Australian Incentive Plan Pty Ltd v Babcock and Brown International Pty Ltd (No. 2)
[2011] VSC 43
•22 February 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
LIST C
No. 5005 of 2010
| AUSTRALIAN INCENTIVE PLAN PTY LTD (ACN 119 391 936) (in its capacity as trustee of the Australian Incentive Trust) | Plaintiff |
| v | |
| BABCOCK & BROWN INTERNATIONAL PTY LTD BABCOCK & BROWN AUSTRALIA PTY LTD | First Defendant Second Defendant |
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JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 February 2011 | |
DATE OF JUDGMENT: | 22 February 2011 | |
CASE MAY BE CITED AS: | Australian Incentive Plan Pty Ltd v Babcock & Brown International Pty Ltd & Anor (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 43 | |
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TRUSTS AND TRUSTEES – Necessary parties in an application to vary trusts – Trustee Act 1958 (Vic) s 63A - Re Whigham’s Settlement Trusts [1971] WLR 372; Re Longmans Settlement Trusts [1962] 2 All ER 193.
CHARITABLE TRUSTS – Nomination of charities as beneficiaries - Role of Attorney-General Bradshaw v University of Wales, Aberystwyth [1988] 1 WLR 190; Wallis v Solicitor-General for New Zealand [1903] AC 173 (PC).
COSTS – Trustee entitled to costs incurred in having a question determined in relation to the administration of the trust – Re Buckton [1907] 2 Ch 406; Elders Trustee and Executor Co Ltd v Eastoe [1963] WAR 36 – Party pursuing a contentions claim in the course of litigation properly pursued by a trustee subject to usual costs rules – Trustee not entitled, without reference to the court, to decide to agree to pay party costs of such a contentious claim – Wendt v Orr [2004] WASC 28.
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APPEARANCES: | Counsel | Solicitors |
| For the Attorney-General | Mr R.T.A. Waddell | Victorian Government Solicitor |
| For the Plaintiff | Mr C.P. Young | Freehills |
| For the Defendant | Mr J.S. Graham | Hall & Wilcox |
HIS HONOUR:
Issues
The issues presently before the Court follow from my judgment in this proceeding which was delivered on 10 December 2010 (Australian Incentive Plan Pty Ltd v Babcock & Brown International Pty Ltd & Anor [2010] VSC 564).
For the reasons set out in that judgment I was of the opinion that the application by the plaintiff to amend the Trust Deed as proposed should be granted, with the result that clause 2.5 was amended to provide for termination of the Trust on the liquidation of Babcock & Brown Ltd as proposed in Schedule 1 of the Amended Originating Motion (together with the minor consequential amendment sought). Further, the nomination of “Residual Beneficiaries” as defined in clause 1.1 of the Trust Deed, by the Court, was exercised solely in favour of charities. It followed that the summons issued of behalf of the first and second defendants, dated and filed 21 October 2010, was dismissed.
I reserved the question of the particular charities to be nominated as Residual Beneficiaries for further submissions by the parties. I also directed that the parties forward a copy of my judgment to the Attorney-General and inform him of my intention to hear submissions in this respect, with a request that he appear to assist the Court on behalf of the Crown as “the guardian of the public interest in the enforcement of charities”; to quote Hoffman J (as his Lordship then was) in Bradshaw v University College of Wales, Aberystwyth.[1] I am grateful that the Attorney-General has responded to my request and is now represented by counsel.
[1][1988] 1 WLR 190 at 192.
In relation to costs, I noted the position of the parties that the costs of this proceeding should be borne by the Trust Fund itself. Nevertheless, I reserved the question of costs pending hearing any submissions which the Attorney-General might have wished to make in this respect.
Consequently, the remaining live issues are: first, which charity or charities are to be nominated as “Residual Beneficiaries” for the purposes of clause 1.1 of the Trust Deed by the Court; and, secondly, whether the costs of all or some of the parties to this proceeding, and the costs of the Attorney-General, should be borne by the Trust Fund and, if so, to what extent.
Nomination of a charity or charities
The Plaintiff, as trustee of the Australian Incentive Trust, and the Attorney-General made submissions in relation to the nomination of a charity or charities. The defendants did not make submissions on this issue; confining their submissions to the question of costs.
Submissions in relation to this issue have also been made by the Attorney-General. The capacity of the Attorney-General to appear and to make submissions on both this issue, and on the issue of costs in the present circumstances, is encapsulated in the following passage from the advice of the Privy Council delivered by Lord Macnaughten in Wallis v Solicitor-General for New Zealand [1903] AC 173 at 181-2:
“It is the province of the Crown as parens patriae to enforce the execution of charitable trusts, and it has always been recognised as the duty of the law officers of the Crown to intervene for the purpose of protecting charities and affording advice and assistance to the Court in the administration of charitable trusts.”
It follows that the position is as stated by Dal Pont in Charity Law in Australia and New Zealand (OUP, 2000), 267 that: “… the Attorney-General is the only competent party to protect charitable trusts, to seek to enforce them, and to look after the interests of the public in those trusts” (citing in support of this proposition Strickland v Weldon;[2] Solicitor-General v Wylde;[3] and Ku-ring-gai Municipal Council v Attorney-General.[4])
[2](1885) 28 Ch D 426 at 430 per Pearson J.
[3](1945) 46 SR (NSW) 83 at 105-110 per Nicholas CJ in Equity.
[4](1954) 55 SR (NSW) 65 at 69-70 per Roper CJ in Equity.
The plaintiff submitted that the following charities should be nominated as Residual Beneficiaries. These charities have, it was submitted, previously received support or donations from employees of the Babcock & Brown group of companies in New South Wales through various programs administered by the group, including employer matched giving and the Babcock & Brown Community Engagement Program:
(1)the Sir David Martin Foundation (a charitable foundation founded by the former Governor of New South Wales, Sir David Martin, which focuses on reducing homelessness and disadvantage for young people), which is located in Sydney;
(2)the Cancer Council of New South Wales (a charity committed to overcoming cancer through research funding, education and other preventative strategies, and facilitation of care to those affected by cancer), which is located at Woolloomooloo;
(3)the Wayside Chapel (a ministry and outreach centre dedicated to providing health, welfare, counselling, and community services to disadvantaged people in inner-city Sydney), which is located at Potts Point; and
(4)the Daystar Foundation (a not-for-profit foundation which designs and implements education programs to assist school children to have a positive school experience, complete their education and increase their future life opportunities), which is located at Leumeah.
As indicated, each of those charities is located in New South Wales.
Alternatively, the plaintiff submitted that the following charities established following the recent natural disasters in Queensland and Victoria should be nominated as Residual Beneficiaries:
(1)the Premier’s Disaster Relief Appeal; and
(2)the Red Cross Victorian Floods Appeal 2011.
The Attorney-General, on the other hand, submitted that the following charities should be nominated as Residual Beneficiaries:
(1)Berry Street;
(2)Children First Foundation;
(3)Children’s Cancer Centre Foundation Ltd; and
(4)the Portsea Camp.
Each of these charities is a children’s charity and a Victorian charity.
The Attorney-General submitted that nomination of these children’s charities is appropriate because two of the New South Wales charities referred to as charitable objects of the Babcock & Brown Group of companies in a plaintiff’s solicitors’ letter to the Attorney-General dated 14 December 2010 were children’s charities. This appears to be consistent with the nomination by the plaintiff in its submissions of two charities specifically directed to assisting young people and children.
Further, the Attorney-General submitted that the charities nominated should be Victorian charities because:
(1)The public benefit of a charitable purpose is normally located within the jurisdiction of the Court; and
(2)the Attorney-General’s power and the Court’s jurisdiction to supervise the use of the charitable funds is limited to the State of Victoria.
Further, it was submitted that the charities specifically nominated are charities which, according to the Attorney-General’s information and belief, carry out valuable charitable work and have a need for further funding, but do not have a sufficiently high public profile to receive sufficient public financial support.
The nomination of particular charities in the present circumstances is very difficult as there is no doubt that all the charities proposed, by the plaintiff and the Attorney-General, are, as far as they are able, meeting pressing, and in many instances, desperate needs in our community – which I do see as the whole of Australia, and not only Victoria or New South Wales. In addition, as the plaintiff has identified, there are the additional, and in many cases desperate, needs of people who have suffered so badly from this summer of natural disasters, including the massive flooding in Queensland, New South Wales, Victoria and the Northern Territory, a cyclone in Queensland of the utmost severity, cyclones in Western Australia and the Northern Territory and, as if that was not all enough, serious bushfires in Western Australia. Nevertheless, for the reasons indicated, I am of the opinion that I should nominate the charities proposed by the Attorney-General. This does not indicate any adverse view of the charities proposed by the plaintiff, quite the contrary. Nor does it indicate any lack of concern for the people these charities seek to assist – children and young people, the homeless and disadvantaged and the victims of the recent natural disasters.
In accepting the Attorney-General’s submissions in preference to those of the plaintiff, the trustee, I observe, first, that the Attorney-General is, as indicated previously, the only competent party to protect charitable trusts and to seek to enforce them. Consequently, though it is appropriate to receive the assistance of submissions by the plaintiff, as Trustee, it is to the Attorney-General’s submissions to which I must ultimately have regard.
It would, of course, be hoped and desirable that in circumstances such as this, a trustee party and the Attorney-General would communicate with each other and thereby assist the Court. This is the position in this case and the plaintiff has assisted in communicating the general purposes of previous charitable giving by the employees of the Babcock & Brown group of companies as set out in its submissions to which reference has been made. The Attorney-General has, and in my view quite correctly, taken account of these general charitable purposes which have been supported in the charitable beneficiaries he has proposed for nomination.
The Attorney-General has, for the reasons set out in his submissions, nominated exclusively Victorian charities. I accept the reasons advanced by the Attorney-General for adopting this course, which are, in my opinion, entirely correct. I also accept the Attorney-General’s assessment of the appropriateness of the particular charities nominated on the basis of the value of their charitable work and their ability to attract funding.
Costs of the proceeding
The plaintiff, as trustee, reiterated its submission made at trial that its costs of and incidental to the proceeding should be paid out of the trust fund. Further, it submitted that the costs of the defendants should also be paid out of the trust fund on a solicitor and own client basis.
The defendants also sought an order that their costs of the proceeding be paid on a solicitor and own client basis out of the trust fund on the basis that this is the usual order for all parties’ costs where, in a case such as this, the trustee asks to have a question determined which has arisen in the administration of the trust, and the claim was a reasonable one: Re Buckton;[5] Elders Trustee & Executor Co Ltd v Eastoe;[6] Applicants A1 and A2 v GE Brouwer (in his capacity as Director of the Office of Police Integrity) & Anor (No 3).[7] See also Williams’ Civil Procedure Victoria (LexisNexis Butterworths, looseleaf service) at [I63.26.20].
[5][1907] 2 Ch 406, 414-417 (Kekewich J).
[6][1963] WAR 36.
[7][2008] VSCA 99 at [3].
It was submitted that in this proceeding the plaintiff’s application to the Court required consideration of the defendants’ entitlement. It was also submitted that it was convenient, and appropriate, that the defendants be represented at the hearing to advance their position which, whilst ultimately not upheld, was a reasonable position to advance. The litigation was, it was said, conducted in a co-operative and efficient manner for the benefit of all concerned, including the trustee and the beneficiaries.
The Attorney-General opposed the defendants’ application for costs. In broad terms, this was on the basis that properly characterised the defendants were involved in the proceedings in pursuit of a contentious claim and, further, it was not open to the plaintiff, as trustee, to agree to the defendants’ costs being borne by the Trust Fund. In the latter respect, the Attorney-General had understood that the plaintiff had agreed to the payment of the defendants’ costs being borne by the Trust Fund. It was clarified in the course of the hearing that the position was that the plaintiff and the defendants merely regarded this as the appropriate course, but there was no actual agreement between them in this respect. I turn now to the Attorney-General’s submissions in detail.
In this proceeding, as the Attorney-General observed, the plaintiff sought relief under s 63A of the Trustee Act 1958 in the administration of the trust fund by originating motion. In substance, the defendants sought an order transferring the trust fund to themselves on a resulting trust by a summons within the proceeding. Thus, in effect, there have been two proceedings. The proceeding by originating motion was not, essentially, contentious, being a proceeding for the advice and directions of the Court. The defendants submitted, nevertheless, that they had a role in this proceeding as a contradictor and to assist the Court more generally. However, the Attorney-General submitted the defendants were not a necessary party to this claim for relief, on either basis. In my view, the Attorney-General was correct in this respect. The proceeding was one where the plaintiff, as trustee, sought the assistance of the Court, as a court of equity, in relation to the construction and administration of the Trust. It was a proceeding in the exclusive jurisdiction in equity where the equity court exercises its jurisdiction to assist in relation to one of its central heads of jurisdiction; trusts. Except in unusual circumstances, which do not apply in this proceeding, it requires only an application by the trustee. No contradictor or other party is required, save for the Attorney-General in relation to charitable trusts.
In terms of the authorities, the defendant relied particularly on the following statement by Kekewich J in Re Buckton:[8]
“In a large proportion of the summonses adjourned into Court for argument the applicants are trustees of a will or settlement who ask the Court to construe the instrument of trust for their guidance, and in order to ascertain the interests of the beneficiaries, or else ask to have some question determined which has arisen in the administration of the trusts. In cases of this character I regard the costs of all parties as necessarily incurred for the benefit of the estate, and direct them to be taxed as between solicitor and client and paid out of the estate. It is, of course, possible that trustees may come to the Court without due cause. A question of construction or of administration may be too clear for argument, or it may be the duty of trustees to inform a claimant that they must administer their trust on the footing that his claim is unfounded, and leave him to take whatever course he thinks fit. But, although I have thought it necessary sometimes to caution timid trustees against making applications which might with propriety be avoided, I act on the principle that trustees are entitled to the fullest possible protection which the Court can give them, and that I must give them credit for not applying to the Court except under advice which, thought it may appear to me unsound, must not be readily treated as unwise. I cannot remember any case in which I have refused to deal with the costs of an application by trustees in the manner above mentioned.
There is a second class of cases differing in form, but not in substance, from the first. In these cases it is admitted on all hands, or it is apparent from the proceedings, that although the application is made, not by trustees (who are respondents), but by some of the beneficiaries, yet it is made by reason of some difficulty of construction, or administration, which would have justified an application by the trustees, and it is not made by them only because, for some reason or other, a different course has been deemed more convenient. To cases of this class I extend the operation of the same rule as is observed in cases of the first class. The application is necessary for the administration of the trust, and the costs of all parties are necessarily incurred for the benefit of the estate regarded as a whole.
There is yet a third class of cases differing in form and substance from the first, and in substance, though not in form, from the second. In this class the application is made by a beneficiary who makes a claim adverse to other beneficiaries, and really takes advantage of the convenient procedure by originating summons to get a question determined which, but for this procedure, would be the subject of an action commenced by writ, and would strictly fall within the description of litigation. It is often difficult to discriminate between cases of the second and third classes, but when once convinced that I am determining rights between adverse litigants I apply the rule which ought, I think, to be rigidly enforced in adverse litigation, and order the unsuccessful party to pay the costs. Whether he ought to be ordered to pay the costs of the trustees, who are, of course, respondents, or not, is sometimes open to question, but with this possible exception the unsuccessful party bears the costs of all whom he has brought before the Court.”
The defendants sought support from this statement on the basis of the “second class of cases” to which Kekewich J referred. The Attorney-General submitted, however, that the defendants’ position fell within the “third class of cases”, rather than the second. It was also submitted that the defendants could draw no support from other authorities and commentary relied upon as these authorities and commentary were, to the extent relied upon, directed to the first or second, rather than the third, class of cases.
[8][1907] 2 Ch 406 at 414-5.
In my opinion, if any of the classes of cases referred to by Kekewich J in Re Buckton[9] is applicable, it is the third class, rather than the first or second. In any event, it should be observed that the position of the defendants is not that of a beneficiary. Rather, their position is based on a claim of a resulting trust in favour of the settlor, a claim clearly adverse to that of any other claimants of any beneficial interest, actual or contingent, to any part of the Trust Fund. In my view, this position is not changed by the fact that a defendant may be joined to proceedings by consent – as was the position in these proceedings – and thereby saved the institution of fresh proceedings, by writ or otherwise. As indicated during the course of the present hearing, the issue is to be resolved having regard to the substance, rather than the form, of the relevant claims. Further, having found that the defendants were not a necessary party to the proceeding by the plaintiff, as trustee, it follows that any argument that they might be regarded as within the “extended” second class of cases referred to by Kekewich J,[10] being cases where the non-trustee party enables the trustee to obtain the relief sought by being present as a party to assist the court, falls away and is inapplicable to the present proceedings.
[9][1907] 2 Ch 406 at 414-5.
[10][1907] 2 Ch 406 at 416.
The Attorney-General submitted that as the defendants did not succeed in their claim in this proceeding, costs should follow the event in respect of the defendants’ summons in the proceeding and that no order as to costs should be made in respect of the relief sought by the originating motion. In support, reference was made to the principles set out in Ford and Lee, Principles of the Law of Trusts, at [14.3330]:
“A trustee may be involved in proceedings, which do not raise contention between parties. Where a trustee after taking advice is in doubt as to what the trust instrument provides or as to a question of administration the proper course is to apply to the court for answers to the relevant questions. The beneficiaries who could be affected by the outcome have to be represented. Usually in such proceedings the costs of all parties will be ordered to be paid out of the trust assets: compare Holding and Management Ltd v Property Holding and Investment Trust plc [1990] 1 All ER 938 (where the trustee refused to follow the beneficiaries’ agreed wishes).
Where proceeding brought by beneficiaries to clear up matter, a similar order for costs from fund will be made. However, if beneficiaries are in substance pursuing a claim against other beneficiaries, costs will follow the event: Noy v Tapgnuk (1997) 138 Flr 205.”
On the supposition that the plaintiff and the defendants had reached an agreement that all parties should have their costs from the Trust Fund, the Attorney-General made submissions that a trustee is not entitled to act independently and without reference to the court to decide to pay from the estate the costs of parties to litigation concerning the estate; referring to the decision of the Western Australian Supreme Court in Wendt v Orr[11]. Consequently, the Attorney-General submitted that the question of costs cannot be dealt with by an agreement between the plaintiff and the defendants and should be dealt with by the Court. In my opinion, on the basis of the authorities referred to in this decision of the Western Australian Supreme Court, the position is as submitted by the Attorney-General but, as indicated, the point is not necessary to decide as the parties have indicated that there is no such agreement.
[11][2004] WASC 28 at [113] to [122].
The plaintiff sought relief in these proceedings under s 63A(1) of the Trustee Act. Generally, the only necessary parties to such an application would be:
(1)the beneficiaries consenting to the proposed variation; and
(2)representatives of the persons referred to in s 63A(1)(a) to (d): Re Whigham’s Settlement Trusts;[12] or
(3)in cases where there may have been a charitable trust, the Attorney-General: Re Longmans Settlement Trusts.[13]
[12][1971] 1 WLR 372.
[13][1962] 2 All ER 193.
The defendants, the first being the settlor and the second on whose behalf the first defendant paid the funds into the trust under a Master Agreement, were neither of them a necessary party to the plaintiff’s application for relief under s 63A of the Trustee Act.
The Attorney-General submitted, in my view correctly, that the defendants were not able to represent any interest relevant to the relief being sought by the plaintiff under s 63A of the Trustee Act. However, it was said, they took the opportunity to make a claim by summons which was, in substance, a separate proceeding for the recovery of the trust property on a resulting trust. Thus, the plaintiff and the defendants were substantially in contention regarding the continued existence of the trust but once that issue was determined, the defendants had no further interest in the relief being sought by the plaintiffs. Had the defendants been successful in establishing a resulting trust in favour of the settlor, there would have been no basis for an application under s 63A.
It was submitted that the defendants were making a self-interested and essentially commercial claim for recovery of funds on the basis that there was a surplus of trust funds which could not be distributed. The defendants did not make any submissions regarding the principal relief being sought by the plaintiff. Rather, the Attorney-General submitted, they argued the logically prior issue of the failure to distribute the surplus and in favour of the resulting trust. Once they lost this point, they had no further interest in the relief being sought by the plaintiff and nothing to contribute to the arguments before the Court. Consequently, it was said that heaving failed in this claim, the defendants should pay both their own and the plaintiff’s costs of defending their claim by summons. In relation to the application for relief under s 63A of the Trustee Act, it was said that they should bear their own costs, not being a necessary or properly interested party.
For the reasons indicated, I accept the Attorney-General’s submissions, in particular with respect to the characterisation of the proceedings, the basis for applying the usual costs consequences with respect to a failed claim, the lack of any necessity for the defendants to be parties for the purposes of the application under s 63A of the Trustee Act and in relation to their claim as a contentious commercial claim.
In conclusion, the Attorney-General submitted that, having regard to the need to preserve the charitable trust fund and to the matters already referred to, the appropriate order for costs should be:
(1)That the defendants pay the plaintiff’s costs of the defendants’ summons in the proceeding;
(2)Otherwise, that provision be made for the plaintiff’s costs of the proceeding from the Trust Fund; and
(3)Provision be made for the Attorney’s costs of his appearance on behalf of Her Majesty as parens patriae.
Conclusion
For the reasons set out above, I order that the charities specified by the Attorney-General as appropriate nominees be nominated as Residual Beneficiaries under the Trust in equal shares and proportions and that costs be ordered as submitted by the Attorney-General.
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