Supreme Court New South Wales Medium Neutral Citation: Spatt v Benson; Benson v Spatt [2019] NSWSC 1195 Hearing dates: 30 August 2019 Decision date: 10 September 2019 Jurisdiction: Equity Before: Kunc J Decision: Executor entitled to costs on the indemnity basis to be paid out of the estate and other parties to pay their own costs Catchwords: COSTS - Party/Party - Payable out of a fund - Deceased estate - Proceedings to remove executor and for judicial advice as to whether executor should defend - Proceedings resolved without a hearing on the merits - Whether executor entitled to costs of both proceedings on the indemnity basis from the estate Legislation Cited: Trustee Act 1925 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Bovaird v Frost [2009] NSWSC 917 McNamara v San [2010] NSWSC 809 Murdocca v Murdocca (No 2) [2002] NSWSC 505 Nobarani v Mariconte [No 2] [2018] HCA 49; (2018) 360 ALR 390 Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681 Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 Category: Costs Parties: 2017/245068 proceedings Joel Spatt (Plaintiff) Michael William Benson (First Defendant) Julie Merle Spatt (Second Defendant) 2017/356484 proceedings Michael William Benson (Plaintiff) Joel Spatt (First Defendant) Representation: Counsel: 2017/245068 proceedings L. Ellison SC; B Narula (Plaintiff) P.T. Russell (First Defendant) S.B. Docker (Second Defendant) C. McPhillips (Solicitor - beneficiaries of the estate) 2017/356484 proceedings P.T. Russell (Plaintiff) L. Ellison SC; B Narula (Defendant) Solicitors: 2017/245068 proceedings Legacy Law (Plaintiff) Ashurst (First Defendant) HWL Ebsworth Lawyers (Second Defendant) HWL Ebsworth Lawyers (beneficiaries of the estate) File Number(s): 2017/245068; 2017/356484 Publication restriction: No Judgment Summary 1. Nathan Spatt (the "deceased") died on 11 July 2015, leaving an estate with a sworn value of approximately $23 million (the "estate"). A significant amount of that value is represented by shares in three private companies (the "Companies"). Pursuant to his will (the "Will"), the residuary estate was to be divided equally between his widow, Julie Merle Spatt, and his grandchildren Joel Spatt, Jesse Spatt and Julie Dorothy Spatt. The executors under the Will were Mr Michael William Benson, who was the deceased's longstanding accountant but – importantly – not a beneficiary under the Will, and Joel Spatt. Without any disrespect, I shall refer to the family members by their given names, with Julie Merle Spatt being referred to as Julie Senior. 2. A dispute broke out among the residuary beneficiaries as to the administration of the Will. Joel commenced proceedings 2017/245068 to remove Mr Benson as an executor (the "Removal Proceedings"). Mr Benson commenced proceedings 2017/356484 (the "Judicial Advice Proceedings") for judicial advice as to whether he was justified in defending the Removal Proceedings. Julie Senior has sided with Mr Benson, including providing him with an indemnity for his costs of these proceedings. Jesse and Julie have aligned themselves with their brother Joel. 3. The Judicial Advice Proceedings came before me for hearing in late 2017. Since then the Court has conducted a number of hearings intended to focus the parties on the real issues in dispute between them concerning the administration of the Will. To their credit, the parties have managed, although not without controversy, to agree on steps which have led to the estate having been substantially (but not yet completely) administered. 4. The point has been reached where the parties agree that both the Removal Proceedings and the Judicial Advice Proceedings should be brought to an end. The remaining argument between them, which is the subject of these reasons, is how that should be done (dismissal or discontinuance) and how the costs should be borne. 5. The parties have settled their disputes and neither the Removal Proceedings nor the Judicial Advice Proceedings has been dealt with on the merits. In those circumstances, the Court has determined that Joel should be given leave to discontinue the Removal Proceedings and that the Judicial Advice Proceedings should be dismissed. No sufficient reason has been demonstrated why the usual course in relation to an executor should not be followed, with the result that Mr Benson is entitled to be indemnified for his costs of these proceedings out of the estate on the indemnity basis. With one exception, the Court makes no other order as to costs with the intention that each party should bear their own costs. The exception is that the parties to the Administration Motions (see paragraph [55] below) should each have their costs paid out of the estate on the indemnity basis. 6. Mr L Ellison of Senior Counsel appeared with Mr B Narula of Counsel for Joel, Mr P T Russell of Counsel appeared for Mr Benson, Mr S B Docker of Counsel appeared for Julie Senior, and Ms C McPhillips, Solicitor, appeared for Jesse and Julie. While both Jesse and Julie have made submissions, neither of them is a party to either set of proceedings, although they were respondents to one of the Administration Motions. Background and procedural history 1. The deceased died on 11 July 2015. 2. Mr Benson and Joel were nominated as the co-executors of the estate under the Will. Mr Benson was the longstanding accountant of the deceased, and Joel is one of the deceased's grandchildren. Mr Benson is not a beneficiary under the Will. In these reasons, the phrase "the beneficiaries" refers to Joel, Jesse and Julie, and not Julie Senior, unless expressed otherwise. 3. The deceased left to Julie Senior two properties valued at $2,200,000 and $1,330,000, and an indexed legacy of $2,000,000. Maurice, who is the deceased's son and is not involved in these proceedings, was left $750,000. Joel, Jesse and Julie were each left $1,000,000. All of the specific gifts under the Will have been distributed. 4. The residuary estate was left to Julie Senior, Joel, Jesse and Julie. This included all of the issued shares in the Companies. The beneficiaries proposed that these shares were to be transferred in specie to the beneficiaries of the residuary estate. The Companies were investment vehicles comprising cash and investments. Mr Benson and Julie Senior were the sole directors of the Companies after the death of the deceased. 5. On 5 August 2015, Joel noted in correspondence to Mr Benson that "it would be prudent that I be appointed as director of" the Companies "in my joint capacity as executor and trustee of the estate with you, as ultimately the estate is now the 100% shareholder in the Companies". 6. On 13 August 2015, Mr Benson replied the "three Companies are an entirely different matter and don't form part of the estate". 7. On 21 August 2015, approximately one month after the death of the deceased and prior to the grant of probate, the executors advised the beneficiaries that "until Probate has been granted nothing will be happening with the estate". Moreover, the beneficiaries were informed that the three Companies "will remain static as far as possible and the only transactions to occur will be those of an unavoidable nature" and "will be approved by Joel Spatt and Michael Benson". 8. On 10 September 2015, a similar letter was sent by Joel and Mr Benson to Jesse: "We the joint executors of The Estate of The Late Nathan Spatt, being Joel Spatt and Michael Benson wish to report to you as follows. The current position of the estate is that we have appointed John Maitland, solicitor, to handle the matter of applying for Probate, the solicitor has already placed an advertisement with the Supreme Court notifying of the death of Nathan Spatt and that the executors will be making application for Probate within the next fourteen days. Please note that until Probate has been granted nothing will be happening with the estate. The three Companies … will remain static as far as possible and the only transactions to occur will be those of an unavoidable nature, which will be approved by Joel Spatt and Michael Benson. … The joint executors will not be able to act as executors until such time as Probate has being ranted." 1. Despite the above correspondence, on or about 11 September 2015, Mr Benson invested the sum of $150,066 in the estate's name with Langley Finance Pty Ltd. 2. On 18 September 2015, Mr Benson and Julie Senior invested $250,000 with Alceon Secured Debt Fund. 3. Probate was granted on 23 November 2015. 4. On 31 March 2016, Jesse requested an update on the administration of the estate. Joel forwarded the message to Mr Benson saying, inter alia: "[with] regards to the transfers of Point Piper & Bowral to Julie Snr, I note you have previously advised it will be cheaper for you to attend to this rather than instructing Teece Hodgson & Ward. Whilst I am happy for you to attend to these transfers, I think it would be prudent to obtain a quote from John Maitland to have on record as executors." 1. Mr Benson replied to Joel: "Hi Joel Why don't you say what you really mean, what are you getting at. Please be clearer without your form of political correctness because I am approaching this matter to the best of my ability and I am getting more than a little frustrated with all the "completeness for my records" commends [sic] from you, also I now have an additional executor to deal with. The Companies are set in motion by the state and type of investments that Nathan made, we are in a holding pattern until maturity dates are reached. I have taxation consequences to deal with in regards to dividends which I am more than capable of dealing with. … I have my fees covered in the will and the rent has a lease [sic] and the ATO is always there for tax." 1. On 11 November 2016, an email was sent from Jesse to both of the executors which included: "It is my understanding that the general intention (and consensus) is to ultimately wind up these companies once the various investments mature. If this is the case, what options are available (i.e. through liquidation or deregistration), what are the pros and cons of each option etc.?" 1. On 23 February 2017, there was a meeting between the executors and the residuary beneficiaries. At this meeting, it was decided that subject to advice from KPMG, the beneficiaries wanted the shares in the Companies to be distributed to them in specie. This arrangement was confirmed in a series of emails between the parties. 2. In May 2017, Joel retained his lawyers, Legacy Law, and both Jesse and Julie retained Ms McPhillips. 3. In June 2017, Mr Benson retained Ashurst as his legal representative. 4. On 24 July 2017, before any proceedings were commenced, Ashurst wrote to the beneficiaries: "…both directors share the view that it was never the intention of the deceased for each of the Companies to continue to operate or to have an extended trading life after his death. For this reason, our client with the support of Mrs Spatt Snr, have not caused the Companies to take on any new investments and have proceeded on the basis that those Companies will be wound up or deregistered in due course. … Our client is sincere in his efforts to avoid further dispute and to explore alternative arrangements if a position can be agreed amongst the beneficiaries. As part of this process, our client is prepared to consider alternative realisation strategies …" 1. On 11 August 2017, by statement of claim, Joel commenced the Removal Proceedings against Mr Benson, seeking orders to have Mr Benson removed as the executor of the estate. Those proceedings also sought to have Mr Benson pay Joel's costs on the indemnity basis, and pay his own costs, without recourse to the estate. 2. The primary complaint in the Removal Proceedings was that Mr Benson had failed to transfer the estate's shares in the Companies to the beneficiaries of the residuary estate in specie pursuant to the Will. The reason this did not happen is because Julie Senior did not want to receive the shares in the Companies and become a minority shareholder. Instead, Julie Senior sought to receive her quarter of the residuary estate in cash. Julie Senior was joined as the second defendant in the Removal Proceedings. Joel also complained that he had not been given access to the financial records of the Companies and that Mr Benson had failed to provide financial and other information to the beneficiaries. 3. On 6 September 2017, Ashurst sent a letter to the beneficiaries articulating the issue concerning the shares: "One of the four beneficiaries, being Julie Spatt Snr, does not want to accept a transfer of the shares and would prefer to receive the dividends paid by the Companies to the Estate or otherwise paid to the Estate on the winding up of the Companies. … Our client has spoken to Julie Spatt Snr and understands that she may be prepared to consent to the shares in the Companies being transferred to the other beneficiaries if there is a way to value her 25% interest in the Residuary Estate and facilitate a payment to her in satisfaction of her legacy under the Will." 1. This proposal by Mr Benson was ignored or rejected by the other beneficiaries of the residuary estate. 2. On 6 October 2017, Ashurst sent further correspondence to the beneficiaries relating to the construction of the Will: "On the proper construction of the Will and in order to effect the separate gifts of the Residuary Estate, the executors are obliged to realise and convert the Residuary Estate into cash and to divide and distribute that cash equally amongst the residuary beneficiaries. Even if that construction is incorrect, it is clearly within the full discretion and power of the executors to realise and distribute the Residuary Estate should they so decide. … Whilst our client can (and if necessary will) seek advice by himself he would prefer to approach an independent Senior Counsel or the Court with your client if possible. Could you please let us know if your client will consent to this course of action?" 1. The beneficiaries did not take up the invitation to approach Senior Counsel or the Court for advice. 2. Another letter dated 6 November 2017 was sent to the beneficiaries saying that they had failed to explain: "(i) why they wish to continue with Companies that no longer trade; (ii) why they would be insisting on Julie Spatt Snr being tied into the Companies going forward; (iii) what your clients intend to do with the Companies going forward should their testamentary trustees proceed to hold 75% of the shares in the Companies; and (iv) how a distribution of the shares will allow for Julie Spatt Snr to be paid out for her 25% of the Residuary Estate and will otherwise ensure an equal outcome of the distribution of the Residuary Estate as between all of the Residuary Beneficiaries." 1. On 10 November 2017, a reply was sent to Mr Benson's legal representatives, which included: "Your client, a co-executor but not a beneficiary, wishes to ignore the views of 75% of the shareholders and liquidate a successfully operating private Companies [sic]. Our client, a co-executor and beneficiary, wishes to place 75% of the Companies into the hands of the recipients intended by the deceased. The same 75% and the other 25% of the shareholding can then decide in their own way and own time the future of the Companies. … All your client is asked to do is transfer shares in a private company. If he cannot do that, he will be removed." 1. This letter provided no suggestion that the beneficiaries were willing to compromise and give Julie Senior her share of the residuary estate in cash as she had requested, rather than the shares in specie. 2. On 24 November 2017, Mr Benson commenced the Judicial Advice Proceedings to obtain judicial advice about whether he would be justified in defending the Removal Proceedings. 3. At a directions hearing for the Judicial Advice Proceedings before me on 6 December 2017, I asked what the basis was for the removal application. Mr Ellison SC, who appeared for Joel, replied (T4:18-24) "The removal is that the three grandchildren have said, "we want the asset of the estate which is available for distribution in specie, to be distributed to us in specie" and there have been directions given to the two executors to that effect. My client, as executor and beneficiary, is happy to act on that direction. Mr Benson is not. Mr Benson says, I don't think there is any dispute, he wants to put into effect the deceased's intention that the Companies all be wound up in the context of the administration." 1. On 11 January 2018, Julie Senior entered into a deed of indemnity with Mr Benson. Under this agreement, Mr Benson was indemnified for all his legal costs concerning both the Removal Proceedings and the Judicial Advice Proceedings, including indemnifying Mr Benson against any adverse costs orders. 2. On 26 February 2018, I stayed both the Removal Proceedings and the Judicial Advice Proceedings, so what appeared to be the real matter in dispute could be addressed, being the construction of the Will and the administration of the estate. No party opposed those orders being made. 3. Also on 26 February 2018 the legal representatives of Joel informed the legal representatives for Mr Benson that they were content to allow Julie Senior to be paid out of her share of the residuary estate in cash. This arrangement is noted in paragraph [41] below, whereby pursuant to consent orders dated 16 March 2018, it was agreed that Julie Senior's share of the residuary estate would be paid out in cash. 4. On 2 March 2018, Joel commenced another set of proceedings, 2018/68933 (the "Construction Proceedings"), which sought to determine the construction of the Will. In those proceedings, Mr Benson was the first defendant, Julie Senior was the second defendant, Jesse was the third defendant and Julie was the fourth defendant. 5. On 8 March 2018, Julie Senior filed a cross-claim in the Construction Proceedings. 6. On 16 March 2018, the Construction Proceedings were finalised by these consent orders: "1. DIRECT THAT, at the time of distributing their Residuary Estate (as that term is defined in clause 6.1 of the Will of the late Nathan Spatt ("the deceased"), the executors of the Estate of the deceased who died on 11 July 2015 leaving a will dated 24 July 2014 of which Probate 2015/234131 was granted to the Plaintiff and the First Defendant on 23 November 2015: (a) pay to the second defendant, in satisfaction of the deceased's gift under clause 6.2 of the Will, a sum of money equal to the value of one quarter of the Residuary Estate; and (b) distribute the remainder of the Residuary Estate in specie equally between the plaintiff, third defendant and fourth defendant in their capacity as trustees of the sub-trusts in accordance with clause 6.3, 6.4 and 6.5 of the Will. 2. DIRECT THAT in determining the value of one quarter of the Residuary Estate for the purpose of order 1(a), any shares held by the estate in the private companies of the deceased are to be valued as if each company was being voluntarily wound up; 3. ORDER THAT the First Defendant's costs of these proceedings be paid out of the Estate of the deceased on the indemnity basis and that there otherwise be no order as to costs of any other party in these proceedings to the intent each of the Plaintiff, Second Defendant, Third Defendant and Fourth Defendant bears his or her costs in these proceedings and without recourse to the Estate of the deceased. 4. These proceedings are otherwise dismissed. 5. Nothing in the orders herein precludes either the Plaintiff or the First Defendant as executors of the estate of the deceased making an application for commission and professional fees. 6. Reserve for further consideration the directions in orders 1 and 2." 1. Despite the Construction Proceedings, and therefore what the Court had been told was the main issue of contention between the parties, being resolved, both the Removal Proceedings and the Judicial Advice Proceedings continued. 2. On 19 March 2018, Mr Benson emailed Joel, following the making of the consent orders on 16 March 2018. He said: "Following the orders made by the Court today, I propose that we arrange to meet next week to discuss the next steps required to achieve the administration of the Estate." 1. This meeting came to nothing and again there was no progress in the administration of the estate. 2. On 2 May 2018, I ordered the parties to participate in a mediation, "the subject matter of the mediation to be the identification, and to the extent possible, agreement of what steps are required to be taken to administer the Estate." 3. Mediation occurred on 31 May 2018 and 3 August 2018 with the assistance of the Hon Keith Mason AC QC. Although the main issue in dispute had been resolved by the consent orders of 16 March 2018, the parties were still unable to agree on the further steps necessary to administer the estate. 4. At the first mediation, it was agreed that Joel would have access to the books and records of the estate and the Companies, to make copies of those records and documents. It was also agreed that Joel's costs of reviewing those documents were to be borne by the estate up to a limit of $50,000. 5. Joel subsequently engaged KPMG to carry out a review of the books and records of the Companies and the estate. 6. In mid-2018, prior to the second mediation, KPMG prepared a report of its investigations. In accordance with the agreement, the estate paid $50,000 towards KPMG's fees for preparing the report. No additional allegations emerged against Mr Benson as a result of KPMG's review. 7. On 8 August 2018 a letter was sent by Joel's legal representatives to Mr Benson. It requested that Mr Benson be removed as accountant of the estate and the Companies, and that KPMG replace him. The letter specifically requested: "KPMG is to be engaged to oversee ongoing accounting and tax agent services with regard to the Estate and Companies, including their wind-up." 1. On 20 August 2018, Mr Benson's legal representatives replied to the letter in the preceding paragraph. They stated, inter alia, why Mr Benson could not agree to be removed as executor of the Will. They also outlined why the distribution of the residuary estate had gone for so long: "The agreed position involved the orderly realisation of all assets in the Companies and the Estate to cash, including the winding up of those Companies, for ultimate distribution to the Residuary Beneficiaries (in cash). Joel Spatt and his siblings' change of position demanded that the Companies not be wound up, their assets not be realised to cash in the Estate and that there be an in specie distribution of the assets of the Estate to all Residuary Beneficiaries, including the shares in the Companies. They would not contemplate any other outcome that would enable Julie Spatt Snr to receive her share of the Residuary Estate in cash. It was not until 26 February 2018 that we were first notified that Joel Spatt (and his siblings) would not object to Julie Spatt Snr receiving cash for her share of the Residuary Estate. The Construction Proceedings settled very quickly and on that basis. Now, Joel Spatt and his siblings, by the offer, and without explanation, have changed their position again, the third change by our count, demanding inter alia that the Companies be wound up and Julie Spatt Snr not receive her share of the Residuary Estate in cash. It is these unpredictable changes of position, and the uncompromising way in which each of these positions have been pursued which have caused the litigation and delayed the administration of the Estate. … However, Mr Benson does not object to Joel Spatt retaining KPMG personally to review any accounts or returns prepared by Mr Benson, and Mr Benson is happy to work with KPMG should Joel wish to retain them in this capacity. Further, and subject to any disagreement from the Residuary Beneficiaries, Mr Benson is happy for Joel Spatt's costs of retaining KPMG for this purpose to be paid for by the Estate." 1. Following the resolution of the Construction Proceedings, on 22 August 2018 the matter was before me again for a directions hearing in relation to the Removal Proceedings and the Judicial Advice Proceedings. At this hearing, Mr Ellison SC submitted for Joel (T6:28-32;T7:20-22) (emphasis added) "We want the proceedings [Judicial Advice Proceedings] to stay on foot. We are more than happy, and that's the point of the open offer. We can say to the other executor, let's cooperate in doing this. If he doesn't, I then come back to court and say there's a probate that remains unadministered; for a number of reasons I want to remove the other executor, or I want us both removed because the job is not being done. … If I could go back perhaps to the – if I should take you to the offer from Legacy Law, we are not seeking Mr Benson's removal, that would be a bridge too far. But if you look at what's contemplated it is purely administrative matters." 1. Directions were then made for the filing by 14 September 2018 of notices of motion in both the Removal Proceedings and the Judicial Advice Proceedings for any application to dispose of the proceedings. I also invited the parties to exchange what I described as draft notices of motion in relation to what each party contended should be the next steps in the administration of the estate. 2. In response to those directions, on 14 September 2018 Mr Benson filed two notices of motion, one in each of the Removal Proceedings and the Judicial Advice Proceedings, which sought to have both sets of proceedings dismissed. The notice of motion in relation to the Removal Proceedings sought to have Mr Benson's costs of and incidental to the notice of motion and the Removal Proceedings be paid out of the estate on the indemnity basis. Similarly, the notice of motion in the Judicial Advice Proceedings also sought to have Mr Benson's costs paid out of the estate on the indemnity basis. 3. On 17 September 2018, Julie Senior filed a draft notice of motion. On 21 September 2018, Joel filed an amended notice of motion. Both of these motions (the "Administration Motions") sought orders in relation to the administration of the estate. While filed in the Removal Proceedings, they were unrelated to the Removal Proceedings, which were stayed at the time. 4. On 21 September 2018, all of the notices of motion which had been filed, being both Administration Motions and those of Mr Benson in both the Removal Proceedings and Judicial Advice Proceedings were set down for hearing on 19 October 2018. 5. The parties were able to agree on the further administration of the estate. On 19 October 2018, the Court made a series of detailed orders by consent which included: 1. Appointing KPMG to check Mr Benson's accountancy and taxation work for the estate and the Companies; 2. For the winding up of the Companies and the distribution of their assets to the estate; 3. For the winding up of the estate and the distribution of the residuary estate in accordance with the consent orders made in March 2018; 4. Reserving for further consideration the orders for the administration of the estate; 5. Dismissing the Administration Motions and reserving costs; 6. Lifting the stay of the Removal Proceedings; and 7. Standing over Mr Benson's notices of motion filed 14 September 2018 to 7 December 2018. 1. By consent, the proceedings were stood over on two occasions to enable the administration of the estate to be carried out. 2. On 9 April 2019, I made directions in both the Removal Proceedings and the Judicial Advice Proceedings that Mr Benson's notices of motion of 14 September 2018 were to be heard on 30 August 2019. 3. On 23 August 2019, Joel's solicitors served two additional notices of motion. The first was in relation to the Removal Proceedings, seeking to discontinue the proceedings and the second sought the dismissal of the Judicial Advice Proceedings on the basis that the Removal Proceedings were dismissed. Both notices of motion also seek various orders as to costs, in essence that Mr Benson should pay his own costs and pay Joel's costs on the indemnity basis, both without recourse to the estate. 4. Mr Benson's "best estimate" of the costs he has incurred to date from both sets of proceedings is $750,000. However, it is likely the accurate figure is higher. 5. The issues around the administration of the estate have been resolved by the parties, and the parties and their legal representatives are to be congratulated for being able to do so. The subject of argument before me was how the proceedings were to be disposed of and the costs consequences. The formal framework for that debate was provided by Mr Benson's two motions of 14 September 2018 (see paragraph [54] above), Joel's motions of 23 August 2019 (see paragraph [60] above) and the costs of the Administration Motions (see paragraph 57(5) above). Legal principles 1. While the starting point for costs is that costs follow the event, rules 42.19 and 42.20 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) deal with proceedings that are not resolved by a final hearing: "42.19 Proceedings discontinued (1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1. (2) Unless the court orders otherwise or the notice referred to in rule 12.1 (2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued. … 42.20 Dismissal of proceedings etc (1) If the court makes an order for the dismissal of proceedings, either generally or in relation to a particular cause of action or in relation to the whole or part of any claim, then, unless the court orders otherwise, the plaintiff must pay the defendant's costs of the proceedings to the extent to which they have been dismissed." 1. In McNamara v San [2010] NSWSC 809 at [12] Hallen AsJ (as his Honour was then) set out the following principles in respect of UCPR r 42.20: "The following principles may be regarded as relevant in determining who is to bear the burden of costs in a case where the proceedings are dismissed before a final hearing: (a) Costs discretions are truly discretionary: see Oshlack v Richmond River Council (1998) 193 CLR 72 at 84 and there are no absolute rules; (b) The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ; (c) Rule 42.20 of the UCPR does not give rise to a presumption that costs will be ordered against the Plaintiff: Fordyce v Fordham [2006] NSWCA 274; (2006) 67 NSWLR 497; Foukkare v Angreb Pty Limited [2006] NSWCA 335 at [65]; Pentroth Pty Ltd v Kirschild Pty Ltd (2006) 96 SASR 129; Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [53]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32. However, the rule does create a starting point by requiring "… the plaintiff must pay the defendant's costs of the proceedings …" unless that outcome is displaced by a discretionary decision ("unless the court otherwise orders"); (d) Generally, there must be some proper justification, sound positive ground, or a good reason, for departing from the ordinary position: Fordyce v Fordham at [2] per Santow JA; Australiawide at [54] per Bryson JA; circumstances in which it has been held appropriate to depart from the ordinary position include where the proceedings have been rendered unnecessary by circumstances beyond the plaintiff's control; where the plaintiff achieved practical success in the proceedings, or where costs have been significantly increased by the unreasonable conduct of the defendant. (e) The Plaintiff should be the moving party on an application for an alternative costs order: Bitannia at [70] per Basten JA. If facts are to be relied upon to found the court making a different order, the Plaintiff will bear the onus of proving the relevant facts; (f) Where the proceedings are dismissed prior to any hearing on the merits, "the Court cannot try a hypothetical action between the parties" to determine the question of costs: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624; Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd [2007] NSWSC 1120 at [35]; (g) It may be necessary to analyse the whole of the proceedings to determine the appropriate costs order: Fordyce at [67] per McColl JA. A relevant consideration is whether the Plaintiff acted reasonably in commencing the proceedings and whether the defendant acted reasonably in defending them: Australian Securities Commission v Aust-Home Investments Ltd at 201 (cited with approval in Foukkare ); all the relevant circumstances, and not just the fact of dismissal, should be considered; (h) It is also important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event, or settlement, so removes, or modifies, the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the court's discretion otherwise than by an award of costs by the successful party. It is the latter type of case that usually creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs: One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 at 553; cited with approval in Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 per Davies AJA (with whom Mason P and Meagher JA agreed) at [5]; (i) The distinction between the two categories referred to above is often helpful in exercising the costs discretion, notwithstanding that neither category can be precisely defined, the boundary between them is unclear and other factors may be relevant: Bitannia per Basten JA at [79]–[81];Perre v State of New South Wales [2009] NSWLEC 51 at [49]; (j) The rule requires the court to make such order as it thinks just in the particular circumstances of the case." 1. Furthermore, UCPR r 42.25 provides: "(1) Subject to subrule (2), a person who is or has been a party to any proceedings in the capacity of trustee or mortgagee is entitled to be paid his or her costs in the proceedings, in so far as they are not paid by any other person, out of the fund held by the trustee or out of the mortgaged property, as the case may be. (2) The court may order that the person's costs not be so paid if: (a) the trustee or mortgagee has acted unreasonably, or (b) in the case of a trustee, the trustee has in substance acted for his or her own benefit rather than for the benefit of the fund." 1. In Bovaird v Frost [2009] NSWSC 917, Brereton J (as his Honour then was), considered UCPR r 42.25 and said at [28]-[29]: "This rule in substance reflects the position at general law, as summarised by Austin J in Drummond v Drummond [1999] NSWSC 923: [43] In Miller v Cameron (1936) 54 CLR 572, 578, Latham CJ explained that 'as a rule, a trustee is allowed his costs out of the trust estate if his conduct has been honest, even though it may have been mistaken'. In Re Weall ; Andrews v Weall (1889) 42 Ch D 674, 677, Kekewich J spoke of the 'tenderness which the Court is anxious to exhibit towards trustees honestly exercising discretion in discharge of their duties, often difficult and still more often thankless'. In Re Jones; Christmas v Jones [1897] 2 Ch 190, 197 the same judge said that 'a man who fulfils the difficult duties of an administrator, executor or trustee is, in common sense and common justice, entitled to be recouped to the very last penny everything that he has expended properly – that is to say, without impropriety – in his character of administrator, executor or trustee ...'. Thus it is normally the case that an executor who commences or defends an action in the capacity of executor is entitled to be indemnified out of the estate for the costs incurred in doing so, even if the litigation is unsuccessful, the executor's conduct is found to have been mistaken, and the other party in the litigation is held to be entitled to an order for costs. [44] This exception to the normal rule that costs follow the event, which permits an executor to recover costs from the estate, is itself subject to some exceptions, as is plain from Latham CJ's reference to honest conduct and Kekewich J's reference to impropriety. There are two 'sub-exceptions' which are arguably relevant to the present case. [45] The first is the sub-exception for 'impropriety'. As Kekewich J made clear in Re Jones , cases of impropriety include an executor taking or defending proceedings in breach of trust, or conducting the proceedings in such a way that the Court, on a general view of the case, regards the executor's conduct as 'not honestly brought forward' ([1897] 2 Ch 190, 198). Additionally, recourse to the estate may be denied to an executor 'where the claim is of monstrous character, that is, one which no reasonable man could say ought to have been put forward' (at 198). In Re Weall the trustees allowed a solicitor to deduct fees which were not properly chargeable to the life tenant from the rental income of the estate. Kekewich J observed that while mistakes or errors in judgment would not disentitle the trustees to an indemnity, the beneficiaries were entitled to expect 'reasonable prudence' of the trustees (42 Ch D at 678-679). [47] Secondly, the rule which gives an executor the prima facie entitlement to be indemnified out of the estate for costs relates only the costs incurred in the administration and distribution of the estate. Such costs are to be distinguished from costs incurred by an executor in furtherance of a personal interest: Miller v Cameron (1936) 54 CLR at 578-579; Re Jones [1897] 2 Ch at 197-198; Plimsoll v Drake (No 2) (Supreme Court of Tasmania, Zeeman J, unreported, 8 June 1995). Executors who pursue personal interests in litigation are 'not fighting for the estate any more than if they were not executors at all': Skrimshire v Melbourne Benevolent Asylum (1894) 20 VLR 13, 18 per Madden CJ. An executor who prosecutes or defends proceedings in the capacity of, say, creditor or beneficiary of the estate rather than in the capacity as executor cannot expect to recoup the costs of litigation from the estate simply on the basis that he or she is also an executor. In Miller v Cameron Latham CJ took the view that a trustee who defended an action for his removal was thereby representing his own interests and not those of the trust estate. In Plimsoll v Drake Zeeman J reached a similar conclusion where a trustee unsuccessfully asserted the right to demand a release before distributing the trust estate to the beneficiaries. 29 In National Trustees Executors and Agency Co of Australiasia Ltd v Barnes (1941) 64 CLR 268, [1941] VLR 133, [1941] ALR 58 Williams J said at 278-279: The main contention has been whether these costs are recoverable under the indemnity. The learned Chief Justice of the Supreme Court of Victoria decided that they were not because they were incurred by the trustees in defending themselves against a personal liability, and therefore on their own behalf, and not for the benefit of the trust. He considered the principle to be that the costs of trustees of defending such a suit are chargeable against the estate in all cases in which the defence is for the benefit of the estate. … If it is necessary to show such a benefit, then the fact the trustees establish that they have administered properly would be sufficient, but I am satisfied that it is not necessary to do so. Such expressions as acting 'for the benefit of,' 'with reference to,' or 'on behalf of' the trust estate or in the discharge of his duty as a trustee, are used indiscriminately in the judgments, but they all mean the same thing, namely, that the question is whether the costs, charges and expenses are properly incurred by the trustee as an incident of his administration of the estate. If a trustee is sued by beneficiaries who complain of some act or omission by the trustee, he is entitled to defend his conduct as an incident of such administration (in Re Llewellin, Llewellin v Williams , (1887) LR 37 Ch Div 317 at 327. Even if he fails in the suit he may be allowed his costs out of the estate, but if he succeeds, as in this case, he is clearly entitled thereto." 1. Section 59 of the Trustee Act 1925 (NSW) provides, noting especially s 59(4): "(1) A trustee shall be chargeable only for money and securities actually received by the trustee, notwithstanding the trustee's signing any receipt for the sake of conformity. (2) A trustee shall be answerable and accountable only for the trustee's own acts, receipts, neglects, or defaults, and not for those of any other trustee, nor for any banker, broker, or other person with whom any trust moneys or securities may be deposited, nor for the insufficiency or deficiency of any securities, nor for any other loss, unless the same happens through the trustee's own wilful neglect or default. (3) Nothing in subsections (1) and (2) shall prejudice the provisions of the instrument, if any, creating the trust. (4) A trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee's trusts or powers. (5) This section applies to trusts created either before or after the commencement of this Act." 1. In Nobarani v Mariconte [No 2] [2018] HCA 49; (2018) 360 ALR 390, ("Nobarani") the High Court held, per Kiefel CJ, Gageler, Nettle, Gordon and Edleman JJ at [2]-[3], "The general rule concerning executors, like that concerning trustees, is that costs properly and reasonably incurred by the executor in connection with the administration of the estate are payable from the estate. These costs can include litigation expenses. Some examples of recoverable litigation expenses are: where an executor has a reasonable and bona fide belief in the validity of the will albeit one that is found to be incorrect; where an executor is unsuccessful in reasonably defending an action brought by legatees; or where an executor unsuccessfully, but reasonably, seeks to uphold a grant of probate on appeal. The same approach applies to the circumstances of this litigation, where the respondent reasonably and properly sought and obtained a grant of probate in solemn form, and then reasonably and properly resisted appeals seeking to set aside that grant of probate. Although, after an appeal to this Court, the grant of probate was set aside due to a denial of procedural fairness at trial to the appellant, there was, and is, no suggestion that the respondent acted other than reasonably and properly in seeking the grant and in resisting the appeals." 1. Joel, Jesse and Julie drew attention the oft-cited passage from the judgment of McHugh J in Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624 ("Lai Qin") (emphases added; citations omitted): "6. In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. 7. 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. 8. 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. 9. 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." 1. The recent decision of Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681 ("Nichols") also considered the question of costs. At [2] and [8], Basten JA said: "Where the parties resolve their differences, except as to the costs already incurred in litigation, they should usually expect that the court will not award costs. That is because the general rule applicable in civil litigation in superior courts is that costs will "follow the event". That rule is frequently paraphrased by reference to its purpose, namely that the successful party should generally recover its costs from the unsuccessful party. But where there has been no trial there is no "event" because, except in unusual cases, it is not possible to say that one party has been successful and the other unsuccessful. The orders made by consent may or may not demonstrate capitulation by the "unsuccessful" party. … Secondly, although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon." 1. In Nichols, Payne JA (with whom Meagher JA agreed) also noted (at [47]): "The finding that the statement was "prima facie" untrue should not have been made. Any finding of potentially serious misconduct, such as that Mr Nichols made an untrue statement, could only have been made after permitting cross-examination of all the witnesses, in particular Mr Casey and Mr Nichols. That exercise, permitting the cross-examination of witnesses to determine costs issues in a case determined other than on the merits, is antithetical to the principles explained in Lai Qin and adopted repeatedly by this Court since. Such a course would also be contrary to the principles in Pt 6 Div 1 of the Civil Procedure Act 2005 (NSW) which encourages the settlement of litigious disputes." The parties' submissions Mr Benson's submissions 1. Mr Benson submitted only that he should be indemnified for his costs in relation to both the Removal Proceedings and the Judicial Advice Proceedings out of the estate of the deceased. He sought no costs orders against other parties. 2. Mr Benson's submissions can be summarised as: 1. The only relief sought by Joel in the Removal Proceedings was the revocation of the grant of probate and the removal of Mr Benson as the executor. No other relief had been sought, such as any alleged breach of duty to account, or any alleged loss or any damage said to have arisen from alleged misconduct by Mr Benson. If the Removal Proceedings are dismissed, the grant of probate will not have been revoked, and Mr Benson will not have been removed as executor. As such, Joel will not have obtained any of the relief he sought, suggesting Mr Benson's behaviour has not been unreasonable in defending each of the proceedings, and there is no merit in having the proceedings continue. Furthermore, if the Removal Proceedings are dismissed, Mr Benson will continue to act as an executor of the Will and he should, by parity of reasoning, be entitled to his costs of and incidental to the Judicial Advice Proceedings as costs which he reasonably and properly incurred; 2. There can be no suggestion that Mr Benson acted unreasonably in defending the Removal Proceedings, and there is no other disentitling factor which would suggest Mr Benson should not be granted the costs order which he seeks; 3. As an executor, Mr Benson is entitled to his costs on the indemnity basis pursuant to UCPR r 42.25 and s 59(4) of the Trustee Act 1925 (NSW); 4. The cause of the Removal Proceedings was Joel and the other grandchildren beneficiaries of the residual estate refusing to allow Julie Senior to receive part of the residuary estate in cash, as opposed to shares, as was her wish. The length of the proceedings was a result of the beneficiaries changing their position in relation to how the residuary estate should be distributed, with this position changing at least four times. The first was the consensual winding up and converting the residuary estate to cash for distribution, the second was when they refused to allow Julie Senior's shares be paid in cash to her, the third was the concession that Julie Senior's share could be paid in cash, and the fourth was that the Companies be wound up by KPMG. As such, Mr Benson was entitled to respond to each of the positions put forward by the beneficiaries; 5. Even after the Construction Proceedings ended in consent orders, and therefore the primary issue between the parties was resolved, the Removal Proceedings continued, which required Mr Benson to continue to retain legal representatives to defend him, as he was entitled to; and 6. Prior to the commencement of the Removal Proceedings, Mr Benson attempted to resolve any dispute between the executors and residual beneficiaries by having a meeting, which was rejected by Joel, Julie and Jesse. Joel's submissions 1. Joel and the other beneficiaries, Jesse and Julie, are strongly opposed to Mr Benson receiving his costs on the indemnity basis out of the estate of the deceased. Instead, Joel submits Mr Benson should pay his own costs. Additionally, Joel seeks an order that Mr Benson pay his (Joel's) costs on the indemnity basis, without having recourse to the estate of the deceased. In the alternative, Joel submits that there should be no order as to costs. Additionally, Joel submits that no order as to costs should be made concerning Julie Senior, with the intent that she bear her own costs. 2. Joel's submissions can be summarised as: 1. Mr Benson acted unreasonably and as such, he should not be entitled to have costs awarded in his favour. This submission can be broken down into numerous times at which Mr Benson allegedly acted unreasonably, notably his: 1. Conduct prior to probate. Mr Benson informed the beneficiaries that "until Probate has been granted nothing will be happening with the estate." However, despite this Mr Benson invested $150,066 in the estate's name, resulting in a loss to the estate of $224,195. Similarly, on 18 September 2015, Mr Benson invested $250,000 with another fund. Both of these investments were made prior to the grant of probate being received and without the consent of Joel, the co-executor; 2. Failure to administer the Will in accordance with the terms specified in the document, and instead relying upon comments made by the deceased during his lifetime. Joel submits that Mr Benson has repeatedly sought to implement what he thought the deceased's wishes were, as expressed to him during the deceased's lifetime, as opposed to adhering to the deceased's wishes as outlined in the Will; 3. Failure to cooperate with Joel in registering the deceased's shares in the Companies in the names of the beneficiaries. As such, Mr Benson improperly frustrated Joel, Jesse and Julie's rights to receive their one quarter share in the residuary estate by way of the transfer of the shares in the Companies in specie. As a result of Mr Benson's unreasonable behaviour, the Removal Proceedings were commenced, which has proved to be very costly; 4. Failure to provide financial information relating to both the Companies and the estate to Joel as co-executor, despite Joel requestion such information on numerous occasions; 5. Showing partiality in favour of Julie Senior. Mr Benson made payments from the estate to Julie Senior for her personal expenses, without consulting Joel. On 7 December 2016, Mr Benson made a loan advance to Julie without Joel's knowledge. Mr Benson continuously expressed concern for Julie Senior's position as a minority shareholder in the Companies, which was his apparent reason for refusing the transfer of the shares in the Companies in specie. Each of the other beneficiaries would also have been a minority shareholder, however Mr Benson only expressed concern for Julie Senior. The indemnity provided by Julie Senior for costs incurred by Mr Benson supports the appearance of partiality towards her, at the expense of the other beneficiaries; 6. Insistence on a release in his favour being signed in respect of his duties and obligations as an executor with the release being a condition precedent to his further administration of the estate; 7. Numerous financial mistakes being made for the accounts of the estate and the Companies. In addition to causing the estate to lose $224,195 as outlined in paragraph [75(1)(a)], Mr Benson's tax calculations were wrong on numerous occasions and would have resulted in the estate paying an additional $811,907 in tax, had KPMG not reviewed the financial documents of the estate (an allegation strenuously denied by Mr Benson). 1. The behaviour outlined above justified Joel commencing the Removal Proceedings; 2. UCPR rules 42.19 and 42.20 do not create a presumption that the plaintiff pay the costs of the defendant, but place an onus on the plaintiff to show why it is necessary to depart from the ordinary course. The behaviour as outlined above shows that Mr Benson was acting unreasonably and therefore provides a good reason as to why the Court should not follow the ordinary practice of having the plaintiff pay the costs of the defendant. Joel was acting in the best interests of the beneficiaries in commencing the Removal Proceedings and should not be punished for doing so by allowing Mr Benson to have his costs paid out of the estate; 3. Should the Court determine that Joel did not act unreasonably, had the Removal Proceedings continued Joel would almost certainly have been successful and, as such, Mr Benson should pay the higher proportion of costs, or have his costs capped; 4. The total costs of Mr Benson, being at least $750,000, are excessive. There was no business to be run, there were no properties to be sold at auction, and there was no need to consider reserve prices or engage with agents. The exorbitant costs are a result of Mr Benson's unreasonable behaviour; 5. It would be unjust for Joel, Jesse and Julie if the estate were to pay for the costs of Mr Benson. Joel, Jesse and Julie represent 75% of the residuary beneficiaries and it would be unfair for them to be indirectly burdened by the large legal costs incurred by Mr Benson; and 6. Should the Court determine that both Joel and Mr Benson acted reasonably, as per Lai Qin, there should be no order as to costs. Joel's conduct has not been so unreasonable as to justify Mr Benson being rewarded his costs. Julie Senior's submissions 1. Julie Senior supported Mr Benson in both his notices of motion, namely that both sets of proceedings should be dismissed, and Mr Benson should be entitled to have his costs paid on the indemnity basis either by the estate, or by Joel. To date, Julie Senior has indemnified Mr Benson, so an order as to Mr Benson's costs would effectively enable Mr Benson to reimburse Julie Senior. 2. Julie Senior's submissions can be summarised as: 1. Should the Removal Proceedings be dismissed, the Judicial Advice Proceedings should also be dismissed, and costs for both matters should be considered together, with Joel paying for the costs of Mr Benson and Julie Senior on the indemnity basis; 2. Joel should not have recourse to the estate to pay his own costs or the costs if he is ordered to pay them because: 1. The Removal Proceedings were adversarial in nature and put Mr Benson at risk of costs as the executor. Allegations were made of Mr Benson of breach of duty, which Mr Benson was entitled to defend; 2. Joel was acting as a beneficiary rather than an executor when commencing the proceedings and, as such, should not enjoy the protection of an indemnification from the estate; 3. Joel unnecessarily commenced the Removal Proceedings. He should have sought judicial advice, or commenced an administration suit to seek orders to resolve the main issue of construction. The Removal Proceedings were ultimately stayed to allow this to happen, thus demonstrating that they have been commenced inappropriately; 4. Had the Construction Proceedings been commenced first, Mr Benson would not have been joined into the proceedings and would not have had to seek judicial advice; 5. The main issue in the Construction Proceedings should not have been in dispute. Those proceedings were settled within two weeks of their commencement by consent orders. Those proceedings were resolved by Joel, Jesse and Julie changing their position in relation to the administration of the residuary estate and capitulating to allow Julie Senior to have her share of the residuary estate paid to her in cash. Their position changed further when more consent orders were made which sought to wind up the Companies, which is what Mr Benson originally hoped to do; and 6. Once the Construction Proceedings were resolved, there was no purpose in continuing with the Removal Proceedings. The Removal Proceedings should have been discontinued following the 16 March 2018 consent orders. The reason the proceedings were not discontinued was because Joel sought to continue the proceedings, for reasons outlined in paragraph [52] above. 1. In accordance with Nobarani, Mr Benson's costs should be paid by the estate on the indemnity basis, to the extent that Joel is not ordered to pay them; 2. Mr Benson acted reasonably in the actions he took to get legal and judicial advice upon Joel bringing proceedings against him. There was little else he could do, because even consenting to being removed would not have resolved the underlying issue which was the subject of the Construction Proceedings; 3. Joel acted unreasonably in linking the Construction Proceedings and the Removal Proceedings. Doing so brought Mr Benson in as a party and exposed the estate to significant adverse costs. Commencing proceedings in the way Joel did also brought Julie Senior into the proceedings to defend her position that she did not want to accept the shares in specie; 4. The indemnity provided by Julie Senior in relation to Mr Benson did not fuel the litigation. The Removal Proceedings were commenced on 11 August 2017, and the deed of indemnity was entered into on 11 January 2018; 5. Any further allegations made against Mr Benson should not be considered to determine the issue of costs. None of the allegations relate to Joel incurring costs in the Removal Proceedings, and as such are not relevant to the costs discretion. Moreover, there is no utility in the Court resolving the contest of facts of whether or not Mr Benson was acting reasonably because of the now advanced state of administration of the estate; and 6. Should the Court not order Joel to pay Julie Senior's costs, Julie Senior should pay her own costs. There is no basis for Julie Senior to pay the costs of any other party. Jesse and Julie's submissions 1. Jesse and Julie, while not joined to either of the proceedings as parties, have made submissions to the Court. They were parties to one of the Administration Motions. They support the position of Joel in the proceedings, and oppose the estate bearing any costs as sought by Mr Benson. If the Court sees fit to grant Mr Benson's costs, they submit that those costs should be capped, having regard to Mr Benson's behaviour and the circumstances. 2. In their submissions, they noted that the estate has already paid legal costs for the parties amounting to $126,989.75, and $169,400 for the fees owing to KPMG. 3. It was also submitted that given the indemnity Julie Senior provided to Mr Benson, he was able to act with some impunity towards the other beneficiaries. 4. Jesse and Julie support Joel's argument that he was justified in commencing the Removal Proceedings after he had: 1. Been frustrated in his attempts to conduct the estate administration jointly with Mr Benson; 2. Discovered estate and company funds had been expended contrary to advice given to the beneficiaries; and 3. Been impeded from gaining full access to various estate documents. 1. Both Jesse and Julie accept that had Joel been authorised to complete the investigation of the assets of the Companies, it is likely that neither the Construction Proceedings, nor those parts of the relief sought in the Removal Proceedings relating to the transfer of shares, would have been required. As such, it was Mr Benson's unreasonable behaviour which resulted in the costs of the matter escalating. Ending the Removal Proceedings and Judicial Advice Proceedings 1. Given the advanced state of the distribution of the estate, there is no utility in the Removal Proceedings continuing, not least since Joel ceased to press for that relief (see paragraph [52] above). No party has submitted anything to the contrary. Because the proceedings were commenced by Joel, the Court will grant him leave to discontinue the Removal Proceedings. In doing so I have not overlooked Mr Benson's submission that dismissal of the Removal Proceedings would be preferable because it would offer some reassurance that Joel will not commence fresh proceedings. I do not regard that as a relevant consideration given the estate has been substantially administered. As will be apparent from what follows, the Court will otherwise order for the purposes of UCPR r 42.19 with the intention that all parties other than Mr Benson should pay their own costs. 2. There was unanimity that once the Removal Proceedings were ended, by whatever form of order, the Judicial Advice Proceedings should be dismissed. The Court will make that order. Costs – resolution Costs in relation to the Removal Proceedings and the Judicial Advice Proceedings 1. The Court has determined that Mr Benson's costs in relation to both the Removal Proceedings and the Judicial Advice Proceedings should be paid out of the estate on the indemnity basis. The legal principles in relation to the usual entitlement of trustees to indemnification from the fund are clear and set out in paragraphs [65] to [68] above. Those principles should not be departed from unless sufficient grounds are established. I am not satisfied that any such grounds have been established. Mr Benson's costs have been incurred in his capacity as executor. Nor has the Court been provided with any evidence – as opposed to assertion – that the amount of costs he has incurred is unreasonable so as to provide a proper basis on which to reduce them or cap them. 2. Noting that the proceedings have been resolved without a hearing on the merits, and while I accept that Joel acted reasonably to commence the proceedings, I am not satisfied the Removal Proceedings would necessarily, or even likely, have ended in Mr Benson's removal. Mr Benson acted reasonably to defend them and to bring the Judicial Advice Proceedings. As the executor of the estate, he is entitled to have his costs associated with those claims paid out of the estate and on the indemnity basis. 3. Thereafter, having closely case managed the proceedings, I am satisfied that overall the parties continued to behave reasonably in the conduct of the proceedings until their further prosecution became futile such that, as McHugh J said in Lai Qin (see paragraph [69] above), "the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings". That will be the result in these proceedings, with the only exception being Mr Benson's indemnity from the estate because of his status as an executor. 4. I accept Mr Benson's submission that the Court should not make any substantive findings of fact, or speculate upon any likely outcome of either set of proceedings, in relation to the conduct of the parties, because that would be to do exactly what McHugh J says in Lai Qin the Court should not do, and most recently articulated by the Court of Appeal in Nichols as set out in paragraphs [70]-[71] above. This consideration applies with particular force to the numerous matters which the beneficiaries have sought to raise concerning Mr Benson's conduct (see, for example, paragraph [75(1)] above) which go well beyond the limited issues raised in the Removal Proceedings (see paragraph [26] above) that were resolved by the parties. To attempt to consider and make findings on such additional matters in the context of what has been an argument as to costs and where there is no cross-examination of the parties, would deny procedural fairness to Mr Benson, would be the equivalent of conducting a hearing on the merits without all of the evidence, and would be inimical to the just, quick and cheap resolution of the remaining issues in dispute. 5. Notwithstanding that he was a co-executor, Joel's position in the litigation was adversarial to both Mr Benson and Julie Senior. In addition to applying Lai Qin (see paragraph [69] above), I respectfully adopt the observation of Basten JA in Nichols (see paragraph [70] above) that because the substantive matters have settled prior to hearing, there is no event for costs to follow. Consequently, there is no successful party who is entitled to have their costs paid by the opposing side. As such, the Court will make no order as to the costs of Joel and Julie Senior, with the intent that each pays his or her own costs. Costs in relation to the Administration Motions 1. The costs incurred by any party in relation to the Administration Motions should be borne by the estate on the indemnity basis. 2. While the starting point for costs is that costs follow the event, this is not always the case. If proceedings are commenced, and the parties' participation in those proceedings are for the benefit of the estate, then the costs of the trustees and participating beneficiaries are to be paid out of the estate of the deceased: Murdocca v Murdocca (No 2) [2002] NSWSC 505 at [71]-[78]. 3. The Court invited the Administration Motions to crystallise the issues in relation to the administration of the estate. The motions were for the benefit of the estate and as such, the costs of Mr Benson, Joel, Julie, Jesse and Julie Senior in relation to those motions should be paid out of the estate on the indemnity basis. Conclusion 1. The parties will be given an opportunity to bring in short minutes to give effect to these reasons. ********** Amendments 03 October 2019 - The words "The beneficiaries proposed that" added to the beginning of second sentence of paragraph 10. 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: 03 October 2019