Aurora Australasia Pty Ltd v Hunt Prosperity Pty Ltd (Costs)

[2024] NSWSC 756

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

Aurora Australasia Pty Ltd v Hunt Prosperity Pty Ltd (Costs) [2024] NSWSC 756

Hearing dates:

20 June 2024

Date of orders:

20 June 2024

Decision date:

20 June 2024

Jurisdiction:

Equity

Before:

Hammerschlag CJ in Eq

Decision:

(1)   Hunt Prosperity’s costs of the application up to and including 16 May 2024 will be costs in the cause of the proceedings.

(2)   There will be no order with respect to the costs incurred from 17 May 2024 to the intent that each party shall bear their own.

(3)   Unless and until Hunt Prosperity becomes finally entitled to the costs covered by order (1), those costs are not to be paid out of the Fund.

(4)   Hunt Prosperity’s costs incurred from 17 May 2024 are not to be paid out of the Fund.

Catchwords:

COSTS – Application by trustee for judicial advice that it is justified in terminating a trading trust – Where trustee relies on counsel’s opinion to seek judicial advice but where, at the time of first bringing the application, opposition by unitholders to terminate the trust was not yet clear, although it became clear within a short period of time and the trustee nevertheless persisted in the application over opposition – Where trustee and those unitholders are locked in litigation concerning, amongst others, whether the trustee has previously breached trust and the trial is imminently to be heard – HELD – Trustee’s costs to be costs in the cause for the period up to the unitholders’ opposition to the application being made clear, and thereafter, each party to bear their own – Appropriate to order that the trustee not recover those costs up to opposition to the application being made clear from the trust fund unless and until it finally succeeds in the principal proceedings

Legislation Cited:

Trustee Act 1925 (NSW) s 63

Uniform Civil Procedure Rules 2005 (NSW) r 42.25

Cases Cited:

Aurora Australasia Pty Ltd v Hunt Prosperity PtyLtd [2024] NSWSC 680

Category:

Costs

Parties:

Aurora Australasia Pty Ltd (Plaintiff/First Cross-Defendant)
Hunt Prosperity Pty Ltd (Applicant on the Motion/First Defendant/Second Cross-Defendant)
AMHP Pty Ltd (Second Defendant/First Cross-Claimant)
Adam Hartley (Second Cross-Claimant)
David James Driver (Third Cross-Defendant)

Representation:

Counsel:
J Pennay (Solicitor) (Plaintiff/First and Third Cross-Defendants)
A Hochroth (Applicant on the Motion/First Defendant/Second Cross-Defendant)
JM Ireland KC (Second Defendant/Cross-Claimants)

Solicitors:
McCabes Lawyers (Plaintiff/First and Third Cross-Defendants)
Gilbert + Tobin (Applicant on the Motion/First Defendant/Second Cross-Defendant)
D.C. Balog & Associates (Second Defendant/Cross-Claimants)

File Number(s):

2023/00459309

Publication restriction:

Nil

EX TEMPORE JUDGMENT (REVISED)

1. The First Defendant/Second Cross-Defendant applied for judicial advice under s 63 of the Trustee Act 1925 (NSW) which application I dismissed on 4 June 2024: see Aurora Australasia Pty Ltd v Hunt Prosperity PtyLtd [2024] NSWSC 680.

2. Definitions used in that judgment are used here.

3. The question of costs remains.

4. I received written submissions from the three contestants. In addition, I heard them orally.

5. Hunt Prosperity seeks its costs of the application to be paid out of the Fund on an indemnity basis. It draws attention to cl 18 of the Trust Deed under which it has an indemnity in respect of all expenses and costs in connection with the Fund, except in the case of its own fraud, negligence or wilful default. It places significant emphasis on the fact that it had an opinion from Counsel justifying the application.

6. Its fallback position is that the costs of the application should be costs in the cause of the proceedings to which the contestants are party and which are imminently to be heard by Rees J.

7. The Hartley interests submit that there should be no order as to costs on the application to the intent that each of the parties pay their own, and that the Court make an order under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.25(2) on the basis that Hunt Prosperity acted unreasonably or, in substance, for its own benefit rather than for the benefit of the Fund. That rule provides:

(1)    Subject to subrule (2), a person who is or has been a party to any proceedings in the capacity of trustee or mortgagee is entitled to be paid his or her costs in the proceedings, in so far as they are not paid by any other person, out of the fund held by the trustee or out of the mortgaged property, as the case may be.

(2)    The court may order that the person's costs not be so paid if--

(a)    the trustee or mortgagee has acted unreasonably, or

(b)    in the case of a trustee, the trustee has in substance acted for his or her own benefit rather than for the benefit of the fund.

8. Aurora supports the position taken by the Hartley interests but puts, as a fallback position, that the costs of the application should be costs in the cause.

9. Costs are, of course, within the discretion of the Court.

10. I have some doubt that, in bringing the application in the first place, Hunt Prosperity acted reasonably, despite the fact that it had an opinion from Counsel. As I pointed out in the principal judgment, there was no good reason to give judicial advice, and not less than 10 reasons not to give it. One of those reasons was that Hunt Prosperity was acting to reduce its possible exposure.

11. But from the time that Hunt Prosperity knew that both Aurora and the Hartley interests, holding 80% of the equity in the Fund, opposed the enterprise being shut down, I consider that Hunt Prosperity was acting unreasonably in prosecuting the application. The opposition from Aurora and the Hartley interests, and the absence of any overt support from any other unitholder, drive the conclusion that, from that time at least, Hunt Prosperity was acting for its own benefit rather than for the benefit of the Fund. The opinion from Counsel was given before these facts had emerged.

12. It follows, in my view, that from that time (which was no later than 17 May 2024 when the matter came before Rees J), both limbs of r 42.25(2) were satisfied.

13. I observe that 80% of those costs of the application which come out of the Fund will be effectively borne by those who successfully opposed it. Justice does not dictate this result with respect to costs referable to the period after opposition to the application was known.

14. Those costs incurred prior to opposition being known are perhaps in a different category. If Hunt Prosperity is successful in the proceedings, I consider that it should have those costs, but it should not be entitled to recover them from the Fund unless and until it succeeds.

15. In my opinion, the just outcome with respect to costs is, and I order, as follows:

1. Hunt Prosperity’s costs of the application up to and including 16 May 2024 will be costs in the cause of the proceedings.

2. There will be no order with respect to the costs incurred from 17 May 2024 to the intent that each party shall bear their own.

3. Unless and until Hunt Prosperity becomes finally entitled to the costs covered by order (1), those costs are not to be paid out of the Fund.

4. Hunt Prosperity’s costs incurred from 17 May 2024 are not to be paid out of the Fund.

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Amendments

21 June 2024 - [12] - typographical error

Decision last updated: 21 June 2024