Allan and Ors & Allan and Ors
[2014] FamCAFC 162
•2 September 2014
FAMILY COURT OF AUSTRALIA
| ALLAN AND ORS & ALLAN AND ORS | [2014] FamCAFC 162 |
| FAMILY LAW – APPEAL – Where re-instatement of an abandoned appeal sought by the second applicant husband – In the absence of prejudice or injustice to the husband the application for re-instatement is dismissed – Husband to pay the party/party costs of the wife, the third respondent and the fourth respondents in respect of the failed application for re-instatement and the abandoned appeal. FAMILY LAW – APPEAL – Where third applicant seeks leave to appeal out of time – Where third applicant as new trustee of a trust is bound by the conduct of the previous trustee in reaching a compromise and consenting to court orders – Where an appeal against the orders by the trustee does not lie in a challenge to the merit of the orders – Where a point is not taken at first instance which could have been addressed by the other parties it cannot be taken afterwards on appeal – Where any breach of fiduciary duty alleged against the former trustee should be remedied by separate cause of action against the former trustee – An appeal by the third applicant on the grounds he contemplates would be futile – Application dismissed – Third applicant to pay the party/party costs of the wife, the third respondent and the fourth respondents in respect of the failed application for leave to appeal out of time. |
| Family Law Act 1975 (Cth): ss 94, 117 Trustee Act 1925 (NSW): s 9 Family Law Rules 2004 (Cth): rr 1.14, 22.13, 22.43 |
| Application of Richard Albarran; Harb v Harb [2010] NSWSC 1251 Bemert & Swallow (2010) FLC 93-441 Coulton v Holcombe (1986) 162 CLR 1 Davidson & Davidson (No 2) (1994) FLC 92-469 Dowling v St Vincent de Paul Society Inc [2003] VSC 454 Gallo v Dawson (1990) 93 ALR 479 Gilbert v Estate of Gilbert (1990) FLC 92-125 Harvey v Phillips (1956) 95 CLR 235 Haykal & Krawiec & Anor [2014] FamCAFC 110 In re Earl of Strafford, deceased; Royal Bank of Scotland Ltd v Byng [1980] 1 Ch 28 Jackamarra v Krakouer (1998) 195 CLR 516 Maitland v Nationwide News Pty Ltd [2004] NSWCA 155 Metwally v University of Wollongong (1985) 60 ALR 68 Panayotides & Panayotides (1997) FLC 92-733 Re Irismay Holdings Pty Ltd [1996] 1 Qd R 172 Rinehart v Welker [2012] NSWCA 95 Stollznow v Calvert [1980] 2 NSWLR 749 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 |
| 1ST APPLICANT: 2nd APPLICANT: 3rd APPLICANT: | Ms C Allan Mr Allan Mr CC |
| 1ST RESPONDENT: 2nd RESPONDENT: 3rd RESPONDENT: 4th RESPONDENTS: 5th RESPONDENT: | Mrs Allan Mr Senne as Trustee of the AM Trust Mr Senne Mr D & CP as Receivers and Managers of W Nominees No 2 Pty Ltd (Receivers and Managers appointed) (in liquidation) A Finance Ltd |
| FILE NUMBER: | SYC | 3842 | of | 2008 |
| APPEAL NUMBER: | EA | 61 | of | 2014 |
| DATE DELIVERED: | 2 September 2014 |
| PLACE DELIVERED: | Newcastle |
| PLACE HEARD: | Sydney |
| JUDGMENT OF: | Finn, Ryan & Austin JJ |
| HEARING DATE: | 30 July 2014 |
| LOWER COURT JURISDICTION: | Family Court of Australia |
| LOWER COURT JUDGMENT DATE: | 14 April 2014 |
| LOWER COURT MNC: | [2014] FamCA 250 |
REPRESENTATION
| 1ST APPLICANT: | In person |
| COUNSEL FOR THE 2ND APPLICANT: | Mr Green |
| SOLICITOR FOR THE 2ND APPLICANT: COUNSEL FOR THE 3RD APPLICANT: SOLICITOR FOR THE 3RD APPLICANT: | Hudson Law Pty Ltd Mr Kuklik Clear Lawyers |
| SOLICITOR FOR THE 1ST RESPONDENT: | Mills Oakley Lawyers Pty Ltd |
| COUNSEL FOR THE 2ND RESPONDENT: | Mr Auld |
| SOLICITOR FOR THE 2ND RESPONDENT: | Delaney Lawyers |
| COUNSEL FOR THE 3RD RESPONDENT: | Mr Auld |
| SOLICITOR FOR THE 3RD RESPONDENT: | Delaney Lawyers |
| COUNSEL FOR THE 4TH RESPONDENTS: | Mr Roberts |
| SOLICITOR FOR THE 4TH RESPONDENTS: | HWL Ebsworth Lawyers |
| COUNSEL FOR THE 5TH RESPONDENT: | Mr Roberts |
| SOLICITOR FOR THE 5TH RESPONDENT: | HWL Ebsworth Lawyers |
Orders
The Application in an Appeal filed on 1 July 2014 by the second applicant is dismissed.
Subject to Orders 3 and 4 hereof:
(a)The Response to an Application in an Appeal filed on 16 July 2014 by the fourth respondents is dismissed.
(b)The Response to an Application in an Appeal filed on 18 July 2014 by the first respondent is dismissed.
(c)The Further Amended Application in an Appeal filed on 25 July 2014 by the second and third respondents is dismissed.
The second applicant (Mr Allan) shall pay:
(a)
the costs of the first respondent (Mrs Allan), the third respondent
(Mr Senne), and the fourth respondents (the Receivers and Managers of
W Nominees No.2 Pty Ltd (Receivers and Managers appoint.)(in liq.)) incidental to the determination of the Application in an Appeal filed on 1 July 2014 on a party/party basis in the sums agreed or assessed; and
(b)the costs of the first respondent, the third respondent and the fourth respondents incidental to the abandoned appeal (No.EA61/2014) on a party/party basis in the sums agreed or assessed; and
Upon agreement or assessment of the costs payable pursuant to Order 3 hereof, the second applicant shall forthwith do all such acts and things necessary to instruct and cause his solicitors to pay out of the funds they hold on trust pursuant to Order 2 made on 22 July 2014:
(a)First, the sum of costs due to the fourth respondents pursuant to Order 3(a) hereof;
(b)Secondly, the sums of costs due to the first and third respondents pursuant to Orders 3(a) and 3(b) hereof and to the fourth respondents pursuant to Order 3(b) hereof, in equal shares until satisfaction of their respective costs or exhaustion of the funds; and
(c)Thirdly, any remaining balance to the second applicant.
The Application in an Appeal filed on 25 July 2014 by the third applicant is dismissed.
Subject to Order 7 hereof:
(a)The Response to an Application in an Appeal filed on 29 July 2014 by the second and third respondents is dismissed.
(b)The Response to an Application in an Appeal filed on 29 July 2014 by the fourth respondents is dismissed.
The third applicant (Mr CC) shall pay the costs of the first respondent, the third respondent, and the fourth respondents incidental to the determination of the Application in an Appeal filed on 25 July 2014 on a party/party basis in the sums agreed or assessed.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Allan and Ors & Allan and Ors has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT SYDNEY |
Appeal Number: EA 61 of 2014
File Number: SYC 3842 of 2008
| Ms C Allan |
1st Applicant
And
Mr Allan
2nd Applicant
And
Mr CC
3rd Applicant
And
| Mrs Allan |
1st Respondent
And
Mr Senne as Trustee of the AM Trust
2nd Respondent
And
Mr Senne
3rd Respondent
And
Mr D & CP as Receivers and Managers of W Nominees No 2 Pty Ltd (Receivers and Managers)(in liquidation)
4th Respondents
And
A Finance Ltd
5th Respondent
REASONS FOR JUDGMENT
Introduction
During 2008 the second applicant (“husband”) and the first respondent (“wife”) separated after more than 40 years of marriage and proceedings were commenced between them for the alteration of their property interests pursuant to Part VIII of the Family Law Act 1975 (Cth) (“the Act”).
Since that time the spouses have engaged in a battery of interlocutory disputes and the litigation has grown to encompass other parties. There are presently two Applications in an Appeal and various Responses thereto before this Court requiring determination, all of which arise out of an appeal against orders determining a recent interlocutory dispute at first instance.
An appeal against the trial judge’s decision in relation to that dispute was deemed abandoned by the Family Law Rules 2004 (Cth) (“the Rules”). It must now be determined whether the appeal may be re-instated, whether another party may be joined as an appellant in that appeal or permitted to bring a separate appeal out of time, and whether orders should be made providing security for the respondents’ costs in respect of any re-instated or new appeal.
Background
On 14 April 2014, Watts J made orders resolving an interlocutory dispute about the manner in which certain money should be held pending the final hearing of the spouses’ property settlement applications. Relevantly, the orders gave effect to a Deed of Settlement entered into by a number of the parties. We will address the detail of the orders more fully later, but all that need be said at this stage is that the orders released approximately $900,000 to one party as their property and secured another $600,000 in a controlled monies account pending resolution of claims to that money by the other parties. They are the orders which are now the subject of the proposed appeal.
Many parties were involved in the dispute and it is desirable to identify them.
The spouses have four adult children. They were all joined as parties to the proceedings before Watts J, but none actively participated. Nevertheless, one of those children joined in the appeal as an appellant and was the first applicant (“Ms C Allan”) in these proceedings. At the hearing before this Court she informed us of her intention to withdraw from the proceedings and an order was made without objection removing her as a party.
During the spouses’ marriage, two trusts were established – the AM Trust and the Allan Family Trust.
The wife and the four adult children were the beneficiaries of the AM Trust.
Both spouses and the four adult children were the beneficiaries of the Allan Family Trust.
Each trust has had a succession of trustees over many years.
W Nominees No.2 Pty Ltd (Receivers and Managers appoint.) (in liq.) is the trustee of the Allan Family Trust. That corporation was placed into receivership by the fifth respondent (“A Finance Ltd”). The fourth respondents
(“the Receivers”) are the duly appointed liquidators and managers. The fifth respondent did not participate in the proceedings below or before us.
At the time the orders were made by Watts J in April 2014, the second respondent (“Mr Senne”) was the trustee of the AM Trust. He was joined to the appeal not only in his representative capacity as trustee of the AM Trust as the second respondent, but also personally as the third respondent. He should not have been joined as the second respondent because at the time the appeal was instituted on 12 May 2014, he had been replaced as the trustee of the AM Trust by the third applicant (“Mr CC”).
One order made by Watts J on 14 April 2014 (Order 5) effectively discharged an earlier order made by his Honour on 17 June 2010 (Order 4), which had restrained the husband from replacing Mr Senne as the trustee of the AM Trust. The husband acted swiftly upon the fresh orders by substituting Mr CC for
Mr Senne as the trustee of the AM Trust only a week later on
20 April 2014. Mr CC was formally joined as the 14th respondent to the proceedings below by subsequent order made by Watts J on 1 May 2014.
The context in which Watts J made the orders on 14 April 2014 is as follows.
Many years ago the two trusts acquired valuable personal property. After the Receivers were appointed as receivers and managers of the trustee of the
Allan Family Trust in March 2009, they took steps to gather all of the assets of the trust. Among the assets they gathered were assets alleged to be the property of the AM Trust, following which an argument developed over ownership of the contested assets. The interlocutory dispute was heard and determined in June 2010 in the proceedings before Watts J. An appeal followed, which was then compromised without the need for the appeal to be heard.
The compromise, reached between Mr Senne on behalf of the AM Trust and the Receivers on behalf of the Allan Family Trust, was recorded in a Deed of Settlement executed in February 2012. The wife joined in the settlement, but the husband did not. By then the husband was bankrupt.
The effect of the Deed of Settlement was to define the rights of the parties to the sale proceeds of the contested assets, which approximated $1.5 million. The sum of $600,000 was set aside in a discrete fund and the Receivers disclaimed any entitlement to those funds. The balance was paid to the Receivers.
Mr Senne (in his capacity as trustee of the AM Trust) and the wife both disclaimed any entitlement to the money paid to the Receivers, which funds have since been distributed between the Receivers and fifth respondent.
The terms of the Deed of Settlement contemplated that the parties to it would “consent to such orders of the Court as are necessary or desirable to give effect to” its operable parts. The Receivers then made an application to the court in March 2012 for orders that would endorse and implement the terms of the Deed. Both Mr Senne and the wife supported the application, consonantly with their obligations under the Deed.
The husband initially informed the court at a procedural hearing that he did not wish to be heard in respect of the application, but he subsequently filed an affidavit in May 2012 from which it was apparent he opposed the Receivers’ application. Furthermore, at the hearing of the Receivers’ application, the husband applied to be relieved from an injunction restraining him in his capacity as protector of the AM Trust from removing and replacing the trustee of the trust. That application by the husband would (as Watts J recognised at [11] of his reasons for judgment of 14 April 2014) have had the practical effect of ensuring that the trustee of the AM Trust would no longer support the application for orders consistent with the Deed.
Ms C Allan and her siblings did not ultimately participate in the hearing of the Receivers’ application. In June 2012, their solicitors confirmed by way of letter to the fourth respondents’ then solicitors that they would abide by the court’s orders.
Relevantly, the orders subsequently made by Watts J on 14 April 2014:
(a)discharged a former injunction restraining Mr Senne from dealing with the assets of the AM Trust (Order 1);
(b)
ordered the Receivers to pay $600,000 into an account controlled by
Mr Senne and the wife and permitted the Receivers to deal with the balance of the funds (Orders 2 and 3), consistently with the Deed of Settlement executed in February 2012; and
(c)discharged a former injunction restraining the husband, in his capacity as protector of the AM Trust, from removing and replacing the trustee of the trust (Order 5).
It was thereby intended that the wife, the husband, Mr Senne, and the prospective new trustee of the AM Trust would be able to contest entitlement to the preserved sum of $600,000 within the still pending proceedings under
Part VIII of the Act, as the trial judge expressly recognised (at [77] of his reasons in relation to the orders of 14 April 2014).
The husband and Ms C Allan filed their joint appeal against the trial judge’s orders on 12 May 2014. The appeal was deemed abandoned under the Rules
(r 22.13(3)) on 9 June 2014 due to the appellants’ failure to file their draft appeal book index. On 26 June 2014 the husband’s solicitor was appraised of the appeal’s deemed abandonment.
Applications before this Court
The husband sought orders for re-instatement of the appeal in his Application in an Appeal filed on 1 July 2014.
The husband’s application was opposed by the Receivers, the wife, and
Mr Senne, but in the event of the application being granted they each sought security for their costs of the appeal against the husband.
Mr CC sought the orders set out within his Application in an Appeal filed on
25 July 2014. He sought re-instatement of the husband’s abandoned appeal and his joinder to the appeal as an appellant, or alternatively, leave to file his own appeal out of time.
Mr CC’s application was opposed by the Receivers and Mr Senne. Although the wife did not file any Response to Mr CC’s Application, it was still clear she too opposed the relief he sought. The Receivers and Mr Senne alternatively sought security for their costs of the appeal from Mr CC if his application was successful.
During the course of the hearing the wife was permitted to similarly make an alternative application against Mr CC for security for her costs. Her oral application was allowed over Mr CC’s objection, since he suffered no prejudice in meeting the application. He was forewarned of the applications made by the Receivers and Mr Senne for security for costs and the wife’s application was premised on identical submissions. She presented nothing new.
Re-instatement of the abandoned appeal
The husband and Mr CC both sought re-instatement of the appeal. By oversight, the husband’s solicitor had failed to file a draft appeal index on time – a failure which he had attempted to remedy. In such a situation, and without more, a court would generally be disposed to re-instate an appeal, particularly in a case such as this where the delay was not great. Ordinarily, a party should not vicariously assume blame for the modest omission of a solicitor (see Jackamarra v Krakouer (1998) 195 CLR 516 at 543, 544; Maitland v Nationwide News Pty Ltd [2004] NSWCA 155 at [17]; Stollznow v Calvert [1980] 2 NSWLR 749 at 753, 755).
However, subject to re-instatement of the appeal, it was the express mutual intention of the husband and Mr CC for Mr CC to assume sole responsibility for prosecution of the appeal and for the husband to then withdraw. It was conceded the re-instatement process was simply a mechanism by which
Mr CC would be afforded the “vehicle” to prosecute the appeal without the inconvenient onus of establishing his independent entitlement to prosecute an appeal out of time. As an undischarged bankrupt, the husband contended he would be unable to fund the appeal and since Mr CC was the new trustee of the AM Trust, he was more ideally placed to protect the interests of the trust and its beneficiaries.
It was proposed such a process could be facilitated by resort to s 94(2B)(a) of the Act, once the appeal was re-instated, enabling Mr CC’s removal from the appeal as a respondent and his addition to the appeal as an appellant.
The discretion to re-instate an abandoned appeal is not exercised in an unstructured or unprincipled way, but rather in accordance with the established legal principles set out within Gallo v Dawson (1990) 93 ALR 479 at 480 (see Haykal & Krawiec & Anor [2014] FamCAFC 110 at [31], [40]-[46];
Bemert & Swallow(2010) FLC 93-441 at [128]-[131]). As was made plain in Gallo v Dawson, the discretion may only be exercised in favour of the applicant upon proof that strict compliance with the Rules will “work an injustice upon the applicant”.
The husband, who became the solitary applicant upon the withdrawal of
Ms C Allan, will not suffer any injustice or prejudice at all in the absence of relief. There are two reasons for that conclusion. First, he acknowledged through his counsel he has no intention of prosecuting the appeal even if it is re-instated. Second, he admitted the grounds of his abandoned appeal were no longer apposite and would be replaced by the draft grounds of appeal proposed by Mr CC. Although there were some similarities between the grounds formerly advanced by the husband and the grounds Mr CC intended to advance, there were also some substantial differences. Any re-instated appeal would consequently have a different complexion from that previously prosecuted by the husband.
Therefore, in the absence of prejudice or injustice to the husband, his application for re-instatement will be dismissed.
Mr CC independently sought re-instatement of the husband’s appeal, but of course he had no standing to do so. His application for an order to that effect will also be dismissed. Consideration must then turn to his alternative application for permission to appeal out of time.
Leave to appeal out of time
Mr CC’s alternate application was for leave to bring his own appeal against the orders of Watts J out of time.
The Rules provide for such leave to be granted (r 1.14) and the exercise of discretion to grant such leave is governed, as already mentioned, by the principles set out in Gallo v Dawson. The court is mandated to consider the history of the proceedings, the conduct of the parties, the nature of the litigation, and the consequences for the parties of either the grant or refusal of leave. The prospects of the proposed appeal are also relevant. The base object of the inquiry is to ensure the time limitations imposed by the Rules do not become instruments of injustice.
It was submitted on behalf of the Receivers (whose submissions were adopted by both the wife and Mr Senne) that Mr CC had no adequate explanation for his delay and his proposed appeal was futile, which in either case would demand refusal of leave. It is therefore pertinent to analyse Mr CC’s reasons for the delay and the prospects of his proposed appeal.
Mr CC was joined as a party to the proceedings below on 1 May 2014. He was joined on his own application for the express purpose of instituting an appeal against the orders of Watts J made on 14 April 2014. Any appeal he wished to file should have been filed by 12 May 2014, but he did not file his application for leave to file his appeal out of time until 25 July 2014.
Mr CC deposed he was unaware he had been joined to the proceedings until
15 May 2014, by which date time to file the appeal had already expired. That is because the order joining him to the proceedings on 1 May 2014 was made by Watts J in chambers and there was some delay between the making of the order and Mr CC’s receipt of it. Once he became aware of his joinder, a timely appeal had already been lodged by the husband and Ms C Allan. That appeal obviated any need for him to appeal separately, because he perceived his interest in the proceedings as trustee of the AM Trust coincided with the interests of the husband and Ms C Allan.
The appeal of the husband and Ms C Allan was deemed abandoned under the Rules on 9 June 2014. There is no evidence Mr CC was or should have been aware of the abandonment. Significantly, although he was a party to the proceedings below, he was not named as a party to the appeal. Mr Senne was mistakenly named as the second respondent to the appeal as trustee of the
AM Trust, which role had since been assumed by Mr CC.
It was common ground a letter was sent to the parties to the appeal by the appeals registrar on or about 26 June 2014 confirming the abandonment of the appeal. Mr CC deposed he was contacted by the husband on or about
16 July 2014 about filing an appeal, following which he sought advice and filed his application on 25 July 2014.
Those facts were, as we understand it, uncontroversial.
However, there was an aspect of Mr CC’s evidence that warranted reservation about his candour. He deposed (at [10] of his affidavit filed on 25 July 2014):
I did not think I could appeal and I never investigated appealing because I was not a named party to the 14 April Decision and because Ms [C Allan] was appealing for the trust. I am not legally qualified.
That evidence was difficult, if not impossible, to reconcile with other evidence adduced before us.
Mr CC earlier sent a letter dated 28 April 2014 to the Receivers’ solicitors stating:
It is my intention to apply to [Watts J] for a stay of [some orders made on 14 April 2014] and to seek leave to appeal against those Orders.
In furtherance of that stated intention, Mr CC filed an Application in a Case on 30 April 2014 seeking his joinder to the proceedings as the 14th respondent, which Watts J acted upon immediately by making the order in chambers the following day. Mr CC expressly requested and stated in the Application:
That this Application be dealt with expeditiously to enable further application and an appeal to be filed in these proceedings (sic).
It was, as the Receivers submitted, unnecessary for Mr CC to be joined as a party to the proceedings below before lodging an appeal, or at least an application for leave to appeal. Any party with an interest in or who is affected by orders may appeal or seek leave to appeal against the orders (see Panayotides & Panayotides (1997) FLC 92-733 at 83-888). The AM Trust was certainly interested in and affected by the orders made by Watts J and so, in his capacity as the newly installed trustee of the trust, Mr CC was able to appeal, or at least seek leave to do so. Although misconceived about his entitlement, there is no suggestion Mr CC’s belief was other than genuine.
It is reasonably clear from the evidence recited above that Mr CC was acquainted with the proceedings and, following his appointment as trustee of the AM Trust on 20 April 2014, actively considered and decided to file an appeal against the orders of Watts J.
The husband also deposed in an affidavit filed much earlier in the proceedings below that Mr CC “practised as a lawyer for 20 years”, which seriously called into question Mr CC more recent assertion “I am not legally qualified”. This troubling conflict in the evidence was not satisfactorily explained.
Nonetheless, despite such reservations about Mr CC’s candour, there was no valid reason not to accept the apparently uncontroversial facts which proved, first, Mr CC’s belief he was unable to appeal until joined to the proceedings, secondly, his ignorance of his joinder to the proceedings until 15 May 2014, thirdly, his knowledge that by then an appeal had already been lodged by the husband and Ms C Allan, fourthly, his ignorance of the abandonment of the appeal until some time after 26 June 2014, fifthly, the husband’s request of him on or about 16 July 2014 to consider bringing a separate appeal, and lastly, his then hasty steps to file his application on 25 July 2014.
In such circumstances we are inclined to accept the delay is adequately explained by Mr CC.
The second substantive submission made by the Receivers was that, regardless, the appeal intended by Mr CC was futile. To understand the import of that submission it is necessary to explain Mr Senne’s conduct when he was the trustee of the AM Trust.
Mr Senne was expressly empowered by the terms of the AM Trust deed to enter into the compromise with the Receivers and the wife in February 2012, which Watts J recognised in his reasons (at [34]-[36]). The draft grounds of appeal promulgated by Mr CC were annexed to his application for leave to appeal out of time. None of the draft grounds of appeal (as we read them) challenge the trial judge’s findings about Mr Senne possessing the power to do as he did. Rather, Mr CC contends Mr Senne did not exercise his power honestly, wisely and properly and that the trial judge erred by finding otherwise.
The terms of the compromise obliged Mr Senne to support the Receivers’ application for the orders ultimately made by Watts J on 14 April 2014, which fact his Honour also recognised in his reasons (at [17]). Although his Honour only there referred to clause 2 of the Deed of Settlement, clause 9.10 of the Deed additionally provided:
Each Party must do or cause to be done all things necessary or reasonably desirable to give full effect to this Deed and the transactions contemplated by it…
As contractually bound, Mr Senne supported the Receivers’ application to the court for orders implementing the terms of the Deed. While the orders made by Watts J on 14 April 2014 were opposed by the husband, they reflected the orders sought by the Receivers with Mr Senne’s consent.
Although not expressly conceded by Mr CC, he did not submit to the contrary that when he subsequently assumed the role of trustee of the AM Trust he was bound by Mr Senne’s antecedent conduct as trustee of the trust. The trust fund was vested in Mr CC in the same state it was divested by Mr Senne. So much is made plain both by statute (see s 9 of the Trustee Act 1925 (NSW)) and the terms of the AM Trust deed, which relevantly provided at clause 18(1):
The Protector [the husband] shall have power from time to time…to appoint one or more persons to be trustees…in the place of any one or more trustees…and upon every such appointment the Trust Fund shall forthwith be transferred to or vested in the Trustees so appointed…
As the new trustee of the AM Trust, Mr CC had exactly the same duties, powers and discretion formerly possessed by Mr Senne and he could not now do what Mr Senne could not if he had remained the trustee of the trust.
The Receivers submitted that the orders of Watts J cannot be disturbed by
Mr CC since, once the judgment of a court is perfected by the making of a consent order, the parties are bound by their consent. That may be so to a point, but the general principle cannot be stated as broadly as the Receivers contended. A consent order may still be impeached on grounds that invalidate the anterior agreement between the parties (see Harvey v Phillips (1956) 95 CLR 235 at 244).
For present purposes, the Deed of Settlement remains valid and binds the AM Trust. In the absence of some legal or equitable cause of action justifying it, and none was expressly suggested to us to exist, Mr CC could not repudiate the Deed on behalf of the trust.
Similarly, his ability to appeal against the orders made with Mr Senne’s consent on 14 April 2014 is limited. The limited grounds upon which it might be possible do not exist in this instance, as we will now endeavour to demonstrate.
The orders of Watts J were not consent orders in the strict sense because they were made after a hearing on the merits over the objection of the husband. They were, however, orders made with the active support and consent of
Mr Senne as trustee of the AM Trust and may therefore be said to be consent orders from the perspective of the trust.
The fact that an order is made by consent does not, of course, make the order of any different nature from an order made otherwise. The order derives its force from the circumstance that it is a valid order made by the court in question, not from the agreement of the parties. Therefore, save for an important qualification, an order made by consent may be the subject of an appeal in the same way as any other order (see Gilbert v Estate of Gilbert (1990) FLC 92-125 at 77-839).
However, the “important qualification” referred to in Gilbert is of present significance: the correctness of an order may not be appealed on its merits by a party who consented to the order. Rather, that party’s right of appeal is limited to vitiating grounds, such as fraud, mistake, fresh evidence, or the absence of jurisdiction. So, if by having consented to the orders made by Watts J,
Mr Senne could not appeal to challenge the merit of the orders, nor can Mr CC. His substitution for Mr Senne as trustee does not change or enlarge his power.
None of the draft grounds of appeal promulgated by Mr CC, which it is unnecessary to recite, address fraud upon Mr Senne, mistake by Mr Senne, the availability of fresh evidence, or the absence of jurisdiction. Suffice to say that, without exception, they advance arguments directed to the merit of the trial judge’s reasons by reference to facts that remain contentious between the parties. Mr Senne would not have been permitted to advance those arguments on appeal. Nor should Mr CC be permitted.
Even if it were otherwise, and it was thought Mr Senne (and now Mr CC in his place) could appeal the orders because the court did actually inquire into and determine the merit of the orders, he would still be precluded from an appeal by another well-established principle. Where a point is not taken at first instance and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards on appeal (see Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; Metwally v University of Wollongong (1985) 60 ALR 68 at 71;
Coulton v Holcombe(1986) 162 CLR 1 at 7; Davidson & Davidson (No 2) (1994) FLC 92-469 at 80-876).
Mr Senne as trustee contended at first instance that the orders should have been made in the manner they were. Implicit in his support for the orders must have been assertions that he was empowered to reach the compromise with the Receivers and the compromise was prudent. Absent vitiating circumstances, it would not now be open to him to appeal and argue the case differently, when the Receivers might have adduced other evidence at first instance either in chief or by cross-examination to meet such a different argument. If it would not be open to Mr Senne as trustee, it is not now open to Mr CC as the new trustee.
The draft grounds of appeal advanced by Mr CC and the submissions made to us implied he and/or the beneficiaries of the AM Trust are aggrieved about
Mr Senne’s conduct in his former capacity as trustee. The basis of their grievance was not precisely articulated during argument. It was simply asserted by Mr CC that Mr Senne had “improperly” compromised the dispute with the Receivers and the wife by reason of a “conflict of interest”. In subsequent written submissions that we permitted all parties to file, it was also generically asserted by Mr CC that Mr Senne “lacked bona fides” when he entered into the settlement.
Draft ground 5(a) of the proposed appeal recognises that the beneficiaries of the AM Trust “have standing to sue [Mr Senne] for breach of fiduciary duty in relation to the settlement and consent orders”. Mr CC’s counsel expressly conceded during submissions that such a suit is one option of redress, but appeared unwilling to accept it was the most appropriate or only avenue of redress. In the subsequently filed written submissions, Mr CC’s counsel contended it was better to contest the present dispute “by means of the proposed appeal, rather than by going to the increased expense of commencing further proceedings against the former trustee in a new forum”.
We accept the Receivers’ submission that any grievance about the former trustee’s performance is best remedied by a personal suit against Mr Senne for alleged breach of fiduciary duty, not by seeking to unravel the compromise he achieved on behalf of the AM Trust through the Deed of Settlement and the orders of Watts J. If Mr Senne was still the trustee of the AM Trust the beneficiaries would sue him personally to remedy their grievance; not try and appeal the orders of Watts J. The situation should be no different simply because he is no longer the trustee.
Authorities were cited by both the Receivers (see Re Irismay Holdings Pty Ltd [1996] 1 Qd R 172 at 176-177; Application of Richard Albarran; Harb v Harb [2010] NSWSC 1251 at [13]-[29]) and Mr CC (see Dowling v St Vincent de Paul Society Inc [2003] VSC 454 at [21]-[22]) to support their positions. Differences of opinion are discernible in the authorities about the ambit of the statutory power invested in trustees to compromise disputes on behalf of a trust (see also Rinehart v Welker [2012] NSWCA 95 at [162], [182], [196], [218];
In re Earl of Strafford, deceased; Royal Bank of Scotland Ltd v Byng[1980] 1 Ch 28 at 32-33), but it is unnecessary for us to analyse and discuss them at length because none of them assist Mr CC in the circumstances of this case.
Importantly, the present case concerns an agreement reached with third parties by a trustee on behalf of the trust, not unlike the circumstances considered in Harb v Harb, but quite unlike the circumstances in Dowling and Re Irismay, which concerned the compromise of disputes between trustees and beneficiaries of the trust.
In Harb v Harb, a trustee who was appointed to sell realty for two beneficiaries contracted to sell the realty to a third party. The beneficiaries objected to the sale and the trustee sought advice from the court about completion of the sale over the beneficiaries’ objections. The court advised the trustee to complete the sale, recognising that a trustee is not bound to follow the directions of beneficiaries (at [13]) and if beneficiaries are dissatisfied with the decisions and conduct of the trustee they are at liberty to redress their grievance by means other than disturbance of contractual arrangements struck between the trustee and third parties (at [20]-[24], [29]).
Both Re Irismay and Dowling concerned the ambit of a trustee’s statutory power (under comparable State statutes) to compromise disputes on behalf of the trust they administer, but in quite different circumstances from Harb v Harb and from one another. Re Irismay was confined to consideration of the trustee’s ability to settle a beneficiary’s claim against the trust, whereas Dowling was decided in the context of a much broader question about whether the trustees had any power at all to compromise probate proceedings in which their appointment as trustees under a disputed will was itself an issue. In each case, the trustee was in dispute with one or more beneficiaries of the trust about trust property, but neither concerned a dispute involving a third party.
The orders made by Watts J were tantamount to approval of the agreement reached by some of the parties to the proceedings before the court dealing with property, the ownership of which was the subject of dispute in those proceedings. If an attack is now to be mounted by the beneficiaries of the
AM Trust, through Mr CC as the new trustee, as to the probity or prudence of either Mr Senne’s entry into the compromise or his support for the court orders then it should be by way of separate suit. The spouses’ children, who are beneficiaries of the AM Trust and who were independent parties to the proceedings before Watts J, expressly abstained from opposing the proposed orders and chose not to adduce evidence before Watts J about any asserted “conflict of interest” or “lack of bona fides” afflicting Mr Senne’s exercise of fiduciary obligations to them.
It should be made plain that, although Dowling addressed the circumstances under which the beneficiaries of a trust may have a grievance with the trustee about the manner in which the trustee compromised a dispute concerning the trust, it said nothing to controvert the observation in Re Irismay that, to remedy any such grievance, an aggrieved beneficiary should generally sue the trustee for breach of trust rather than seek to impeach the validity of the agreement reached by the trustee.
Thus we are persuaded an appeal by Mr CC on the grounds he contemplates would be devoid of merit, so it would be futile granting leave for him to bring the proposed appeal out of time. His application will therefore be dismissed.
Although Mr CC contended he should be permitted to file and prosecute an appeal because he is the last available person to defend the interests of the
AM Trust, that argument did not satisfactorily address the submission about the futility of his proposed appeal.
Security for costs of the appeal
Since there will be no appeal it becomes unnecessary to consider the applications for security to cover the respondents’ expected costs of the appeal.
It is only now necessary to consider the costs of the failed application to
re-instate the abandoned appeal, the costs of the failed application for leave to appeal out of time, and the costs of the abandoned appeal.
Costs of the failed applications for re-instatement and leave to appeal
As is customary, submissions were sought from the parties on the question of costs in the event of either grant or dismissal of the applications made by the husband and Mr CC.
In circumstances of dismissal, as has occurred, the Receivers, Mr Senne, and the wife all sought that the husband and Mr CC pay their costs of the applications.
The provisions of the Act require that parties ordinarily bear their own costs of proceedings (s 117(1)), but the Act also recognises that costs orders may be appropriate (s 117(2)) and specifies the factors to be considered in exercising that discretion (s 117(2A)).
Mr CC commendably acknowledged that a costs order against him was difficult to resist.
Although Mr CC’s financial circumstances remain unknown, it was submitted for him in earlier argument concerning security for costs, that he would need several weeks within which to post security for costs of up to $100,000 to enable prosecution of his intended appeal. Clearly, his financial circumstances do not militate against a costs order.
He was, of course, seeking an indulgence to bring his appeal out of time, necessitated by his failure to comply with the Rules. The fact he did so wholly unsuccessfully strengthens the applications for costs against him.
As for the husband, he contended (inferentially rather than expressly) that
Mr CC should meet any costs orders, since the application made by Mr CC occupied most of the day once his own likely withdrawal from any appeal was foreshadowed. It is true Mr CC’s application occupied most of the hearing time before us, but that consideration alone belies the context of the hearing. It was the husband’s Application in an Appeal filed on 1 July 2014 which was the catalyst for the hearing. When that Application was listed before Ryan J on
22 July 2014 it was adjourned for hearing before us on 30 July 2014. Mr CC’s Application in an Appeal was not even filed until 25 July 2014.
The husband remains an undischarged bankrupt. He must therefore be regarded as a person of extremely limited means. Alive to those circumstances, Ryan J made an order on 22 July 2014 compelling the husband to secure the Receivers’ costs related to the hearing of his application for re-instatement of the appeal (Order 2). The order required the husband to cause a third party to provide security for the Receivers’ costs in the sum of $15,000. We were informed the husband arranged for a third party to deposit such funds in his solicitor’s trust account, and furthermore, the solicitor undertook to retain those funds in trust pending further order of this court. That security is available to meet any costs liabilities of the husband.
In reliance upon the provisions of s 117(2A)(a), (d), (e), and (g) of the Act, we are persuaded that the respondents should have costs for their successful resistance of both the husband’s and Mr CC’s applications.
The costs will be payable on a party/party basis in the sums agreed or assessed. Although the wife formally sought an order in her Response to an Application in an Appeal that her costs be calculated in accordance with her solicitor’s retainer, the submissions made on her behalf did not indicate any basis upon which anything other than party/party costs would be ordered.
In respect of the costs payable by the husband, the order for security made by Ryan J on 22 July 2014 was only for the benefit of the Receivers and only in respect of their costs of defending the re-instatement application. Therefore, the payment of the Receivers’ costs in that respect from the secured funds will have priority. The respondents shall otherwise share equally in the remainder of the security provided by the husband. To the extent the security is insufficient to meet the entirety of the husband’s liability for the respondents’ costs, he will bear liability for payment of the residue personally.
Costs of the abandoned appeal
Once an appeal is abandoned, an appellant may be ordered to pay the costs of all other parties to the appeal (r 22.43(1)).
The Receivers, the wife, and Mr Senne all applied against the husband for their costs in relation to the abandoned appeal. None made any application for costs against Ms C Allan.
An order will be made requiring the husband to pay the party/party costs of the wife, Mr Senne, and the Receivers in relation to the abandoned appeal.
They must all have incurred costs in relation to the appeal, though we accept the husband’s submission their costs should be quite modest.
The only step taken in the appeal was the filing and service of the Notice of Appeal. It was deemed abandoned less than a month later when the appellants’ solicitor omitted to file the draft appeal index in time. There were no procedural hearings conducted before the appeals registrar and no written submissions were prepared.
The husband asserted the respondents’ costs would be more than satisfactorily covered by the interim security for costs order made by Ryan J in these proceedings on 22 July 2014. That might be so, but the respondents’ costs of successfully resisting his re-instatement application would be more significant and in aggregation with costs of the abandoned appeal may exhaust the existing security. Since there was neither consensus nor any evidence about the quantum of costs it was beyond the task of this court to speculate about the quantification. That is a matter for agreement or assessment.
I certify that the preceding ninety seven (97) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Finn, Ryan and Austin JJ) delivered on 2 September 2014.
Associate:
Date: 2 September 2014
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