IN THE SUPREME COURT OF VICTORIA	Not Restricted	
AT MELBOURNE
Common Law Division
Trusts, Equity and Probate List
S ECI 2023 04426

IN THE MATTER of the estate of ZVONKO CICVARIC, deceased

IN THE MATTER of an application under s 34 of the Administration and Probate Act 1958 and s 48 of the Trustee Act 1958

IVAN CICVARIC	Plaintiff	
		
v		
		
MARIA BLAZEVIC
(in her capacity as executor and trustee of the estate of Zvonko Cicvaric)	Defendant	

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JUDGE:	Goulden AsJ	
WHERE HELD:	Melbourne	
DATE OF JUDGMENT:	16 October 2024	
CASE MAY BE CITED AS:	Cicvaric v Blazevic (No 2)	
MEDIUM NEUTRAL CITATION:	[2024] VSC 633	

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COSTS —Administration and Probate — Where executor/trustee removed from office— Administration and Probate Act 1958, s 34 — Trustee Act 1958, s 48 — Basis for costs order — Whether costs should be apportioned — Whole of circumstances considered to determine unfitness — No apportionment — Whether special circumstances to award of costs on indemnity basis — Knowledge of antecedent conduct — Delay in the administration of the estate — Unreasonable defence of proceeding by executor/trustee.
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APPEARANCES:
	Counsel	Solicitors	
For the Plaintiff	Mr N Baum	Sinisgalli Foster Legal	
			
For the Defendant	Mr T Fleming	Stern Legal	

Contents
Basis for the Costs Order
Should there be any apportionment of the costs?
Should costs be ordered on a standard or indemnity basis?
What legal costs ought be reimbursed?
Disposition

HER HONOUR:
1	I delivered my primary reasons for judgment in this proceeding on 31 July 2024 in favour of the plaintiff (‘Reasons’).  On 14 August 2024, I made orders removing the defendant as executor of the estate under s 34(1)(c) of the Administration and Probate Act 1958 and as trustee under s 48(1) of the Trustee Act 1958, together with consequential orders to give effect to the removal and for the reimbursement of estate monies by the defendant.
2	I invited submissions from the parties on the following matters:
(a)	having found that the defendant must pay the plaintiff’s costs of the proceeding personally, the basis of that costs order; and
(b)	having found that the defendant must repay to the estate the legal costs she charged to it in respect of her defence of this proceeding, the amount of the reimbursement.
	Basis for the Costs Order
3	Under s 24(1) of the Supreme Court Act 1986, the Court has a broad discretion as to the question of costs in a proceeding before it.  This discretion must be exercised judicially, by reference to the factors raised by each case.  As McMillan J said in Re Bogdanov, the ‘central principle’ is ‘to make an order that is fair and just between the parties in the circumstances of each case’.  The usual order ‘is that a successful party in litigation is entitled to a costs order in its favour’, usually ‘on a standard basis’, although there is ‘a discretion to award non-standard costs where the proceeding exhibits a special feature or unusual circumstance’.
4	I have already found that the defendant should pay the plaintiff’s costs of the proceeding on account of the plaintiff’s success.  The only remaining question is on what basis those costs should be ordered to be paid.
5	The defendant submits that a costs order for 50% of the plaintiff’s costs, assessed on a standard basis, is appropriate.  This submission relies on the plaintiff’s failure to establish two of the specific grounds upon which he sought the defendant’s removal, and his failure to secure orders for an account under Order 52 of the Rules.
6	Conversely, the plaintiff submits that costs should be awarded on an indemnity basis, without apportionment, due to the defendant’s conduct in administering the estate and in the defence of the proceeding, and her failure to accept an early offer to renounce her role as executor and for reimbursement of her costs and payment of a commission.
	Should there be any apportionment of the costs?
7	I am not satisfied that the plaintiff has enjoyed only mixed success in the conduct of the proceeding justifying an apportionment of costs.  The plaintiff succeeded in obtaining an order for removal (and consequential orders) on the basis that the executor/trustee was unfit to remain in that office.  The removal was, in substance, the primary issue to be determined in the proceeding.
8	In securing the Court’s favourable determination on this issue, the plaintiff relied on a number of grounds.  In arguing for apportionment, the defendant attempts to cast the plaintiff’s success in terms of his success or failure to establish each of those grounds individually.  Considered alone, each ground may not have been sufficient to secure removal or to have sustained a separate proceeding.  However, the grounds are not considered alone; rather, the Court’s determination of unfitness requires the ‘whole of the circumstances’ to be taken into account.  In this way, any one ground for removal is not ‘distinct, separate and severable’ from each of the others.  The plaintiff’s success in obtaining the removal order hinged on the Court’s consideration of all of the grounds together, which means that there is no basis for apportioning costs by reference to the strength of any one of those grounds, or its contribution to the outcome.
9	Further, although the plaintiff sought orders for an account under Order 52 of the Rules, he sought the orders as a consequence of the removal orders.  The Court declined to make the order for an account under Order 52 for various reasons including because the Administration Account had been prepared and filed shortly prior to trial.  The plaintiff’s submissions concerning the Order 52 account did not occupy much Court time and so were not unduly wasteful of time or resources.  The plaintiff also sought various other orders as a consequence of the removal orders, including for delivery up of all documents pertaining to the estate, which orders were granted.  I also accept the plaintiff’s submission that all of the consequential orders were inherently connected to the primary relief.  It is, therefore, inapt to define the plaintiff’s success in the proceeding by reference to the consequential orders that he secured.
10	For the above reasons, I do not consider that the costs ordered to be paid should be apportioned as to 50%, as submitted by the defendant, or otherwise.
	Should costs be ordered on a standard or indemnity basis?
11	The plaintiff seeks an order that the defendant pay the plaintiff's costs on an indemnity basis, to be taxed in default of agreement.  He relies on the defendant’s conduct that led to the litigation and the manner in which the proceeding was conducted.  The plaintiff also points to the beneficiaries’ offer of 2 November 2022, which offered to permit the executor to renounce her role or be passed over, and included reimbursement for her reasonable costs and expenses, as well as a 1% commission on the gross value of the estate.  Although he does not rely on the offer on the basis that it satisfies the principles expressed in Calderbank v Calderbank, he nevertheless points to it as a circumstance, which combined with others, provides further support for an indemnity costs order.
12	An order for indemnity costs is reserved for exceptional cases, such as those involving unmeritorious,  deliberate, high-handed, or improper conduct, warranting the Court’s disapproval and preventing the successful party from being left out-of-pocket.  As stated by the Court of Appeal in Chen & Ors v Chan & Ors:
Usually, an order for costs will be made on a party/party basis. But an order for costs on a solicitor/client or indemnity basis may be made where special or unusual circumstances have been demonstrated, for example, by establishing misconduct in the proceeding, that the proceeding was brought for an ulterior purpose, or that it was patently unreasonable to institute, or maintain, the proceeding. Special circumstances may also include the making of an allegation of fraud which is not proved.
13	The defendant’s antecedent conduct, although serious and persistent, does not, on its own, justify an indemnity costs award.  This principle finds expression in NNFM Property Pty Ltd v Citibank Ltd (No 2) as follows:
…there is no counterpart ordinary rule that in the absence of special circumstances indemnity costs will be ordered where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation. Even in a proved case of fraud, for example, in my opinion the presumption is that a costs order against the fraudulent party will be on the party and party basis. The conduct of a party that is relevant to the issue of indemnity costs is the party's conduct as litigant.
14	The focus in determining whether indemnity costs should be paid is on the conduct of the party during the litigation.  In limited cases, antecedent conduct may provide a basis for imposing an indemnity costs order, typically where it is intended to provoke, disrupt, prolong or defeat the litigation, or provides context for conduct exhibited during the litigation.  A party’s knowledge, including knowledge of their past conduct, may be relevant to the assessment of their conduct as a litigant.  Therefore, in the present case, it is the defendant’s knowledge of the antecedent conduct that is relevant, rather than the conduct itself, in determining whether her conduct in the litigation warrants an indemnity costs award.
15	For the reasons that follow, I am satisfied that an indemnity costs order is warranted in this proceeding.
(a)	First, the defendant’s unreasonable delay in the administration of the estate, especially after being warned of the intention to bring proceedings, provoked this litigation.  The plaintiff warned the defendant in the correspondence sent on 4 April 2023 and 17 May 2023.  Knowing the plaintiff intended to commence a proceeding absent further action in the administration, she did nothing.  Her continued inaction provoked the plaintiff to bring legal proceedings in September 2023 to seek her removal and to protect his interests and those of the other beneficiaries.
(b)	Second, as I have set out in the Reasons, the defendant’s defence of the litigation was unreasonable.  From shortly after the proceeding started, having received the court process, the defendant was aware of the asserted basis for her removal and the particulars of her conduct in the administration of the estate relied upon, including her failure to distribute the Vermont property in specie and pay funeral expenses, as well as her failure to distribute the remainder of the estate.  Throughout the proceeding, she possessed this knowledge, yet six months after commencement, without explanation and after the matter was set down for trial, she transferred the Vermont property and paid the outstanding funeral expenses.  In my Reasons, I found that she was likely motivated in doing so at that time by her self-interest in resisting the plaintiff’s removal application.  I also found that her refusal to resign and her continued defence of the proceeding was unreasonable and thus, she was not entitled to rely on her executor’s indemnity.  From its commencement, the defendant determined to defend the proceeding without considering whether doing so was in the interests of the beneficiaries, of whom the plaintiff was but one.  This unreasonable resistance of the proceeding increased the plaintiff’s costs in prosecuting the claim against the defendant, it is conduct ‘in the litigation’ that will cause the plaintiff to be out-of-pocket.
(c)	Third, the defendant’s conduct in attempting to sell the Vermont property in early 2024, despite knowing that the beneficiaries did not wish for it to be sold, and the subterfuge she employed to try to effect the sale without it coming to the notice of the beneficiaries, was high-handed and increased the costs of the proceeding.  Whilst that conduct provided support for the findings ultimately made about the defendant’s unfitness to remain in office, the conduct also made it necessary for the plaintiff’s solicitors (who were preparing for trial) to consider and advise their client about the prospect of securing injunctive relief, to issue subpoenas and prepare and file further affidavit evidence.  That further evidence was principally directed to the plaintiff proving that the conduct had occurred, so that he could rely on it in further support of his claim for removal, and so that estate monies improperly expended by the defendant in the attempted sale process could be quantified and the subject of orders for reimbursement.  The conduct also demonstrates a lack of candour by the defendant with the Court and the plaintiff in the conduct of the litigation given she deliberately sought to conceal the intended sale for as long as possible.
(d)	Fourth, there are other aspects of the defendant’s conduct as a litigant, which in totality, are high-handed.  For example, despite being requested to provide invoices itemised in the Administration Account well prior to the trial, the defendant did not produce those invoices until the morning of the hearing, giving the plaintiff very limited time to review those invoices for the purposes of advancing his claim.  Furthermore, the defendant failed to disclose to the plaintiff and the Court that additional monies had been expended from the estate as at the trial date.  Moreover, having heard the plaintiff’s submissions, based on authorities of this Court, that it was improper for an executor to pay their legal costs in reliance on their indemnity in advance of the determination of the proceeding, and despite the advice of her own solicitor and Counsel, the executor continued to do so after the trial and prior to the delivery of my judgment.  By doing so, she has caused the plaintiff to need to review further invoices and adduce further evidence and submissions in support of the claim for reimbursement.
	What legal costs ought be reimbursed?
16	In my Reasons, I held that the defendant had improperly paid her legal costs in defending the proceeding from the estate prior to the determination of it and, additionally, that she was not justified in resisting the proceeding, such that she could not recover those costs pursuant to the executor’s indemnity.  I accordingly found that the defendant must repay to the estate all of the legal costs she charged to it in respect of her defence.  These defence costs need to be quantified.  I previously invited the parties to consider the defendant’s solicitors’ invoice from March 2024, and any subsequent solicitors’ invoices issued and paid using estate monies, and invited further submissions as to the appropriate amount to be reimbursed.
17	The plaintiff submits that nearly all legal costs incurred after 17 May 2023 should be categorised as defence costs.  In support of this expansive order, the plaintiff submits that the only other ‘administration’ costs incurred after this date were related to the conduct of the sale of the Vermont property and/or the investigation of overseas assets, which costs they submit were unreasonable and ought be reimbursed in any event.  In this regard, the plaintiff seeks reimbursement of the following amounts in addition to the defence costs:
(a)	$5580 being part of the costs in Stern Legal’s invoice numbered 1703;
(b)	$2501.29 paid in respect of Croatian legal fees;
(c)	$438.40 in respect of Stern Legal costs paid on 12 March 2024; and
(d)	$272.98 paid as a reimbursement to the defendant on 11 March 2024.
18	These claimed reimbursements go beyond the scope of matters in respect of which I invited further submissions; that invitation being confined to the legal costs disclosed in the Stern Legal invoice numbered 1921, issued in March 2024, and subsequent invoices.  As a result, the defendant could not have foreseen the need to address these costs in her further submissions.  In any event, given my findings, I do not propose to re-open my analysis of other expenditure.  Therefore, I will not order reimbursement of the costs identified in paragraph 17 above.
19	The defendant has submitted that only certain costs itemised in the defendant’s solicitors’ invoices numbered 1921 and 1968 should be reimbursed, as only some of those legal costs relate to the defendant’s defence of the proceeding.  Mr Mutavdzija, solicitor for the defendant, has attempted to isolate the costs of the defence from other costs incurred in connection with the administration of the estate.  He has highlighted those costs in yellow on the invoices attached to his email to the plaintiff’s solicitors dated 14 August 2024.  His calculation of the legal costs to be reimbursed totals $76,603.71.
20	While I appreciate the logic in the defendant’s approach, there are inherent difficulties with it.  Certain costs incurred and paid may relate to both the administration of the estate and the defence of the proceeding without sufficient information to enable determination of the appropriate allocation of cost as between those workstreams.  In other instances, the description in the narration is very general and it is not possible to determine what the costs relate to.  Additionally, there is an issue regarding characterisation in respect of some of the costs.  For example, the costs related to preparing and filing the Administration Account, which was filed in the probate proceeding.  However, the plaintiff sought orders for the filing of the Administration Account and used it as evidence in support of the removal application, thereby obviating the need for the Court to order that an account be produced under Order 52 in this proceeding.  In my view, the costs of the Administration Account are properly classified as costs of defending this proceeding.
21	I also note that Stern Legal invoice numbered 1968 includes charges for attendances to pay invoices which I have ordered be reimbursed by the defendant to the estate, and which are not included in the defendant’s calculation.  As these payments themselves have been ordered to be reimbursed to the estate, it logically follows that monies charged by the defendant’s solicitors to attend to those payments from their trust account should not be costs borne by the estate, even if they are not defence costs per se.
22	In light of the above difficulties, I intend to adopt the approach taken by Mandie J in Skaftouros v Dimos (No 2) where his Honour stated:
Insofar as there may be some small elements of [the costs] that can be said to relate to the administration of the estate and not at all to the proceeding, then, in my view, the defendant should be left to whatever other remedies he may or may not have to recover them from the estate but I do not think that this submission should be allowed to be used as a device to prevent the repayment of very substantial sums which almost exclusively, if not entirely it seems to me, relate to the defence of this proceeding.
I will therefore order that the whole of Stern Legal invoices numbered 1921 and 1968 be reimbursed.  The defendant can seek to recover her legitimately incurred estate administration expenses utilising the remedies she may have against the estate.
23	The defendant must reimburse to the estate the sum of $100,038.46, comprising:
(a)	$1,110.45 in respect of the amount paid 27 February 2024 for the translation of court documents;
(b)	$53,728.82 in respect of the amount paid on 11 March 2024 for Stern Legal’s costs as set out in the invoice numbered 1921 dated 9 March 2024;
(c)	$8,225 in respect of the amount paid on 29 April 2024 for counsel’s costs as set out in the invoice numbered 00084482 dated 27 April 2024;
(d)	$35,871.13 in respect of the amount paid on 5 June 2024 for Stern Legal’s costs as set out in the invoice numbered 1968 dated 5 May 2024;
(e)	$1,103.06 in respect of the amount paid 20 June 2024 for transcript fees as set out in EPIQ’s invoice numbered 45852 dated 10 May 2024.
	Disposition
24	For the reason set out above I will order that:
(a)	the defendant pay the plaintiff’s costs of the proceeding on an indemnity basis;
(b)	the defendant reimburse to the estate the sum of $100,038.46 on account of legal costs charged by the defendant to the estate.