the general costs of mounting the claims (and the costs referable to the successful claims) will go to the successful plaintiff, who will be required to pay only the costs which are solely referable to the unsuccessful claims. In the present case, because of the factual overlap between the claims, there may be few, if any, specific costs attributable to the payments on which Giuseppe failed, and the inclusion of those payments in the proceedings may have resulted in little, if any, increase in the general costs (cf Akierman (No 3) at [117]-[119]). But in principle, if there are additional costs referable to those unsuccessful claims, then Cristina should be able to recover them from Giuseppe. 12. But I think that Giuseppe's failure on the allegation of undue influence is in a different category. The allegations of undue influence and unconscionable bargains were simply alternative bases for achieving the same form of relief, namely an order for repayment. I do not see the allegation of undue influence as therefore giving rise to a separate and discrete claim in the sense in which I have used the term. Rather, that unsuccessful allegation should be seen as giving rise only to a subordinate issue in Giuseppe's claims to recover the payments. As such, it is not clearly dominant or separable, and there should be no deduction from Giuseppe's costs on account of it (cf Akierman (No 3) at [91]-[93]). 13. I turn now to counsel's submission that there should be a lump sum adjustment to the costs rather than differential costs orders. A similar argument was put in Akierman (No 3), which I rejected. In my view, the same considerations apply here. I have no proper basis for fixing the percentage reduction; furthermore, there will need to be an assessment undertaken anyway if only to exclude the costs solely referable to the claims against the other defendants, and to quantify the costs payable under the existing interlocutory orders (cf Akierman (No 3) at [121]-[124]). 14. As I said in Akierman (No 3) at [125], the question is ultimately one of balancing the additional complication of assessing differential costs orders against obtaining a fairer result which reflects the parties' entitlement in principle to costs on the other. As in Akierman (No 3), in the exercise of my judgment I think that a more granular approach is better in the present case, and accordingly, I will make orders reflecting the prima facie costs entitlements of the parties to which I have referred. 15. The final matter is Giuseppe's application for indemnity costs. This was based on an informal offer of compromise made on Friday, 19 March 2021 just before the beginning of the hearing on the following Monday, 22 March. The offer was relevantly as follows: Our client hereby offers to settle the whole of the proceedings as against your client on the following terms: 1. Statement of Claim dismissed as against the Third Defendant. 2. The Third Defendant to assign to the Plaintiff her one-third share in the funds currently held on behalf of Streeter Law. 3. All undischarged costs orders vacated. 4. No order as to costs to the intent that each of the parties will bear his, and her, costs, respectively. This offer is made pursuant to the principles enunciated in Calderbank v Calderbank [1975] 3 All ER 333 and shall remain open for acceptance until 10.00 am Monday, 22 March 2021, whereupon it will lapse and our client reserves his right to tender this letter in any future argument in relation to costs. We trust you will draw to the attention of your client that in the event this offer is not accepted our client will at the hearing, pursue his claim that your client pay into the estate the sum of $3,213,000.00 together with all of his costs in this matter. 1. Counsel for Cristina submitted that her failure to accept the offer was not unreasonable, noting in particular that it was made on the business day before the commencement of the trial. However, I do not find it necessary to deal with that submission. 2. In my view, there is a more fundamental difficulty with the offer. That difficulty is that the claims being advanced by Giuseppe were being advanced by him on behalf of the estate, yet the offer in effect proposed a compromise of Giuseppe's own ultimate one‑third entitlement. 3. On any view, the one-third share was an over‑simplification; Giuseppe's entitlement would only be a net one after taking into account all of the costs of administration. But more broadly, it was not open to Giuseppe to compromise a claim made on behalf of the whole estate simply by accepting a pay‑out of part of the estate's entitlement. To be effective, any compromise would have had to take account of the interests of all beneficiaries, including, of course, Rosaria, who would have received nothing from the proposed settlement. Indeed, leave might have been required from the Court before any judgment could be entered in accordance with the compromise. 4. It follows, I think, that it would not have been open to Cristina to have brought the proceedings to an end simply by accepting the offer. For this reason alone I consider that the failure to accept the offer gives rise to no entitlement to indemnity costs. The order of the Court inter partes will, therefore, be made on the ordinary basis. Orders 1. The orders of the Court on the notice of motion filed by the plaintiff on 3 August 2021 are: 1. Note that on 17 October 2018 the Court ordered that the plaintiff be appointed, pursuant to rule 7.10 of the Uniform Civil Procedure Rules 2005 NSW, to represent the estate of the late Egidio Nitopi ("the deceased") in these proceedings. 2. Grant leave to the plaintiff nuc pro tunc to make his application in the notice of motion. 3. Order that the grant of probate in common form made on 2 March 2015 to the first defendant in respect of the will dated 25 September 1997 ("the will") of the deceased, who died on 16 May 2014, be revoked. 4. Order that the first defendant deposit the said grant in the Registry within 48 hours of these orders being made. 5. Order that the plaintiff be appointed administrator cum testament annexo of the estate of the deceased. 6. Order that further compliance with the Rules be dispensed with. 7. Order that the Administration Bond be dispensed with. 8. Direct that the proceedings be referred to the Registrar to complete the grant in accordance with the Rules. 9. Order that the costs of the applicant/plaintiff and of the respondent/first defendant of the motion be paid out of the estate on the indemnity basis. 10. Refer the matter to the Senior Deputy Registrar in Probate to complete the grant of special letters of administration. 1. The orders of the Court in the substantive proceedings are: 1. Direct that there be judgment against the third defendant in favour of the plaintiff in his capacity as administrator of the estate of the late Egidio Nitopi in the sum of $2,220,335.02. 2. Order that the claims by the plaintiff against the third defendant be otherwise dismissed. 3. Order that as between the plaintiff and the third defendant: 1. the costs thrown away by reason of any amendments to the statement of claim be paid by the plaintiff; 2. the costs solely referable to the claims on which the plaintiff did not succeed be paid by the plaintiff; 3. the costs of the proceedings otherwise be paid by the third defendant. 1. Order that the estate funds held by Streeter Law pursuant to the freezing order made by Supreme Court of New South Wales on 24 July 2017 be paid to the plaintiff in his capacity as administrator. 2. Reserve leave to the parties to apply to have the proceedings in the Supreme Court of Queensland transferred to this Court. 3. Reserve leave to the plaintiff to apply with respect to the payment of costs of the proceedings out of the estate. ********* 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: 09 September 2021