Yizhu Zaknic v Russel Phair &; Russel Phair v Yizhu Zaknic [2017] NSWSC 827

Supreme Court New South Wales

Medium Neutral Citation: Yizhu Zaknic v Russel Phair &; Russel Phair v Yizhu Zaknic [2017] NSWSC 827 Hearing dates: On the papers Decision date: 08 September 2017 Jurisdiction: Equity - Expedition List Before: Sackar J Decision: See para [35] Cases Cited: Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia and Anor ex parte Lai Qin (1997) 186 CLR 622 Category: Procedural and other rulings Parties: Yizhu Zaknic Russel Phair Representation: Counsel: T Morahan L Ellison SC

Solicitors: Proctor Phair Lawyers Chen Shan Lawyers File Number(s): 2016/296449 & 2016/304804 Publication restriction: n/a

Judgment

The Issue 1. Two sets of proceedings namely 2016/296449 and 2016/304802 were due to be heard before me for three days commencing 7 August 2017. The matters settled in advance of that hearing. The outstanding matter between the parties is the question of costs.

Background 1. In late October 2011 the late Frank Zaknic instructed Mr Russel Phair, his solicitor, to prepare a new will which he executed on 27 October 2011. 2. Mr Phair alleged Mr Zaknic said he wanted him to deal with the administration of the estate, take care of his son's interests in the estate and do all the legal work necessary in this regard. Mr Phair was appointed co-executor pursuant to the will along with Mr Zaknic's wife. 3. Mr Phair suggested Mr Zaknic insert a clause in the will so as to enable him to charge for all work done in connection with the estate at professional rates, whether that work involved legal work or the just administration of the estate. 4. Mr Zaknic died suddenly on 28 November 2015. This left his wife and their infant son as sole beneficiaries pursuant to the will. Mrs Zaknic and Mr Phair were co-executors. Probate was granted on 4 April 2016. 5. Whilst in theory it was prudent to have co-executors, sadly the testator could not have made a worse choice. Within a very short time of Mr Phair commencing necessary work in relation to the estate, disputes arose between himself and Mrs Zaknic. This covered a wide range of matters, including Mr Phair accusing Mrs Zaknic of not cooperating with him so as to enable him properly to administer the estate. 6. On 10 December 2015 Mr Phair asserted he sent a costs disclosure by email to Mrs Zaknic. 7. Mr Phair further alleged that from the very outset Mrs Zaknic began interfering in the administration of the estate by making direct contact with managing agents of a number of investment properties of the deceased. He asserted she also transferred a property into her own name while a mortgage debt remained on that property. 8. Mr Phair asserted that he attempted unsuccessfully to explain the difficulties Mrs Zaknic had created and that there were deficiencies on rentals received on some properties as against mortgage commitments. She was allegedly unable or unwilling to accept his various explanations. 9. Mr Phair asserted that Mrs Zaknic instructed him not to investigate properties in Hong Kong or Croatia against his advice. I should also mention in passing that the deceased owned properties in various states of Australia including Victoria and Queensland. 10. On 18 April 2016 Mrs Zaknic lodged a complaint against Mr Phair to the Legal Services Commission. She also informed the Commonwealth Bank that Mr Phair was no longer acting for the estate. 11. Mr Phair asserted Mrs Zaknic told him she wanted to sell various properties and would not listen to him as to the need for valuations. 12. On 19 May 2016 the Legal Services Commission explained to Mrs Zaknic that she and Mr Phair had to jointly administer the estate. The Commission advised each should, if they wished, approach the Court to have the other removed. It otherwise dismissed the complaint. 13. Over the next little while Mr Phair wrote numerous letters on estate matters. Mrs Zaknic however in the meantime instructed Chen Shan Lawyers to act for her. The difficulty as Mr Phair saw it was that Mrs Zaknic had not worked since 2006, her child was a minor and various investment properties were not self-sustaining. From his vantage point much work was to be done. He was also getting no cooperation from Mrs Zaknic as he saw it. 14. On the other hand Mrs Zaknic said the cause of the breakdown in cooperation was the insertion on Mr Phair's advice of what is submitted is a defective charging clause in the will. This permitted Mr Phair to charge professional fees for administrative work and legal work alike. Mrs Zaknic alleged the clause put Mr Phair in a position of conflict between his role as executor and trustee, and lawyer. She alleged that Mr Phair was in breach of the Legal Profession Uniform Law Australian Solicitors' Conduct Rules 2015 (the Solicitors' Rules), in particular Rule 12.1. 15. She asserted it was at a time when she was exceedingly vulnerable and in mourning. Mrs Zaknic also asserted Mr Phair was unhelpful and failed constructively to assist her to understand the basis for his charging. The consequence, according to Mrs Zaknic, was that he also failed to make any proper and/or adequate disclosure and for any number of reasons the charging clause was void. 16. Mrs Zaknic also asserted that the lack of a timely costs agreement, failure to establish an estate account, and failure to reimburse her for legitimate estate expenditure was unacceptable.