In Epov v Epov [2018] NSWSC 1819, a case in which proceedings were brought by a very elderly widow to enforce family provision orders that she receive a legacy from the estate of her deceased husband, the Supreme Court of New South Wales has ordered the executor of the estate, who finally paid the legacy to the widow, to personally pay interest on the moneys and the widow’s costs of the enforcement proceedings on the indemnity basis without recourse to the estate.
Background
The elderly widow had been married to the deceased for over 20 years before his death and had brought a claim for family provision out of his estate. The executor of the estate was a child of the deceased from a prior marriage.
In August 2014, a judge of the New South Wales Supreme Court had made an order that the widow, at that time 86 years of age, should receive a legacy of a specified percentage from the “net proceeds of sale” of certain real property. As the “net proceeds of sale” was defined in the family provision orders to mean the sale price of the property after deducting, amongst other things, the costs and expenses of probate, and administration costs, this meant that payment of the legacy could not be finalised until the estate’s costs had been determined. The property was sold in early 2015, following which there was a partial distribution to the widow. However, a dispute arose between the parties concerning the widow’s costs of the family provision proceedings which were, on the ordinary basis, to be paid out of the estate as agreed or assessed. The costs were ultimately assessed and, by April 2016, the executor had all the information required to make the final calculations to distribute the estate, including the balance of the funds owing to the widow. However, despite the widow’s solicitor seeking payment of the funds on a number of occasions, payment was not forthcoming.
Commencement of enforcement proceedings
In late November 2017, the widow brought proceedings to enforce the family provision orders. The relief sought included interest accruing on the funds owing to the widow and the personal payment by the executor of the widow’s costs of the proceedings on the indemnity basis.
The proceedings came before the Supreme Court on two occasions but there was no appearance for the executor and the matter was fixed for hearing before Kunc J in September 2018. Shortly before the hearing, the executor personally contacted the judge’s associate, indicating that he was seeking an adjournment of the proceedings to a later date.
On the hearing of the adjournment application, Kunc J considered that the executor could not identify any proper reason for not paying the funds to the widow and directed the executor to direct his solicitor to transfer forthwith the funds to the widow’s solicitor’s trust account. However, his Honour allowed the executor, who was personally represented, a further opportunity to demonstrate:
- why the funds should not be released to the widow unconditionally;
- why interest should not be paid on the funds personally; and
- why the Court should not order him personally to pay the widow’s costs of the proceedings on the indemnity basis, and why a gross sum costs order should not be made.
The funds were transferred to the trust account in September 2018 in accordance with his Honour’s direction and, in October 2018, the executor finally consented to an order that the funds be released to the widow.
His Honour then gave the executor one more opportunity to provide submissions as to why he should not pay interest and costs as sought by the widow.
Decision on interest and costs
Kunc J noted that the executor had at all material times been subject to, at least, two overlapping duties:
- his duty as a litigant to comply with the family provision orders; and
- his duty as executor to administer the estate in a timely manner (at [41]).
His Honour found that the executor had failed to fulfil those duties and had not demonstrated any reason for the failure, and said that his conclusions as to both interest and costs were based on this finding (at [41]).
The reasons given by the executor for not paying the funds to the widow were that:
- he was not satisfied that the widow was in a position to give informed instructions regarding the proper disposition of the funds without assistance from an independent third party;
- he was concerned that she might be the subject of undue influence by third parties; and
- he was concerned that her interests should be protected and her money not exhausted through legal fees and associated disbursements (at [42]-[44]).
Kunc J, however, said that:
- while the executor might have genuinely held the concerns expressed by him, the executor had completely failed to demonstrate that the concerns had any basis in fact, and the widow’s solicitor had persuasively addressed the question of the widow’s competence;
- once the provision of the costs assessment had enabled the final calculations to be done, the executor had been advised more than once by his solicitor that he had to get on with administering the estate and paying the funds; and
- if the executor had had concerns about the widow’s mental capacity, he could have sought advice from his solicitor about what action he could take (at [45]-[48]).
Accordingly, his Honour ordered the executor to pay interest on the funds from April 2016 (when the amount of the legacy had become ascertainable) up to and including the date of payment of the funds (at [49]-[54]).
On the issue of the payment of costs on the indemnity basis, Kunc J was satisfied that the executor had been unreasonable in his conduct of the proceedings because he knew, or ought to have known given the availability of legal advice, that he had no proper basis to refuse to pay over the funds and that, properly advised, he should have known that he had no chance of successfully resisting the enforcement proceedings. Accordingly, his Honour ordered the executor to pay the widow’s costs on the indemnity basis (at [57]).
His Honour was also satisfied that the case was an appropriate one for a gross sum costs order for the following reasons:
- the matter had been relatively confined and the widow’s costs were readily ascertainable;
- the widow should never have been required to commence the enforcement proceedings; and
- there ought to be no further delay in bringing the proceedings to a definitive conclusion, especially given that the widow was now nearly 91 years old (at [58]).
Finally, because the executor had incurred the liabilities to pay the interest and costs as a result of his failure to fulfil his obligations both as a litigant and as an executor, Kunc J concluded that the executor was not entitled to an indemnity from the estate for those liabilities. His Honour made a declaration to make it clear that the executor was personally liable for the interest and the widow’s costs of the proceedings on the indemnity basis without recourse to the estate (at [72]).
