Australian Incentive Plan Pty Ltd v A-G (Vic) (No 2)
[2012] VSCA 251
•28 September 2012
SUPREME COURT OF VICTORIA
COURT OF APPEAL
| S APCI 2011 0036 | |
| AUSTRALIAN INCENTIVE PLAN PTY LTD (ACN 119 391 936) (in its capacity as Trustee of the Australian Incentive Trust) | Appellant |
| v | |
| ATTORNEY-GENERAL FOR VICTORIA (NO 2) | Respondent |
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| JUDGES | NETTLE, TATE JJA and DAVIES AJA |
| WHERE HELD | MELBOURNE |
| DATE OF HEARING | 20 August 2012 |
| DATE OF COSTS JUDGMENT | 28 September 2012 |
| MEDIUM NEUTRAL CITATION | [2012] VSCA 251 |
| JUDGMENT APPEALED FROM | [2010] VSC 564 (Croft J) |
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TRUSTS AND TRUSTEES – Appeal – Costs – Trustee’s costs of appeal – Trustee taking advice of court and then appealing against advice – Whether trustee’s costs of appeal to be paid out of trust fund – Whether trustee to be treated like other appellants – Whether, because advice below given on basis not argued below, trustee acting reasonably and in best interests of beneficiaries in bringing appeal – Re Earl of Radnor’s Will Trusts (1890) 45 Ch D 402; Rosenthal v Rosenthal (1910) 11 CLR 87; Dunne v Byrne (1912) 16 CLR 500; Gale v Gale (1914) 18 CLR 560; Re Bubnick [1965] WAR 138, considered, Forsyth v Sinclair (No 2) (2010) 28 VR 635, referred to.
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Appearances: | Counsel | Solicitors |
| For the Appellant | Mr J D Merralls QC with Mr C P Young | Freehills |
| For the Respondent | Mr R T A Waddell | Victorian Government Solicitor |
NETTLE JA:
In this matter I would dismiss the appeal.
I publish my reasons.
TATE JA:
In this matter I would allow the appeal and I publish my reasons.
DAVIES AJA:
In this matter I would dismiss the appeal and I publish my reasons.
NETTLE JA:
The order of the Court is that the appeal is dismissed.
(Discussion re costs)
The appellant trustee, having failed in its appeal from the orders of Croft J, seeks an order that the costs of all parties be paid out of the trust fund.
The general rule is that a trustee is justified in taking the opinion of the court at first instance and that the trustee’s costs of an application for advice will be paid out of the trust fund as between solicitor and client. Similarly, if there is a successful appeal against the judicial construction of a will or trust, a trustee who is joined as a respondent to the appeal is ordinarily entitled to have its costs and expenses of the appeal paid out of the fund as between solicitor and client.[1]
[1]Re Pennington, deceased [1972] VR 869, 875; Gleeson v Fitzpatrick (1920) 29 CLR 29.
Contrastingly, however, as Lord Esher MR said in Re Earl of Radnor’s Will Trusts,[2] if a trustee, after taking the advice of the court at first instance, appeals against the court’s determination, the trustee is ordinarily regarded as being in much
the same position as any other appellant and so, if unsuccessful in the appeal, will be ordered to pay costs personally.
[2](1890) 45 Ch D 402, 423.
In Rosenthal v Rosenthal,[3] Higgins J referred to the latter rule as one of long standing that, although trustees are entitled to their costs out of the estate of getting the guidance of the court in cases of difficulty, they appeal at their own risk and ordinarily must take the usual consequences. More recently, the rule was applied by the Full Court of Western Australia in Re Bubnich[4] and was considered by this court in Forsyth v Sinclair (No 2).[5] Plainly, the purpose of the rule is that, but for its existence, estates would very frequently be frittered away in costs.
[3](1910) 11 CLR 87, 98 in diss, but not in point of principle.
[4][1965] WAR 138, 142–143 (Negus J).
[5](2010) 28 VR 635, 641 [21].
Of course, the rule is subject to exceptions or, perhaps more accurately, it is to be applied according to all the circumstances of the case. So, for example, in Rosenthal itself, a majority of the High Court considered that sufficient justification to depart from the ordinary rule inhered in the fact that the judges below had not taken a well-settled definite view of the legislation in question and had differed in their reasons. Similarly in Dunne v Byrne,[6] the Privy Council held that, because the High Court, whose judgment their Lordships upheld, had split three to two in holding that a testamentary devise was invalid, whereas the Full Court of Queensland below them had held that it was valid, there was sufficient divergence of judicial opinion to warrant that the costs of both parties should be paid out of the estate. In Gale v Gale,[7] the High Court upheld a judgment of Hodges J but concluded that, because the form of the order which his Honour had made was substantially amended on appeal, it was appropriate to order that all parties costs be paid out of the fund.
[6](1912) 16 CLR 500, 503.
[7](1914) 18 CLR 560.
In this case, there are considerations pointing each way. On the one hand, pointing in favour of an application of the rule, here there was no disparity of authority as such. Nor was it the sort of case, which sometimes arises, where a trustee is in effect compelled to appeal in order to preserve the interests of unascertained or unascertainable beneficiaries or those of infants. Here, all 57 members being the only persons who stood to benefit from the appeal were sui juris and plainly apprised of the proceeding. In substance, it was an appeal conducted solely for the potential benefit of the 57 identified beneficiaries, by a corporate trustee of which at least some of those 57 were directors and in control. Accordingly, to adopt and adapt the language of Higgins J in Rosenthal, there was nothing to stop them appealing if they chose.
On the other hand, it is to be assumed that the trustee acted on the advice of competent counsel that it was reasonable to appeal, and the divergence of views among the members of this court bears out that it was reasonable to appeal. Furthermore, despite the Attorney-General being invited to participate in the proceeding below, and put arguments in support of a distribution to charity, the Attorney chose not to appear below; with the consequence that the appellant was not given the chance to put the arguments in opposition to a distribution to charity which were considered on appeal.
Were it not for the latter consideration, I doubt that it would be appropriate to impose the costs of this appeal in effect on the charities in whose favour the judge determined that the fund should be distributed. Given the long standing rule that a trustee who appeals against the court’s advice appeals at the trustee’s own risk, I should assume that the appellant made some sort of arrangement in advance of the litigation for the 57 beneficiaries to indemnify the appellant against costs in the event that the appeal proved unsuccessful. Other things being equal, I should not think it unjust that those persons wear the cost of the appeal.
On balance, however, given the way in which the matter was dealt with below, I am persuaded that there remained sufficient uncertainty about the issues to warrant an appeal at the expense of the fund.
Accordingly, I would order that each party’s costs of the appeal as between solicitor and client be paid out of the fund.
TATE JA:
I agree with Nettle JA.
DAVIES AJA:
I agree with Nettle JA but I wish to add one short observation of my own.
In my view, the court should be reluctant to deprive an unsuccessful trustee of an order that the trustee’s costs be paid out of the trust fund, where the appeal is pursued in the performance of their duties as trustee.
There is a sound policy reason as to why a trustee should be encouraged to use the resources of the Court. Trustees act in a fiduciary role and have fiduciary responsibilities. They are looking to the interests of the relevant stakeholders to whom those responsibilities are owed in bringing the appeal. They should not be discouraged from pursuing litigation, where properly advised, by reason of a fear that the usual order might apply.
NETTLE JA:
In the result, the orders of the Court are as follows:
1. The appeal is dismissed.
2.Each party's costs of the appeal as between solicitor and client shall be paid out of the fund.
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