Application of Macedonian Orthodox Community Church St Petka Incorporated

[2006] NSWSC 392

CITATION:	Application of Macedonian Orthodox Community Church St Petka Incorporated [2006] NSWSC 392
HEARING DATE(S):	10 February, 14 March 2006
JUDGMENT DATE :	8 May 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Objectors/beneficiaries permitted to inspect non confidential parts of counsel's opinion to plaintiff/trustee.
CATCHWORDS:	TRUSTEE [204]- Application by trustee for judicial advice on whether trustee must disclose counsel's opinion on main proceedings to beneficiary opponents in main proceedings- Whether and which parts of counsel's opinion are confidential or privileged- Objectors to be given access to as much of the opinion as does not disclose confidential or privileged information.
LEGISLATION CITED:	Trustee Act 1925, ss 63, 85
CASES CITED:	Alsop Wilkinson v Neary [1996] 1 WLR 1220 Craig v Humberclyde Industrial Finance Group Ltd [1999] 1 WLR 129 Hassle v Commissioner of Patents (1987) 9 IPR 565 Kioa v West (1985) 159 CLR 550 Midland Bank Trust Co Ltd v Green [1980] Ch 590 Re Allen-Meyrick's Will Trusts [1966] 1 WLR 499 Re Beddoe [1893] 1 Ch 547 Re Eaton [1964] 1 WLR 1269 Re Kay's Settlement Trusts [1939] Ch 329 Re Moritz [1960] Ch 251 Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547 Re Perpetual Trustee Co Ltd [2003] NSWSC 1185 Smith v Croft [1986] 1 WLR 580 Wheeler v Philip Morris Ltd (1989) 97 ALR 282
PARTIES:	Macedonian Orthodox Community Church St Petka Incorporated (Plaintiff) His Eminence Petar, The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand and The Very Reverend Father Mitko Mitrev (Objectors)
FILE NUMBER(S):	SC 2451/04
COUNSEL:	G O Blake SC (P) T G R Parker SC and R E Steele (Objectors)
SOLICITORS:	McConnell Jaffray (P) Sachs Gerace Lawyers (Objectors)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Monday 8 May 2006

2451/04 – APPLICATION OF MACEDONIAN ORTHODOX COMMUNITY CHURCH ST PETKA INCORPORATED

JUDGMENT

1 HIS HONOUR: There are long running proceedings before Hamilton J No 3369 of 1997 in which Metropolitan Petar, Bishop of the Macedonian Orthodox Church Diocese of Australia and New Zealand, claims that the plaintiff in the present proceedings holds certain real estate and interests in real estate upon trust for the Macedonian Orthodox Church. These 1997 proceedings will be referred to in these reasons as "the main proceedings".

2 On 23 August 2002, Hamilton J made an order in the main proceedings that certain questions be tried separately and in advance of other issues. His Honour gave judgment on 4 April 2003 in which he held that property referred to in Schedule A to the statement of claim was, prior to the transfer of the legal estate in such property to the present plaintiff, held upon trust to permit that property to be used by the Macedonian Orthodox Church St Petka Rockdale as a site for a church of the Macedonian Orthodox religion and for other buildings and activities concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox religion. However, his Honour indicated that he was unable on the evidence to answer the question as to any other property. He held that the trust was a valid charitable trust and was still binding that property.

3 The remaining issues have been fixed for hearing before Hamilton J some time later this year.

4 The present proceedings came before Palmer J in May 2004. Notice of the summons was served on the plaintiffs in the main proceedings and upon the Attorney General. The Attorney General informed the court that he did not wish to participate but the plaintiffs in the main proceedings did appear and have taken an active part in them.

5 In these proceedings the plaintiff, as trustee, seeks judicial advice under section 63 of the Trustee Act 1925, as to whether it would be justified in defending the main proceedings in seeking relief under s 85 of the Trustee Act 1925 in respect of any breach of trust and in disposing or charging trust assets in order to pay its reasonable costs of defending the proceedings. On 7 May 2004, Palmer J noted that he was concerned that the plaintiff had not procured an opinion of counsel which supports the proposition that it had such prospects of success in the main proceedings as to justify it either in continuing to defend the proceedings or in expending trust funds in that defence. His Honour made an interim order; see [2004] NSWSC 388.

6 The second stage of these proceedings was heard by Palmer J in June 2005, his Honour giving judgment on 10 June 2005 [2005] NSWSC 558. His Honour further noted that the plaintiff had not received counsel's advice. The reason proffered was that everybody had been too busy in and about interlocutory applications in the main proceedings. However, his Honour accepted that there was not that much purpose in counsel's advice being obtained before the final (now the seventh) version of the statement of claim had been settled. His Honour held that the plaintiff had locus standi and that the delay in bringing the application was not fatal.

7 His Honour said at [75]:

"In my opinion, it is appropriate that the Association [meaning the plaintiff in the present proceedings] obtain a preliminary opinion from counsel as to the prospects of the Main Proceedings on the basis of what is already known about the issues as raised by the Objectors' Statement of Claim (version 7) and about the nature of the evidence which is available to the Association in rebuttal."

He then said at [80]:

"If the Association believes that the preliminary opinion of counsel warrants it in continuing to defend the Main Proceedings, it may apply again for advice justifying further recourse to trust assets for that purpose. In other words, the Association will have to take its ability to have recourse to trust assets one step at a time."

8 In due course counsel's opinion was obtained. It was obtained from Mr G O Blake SC who has represented the plaintiff throughout these proceedings. The opinion was tendered on a confidential basis (whatever that may mean). The advice goes to 185 pages, 396 paragraphs. Although the opinion contains some material which might be called confidential information, a large proportion, possibly 45%, merely deals with questions of the history of the Church, the history of the litigation and relevant legal principles.

9 The matter came back into my list on 10 February 2006. The principal purpose was to see if dates for hearing questions 1 and 6 in the summons could be found. On that day I heard argument, subsequently supplemented by written submissions, as to whether the objectors were entitled to be given access to counsel's opinion.

10 I did fix a date for hearing, 27 April 2006, but this was later vacated for a number of reasons, principally the late filing of submissions and amended statement of facts.

11 The purpose of these reasons is to rule on the question as to whether or not the whole or any part of Mr Blake's opinion should be made available to the objectors, and if so, on what terms.

12 As Palmer J said in his 2005 judgment (at [20]-[23]), the jurisdiction to give advice to trustees harks back to the old administration suit days when trustees could pay the whole of the trust fund into Chancery and it would then be administered under the aegis of the court. In England, that still appears to be the basis of the jurisdiction. A "Beddoe application", as judicial advice applications are known in England, is considered in the English Rules as a simplified administration procedure by originating summons. In England, this carries through to the fact that trustees having asked for advice are bound to follow it; see eg Re Allen-Meyrick's Will Trusts [1966] 1 WLR 499.

13 However, in NSW the procedure is statutory and it has been somewhat more divorced from the old administration suit procedure. Nonetheless, the principles generated during the period of the administration suit are germane to how a judge should act when dealing with an application under the statute.

14 In England, a practice note 64 BPD has been issued which deals with what the court expects will be provided to it on an application of this nature.

15 Essentially, the practice note says that all the beneficiaries must be consulted and preferably made parties to the application, the beneficiaries are to see all the relevant documents but that there is an exception and that is where a beneficiary is the trustee's adversary in litigation and in that situation the trustee need not serve the beneficiary with any document where the document would be privileged in the principal litigation between the trustee and that beneficiary; see para 7.6 on p 1675 of the 2005 edition of the English White Book.

16 As I mentioned earlier, the English application is known as a Beddoe application after Re Beddoe [1893] 1 Ch 547. A similar procedure is used with respect to proceedings brought by minority shareholders against a company, a matter to which I will return.

17 There are a series of cases in England dealing with the present point. In Re Moritz [1960] Ch 251, an executor took out an application to which all the residuary beneficiaries were defendants asking the court for directions as to whether they should take certain proceedings against two of the beneficiaries. The defendants were supplied with copies of the affidavits, but not with copies of the exhibits. The defendants, that is, the beneficiaries proposed to be sued, sought an order that they be supplied with copies of certain of the exhibits. Wynn-Parry J held that whilst it was proper and necessary to join all the beneficiaries, refused the application indicating at p 255 that he understood the practice was that the adversary parties should not be present in the court when the matter was debated and should not be furnished with the evidence upon which the court was asked to act. He distinguished the case where what was involved was a pure question of law such as in Re Kay's Settlement Trusts [1939] Ch 329.

18 That decision was followed by Wilberforce J in Re Eaton [1964] 1 WLR 1269, though his Lordship added a rider that the practice must be adapted so far as is practicable in order to do justice in the particular circumstances of each case.

19 In Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547, in an ex tempore judgment, I referred to Re Moritz and Re Eaton, Smith v Croft [1986] 1 WLR 580 and Midland Bank Trust Co Ltd v Green [1980] Ch 590 and noted that the 25 years since Moritz had indicated that in England a more flexible practice had emerged and that is to allow the beneficiaries to participate far more than used to be the case and that the way of dealing with the problem is to withhold from a party certain parts of the material. I noted that I had adopted a similar practice in patent cases in Hassle v Commissioner of Patents (1987) 9 IPR 565.

20 Smith v Croft was a company case. At 588 Walton J said that all the evidence should be disclosed save to the extent that it consists of matters covered by legal professional privilege, though he added "(This will always extend to counsel's opinion) or where there is some other excellent reason for this being held back." In that particular case his Lordship thought that a matter which might be kept confidential was the identity of the person who was leaking information to the plaintiff.

21 In Alsop Wilkinson v Neary [1996] 1 WLR 1220, Lightman J said that in a Beddoe application each party is entitled to know everything that is communicated to the court. He said at 1226:

"The justification for the protection afforded to trustees by Beddoe order is that the beneficiaries are given the opportunity to make representations to the court before the order is made."

22 Finally, in Craig v Humberclyde Industrial Finance Group Ltd [1999] 1 WLR 129, the English Court of Appeal said (per Morritt LJ at 136) that the court was acting in an essentially administrative capacity, and that it needed to adjust its actions to the circumstances of the individual case with a view of doing justice so far as possible to all parties and that it is appropriate to exclude the adversary from participating in some parts of the proceedings.

23 Although I am only dealing with one aspect of the s 63 application, namely whether counsel's opinion should be disclosed to the objectors, it is necessary to keep in mind what has to be established by a plaintiff in order to convince the court that it should give the plaintiff directions. In my view the authorities (and the English practice note) give the following indications:

1. The application is not just a formality. The trustee gets protection by an order under s 63 of the Trustee Act 1925, but to get that protection it needs to give the beneficiaries sufficient opportunity to ensure that the court has available all the appropriate material and arguments.

2. A trustee will be expected to provide material to the court to demonstrate:

(a) that it has taken proper legal advice and, if need be, commercial advice, and that a reasonable trustee might well abide by that advice;

(b) that where the advice sought is in connection with litigation, the trustee must show not just that it has advice that it is more likely than not that it will be successful, but also that in pursuing the litigation it will be acting in the best interests of the trust. Thus, for instance, there may well be situations where counsel has advised that there is a good chance of success but that the costs of obtaining a verdict would be a million dollars and the outcome might be a verdict for $10,000. A reasonable trustee may well take the view that despite the assurance of success, it is not in the interests of the trustee to pursue the litigation.

3. The trustee must consult the beneficiaries and inform the court of their attitude.

24 It must always be remembered that the prime purpose of the exercise is to see that the trust is properly administered with regard to its status in the present case as a charitable trust.

25 With these matters in mind, I now turn to the submissions that have been made by counsel.

26 Mr Blake SC for the plaintiff, made written submissions dated 27 February 2006 and made a series of points which can be summarised as:

1. The established practice in applications for judicial advice of the court is not to compel legal advice as to a trustee's case or defence to be provided to other parties to the litigation.

2. The principles of natural justice do not require provision of the legal advice of a trustee to other parties to litigation.

27 As to Mr Blake's first proposition, I think, with respect, it is too widely stated. I have read the cases that he refers to, some of which contain what I might call only throw away lines or words directed to what I called primitive applications in Re Perpetual Trustee Co Ltd [2003] NSWSC 1185. I have already dealt with what I consider to be the current leading cases on the topic and I do not consider there is any established practice in the present sort of case to deny complete access to other parties to a s 63 application or other parties who are properly endeavouring to assist the court in the determination of the s 63 application.

28 Certainly, as I said in Re Permanent Trustee Australia Ltd (1994) 33 NSWLR 547 and as is made clear in the English practice note, one withholds confidential information and, if one follows the English practice note, information which, although not privileged material in the s 63 application, would be privileged material as against the objectors in the principal proceedings. I will return to this point later.

29 The confidential material would include commercially sensitive information. It would also include counsel's assessment of the facts of the case and his or her opinion as to how a judge might react to the various affidavits or witness statements and probably how the law related to the facts. It would also extend to counsel's opinion of the chances of success. However, on the other side of the line to my way of thinking would be counsel's statement of what the law is, particularly if that statement was made as a result of stating what various judges had said in the leading cases.

30 As far as natural justice is concerned, as Mr Blake points out, what is appropriate in terms of natural justice depends on the circumstances of the case: Kioa v West (1985) 159 CLR 550, 584.

31 Mr Blake says that the court's jurisdiction under s 63 is to provide in an essentially administrative case, private advice to a trustee. However, he then acknowledges that "The court is essentially engaged solely in determining what ought to be done in the best interests of a trust estate and not in determining the rights of adversarial parties."

32 Mr Blake tends to rely on the second part of that statement, but in my view the first part is equally valuable, that is, that the court is not dealing with a s 63 application in order to give a trustee some advantage in litigation by allowing it to use trust funds to defend its position, but rather is making a determination which is best for the trust estate.

33 Insofar as that application involves questions of law then the court is assisted not only in having the trustee's counsel giving an opinion as to the questions of law (not the law as it relates to the facts but the law in general), but also in receiving comment on that statement by the objectors' counsel. Normally, the court is best placed to make a decision by hearing the best statements of two opposing views.

34 With respect, Mr Blake's submission does not make me deviate from the basal proposition in Re Permanent Trustee Australia Ltd that, in an application such as the present, (which might be distinguished from a primitive application or an application in a corporate struggle), the court withholds from the objector any confidential information or perhaps material which would be privileged in the principal application, but otherwise is interested in obtaining its comments on the material whether that material is contained in counsel's advice or otherwise.

35 Mr Parker SC for the objectors, argued that there was no valid way of distinguishing the Permanent Trustee case and it must be borne in mind that the court had to consider the benefit of the trust in pursuing the litigation as well as whether there was a sufficiently arguable case. He put that really questions of privilege had little part to play.

36 In answer to the comment I made during the hearing that the changed rules on preliminary discovery may indicate a changed public policy that there should be greater disclosure by people in litigation of their case to their opponents, Mr Parker in additional submissions put that this matter was relevant because the plaintiffs could hardly be prejudiced by disclosure of opinions to the extent that such disclosure would only reveal material which would need to be discovered in due course.

37 I have already called attention to the English practice note on the subject. I will set out various relevant parts which, to my mind, with respect, are common sense and are relevant to applications in this court as well as in England:

"Evidence
7.1 The trustees' evidence should be given by witness statement. In order to ensure that, if directions are given, the trustees are properly protected by the order, they must ensure full disclosure of relevant matters, even if the case is to proceed with the participation of beneficiaries as defendants.
7.2 Applications for directions whether or not to take or defend or pursue litigation should be supported by evidence including the advice of an appropriately qualified lawyer as to the prospects of success and other matters relevant to be taken into account, including a cost estimate for the proceedings and any known facts concerning the means of the opposite party to the proceedings, and a draft of any proposed statement of case. …

7.4 All applications for directions should be supported by evidence showing the value of the trust assets, the significance of the proposed litigation or other course of action for the trust and why the court's directions are needed … .
7.6 If a beneficiary of the trust is a party to the litigation about which directions are sought, with an interest opposed to that of the trustees, that beneficiary should be a defendant to the trustees' application, but any material which would be privileged as regards that beneficiary in the litigation should be put in evidence as exhibits to the trustees' witness statement, and should not be served on the beneficiary. However if the trustees' representatives consider that no harm would be done by the disclosure of all or some part of the material, then that material should be served on that defendant. That defendant may also be excluded from part of the hearing, including that which is devoted to discussion of the material withheld."

38 7.7(3) provides that:

"The evidence must explain what, if any, consultation there has been with beneficiaries, and with what result. In preparation for an application for directions in respect of litigation, the following guidance is to be followed: ….
(3) In relation to a charitable trust the trustees must have consulted the Attorney General, through the Treasury Solicitor, as well as the Charity Commissioners …".

39 It is clear that if the English directions were applicable in the present case, the present application is deficient in evidence. That, however, does not concern me on this application. The thing that does concern me is that the English directions clearly favour the approach that not only are hostile beneficiary objectors to be given as much material as possible without prejudicing the trustee's case, there must be consultation in charitable trust matters with representatives of the Attorney General.

40 All this material reinforces the view that the objectors should be given access to as much of Mr Blake's opinion as does not: (a) disclose confidential information; and (b) contain material which is privileged in the principal litigation.

41 Mr Blake's opinion and supplementary opinion are said to have been made available to the court "on a confidential basis" whatever that means. In fact they have been kept by a judge and not let out of his chambers.

42 I cannot give this judgment without referring to some parts of the opinion, but I will be very conservative and only refer to those matters which could not be the subject of confidentiality or privilege. I will then publish these reasons and stand the matter over for a short time for short minutes so that there can be a proper objection made to any of my preliminary rulings.

43 The first 31 pages of the opinion merely set out the history of the main proceedings and judicial advice proceedings, the questions arising and the advice that has been sought. Pages 32 to 41 set out more or less verbatim various parts of the Canons of the Church and judgments of the courts bearing upon them. Pages 41 to 62 deal with matters of facts and documents all of which have already been made public. Pages 62 to 74 merely set out propositions of law supported by long quotations from the authorities. Pages 74 to 94 under the heading "(c) Conclusions" constitute opinions of counsel which in the principal litigation would be privileged as against the objectors and I believe should not be disclosed.

44 Pages 94 to 108 deal with facts which are already in affidavits filed in the proceedings. 108-115 are in the same plight.

45 Pages 115 to 125 set out long extracts from the cases and state legal principles.

46 The section headed "(c) Conclusions" commencing on pages 125 to 144 may well be privileged on the same basis as the previous conclusions. Pages 144 to 153 appear to deal with facts which are within the knowledge of all the participants and 153 to 156 deal with legal principles.

47 Pages 156 to 165 under the heading "(c) Conclusions" appear to me to be privileged in the principal litigation.

48 Pages 166 through to 168 state facts and 168 to 172 state principles of law and these are not confidential in any way. The heading "(c) Conclusions" commencing on 172, however, does introduce a further passage of privileged material which goes on until 179.

49 I will not describe what is on pages 179 to 182, but apart from para 390 which merely quotes from Wheeler v Philip Morris Ltd (1989) 97 ALR 282 at 311, the material might be considered to be privileged. There are some conclusions which also fall into the privileged category up to the top of 184. Pages 184 to 185 being paras 395-396 are not privileged.

50 The supplementary opinion of 27 February 2006 states conclusions and may well be privileged in the principal proceedings.

51 Accordingly, in my view I should permit inspection by the objectors of Mr Blake SC's opinion of 13 December 2005 except paras 100-164, 256-300, 327-343, 363-394 and so much of the Table of Contents as refer to any of those paragraphs.

52 However, the only formal order I make is to stand the proceedings over until 11 May 2006 at 9.30 am for short minutes to be brought in and further directions made.

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