Re Lapan; McMurray v Lapan (No 2) [2018] VSC 173 (12 April 2018)

IN THE MATTER of the estate of NILA LAPAN, deceased

-and-

IN THE MATTER of an application pursuant to Order 53 of the Supreme Court (General Civil Procedure) Rules 2015 for recovery of land

-and-

IN THE MATTER of an application pursuant to rule 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 for directions in relation to the administration of the estate

LUCY (LUDMILA) MCMURRAY (as executor of the estate of the late NILA LAPAN, deceased)	Plaintiff

v

STEFAN LAPAN	Defendant

COSTS − Executor of estate commenced an administration proceeding against defendant by his litigation guardian − Where person named as litigation guardian not appointed and did not consent to be defendant’s litigation guardian − Where it was reasonable for executor to accept that litigation guardian continued as defendant’s litigation guardian after settlement of the probate proceeding in which he was litigation guardian − Where defendant’s former litigation guardian seeks costs on an indemnity basis be paid by plaintiff – Application dismissed.

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms A S Bartfeld	White & Mason Lawyers

Defendant in person	No appearance	Not applicable

For Richard John Kent	M J K Arthur	Aughtersons Lawyers

1 Nila Lapan died on 9 October 2013 (‘the deceased’). She is survived by her adult children, the plaintiff (‘Ms McMurray’) and the defendant (‘Mr Lapan’).

2 In September 2014, Mr Lapan applied for probate of the deceased’s last will. On 29 October 2014, Ms McMurray objected to Mr Lapan’s application for a grant of probate on the grounds that the deceased lacked testamentary capacity and Mr Lapan exerted testamentary undue influence on the deceased at the time she made the last will (‘the probate proceeding’).

3 Some two years later, on 9 September 2016, Richard John Kent was appointed as Mr Lapan’s litigation guardian in the probate proceeding. Mr Kent was represented by Aughtersons Lawyers (‘Aughtersons’) in that proceeding.

4 On 28 September 2016, the probate proceeding was resolved at a round table conference and the parties signed heads of agreement. Mr Lapan was represented by Mr Kent as his litigation guardian. On 14 October 2016, the parties signed the terms of settlement, which included a term that Mr Lapan vacate the estate property by 31 March 2017.

5 Almost five months after the terms were signed, on 29 March 2017, Mr Kent issued a summons seeking approval of the compromise. There is no explanation from Mr Kent for taking five months to apply for the approval of compromise of the terms of settlement, when r 15.08(2) of the Rules requires that a summons for approval be filed no later than 30 days after the compromise has been reached.

6 On 23 May 2017, the Court ordered that the compromise be approved. Despite the terms of settlement requiring Mr Lapan to vacate the estate property by 31 March 2017, he remained living in the estate property.

7 Upon the approval of the terms of settlement, Ms McMurray issued a proceeding seeking a grant of probate of the deceased’s penultimate will. Probate of the deceased’s penultimate will was granted to Ms McMurray on 26 July 2017. Following the grant, Mr Kent continued to re-negotiate certain matters with Ms McMurray, including informing Ms McMurray that Mr Lapan’s financial position did not allow him to vacate the estate property. Further negotiations took place, however, Mr Lapan did not vacate the estate property.

8 On 19 October 2017, Ms McMurray issued this proceeding seeking relief including an order that Mr Lapan vacate the estate property within 30 days of the judgment of the Court. Ms McMurray also sought advice in the administration of the deceased’s estate as to whether she was justified in seeking orders against Mr Lapan for the recovery of costs incurred by both herself and by Mr Kent as Mr Lapan’s litigation guardian, as a result of Mr Lapan’s non-compliance with the terms of settlement (‘the administration proceeding’).

9 The administration proceeding named Mr Lapan as the defendant and Mr Kent as his litigation guardian. On 20 October 2017, Aughtersons were served with the relevant documents in the administration proceeding.

10 Orders in the administration proceeding were made on 28 February 2018, with written reasons delivered on 7 March 2018.^[1] Orders were made, inter alia, that Mr Lapan vacate the estate property and be liable for the payment of rent for so long as he remained in the estate property after 31 March 2017 and that the outstanding rent be paid from Mr Lapan’s share of the estate.

11 The remaining issues in the administration proceeding are the costs incurred by Mr Kent in the administration proceeding and subsidiary matters arising from the costs disputes.

12 Mr Kent seeks an order that Ms McMurray pay his costs on an indemnity basis, said to be estimated in excess of $3,000.

13 Ms McMurray seeks an order that Mr Lapan pay the costs of the administration proceeding personally and on an indemnity basis.

14 After the approval of compromise in May 2017, Mr Kent continued his involvement in estate matters on behalf of Mr Lapan until 23 October 2017. His involvement included his personal attendance at the estate property with Ms McMurray and Mr Lapan, attempting to discuss a collateral proposal to the terms of settlement during that attendance, instructing Aughtersons to engage in ongoing written and telephone communications with Ms McMurray’s solicitors between 23 May 2017 and 23 October 2017, issuing a notice to vacate to the tenants of the estate property, identifying himself as Mr Lapan’s litigation guardian and agent and communicating with Mr Lapan in an effort to assist him in vacating the property.

15 Further, on 22 June 2017, after Ms McMurray’s solicitors notified Aughtersons that they had received an email directly from Mr Lapan, Aughtersons responded by advising them to ‘disregard the correspondence from Stefan Lapan’ and stated that Mr Lapan had been informed that he should not communicate with Ms McMurray’s solicitors directly. Aughtersons further reaffirmed Mr Kent’s involvement as Mr Lapan’s litigation guardian by letter dated 14 July 2017, in which Aughtersons noted that Mr Kent, ‘as litigation guardian, cannot force Stefan to leave the property’. By letter dated 17 July 2017, Ms McMurray’s solicitors expressed their concern about the volume of correspondence passing between the respective practitioners. By letter dated 15 August 2017, Ms McMurray’s solicitors foreshadowed the administration proceeding to Aughtersons. This letter stated that in the event that Aughtersons, on Mr Kent’s behalf, were experiencing any difficulties with the matter, further direction should be sought from the Court. Despite this correspondence, Aughtersons maintained involvement by confirming that they would respond to Ms McMurray’s solicitors once they received instructions from Mr Kent, who was believed to be liaising with Mr Lapan at the time.

16 After service of the administration proceeding on 20 October 2017, on 26 October 2017, Aughtersons wrote to Ms McMurray’s solicitors to advise that the administration proceeding was irregular and improperly constituted because it named Mr Kent as Mr Lapan’s litigation guardian. It is by this letter that Ms McMurray was informed that Mr Kent no longer acted on behalf of Mr Lapan. By letter dated 17 November 2017, Ms McMurray’s solicitors informed Aughtersons that the administration proceeding would be amended to remove references to Mr Kent.

17 There is no explanation by Mr Kent as to why he engaged in ongoing discussions with Ms McMurray and her solicitors after the approval of the terms of settlement. His overall conduct as Mr Lapan’s litigation guardian after execution of the terms of settlement caused delay in the administration of the estate, particularly in relation to Mr Lapan’s continued occupation of the estate property despite his being required under the terms of settlement to vacate by 31 March 2017. This resulted in further costs in the administration of the estate.

18 Mr Kent contends that the ordinary, preferable course was for Ms McMurray to issue a summons in the probate proceeding, rather than commence the administration proceeding.

19 Ms McMurray contends the administration proceeding was the proper procedure for the determination of the issues in dispute.

20 Ms McMurray was the defendant in the probate proceeding challenging Mr Lapan’s application for a grant of probate of the deceased’s last will. The probate proceeding was resolved by way of terms of settlement. Upon approval of the terms of settlement, Ms McMurray was then able to obtain a grant of probate of the penultimate will, which was granted on 26 July 2017. Once probate of the penultimate will was granted, Ms McMurray had the standing, as executor, to seek the direction of the Court to enforce the terms of settlement and administer the estate of the deceased. If Ms McMurray made an application to enforce the terms of settlement in the probate proceeding it would be struck out because she is a defendant in her personal capacity in that proceeding. In the administration proceeding, Ms McMurray is the plaintiff in her capacity as the executor of the estate of the deceased and followed the correct procedure for the determination of the issues arising from the breach of the terms of settlement by Mr Lapan.

21 Mr Kent next contends that the administration proceeding is irregular and was improperly constituted and, as a result, the originating process is liable to be set aside and the proceeding stayed.^[2] Mr Kent says that the administration proceeding named him as Mr Lapan’s litigation guardian when he had not been appointed or consented to that appointment. His only appointment as Mr Lapan’s litigation guardian was in the probate proceeding. He also says that his solicitors, Aughtersons, did not have instructions to accept service on behalf of Mr Lapan.

22 It is not disputed that the administration proceeding was instituted in the name of Mr Kent as Mr Lapan’s litigation guardian. However, the correspondence and the actions taken by Mr Kent and Aughtersons after the approval of the compromise in May 2017 are consistent with Mr Kent continuing to act as Mr Lapan’s litigation guardian. Mr Lapan did not object to Mr Kent’s continued involvement in the estate matters. In light of Mr Kent’s overall conduct after the approval of the terms of settlement up to when the administration proceeding was issued, it was reasonable for Ms McMurray and her solicitors to assume that he maintained his consent to act as Mr Lapan’s litigation guardian in the context of estate matters. Had Mr Kent no longer consented to this role, this should have been immediately made clear to Ms McMurray and Mr Lapan. As soon as Ms McMurray was informed that Mr Kent did not consent to act as Mr Lapan’s litigation guardian in the administration proceeding, her solicitors informed Aughtersons that the administration proceeding would be amended.

23 A failure to appoint a litigation guardian in a proceeding is an irregularity. As such, it is an irregularity that can be cured by subsequent order of the Court.^[3] Rule 2.01 of the Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules’) provides that ‘non-compliance with the Rules does not render the proceeding a nullity; it is a curable irregularity’.^[4] Pursuant to r 2.01(2)(c), the Court is invested with discretion to allow amendments in the event of non-compliance with the Rules. The Court possesses wide powers to deal with irregularities in procedure, with such discretion being exercised in accordance with the demands of justice in the case at hand.^[5]

24 In accordance with the Rules, the joinder of Mr Kent as Mr Lapan’s litigation guardian in the administration proceeding did constitute an irregularity, albeit an irregularity which the Court has discretionary power to cure.^[6] Given the conduct of Mr Kent and Aughtersons, it would be unfair and prejudicial to Ms McMurray not to allow the amendment. Accordingly, on 8 December 2017, orders were made granting leave to Ms McMurray to amend the heading to the administration proceeding by removing the reference to Mr Kent as litigation guardian of Mr Lapan.

25 As stated, Mr Kent’s conduct was such that it was reasonable for Ms McMurray and her solicitors to assume that Mr Kent maintained his consent to act as Mr Lapan’s litigation guardian in the context of estate matters. Mr Kent took no steps to alter that perception. As soon as Ms McMurray was made aware that Mr Kent had not consented to an appointment as Mr Lapan’s litigation guardian in the administration proceeding, she agreed to amend the administration proceeding. In such circumstances, it is unreasonable for Ms McMurray to pay the claimed costs of Mr Kent.

26 Mr Kent’s solicitors should have notified Ms McMurray’s solicitors that he would consent to the amendment of the title of the administration proceeding. Instead, Mr Kent retained counsel to appear to seek the costs estimated in excess of $3,000 from Ms McMurray. It was unreasonable for Mr Kent to retain counsel in the circumstances and, in any event, the estimated amount is unreasonable.

Should Mr Lapan pay the costs of the administration proceeding personally and on an indemnity basis?

27 Ms McMurray seeks an order that Mr Lapan pay the costs of the administration proceeding personally and on an indemnity basis. The orders made in the administration proceeding on 28 February 2018 included an order that Mr Lapan pay Ms McMurray’s costs of and incidental to the administration proceeding be paid on an indemnity basis and for such sum to be adjusted from Mr Lapan’s share of the estate. This order includes Ms McMurray’s costs and expenses incurred in dealing with Mr Kent and Aughtersons after the approval of the terms of settlement and in amending the administration proceeding.

28 Order 3 of the orders made on 28 February 2018 provided that Mr Lapan pay the litigation guardian’s costs and the litigation guardian’s legal costs incurred as a result of Mr Lapan’s non-compliance with the terms of settlement personally, such sum to be adjusted against his entitlement from the deceased’s estate.

29 In view of the quantum of the claim made by Mr Kent in this proceeding and given that Mr Lapan represented himself in the administration proceeding, Mr Kent should provide details of any costs incurred since the date of approval of the compromise.

(a) Mr Kent’s application that Ms McMurray pay his costs on an indemnity basis be dismissed; and

(b) on or before 26 April 2018, Mr Kent provide the Court with details of his costs incurred since approval of the compromise on 23 May 2017.

JUDGE:	McMillan J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF RULING:	12 April 2018
CASE MAY BE CITED AS:	Re Lapan; McMurray v Lapan (No 2)
MEDIUM NEUTRAL CITATION:	[2018] VSC 173

Supreme Court of Victoria

Re Lapan; McMurray v Lapan (No 2) [2018] VSC 173 (12 April 2018)