Carbone v Bernard Henricus Lamers as trustee for the Ben and Debra Lamers Family Trust - [2025] WASCA 24

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT :   THE COURT OF APPEAL (WA)
CITATION:   CARBONE -v- BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST [2025] WASCA 24
CORAM:   QUINLAN CJ
BUSS P
DALTON AJA

HEARD:   8 OCTOBER 2024
DELIVERED          :   7 FEBRUARY 2025
FILE NO/S:   CACV 22 of 2023
BETWEEN:   SARO VINZI CARBONE
First Appellant
BRIGHT IMAGE DENTAL PTY LTD
Second Appellant
AND
BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST
First Respondent
ARVIND PTY LTD
Second Respondent
DINO TRAVAGLINI as trustee for THE ARVIND PROPERTY TRUST
Third Respondent

FILE NO/S: CACV 76 of 2023
BETWEEN: ARVIND PTY LTD
Appellant
AND
BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST
First Respondent
SARO VINZI CARBONE
Second Respondent
BRIGHT IMAGE DENTAL PTY LTD
Third Respondent

ON APPEAL FROM:
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   HILL J
Citation: BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST v ARVIND PTY LTD [No 3] [2023] WASC 30
File Number            :   CIV 2404 of 2017
Jurisdiction              :   SUPREME COURT OF WESTERN AUSTRALIA
Coram:   HILL J
Citation: BERNARD HENRICUS LAMERS as trustee for THE BEN AND DEBRA LAMERS FAMILY TRUST v ARVIND PTY LTD [No 3] [2023] WASC 30(S)
File Number            :   CIV 2404 of 2017

Catchwords:

Contract - Oral agreement for development of property - Terms of contract - Express term to develop land through unit trust - Whether the primary judge made errors in relation to the terms of the agreement

Costs - Primary judge's costs orders following trial - Trustee's right of indemnity against trust assets for its costs of the primary proceedings - Whether the primary judge made appellable errors

Legislation:

Rules of the Supreme Court 1971 (WA), O 66 r 1(1), O 66 r 9(2)
Supreme Court Act 1935 (WA), s 37(1)
Trustees Act 1962 (WA), s 71

Result:

CACV 22 of 2023
Appeal dismissed

CACV 76 of 2023
Leave granted to Arvind Pty Ltd to appeal
Leave refused to Mr Carbone, Bright Image Dental Pty Ltd and Mr Lamers to cross‑appeal
Costs order number 1 made by the primary judge on 26 June 2023 set aside and a new order substituted
Costs order number 7 made by the primary judge on 26 June 2023 set aside and a new order substituted

Category: B

Representation:

CACV 22 of 2023

Counsel:

First Appellant	:	In person
Second Appellant	:	No appearance
First Respondent	:	A L Spencer
Second Respondent	:	A Metaxas
Third Respondent	:	No appearance

Solicitors:

First Appellant	:	In person
Second Appellant	:	No appearance
First Respondent	:	Kennedy Vinciullo
Second Respondent	:	Metaxas Legal
Third Respondent	:	HWL Ebsworth Lawyers (Perth)

CACV 76 of 2023

Counsel:

Appellant	:	A Metaxas
First Respondent	:	A L Spencer
Second Respondent	:	In person
Third Respondent	:	No appearance

Solicitors:

Appellant	:	Metaxas Legal
First Respondent	:	Kennedy Vinciullo
Second Respondent	:	In person
Third Respondent	:	No appearance

Cases referred to in decision:

Armitage v Nurse [1998] Ch 241
Barnes v Addy (1874) Lr 9 Ch App 244
Bernard Henricus Lamers as trustee for The Ben and Debra Lamers Family Trust v Arvind Pty Ltd [No 3] [2023] WASC 30
Bernard Henricus Lamers as trustee for The Ben and Debra Lamers Family Trust v Arvind Pty Ltd [No 3] [2023] WASC 30 (S)
Cardaci v Cardaci (No 5) [2021] WASC 331 (S)
Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20; (2019) 268 CLR 524
Fan v Tang [2010] NSWSC 11
Frigger v Lean [2012] WASCA 66
Grove v Grove [2022] WASCA 86
House v The King [1936] HCA 40; (1936) 55 CLR 499
Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178
Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198
Perpetual Trustee Co Ltd v Attorney-General (NSW) [2018] NSWSC 1456
Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388
Thiess v TCN Channel Nine Pty Ltd (No 5) [1994] 1 Qd R 156

Table of Contents

Quinlan CJ

CACV 22 of 2023 - counterclaim appeal

CACV 76 of 2023 - costs appeal

Broad overview of the proceedings below

Costs orders and costs reasons

Grounds 1 and 2 of the costs appeal

Legal principles

Ground 1 - was Mr Lamers the successful party?

Unsuccessful financial claims

Claim as a creditor

Claims based on the mortgage breach

Claims based on the accounts breach

Conclusion as to ground 1

Ground 2 - did the apportionment of costs manifest error?

Ground 3 of the costs appeal

Ground 4 of the costs appeal

Ground 5 of the costs appeal

Conclusion on the costs appeal

Mr Carbone and Bright Image's cross-appeal in the costs appeal

Mr Lamers' cross-appeal in the costs appeal

Buss P....................................................................................................................................... 31

Dalton AJA

CACV 22 of 2023 Counterclaim Appeal

Oral Agreement to Develop Land

Family Disputes

Litigation

Counterclaim Below

Judgment on Counterclaim

Notice of Contention

Grounds of Appeal

Result

CACV 76 of 2023 Costs Appeal

Arvind's Costs Appeal

The Case Below

Orders Made on Trial and as to Costs

Costs Orders and Appeals Generally

Ground of Appeal 1

Ground of Appeal 2

Ground of Appeal 3

Ground of Appeal 4

Ground of Appeal 5

Result of the Costs Appeal

Cross-appeal by Carbone and Bright Image

Lamers' Cross-appeal as to Costs

Result

QUINLAN CJ:

I have had the considerable benefit of reading, in draft, Dalton AJA's reasons for decision in relation to these two appeals.

CACV 22 of 2023 - counterclaim appeal

I agree with Dalton AJA, for the reasons that her Honour gives, that the appeal brought by Mr Carbone and Bright Image Dental Pty Ltd (Bright Image) in relation to the counterclaim brought by Bright Image (CACV 22 of 2023) must be dismissed. Were it necessary, I would also have upheld Mr Lamers' notice of contention, for the reasons given by Dalton AJA.
I agree with the orders proposed by Dalton AJA in CACV 22 of 2023 including as to costs (subject to any submissions by the parties at judgment delivery).

CACV 76 of 2023 - costs appeal

I have, however, come to a different conclusion in relation to the appeal brought by Arvind Pty Ltd (Arvind) in relation to the costs of the primary proceedings (CACV 76 of 2023). I would dismiss that appeal (and the cross‑appeal brought by Mr Lamers).
In that regard, I agree with Dalton AJA that grounds 1, 3 and 4 in the costs appeal have not been established. Where I differ is in relation to grounds 2 and 5.
In summary, in my view, it was open to the learned trial judge to conclude that Arvind and Mr Carbone should pay 75% of Mr Lamers' costs of the proceedings (apart from the costs dealt with by order 2 of the learned trial judge's costs orders). The challenge to that finding (by ground 2 in the costs appeal) invoked the second limb of House v The King,[1] namely that the apportionment of 75%/25% was plainly unjust or unreasonable. For the reasons that I will come to, I am not satisfied that it was.
[1] House v The King [1936] HCA 40; (1936) 55 CLR 499 (House v The King) 504 - 505 (Dixon, Evatt & McTiernan JJ).
Similarly, I am not satisfied that the learned trial judge was in error in concluding that Arvind was not entitled to an indemnity from the assets of the APT Unit Trust with respect to its costs in defending the proceedings, a conclusion challenged by ground 5 of the costs appeal.
Before turning to those matters, I can briefly outline the proceedings below.

Broad overview of the proceedings below

At its most basic, the primary proceedings concerned allegations, by Mr Lamers, against Mr Carbone in connection with a business venture between them, and their associated corporate entities, concerning the development of land in Ranford Road, Canning Vale (Ranford Road).
As Dalton AJA has outlined, the venture, which had its genesis in 2009, involved the acquisition of the land at Ranford Road and the construction of three showrooms on that land. Through their respective family trusts, it was proposed that Mr Carbone would contribute the land and that Mr Lamers would contribute the construction costs. Again in broad summary, Mr Carbone's family trust (of which Bright Image was the trustee) would acquire a two‑thirds interest in the venture and Mr Lamers' family trust (of which he was the trustee) a one‑third interest. There was, however, a dispute as to the precise terms of their respective interests, including a dispute as to the terms of an oral agreement entered into between Mr Lamers and Mr Carbone in July 2009 (Oral Agreement).
The vehicle for the venture was a unit trust (APT Unit Trust) of which Arvind was the trustee. As trustee, Arvind became registered proprietor of Ranford Road. Significantly, Arvind was a company controlled by Mr Carbone. Mr Carbone was, relevantly, the controlling mind of Arvind.
The proceedings below, which were commenced in 2017, alleged various breaches of trust by Arvind. Those breaches were alleged to have been committed as a result of action taken by Mr Carbone as the controlling mind of Arvind.
In particular, Mr Lamers alleged that Arvind breached its obligations as the trustee of the APT Unit Trust by granting a mortgage to the National Australia Bank (NAB) over Ranford Road in December 2010 to secure a guarantee and indemnity of a loan facility of Bright Image (i.e. the other entity controlled by Mr Carbone) (the mortgage breach). The granting of the mortgage on Ranford Road enabled the release of funds from NAB to Mr Carbone.
As a result of this, and other, alleged breaches of trust, Mr Lamers sought an order that Arvind be removed as trustee of the APT Unit Trust and a replacement trustee appointed. Mr Lamers also sought further relief, in the form of equitable compensation and an account of profits, including against Mr Carbone and Bright Image. In relation to the claims against Mr Carbone and Bright Image, Mr Lamers contended that they each knowingly participated in or assisted Arvind in its breaches (the Barnes v Addy claims).
The learned trial judge was satisfied that Arvind had breached its duties as trustee of the APT Unit Trust in a number of respects, including by granting the mortgage and preferring the interests of Bright Image over that of Mr Lamers.[2] Her Honour concluded that Mr Carbone, as director of Arvind, did not distinguish between his obligations as a director of the trustee company and his interests in Bright Image or in any other capacity.[3] Her Honour ordered that Arvind be removed as trustee and replaced by Mr Travaglini (the third respondent to CACV 76 of 2023).[4]
[2] Bernard Henricus Lamers as trustee for The Ben and Debra Lamers Family Trust v Arvind Pty Ltd [No 3] [2023] WASC 30 (primary reasons) [767].
[3] Primary reasons [768].
[4] Primary reasons [776].
The learned trial judge also found that Mr Lamers was not entitled to equitable compensation. Indeed, her Honour observed that Mr Lamers 'led no evidence as to what loss was suffered by the trust from the granting of the mortgage or the profit that [Arvind] derived from the breach of duties'.[5] Her Honour also dismissed the Barnes v Addy claims against Mr Carbone and Bright Image, on the basis that Mr Lamers had neither pleaded, nor proven, a dishonest or fraudulent design on the part of Mr Carbone and Bright Image.[6]
[5] Primary reasons [777].
[6] Primary reasons [787].
The above summary does not include the counterclaim brought by Bright Image, by which Bright Image sought orders requiring Mr Lamers to accept transfer of one of the showrooms on Ranford Road in full satisfaction of his entitlements. That counterclaim was dismissed. For the reasons given by Dalton AJA in relation to CACV 22 of 2023, it was properly dismissed, with costs. The resolution of the counterclaim does not impact on the costs appeal.
The trial itself ran for eight days. The large bulk of the trial was taken up with the evidence of Mr Lamers (three days of evidence spread over four days of trial) and Mr Carbone (two days of evidence spread over three days of trial). The other witnesses called by Mr Lamers and Arvind were relatively confined in the scope of their evidence. Mr Carbone and Bright Image did not call any witnesses.

Costs orders and costs reasons

The costs orders made following trial, relevantly, included the following:
1.[Arvind and Mr Carbone], each jointly and severally, pay 75% of [Mr Lamers'] costs of the proceedings, including reserved costs, to be taxed if not agreed.
2.[Mr Lamers] pay [Mr Carbone's and Bright Image's] costs of the proceedings, limited to the costs of the specific claims made by [Mr Lamers] against [Mr Carbone and Bright Image] (i.e. the Barnes v Addy claims pleaded in paragraphs 57 - 59 and 61 - 62 of [Mr Lamers'] statement of claim).
3.[Bright Image] pay [Mr Lamers'] costs of the counterclaim.
…
7.[Arvind] is not entitled to an indemnity from the assets of the APT Unit Trust with respect to its liability for costs under orders 1 and 6 above, or its own costs of the proceedings.
As Dalton AJA has said (at [151]), order 1 of these orders must be read as subject to the orders that follow it, including order 2. That is, Mr Lamers' entitlement to 75% of the costs of the proceedings does not include costs of the proceedings as they relate to the Barnes v Addy claims against Mr Carbone and Bright Image, in relation to which Mr Carbone and Bright Image are entitled to their costs in their entirety. As I will come to, this is relevant to an analysis of the learned trial judge's exercise of the discretion as to costs as a whole.
The learned trial judge's reasons in relation to costs, as they related to orders 1 and 2, concluded that 'broadly speaking, [Mr Lamers] was the successful party at trial', stating that:[7]
This is evident from the orders made on 17 February 2023 which included an order that [Arvind] be removed as trustee of the Arvind Property Trust. All the defendants in opposed any order for the removal of Arvind] as trustee.
[7] Bernard Henricus Lamers as trustee for The Ben and Debra Lamers Family Trust v Arvind Pty Ltd [No 3] [2023] WASC 30 (S) (costs reasons) [41].
Her Honour continued:
[42]Given this finding, the prima facie position is that [Mr Lamers] is entitled to receive his costs of the action, subject to any discount that is appropriate for the issues raised by [Mr Lamers] on which he did not succeed.
[43]I accept [Arvind's, Mr Carbone's and Bright Image's] submission that some of the questions raised by [Mr Lamers] on which he did not succeed were the subject of evidence and argument at trial. In particular, [Arvind, Mr Carbone and Bright Image] emphasised that [Mr Lamers] was unsuccessful in his argument that the oral agreement was irrelevant to the issues in the proceeding and did not obtain any relief in respect of the grant of the mortgage because of the limitation period.
[44]While I accept [Mr Lamers] did not obtain an order to remove the mortgage or seek damages for the grant of the mortgage, the actions of [Arvind] in granting the mortgage was a matter, together with other breaches of trust, [which] justified the removal of [Arvind] as trustee of the Arvind Property Trust. On this basis, I do not accept [Arvind's, Mr Carbone's and Bright Image's] submissions that the time and cost of this issue is a matter which would warrant a departure from the usual costs order. In addition, while [Mr Lamers] was not successful in obtaining any order for equitable compensation, this was because [Mr Lamers] led no relevant evidence. Self-evidently, no significant time was spent at the trial in addressing this issue.
[45]However, I accept that the position of [Mr Lamers] in respect of the oral agreement, on which he was unsuccessful at trial, was a significant issue at trial and was addressed by the parties at length in both their evidence and submissions. On this basis, I consider there should be some reduction of [Mr Lamers'] costs to take account of this. In my view, the appropriate discount is 25%. That is, I consider [Mr Lamers] is entitled to an order for 75% of his costs of the proceedings.
[46]In respect of the costs of [Mr Carbone and Bright Image], I do not accept [Mr Lamers'] submission that these parties were joined to the proceedings as necessary parties. [Mr Lamers] made separate claims against each of these defendants and did not succeed in those claims. Prima facie, these defendants are entitled to an order that the plaintiff pay their costs of the action.
[47]In this case, for a significant time, the defendants were represented by one set of solicitors. On 14 February 2020, [Mr Carbone and Bright Image] filed a notice of change of representation appointing Effective Legal to act on their behalf. While a separate defence was filed by these defendants, it was, in all material respects, identical to the defence of [Arvind] except in so far as it dealt with the specific claims against [Mr Carbone and Bright Image].
[48]While I accept that nothing that has been raised by [Mr Lamers] are matters that would justify a departure from the usual costs order that [Mr Carbone and Bright Image] are entitled to their costs, it is my view that these costs should be limited to the costs of defending the specific claims brought against these defendants and not the costs of the proceedings more generally.
In relation to order 7, concerning Arvind's indemnity, the learned trial judge's costs reasons were:
[106]In this case, [Arvind] resisted its removal as trustee of the Arvind Property Trust. Having found that [Arvind] should be removed as trustee, as a general rule, [Arvind] is not entitled to an indemnity from the trust for its costs of the proceeding.
[107]For the following reasons, I am satisfied in this case that the general rule should apply.
[108]First, this was adversarial litigation. Nothing in these proceedings concerned the proper construction of the trust deed nor the nature of the trustees' duties under the trust deed. [Arvind] was not successful in resisting its removal as trustee.
[109]Second, in my view, Arvind acted unreasonably in resisting its removal as trustee of the Arvind Property Trust. I have found that Arvind preferred the interests of [Bright Image] over the interest of [Mr Lamers] and failed to separate the issues concerning the trust from the issues arising from the estate of Mr Lamers Snr. Notwithstanding these matters, Arvind defended the proceedings on the basis that its conduct was justified.
[110]Third, in acting in the manner referred to at [109], Arvind misunderstood the nature of its duties as trustee and the obligations to which it was subject. In my view, the defence of the proceedings by Arvind was not for the benefit of the trust but was for the benefit of each of the defendants.
[111]Fourth, the failure by Arvind to carry out its duties as trustee and to act impartially, particularly in seeking to raise issues which were not connected with the trust, is what, in my view, caused or at least significantly contributed to this litigation.

Grounds 1 and 2 of the costs appeal

By grounds 1 and 2 of the costs appeal, Arvind challenges the order that Arvind and Mr Carbone pay 75% of Mr Lamers' costs of the proceedings (apart from the costs dealt with by order 2 of the costs orders). Ground 1 contends that the learned trial judge erred in finding that Mr Lamers was the successful party at trial. Ground 2 contends that the apportionment of 75%/25% in Mr Lamers' costs was in error. At the hearing of the appeal, counsel accepted that ground 2, in substance, contended that the apportionment was unreasonable or plainly unjust having regard to the issues on which Mr Lamers failed at trial.[8]
[8] Appeal ts 27.

Before turning to the grounds, it is convenient to refer to a number of the relevant principles.

Legal principles

Appellate restraint in relation to costs orders was reiterated by this Court in Grove v Grove,[9] in the following terms:
It is seldom in the interests of justice, nor consistent with the goal and objects enshrined in O 1 rr 4A and 4B of the Rules of the Supreme Court 1971 (WA) (RSC), that a litigant be permitted to challenge a discretionary costs order. Thus, ordinarily as a matter of fact, a grant of leave to appeal on a costs issue is rare.
Similarly, an appellate court will not, without strong reasons, interfere with an exercise of discretion on a question of costs. It is necessary to demonstrate manifest error or that the order stands outside the limits of a sound discretionary judgment. By 'manifest error' what must be shown is that the primary court made an error in principle or acted on a manifestly erroneous view of the facts or that the order is manifestly unreasonable. The appellant must meet the standard of discretionary error established in House v The King.
On an appeal of this type an appellate court is not entitled to substitute its own decision for that of the primary court merely because the appellate court prefers a different result or considers that a different result would be more just and equitable. The test is not whether the Court of Appeal would have made the same order but whether there is a ground on which the primary court's order could reasonably be made. Accordingly, as has been said in the Court of Appeal of Victoria:
It is extraordinarily difficult to show that a court of first instance or a tribunal with wide discretionary powers has erred in the exercise of its powers to award costs, if there be some basis for making an order other than the conventional order in favour of the successful party.
[9] Grove v Grove [2022] WASCA 86 (Grove v Grove) [35] ‑ [37] (Buss P, Murphy & Vaughan JJA) (citations omitted).
The appellate restraint reflected in this passage is a product of the nature of the costs discretion itself.
Subject to any statutory provision to the contrary, the Court has a very wide discretion in respect of the orders for costs in proceedings.[10] The discretion to award costs is to be exercised judicially but it is otherwise unconfined.[11] Ultimately, the discretion must be exercised to achieve what is fair and just between the parties according to the circumstances of the particular case.[12]
[10] Supreme Court Act 1935 (WA) (Supreme Court Act) s 37; Supreme Court Rules 1971 (WA) (Rules) O 66, r 1.
[11] Frigger v Lean [2012] WASCA 66 [53] (Murphy JA, Allanson J & Newnes AJA agreeing).
[12] Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 558.
Without limiting the Court's wide discretion as to costs, the starting point in relation to the award of costs is that the Court will generally order that the successful party to the action or matter recover their costs.[13]
[13] Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96; (2019) 54 WAR 388 (Strzelecki Holdings) [49] (Murphy, Mitchell & Pritchard JJ).
What constitutes 'success' in proceedings is to be determined by the reality of the circumstances involved in the case. The Court may depart from the general rule that costs follow the event and modify a costs order to take into account matters such as any unreasonable conduct of a generally successful party, or to the failure of that party on one or more specific issues.[14] An order that a successful party should recover only a portion of its costs where it has not been successful in relation to particular issues, however, should not be made as a matter of course.[15]
[14] Strzelecki Holdings [50] (Murphy, Mitchell & Pritchard JJ).
[15] Strzelecki Holdings [51] (Murphy, Mitchell & Pritchard JJ).
Where the Court decides, in the exercise of its discretion, to modify the usual costs orders to reflect the limited success of the successful party, that power will be exercised broadly, and as a matter of impression, and without any attempt at mathematical precision (which is likely to prove illusory in any event). That approach reflects the fact that it may be difficult to separate the factual and evidentiary substratum of different issues, the fact that some issues are more important than others, and the fact that some issues are subsidiary to others.[16]
[16] Strzelecki Holdings [52] (Murphy, Mitchell & Pritchard JJ).
Turning, then, to grounds 1 and 2 of the costs appeal.

Ground 1 - was Mr Lamers the successful party?

The learned trial judge's conclusion that, 'broadly speaking', Mr Lamers was the successful party at trial, clearly rested upon the fact that Mr Lamers was successful in obtaining orders that Arvind be removed, and replaced, as trustee of the APT Unit Trust. In that regard, Mr Lamers had submitted, and the learned trial judge evidently accepted, that the orders for the replacement of the trustee were the 'primary relief' sought in the proceedings.
In its submissions on appeal, Arvind sought to downplay the significance of the relief obtained by Mr Lamers. Counsel submitted that the characterisation of the relief as the 'primary relief' was 'disingenuous' and that to describe Mr Lamers as successful was analogous to treating an award of nominal damages as a successful outcome in a proceeding where the sum of money is the basis of the action.[17]
[17] Appeal ts 21 ‑ 22.
I reject those submissions.
There was nothing merely 'nominal' about the relief sought and obtained by Mr Lamers. That relief was necessary to ensure the proper administration of the APT Unit Trust, in circumstances in which the controlling mind of the existing trustee, Mr Carbone, was through his own family trust (via Bright Image) a beneficiary of the trust and who had been demonstrably directing the actions of the trust in a manner which preferred his interests over Mr Lamers. The removal of the entity controlled by Mr Carbone as trustee was the hinge upon which the litigation turned. It was relief sought from the commencement of the proceedings. Indeed, in the event that the administration of the trustee was placed into the hands of an independent trustee (as became the case), much of the concern as to the financial interests of Mr Lamers sought to be protected by the other relief fell away.
Counsel for Mr Lamers said as much in closing submissions at trial:[18]
So in summary, if the primary relief sought by the plaintiff is granted, then the need for your Honour to concern yourself with matters of equitable compensation and the like, falls away.
[18] Trial ts 941.
Nor was this some form of late fall-back position on the part of Mr Lamers. The further re-amended substituted statement of claim (statement of claim) expressly pleaded that the removal of Arvind as trustee was the primary relief sought by Mr Lamers.[19] Mr Lamers' written opening submissions for trial identified Arvind as the 'principal relief sought by the plaintiff' and those submissions were almost entirely directed towards Mr Lamers' claim for that relief.[20]
[19] Statement of claim [63] (BAB 328).
[20] Plaintiff's Opening Submissions dated 15 October 2020 especially at [12], [80].
The only reference to the other relief sought by Mr Lamers in opening was in the final paragraph of those submissions:[21]
In addition to the removal and replacement of the trustee, and the mandatory injunction to remove the mortgage over Ranford Road (if that is in fact possible), the plaintiff seeks various forms of other equitable relief, including equitable compensation and an account of administration in common form or on the basis of wilful default. It is difficult at this stage for the plaintiff to specify with more precision the relief he presses for, given the inconsistent manner in which the trust has been administered. The plaintiff proposes to address the Court further in closing, once he has heard and considered all the evidence.
[21] Plaintiff's Opening Submissions dated 15 October 2020 especially at [81].
As I will come to later, the equivocal nature of Mr Lamers' claim to further relief (i.e. the 'difficulty' in its identification) continued to be reflected in the closing submissions.[22]
[22] Plaintiff's Closing Submissions dated 6 November 2020 [57].
Having regard to the trial record as a whole, in my view, it is correct to characterise Mr Lamers' claim to have Arvind replaced as the trustee of the APT Unit Trust, as the 'principal' or 'primary' relief sought by him. It was certainly open to the learned trial judge, who was best placed to determine the question, to conclude that by obtaining that relief Mr Lamers was the successful party at trial. In reaching that conclusion, the learned trial judge plainly recognised that there were issues in relation to which Mr Lamers was not successful, as reflected in her Honour's conclusion that he should recover only a portion of his costs. That apportionment will be addressed in the context of ground 2.

Unsuccessful financial claims

In support of both grounds 1 and 2, Arvind placed significant emphasis on what it submitted were Mr Lamers' unsuccessful financial claims. As ground 1.2 contends:
[H]er Honour failed to have regard to Lamers financial claims as at 6 November 2020 when the trial was completed which totalled about $5,238,822 or $2,427,083 as follows:
(1)$1,680,000 as a creditor of the appellant;
(2) $3,543,405 as an account of profits; and/or
(3) $731,666 and $15,417 as equitable compensation
each of which was unsuccessful;
Baldly stated in this way (i.e. financial claims 'which totalled about $5,238,822 or $2,427,083'), there might be thought to be some substance to Arvind's contention that Mr Lamers' success was a 'pyrrhic' victory.[23] Upon closer inspection, however, that is not the case.
[23] Appellant's Submissions [22] (WAB 17).
It is convenient to briefly address each of the 'financial claims' separately.

Claim as a creditor

Arvind submitted that Mr Lamers sought '$1,680,000 as a creditor' of the APT Unit Trust. The basis for that submission is not clear. While Arvind submitted at one point that such a claim appeared in Mr Lamers' written closing submissions dated 6 November 2020,[24] it later submitted that the claim was 'not mentioned in Lamers written closing submissions dated 6 November 2020 when it should have been abandoned and the Court so informed'.[25]
[24] Appellant's Submissions [20] (WAB 17).
[25] Appellant's Submissions [28(4)] (WAB 19).
Properly understood, in my view, Mr Lamers made no such claim in the primary proceedings. More specifically, while there was a plea to the effect that Mr Lamers was a creditor of the APT Unit Trust (which I will come to), there was no claim in the trial that Mr Lamers be paid any sum on account of a debt owed by Arvind to him. There was no prayer for relief to that effect in the statement of claim, Mr Lamers did not open on the basis that he was entitled to such relief and (not surprisingly) did not close his case on that basis. Nor did Arvind's closing submissions respond to a claim for such relief. For, in truth, there was none.
The controversy in the primary proceedings as to whether Mr Lamers was a creditor of the APT Unit Trust did not concern a present entitlement to be repaid a debt but, rather, concerned the basis upon which Mr Lamers' and Mr Carbone's contributions to the development of Ranford Road were to be accounted for; namely whether they were to be treated purely as capital contributions or as loans to be discharged prior to capital distribution to the beneficiaries. That controversy, in turn, related to the dispute between the parties in relation to the Oral Agreement as to the terms upon which Ranford Road would be developed.
It was in that context that Mr Lamers pleaded that the funds advanced by him to the APT Unit Trust were a non-current loan from him (as trustee for his family trust) to the APT Unit Trust.[26] And, indeed, that is how that contribution was recorded in the trust's financial statements (prepared on instructions from Mr Carbone on behalf of Arvind), as indeed were Mr Carbone's (or Bright Image's) contributions.[27]
[26] Statement of claim [31], [31A] (GAB 328).
[27] See primary reasons [524] - [525].
In that context, the learned trial judge found, contrary to Mr Lamers' position, that the 'objective intention of the parties was that the transfer of the showrooms to the unitholders would be in full and final satisfaction of their respective contributions to the development of the Ranford Road Property'.[28] Accordingly, her Honour did not accept that it was a term of the Oral Agreement that an 'in specie distribution of capital could only occur if all of the liabilities of the trust had been discharged'.[29]
[28] Primary reasons [605].
[29] Primary reasons [607].
It was these conclusions that led to the learned trial judge rejecting the contention that Mr Lamers was a creditor. As her Honour said:[30]
As set out above, it is my view that it is an implied term of the Agreement that the contributions of the plaintiff to the construction of the showrooms, as recorded in the financial statements of the APT Unit Trust as a non-current loan, which would be discharged in full by the transfer of one strata titled showroom once strata titles were issued. On this basis, while I accept that the plaintiff is recorded in the financial statements of the APT Unit Trust as a creditor with a non-current loan, I consider this loan was not repayable on demand and was subject to the terms of the Agreement.
[30] Primary reasons [638].
The important point, for present purposes, is that this conclusion did not relate to a claim for immediate payment of the alleged debt, but to the manner in which the parties' contributions to the development would be dealt with, for example, in a final distribution of the APT Unit Trust. Nor was it a claim for a debt to the exclusion of, or in preference to, the interests of the other beneficiaries of the trust. That is, if Mr Lamers' position in relation to the characterisation of his contribution of $1,054,680 as a loan (to be discharged before 'in specie distribution of capital') had been accepted, it would have applied equally to Bright Image's contribution, which was also recorded in the financial statements as a non-current loan (of $2,123,348).
I note, for completeness, that prior to the commencement of the primary proceedings there had been a claim by Mr Lamers for repayment of the non-current loan recorded in the financial statements. That claim, in the form of a statutory demand, was based upon advice as to Mr Lamers' entitlements from an accountant, Mr Napoli, based on Mr Napoli's conclusions from the financial statements. Arvind applied to set aside the statutory demand on the basis that contributions made by each of Mr Lamers and Bright Image were, in effect, a contribution of equity which had been miscategorised in the accounts of the APT Unit Trust. The statutory demand was set aside by consent.[31]
[31] As to which see primary reasons [519] - [523].
In that connection, Mr Napoli, who gave evidence at trial, agreed that it would not be possible for Mr Lamers to receive an in specie distribution of a showroom and have his loan account paid out as 'the transfer of a unit to Mr Lamers would, in effect, reduce the balance of his loan account'.[32]
[32] Primary reasons [556].
It is, therefore, incorrect in my view to characterise the 'creditor issue' as a financial claim for $1,680,000. It was, rather, an issue as to how the parties' contributions to the development of Ranford Road would ultimately be accounted for, by the trustee of the APT Unit Trust, in administering the trust. While Mr Lamers was unsuccessful in relation to that issue, the controversy over the Oral Agreement and the terms upon which Ranford Road would be developed were a matter which the learned trial judge expressly addressed in reducing Mr Lamers' costs by 25%.
Particularly in light of the learned trial judge's recognition that Mr Lamers' entitlement to costs should be reduced by that proportion, Arvind's success on the 'creditor issue' does not belie the learned trial judge's conclusion that, 'broadly speaking', Mr Lamers was the successful party at trial.

Claims based on the mortgage breach

The large portion of the 'financial claims' referred to by Arvind in ground 1.2 (an account of profits of $3,543,405 or $731,666 as equitable compensation) related to the mortgage breach found by the learned trial judge; that is, to Arvind's conduct in granting a mortgage to NAB over Ranford Road to secure a guarantee and indemnity of a loan facility of Bright Image. The mortgage breach was a significant breach of Arvind's duties as trustee. Bright Image's facility, which was secured by the guarantee and mortgage granted by Arvind, was for $6.295 million. This was well in excess of the value of Ranford Road. The mortgage breach not only prevented Ranford Road being used as security for trust purposes, it put at risk the trust assets, to the detriment of the beneficiaries.
In addition, the mortgage granted by Arvind over Ranford Road enabled Mr Carbone to have funds released for his benefit from NAB.[33] In his closing submissions, Mr Lamers' submitted that the total of the funds released to Mr Carbone was $3,543,405.[34] That is where the figure of $3,543,405 identified by Arvind in ground 1.2 comes from. Significantly, to the extent that it formed part of Mr Lamers' claim, that alleged benefit was a benefit derived by Mr Carbone, not a benefit to Arvind. Hence, the Barnes v Addy claims with respect to the mortgage breach against Mr Carbone and Bright Image.
[33] See primary reasons [264] - [274].
[34] Plaintiff's Closing Submissions dated 6 November 2020 [58] - [61] (BAB 598 - 599).
This was made clear in Mr Lamers' immediately preceding submission in closing:[35]
As the controlling mind of both Arvind and Bright Image, the plaintiff seeks remedies against Mr Carbone and Bright Image on the basis that they knowingly participated and assisted in Arvind’s numerous breaches of trust.
Identification of the benefit or gain is a matter of judgment informed by equitable principles. It has been difficult for the plaintiff to identify the benefit or gain obtained by the defendants (in using Ranford Road as security) due to their reluctance to provide documentation. The plaintiff had to pursue an application for further and better discovery, which was contested and (unsuccessfully) appealed.
[35] Plaintiff's Closing Submissions dated 6 November 2020 [56] - [57].
There was no suggestion in the closing submissions that Arvind profited, or benefited, from the funds released for the benefit of Mr Carbone, a matter acknowledged by Mr Lamers' submission that the utility of an account of profits against Arvind was unclear.[36]
[36] Plaintiff's Closing Submissions dated 6 November 2020 [62] (BAB 599).
It is, accordingly, in my view, not correct to say that Mr Lamers was unsuccessful in a claim for an account of profits in the sum of $3,543,405 against Arvind. To the extent that the release of funds totalling that amount was claimed, it was claimed as a benefit derived by Mr Carbone. While the claim against Mr Carbone was unsuccessful, that outcome was reflected in the costs order made in favour of Mr Carbone and Bright Image with respect to the Barnes v Addy claims.
The claim for equitable compensation of $731,666.67 was expressed to be in the alternative to the claim for an account of profits. That claim was not based on any evidence of loss, but on Mr Lamers' nominal share of the then-existing balance of $2,195,000 of Bright Image's loan facility secured by the mortgage (relying upon the decision of Slattery J in Fan v Tang).[37] That claim failed for lack of evidence and, as the learned trial judge recognised in the costs reasons, involved no significant time spent at trial.[38]
[37] Fan v Tang [2010] NSWSC 11.
[38] Costs reasons [44].
The claim for additional relief based on the proven mortgage breach, particularly in light of the costs order made against Mr Lamers in relation to the Barnes v Addy claims, does not undermine the learned trial judge's conclusion that Mr Lamers was the successful party at trial.

Claims based on the accounts breach

Finally, the claim based on the 'accounts breach' ($15,417.33) was based on the taxed costs paid by Mr Lamers in connection with the application to set aside the statutory demand referred to at [52] above.[39] That claim was based on Mr Lamers' pleaded case that, in response to the statutory demand, Arvind put on evidence that the books and accounts were inaccurate which therefore caused the Plaintiff to consent to the setting aside of the demand and receive an adverse costs order.[40] The accounts were subsequently amended and it was those amendments that Mr Lamers pleaded constituted the 'accounts breach'.
[39] Plaintiff's Closing Submissions dated 6 November 2020 [64] (BAB 599).
[40] Statement of claim [56(b)].
The learned trial judge concluded that the amendments to the financial statements were not made in breach of the unit trust deed. The claim for equitable compensation based on the accounts breach therefore fell away.
In the context of the issues in the proceedings as a whole, in my view, the alleged 'accounts breach' and the claim for equitable compensation in relation to it was not a significant issue at trial. Certainly, in my view, Mr Lamers' failure to establish that breach could not undermine the conclusion that he was the successful party in the litigation.

Conclusion as to ground 1

For the above reasons, in my view, the learned trial judge's conclusions in relation to the financial claims referred to in ground 1.2 do not provide a proper basis to overturn her Honour's conclusion that Mr Lamers was the successful party. Nor, for the reasons given by Dalton AJA, has Arvind otherwise demonstrated that her Honour's conclusion in that regard was in error. To the contrary, in my view, that conclusion was correct.
Ground 1 must be dismissed.

Ground 2 - did the apportionment of costs manifest error?

Ground 2 contends that the learned trial judge's reduction of the costs payable to Mr Lamers, in order 1 of the costs orders, by 25% was so 'grossly inappropriate' as to manifest error (in the House v The King sense).[41]
[41] Appeal ts 27.
In support of that contention, Arvind relied upon the matters relied upon by it in ground 1, including its submissions as to the 'failed financial claims'. In that regard, Arvind's submissions in the costs appeal sought to analyse and characterise the parties' success by reference to various enumerated issues. In that regard Arvind referred to the learned trial judge's identification, in both the primary reasons and the costs reasons, of 'four primary issues' in the proceedings and to her Honour's reference elsewhere in the primary reasons to nine issues that required determination.[42] For its part, Arvind proffered that her Honour ought to have concluded that there were 12 issues in the primary reasons, the resolution of which it sought to characterise in very tendentious terms. For example, Arvind submitted that the mortgage breach claims were both 'hopeless and/or doomed to fail' for the reason that any discrete cause of action based on the mortgage breach was statute barred.[43] Arvind made this submission despite the fact that the learned trial judge concluded that the mortgage breach had been proven and that it was an important factor in removing Arvind as the trustee of the APT Unit Trust.
[42] Appellant's Submissions [13] - [14] (WAB 16).
[43] Appellant's Submissions [29] (WAB 19 - 20).
In any event, none of the various taxonomies of issues referred to by Arvind were particularly useful in determining the ultimate question as to whether the learned trial judge's wide discretion as to costs miscarried. Indeed, the use of those taxonomies, in my view, betrayed the misconception that the modification of costs orders to reflect the limited success of the successful party involves an attempt at mathematical precision (an attempt which this Court has described as illusory).[44]
[44] See [31] above.
In that context, while the learned trial judge did refer to there having been four primary issues for determination in the proceedings, I do not read the costs reasons to suggest that the reduction in Mr Lamers' entitlement to costs by 25% was intended to simply reflect his lack of success on one of those four primary issues (although I accept that the costs reasons might be construed in that way). In my view, the costs orders, and the reasons for them, are more nuanced than that, and reflect the broad and impressionistic approach to the apportionment of costs contemplated by the authorities.
In that regard, while the learned trial judge placed particular emphasis on Mr Lamers' having been unsuccessful 'in respect of the Oral Agreement', the factual and legal issues arising from the oral agreement traversed at least two of the 'primary issues' identified by her Honour in the primary reasons; namely the terms of the Oral Agreement (primary issue 1) and whether the Oral Agreement governed the development (primary issue 2). Even in relation to those two 'primary issues' there was mixture of success. For example, the defendants' claim that it was a term of the Oral Agreement that Mr Carbone and Bright Image could use Ranford Road as security for their borrowing was rejected by the learned trial judge, as was the aspect of the Oral Agreement upon which Bright Image's counterclaim rested.
Relatedly, it is important, in my view, to recognise that the 25% reduction in Mr Lamers' entitlement to costs in order 1 of the costs orders must be understood in light of the costs orders as a whole, including order 2, which made a separate and distinct order in relation to the Barnes v Addy claims. As I have said, Mr Lamers' entitlement to 75% of the costs of the proceedings does not include costs of the proceedings as they relate to the Barnes v Addy claims against Mr Carbone and Bright Image. For the reasons I have given in the context of ground 1, the greater bulk of the 'financial claims' (namely the claim for an account of profits with respect to the $3,543,405 obtained by Mr Carbone as a consequence of the mortgage breach) was reflected in the Barnes v Addy claims. Mr Lamers' costs in that regard are not included in the entitlement to costs in order 1.
Similarly, in exercising the discretion in relation to costs, it is apparent that the learned trial judge took into account the common factual and evidentiary substratum of issues in relation to which there was mixed successes at trial (such as the mortgage breach) and the length of time devoted to particular issues at trial. Those considerations were, accordingly, properly taken into account in the broad approach to apportionment. Given that much of the trial was taken up with the evidence of Mr Lamers and Mr Carbone, whose evidence ranged over all of the issues in the trial, the learned trial judge was best placed to determine what was a fair and just apportionment of the costs.
Having regard to all of the relevant circumstances, I am not satisfied that to award Mr Lamers 75% of his assessed costs, save for the costs of the Barnes v Addy claims, stands outside the limits of a sound discretionary judgment. Given Mr Lamers' success in obtaining the primary relief that he sought, in all of the circumstances it was reasonable for the learned trial judge to conclude that the significant adjustments to the costs awarded to Mr Lamers (including the 25% reduction and the specific order in relation to the Barnes v Addy claims) were just and equitable.
I would dismiss ground 2 of the costs appeal.

Ground 3 of the costs appeal

I agree with Dalton AJA, for the reasons that her Honour gives, that ground 3 of the costs appeal is without merit.

Ground 4 of the costs appeal

I agree with Dalton AJA, for the reasons that her Honour gives, that ground 4 of the costs appeal must be rejected.

Ground 5 of the costs appeal

Ground 5 of the costs appeal challenges order 7 of the costs orders, insofar as it provided that Arvind was not entitled to an indemnity from the assets of the APT Unit Trust with respect to its own costs of the proceedings. There is no challenge to order 7 insofar as it provides that Arvind is not entitled to an indemnity with respect to the costs orders made against it.
Ground 5 contains a number of sub-grounds, including contentions that the learned trial judge 'failed to have regard' to a number of matters. An immediate hurdle facing those contentions is that, remarkably, Arvind made no submissions to the learned trial judge in opposition to Mr Lamers' submission that Arvind should not be entitled to an indemnity.[45] It is well established that, unless fundamental and obvious, it is incumbent on a party who contends on appeal that a discretion has miscarried to demonstrate that the primary judge's attention was drawn to the particular matter of which complaint is made.[46] In any event, in my view, the contentions in ground 5 are without substance.
[45] The failure of Arvind to address whether it should be entitled to an indemnity from the trust assets is even more remarkable in light of the fact that the learned trial judge specifically made orders on 17 February 2023 requiring the parties to file submissions in relation to that issue.
[46] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 [120] (Gummow ACJ, Kirby, Hayne & Heydon JJ); Grove v Grove [86] (Buss P, Murphy & Vaughan JJA).
Rather than address each sub-ground in fine detail, I will deal with what I understand to be the central points raised by ground 5.
First, Arvind submitted that on 13 December 2019 the learned trial judge made an order that Arvind be permitted to pay its legal costs from the assets of the trust pursuant to cl 68 of the trust deed.[47] As Dalton AJA has explained, that order was an interlocutory order and was subject to the ultimate resolution of the question as to whether Arvind was in breach of its duties as trustee. That interlocutory order provided no barrier to the orders made following trial.
[47] Ground 5(1).
Secondly, Arvind submitted that the learned trial judge failed to have regard to the fact that the grounds relied upon by Mr Lamers for the removal of Arvind prior to 4 September 2020 were dismissed.[48] In effect, Arvind contended that Mr Lamers succeeded in having Arvind removed on the basis of a late case raised in the final amendments to the statement of claim. Arvind's submissions simply asserted, rather than demonstrated, this to be the case. There is no substance to the point. Mr Lamers sought the removal of Arvind as trustee from the commencement of the proceedings, including by reason of the mortgage breach. Indeed the first step in the proceedings taken by Mr Lamers (an application for an interlocutory injunction preventing any further encumbrance of the trustee assets or drawings from the loan facility secured by the mortgage) was directly related to Arvind's breach of trust in granting the mortgage. It was always an issue in the proceedings.
[48] Ground 5(2).
Thirdly, Arvind submitted that the learned trial judge erred in finding (at costs reasons [108]) that the proceedings were not concerned with the proper construction of the trust deed.[49] As Dalton AJA has observed at [225], the submission appears to misunderstand the point being made by the learned trial judge, which was that Arvind adopted a hostile, adversarial position in the litigation, rather than simply seeking directions as to its obligations under the trust deed. In that regard, her Honour was undoubtedly correct. Arvind did, indeed, adopt an adversarial position in the litigation which was wholly aligned with that of Mr Carbone. Mr Carbone was, of course, the controlling mind of Arvind and, while Mr Carbone was separately represented, Arvind ran its defence as a defence of Mr Carbone. The learned primary judge, for example, found that Arvind's defence of the proceedings was not for the benefit of the trust but for the benefit of each of the defendants.
[49] Ground 5(3).
It was well-open to the learned trial judge to reach that conclusion. The record of the trial reveals that Arvind assumed much of the responsibility for the conduct of the defence of all of the defendants. For example, counsel for Arvind cross-examined Mr Lamers at length and, significantly, it was Arvind that called Mr Carbone to give evidence and that called all of the other witnesses for the defendants. Mr Carbone and Bright Image did not call any witnesses.
Fourthly, Arvind's contention that the learned trial judge failed to give sufficient reasons for a number of the findings in the costs reasons (such as Arvind having preferred the interests of Bright Image over Mr Lamers and that it defended the proceedings on the basis that its conduct was justified)[50] may be readily dismissed. Those findings were findings made by the learned trial judge in the primary reasons. Her Honour gave reasons for those findings in the primary reasons and they were not challenged on appeal. She did not need to repeat them again in the costs reasons.
[50] Ground 5(4).
The final matter raised in relation to ground 5 was that the learned trial judge failed to have regard to her findings to the effect that 'she dismissed all of the claims by [Mr Lamers] against [Arvind] which included claims for damages or compensation in the order of $5,238,822 or $2,427,083 all of which were dismissed'.[51] Of course, the primary relief claimed by Mr Lamers was not dismissed. Accordingly, I read this sub-ground to be a reference to the defendants' success on the 'financial claims'.
[51] Ground 5(5)(b) (ground 5(5)(a) is simply a repetition of ground 5(2)).
I have already addressed Arvind's submissions in relation to the 'financial claims' in the context of ground 1. For the reasons I have set out there, the large part of the financial claims identified by Arvind on appeal consisted of claims against Mr Carbone. They were not the focus of the proceedings against Arvind in relation to which Mr Lamers was, as her Honour found, the successful party. Nor, clearly, were the claims for an account of profits or equitable compensation claims against trust assets, but rather against the defendants personally. Similarly, for the reasons I have given, the 'creditor issue' was not a claim for a debt to the exclusion of, or in preference to, the interests of the other beneficiaries of the trust but, was rather an issue concerning the terms of the development that would have applied equally to Mr Lamers and Bright Image. For these reasons, for the purposes of costs, I would not characterise Arvind's defence of any of the financial claims as being for the protection of trust assets or being otherwise for the benefit of the trust.
As I have already observed, the learned trial judge found (correctly in my view) that Arvind's defence of the proceedings was not conducted for the benefit of the trust but for Arvind, Mr Carbone and Bright Image's benefit. In those circumstances, any success that Arvind had in the proceedings did not entitle it to recover its costs from the trust assets. In my view, the learned trial judge did not err in so concluding.
In this context, it is at least implicitly (if not explicitly) recognised in the costs reasons that if Arvind were to be indemnified from the assets of the APT Unit Trust, that indemnity could only, in effect, operate to the benefit of Mr Carbone (and the entities associated with him) and to the detriment of Mr Lamers. That is because any diminution of the trust assets, in order to pay Arvind's costs, would reduce the assets available for distribution to the beneficiaries (i.e. Mr Lamers and Bright Image) entirely for the benefit of another entity associated with Mr Carbone. To the extent that one entity associated with Mr Carbone (i.e. Bright Image) would be disadvantaged by the indemnity, that disadvantage would have been more than offset by the benefit to the other entity associated with him (i.e. Arvind). The diminution of Mr Lamers' interest as a beneficiary in such a case would, by contrast, be all downside from his perspective.
Given the learned trial judge's finding that Mr Carbone failed to distinguish between his personal interests and the interests of Arvind and Bright Image, such a result would not, in my view, have been fair and just.
I would dismiss ground 5 of the costs appeal.

Conclusion on the costs appeal

For these reasons, I am not satisfied that Arvind has met the high burden necessary for this Court to interfere with the learned trial judge's exercise of discretion in relation to costs. For the same reasons I am not satisfied that a substantial injustice would occur by leaving her Honour's costs orders undisturbed. I would therefore refuse leave to appeal under s 60(1)(e) of the Supreme Court Act 1935 (WA) and dismiss the costs appeal.

Mr Carbone and Bright Image's cross-appeal in the costs appeal

Mr Carbone and Bright Image filed a cross-appeal in the costs appeal, which (save for the omission of ground 5) was in precisely the same terms as Arvind's costs appeal.
For the reasons I have given in the costs appeal, I would refuse leave to appeal and dismiss Mr Carbone and Bright Image's cross-appeal.

Mr Lamers' cross-appeal in the costs appeal

Mr Lamers also filed a cross-appeal in the costs appeal.
By ground 1, Mr Lamers contended that the learned trial judge erred in excluding Bright Image from liability under order 1 of the costs orders. For the reasons given by Dalton AJA, I am not satisfied that the learned trial judge so erred. In any event, Mr Lamers accepted that he could not point to a substantial injustice that would occur by leaving order 1 undisturbed in that respect.
By ground 2, Mr Lamers' contended that, if his notice of contention in the counterclaim appeal was upheld, Arvind and Mr Carbone should be liable for all of the costs in order 1 of the costs orders (or alternatively 90% of those costs).
While I would, if necessary, have upheld the notice of contention in the counterclaim appeal, that conclusion would not, in my view, have justified the apportionment applied by the learned trial judge being disturbed.
The notice of contention identified an additional basis upon which Bright Image's counterclaim could have been dismissed, namely the unenforceability of the Oral Agreement by Bright Image (as opposed to Mr Carbone). This did not, as Dalton AJA has explained, otherwise render the Oral Agreement irrelevant to the rights of the parties. And as I have also explained in the context of ground 1, the learned trial judge's conclusions in relation to the Oral Agreement had real consequences for other issues in the proceedings (including the 'creditor issue').
As it was, Bright Image was ordered to pay all of the costs of the counterclaim (see order 3 of the costs orders). The success of the notice of contention on the counterclaim appeal simply supports the correctness of that order.
Nor would I otherwise disturb the learned trial judge's apportionment of costs in Mr Lamers' favour. To adapt what I said in the costs appeal, in all of the circumstances it was reasonable for the learned trial judge to conclude that the significant adjustments to the

costs awarded to Mr Lamers (including the 25% reduction, the specific order in relation to the Barnes v Addy claims and the order for costs in relation to the counterclaim) were just and equitable.

I would dismiss Mr Lamers' cross-appeal in the costs appeal.

BUSS P:

I agree with Dalton AJA.

DALTON AJA:

These two appeals were heard together. They both arise out of civil litigation determined in the Supreme Court at the beginning of 2023. The appeal in CACV 22 of 2023 is against the dismissal of the counterclaim below. The appeal in CACV 76 of 2023 is against costs orders made in the proceedings. I will deal with the appeal in CACV 22 of 2023 first.

CACV 22 of 2023 Counterclaim Appeal

The appeal in CACV 22 of 2023 is against findings which the primary judge made on the counterclaim which the second appellant, Bright Image Dental Pty Ltd (Bright Image) ran below. As a preliminary matter, the counterclaim was that of Bright Image; the first appellant, Mr Carbone, could not properly be an appellant in relation to this appeal. That is enough to dismiss Mr Carbone's appeal with costs.

Before coming to the grounds of appeal, and a notice of contention filed by the first respondent, Mr Lamers, it is necessary to outline the factual matters giving rise to dispute.

Oral Agreement to Develop Land

In 2009 Mr Carbone expected to acquire some land, but could not afford to develop it. He approached his brother‑in‑law, Mr Lamers, and proposed that they develop the land together. They agreed (Oral Agreement) that Mr Carbone's brother‑in‑law would build three shops, or showrooms as they were called in the evidence, on the land. Mr Carbone would contribute the land he expected to acquire, and Mr Lamers would pay for the construction costs. Because, at this stage,

Mr Carbone and Mr Lamers were good friends, little attention was paid to what reasonable business people might think were essential details in relation to this development.
Furthermore, although both men had experience in property development, neither seemed to give sufficient thought to how they would undertake this development. As the judgment below shows, almost nothing was done in a regular or sequential way. The statement of the facts in this judgment overlooks some of the difficulties and untidiness which are detailed in the judgment below, but are not relevant to resolving the points taken on this appeal.
By the Oral Agreement, Mr Lamers and Mr Carbone agreed to use family trusts as the vehicles for their investment in the venture. Each family trust would buy units in a unit trust. The company which would acquire the land, and run a business renting the shops built on the land, would be the trustee of the unit trust.
Mr Carbone controlled Bright Image.[52] It was the trustee of the Carbone Family Trust. In May 2009 Mr Lamers established the Lamers Family Trust of which he was appointed the trustee.
[52] Mr Carbone is a dentist and apparently, when not pursuing his property development interests, practises part-time in that profession.
By the Oral Agreement, Mr Lamers and Mr Carbone agreed that Mr Lamers' family trust would have one‑third of the units in the unit trust, and two‑thirds of the units would belong to Mr Carbone's family trust. After the showrooms had been completed, an application would be made for strata titles to be issued so that the three showrooms became separate lots on a strata title plan. After the issue of strata titles, Mr Lamers' family trust would receive one showroom, and Mr Carbone's family trust would receive two showrooms. None of this was contentious on the evidence of Mr Lamers and Mr Carbone below ‑ see [578] of the judgment below.
Arvind Pty Ltd became the registered proprietor of the land. It was a company controlled by Mr Carbone. The Arvind Property Trust was established. It was a unit trust. Arvind was the trustee and each family trust was allocated units. Mr Lamers held 100 units and Bright Image held 200 units.
Until strata titles issued, it was agreed that Mr Lamers' family trust would receive one‑third of the income made from renting the showrooms and Mr Carbone would receive two‑thirds. It was not clear on the evidence what (if any) agreement was made as to how long the three shops would be operated by the unit trust as a rental business before strata titles issued, and what (if any) role the unit trust would play after strata titles issued.
The showrooms were constructed and were rented out. The expenses of the rental business were paid by Arvind, and the remaining monies were paid into a bank account to which both Mr Lamers and Mr Carbone had access (the joint bank account). For some years Mr Lamers and Mr Carbone took drawings from the joint bank account on a one‑third/two‑thirds basis. Occasional irregularities occurred as to drawings, financial statements prepared on behalf of the unit trust, and payment of Arvind's GST obligations, but while Mr Lamers and Mr Carbone remained friends, these things did not create problems.

Family Disputes

In the latter half of 2016 the relationship between the two men broke down because of financial disputes related to the estate of Mr Lamers' and Mrs Carbone's father. The intensity of that family dispute apparently precludes any communication between the two families. Unfortunately, despite the involvement of their lawyers, it also seems to preclude any sensible approach to a disengagement of their financial interests in the property of the unit trust.

Litigation

Mr Lamers commenced litigation in the Supreme Court in August 2017. He made a claim as beneficiary of the unit trust against Arvind as trustee of that trust for breach of fiduciary duty and breach of the unit trust deed. He claimed against Mr Carbone for being knowingly concerned in those breaches, on the basis of the rule in Barnes v Addy.[53] The claims made against Arvind were for equitable compensation; an account of profits; removal and replacement of Arvind as trustee of the unit trust; an inquiry into damages for breach of the trust deed, and orders that the unit trust be wound up. The claims against Mr Carbone were for equitable compensation and an account of profits.
[53] Barnes v Addy (1874) Lr 9 Ch App 244.
The statement of claim was amended on several occasions. Bright Image was added as a third defendant at the end of 2018. The claim against Bright Image was also a Barnes v Addy claim. Mr Lamers sought the same relief against Bright Image as he did against Mr Carbone. An eight day trial was heard in October and November 2020.

Counterclaim Below

Mr Lamers' statement of claim included a claim for repayment of a debt shown in the financial statements for the unit trust as a non‑current loan by Mr Lamers to the unit trust. The initial amount of this debt was over one million dollars. It was the amount Mr Lamers paid to construct the shops. Mr Lamers asserted that he was entitled to repayment of that debt in addition to the transfer of one of the showrooms. The judge below found that the distribution of the showrooms contemplated by the Oral Agreement was to be in full satisfaction of the parties' initial financial contributions to the unit trust. That is, while the construction costs advanced by Mr Lamers were recorded in the accounts of Arvind as a non‑current loan, the Oral Agreement was that distribution of one of the three showrooms to Mr Lamers' family trust would be in full satisfaction of his initial contributions. There was no appeal from this finding.
In the context of his pleading which made claim to both repayment of the non‑current loan, and receipt of one of three showrooms, Mr Lamers asserted that Mr Carbone had wrongfully made several attempts to have Mr Lamers accept a transfer of one of the three showrooms in full satisfaction of his capital contribution to the unit trust.[54] This was in a part of the statement of claim which listed conduct relied upon by Mr Lamers as grounds for removal of Arvind as the trustee of the unit trust.
[54] These pleadings are at paragraph 62K and following of the statement of claim as most recently amended prior to trial.
In response to this part of Mr Lamers' pleading, the defence pleaded that from July 2017, Mr Lamers had asserted a right to be registered as owner of showroom 3 (Lot 1) on Strata Plan 64934 upon a separate title being issued for that lot.[55] However, the pleading continued, when Arvind attempted to transfer title to Mr Lamers, he refused to accept the transfer of that lot. It was not pleaded by any party that there was an agreement between any of the parties that when strata titles issued Mr Lamers would receive showroom 3 (Lot 1).
[55] See paragraph 62I of the defence of the second and third defendants filed most recently before trial.
Bright Image, on behalf of the Carbone Family Trust, ran a case by counterclaim in which it sought declarations, and other relief, to the effect that since 2017 (or alternatively 2019), Mr Lamers had been obliged to accept a transfer of showroom 3 (Lot 1) in full satisfaction of his entitlements under the Oral Agreement and unit trust. The primary judge refused to make those declarations, or grant that relief.
Like the defence pleadings, the pleadings on Bright Image's counterclaim do not plead any agreement between any of the parties that when strata titles issued, Mr Lamers would receive showroom 3 (Lot 1). The counterclaim relies upon the defence pleading just discussed, and details evidence that Mr Lamers had asserted a right to receive showroom 3 (Lot 1). It does not allege any agreement to that effect. The closest it gets is to allege that, 'from January 2017 until 6 August 2019 (and currently) [Mr Lamers] had maintained that in mid‑2009 he made a verbal agreement with [Mr Carbone] pursuant to which the title to [showroom 3 (Lot 1)] when issued was to be transferred to [Mr Lamers] …'.[56] This allegation is denied in the defence to the counterclaim.[57]
[56] Paragraph 62I (2.29)(a) of the defence and paragraph 64 of the counterclaim filed most recently before trial.
[57] Paragraph 18 of the Reply and Defence to the counterclaim filed most recently before trial.

Judgment on Counterclaim

At trial Mr Lamers contended that after the unit trust deed came into existence, it governed the rights of the beneficiaries of the unit trust in relation to the trust property, to the exclusion of the Oral Agreement. The trial judge rejected that submission. She said:
[629]     In this case, I do not accept that the Unit Trust Deed comprises the entire agreement between the parties or that objectively they intended the [Oral] Agreement would be replaced by the Unit Trust Deed. In this regard, I accept [Arvind's, Carbone's and Bright Image's] submissions that the Unit Trust Deed did not provide for nor contemplate the contribution of the vacant land by or on behalf of [Bright Image] or the payment of the construction costs by [Lamers]. Each of these matters were central elements of the Agreement.
[630]     Given the Unit Trust Deed does not comprise the entire agreement between the parties, it is my view that the general proposition referred to by [Lamers] does not apply. The [Oral] Agreement remained in place. In performance of the express terms of that Agreement, the APT Unit Trust was established and Arvind held the Ranford Road Property on the terms of the Unit Trust Deed.
[631]     This conclusion does not, however, mean that the terms of the Unit Trust Deed can be ignored. The parties expressly agreed that the Ranford Road Property would be held in a unit trust and that [Lamers and Bright Image] would be issued units in that trust in agreed proportions. In my view, the [Oral] Agreement co-exists with the unit trust structure that was agreed by the parties and the Unit Trust Deed must be construed in accordance with the terms of the [Oral] Agreement. In the event of a conflict, I accept the objective intention of the parties was that the [Oral] Agreement should take precedence.
In determining the counterclaim the judge below said:
[789]By way of counterclaim, [Carbone and Bright Image] seek declarations that from 12 September 2017 alternatively 22 May 2019:
(a)[Lamers] was obliged to accept a transfer of showroom 3 'in satisfaction of [Lamers'] entitlements under the Agreement';
(b)[Bright Image] was required to accept the transfer of showrooms 1 and 2; and
(c)[Arvind] was obliged to account for the income and expenses of the Ranford Road Land in accordance with (a) and (b).
[790]On this occurring, [Carbone and Bright Image] seek an order that the APT Unit Trust be wound up.
[791][Carbone and Bright Image] also seek an order that on registration of the transfer of showroom 3, this property be charged in favour of Arvind to 'secure the first defendant's right to indemnity'.
[792]Counsel for [Lamers] submitted that [Carbone and Bright Image] had not put forward any legal basis on which the court should make these orders.
[793]I accept this submission. As set out above, it was an express term of the [Oral] Agreement that after strata titles were issued, [Lamers] would receive one showroom and [Bright Image] two showrooms. However, I do not accept there was any agreement as to which of the showrooms each would receive. In addition, there is no evidence that at present, the strata titles have been issued.
[794]In relation to the order sought that the property be the subject of a charge to secure the 'first defendant's right to indemnity', no basis was advanced as to the basis on which a trustee's right of indemnity against the assets of the trust should extend to assets which are no longer trust assets. Any suggestion that [Arvind] has a right of indemnity against [Lamers] as a unitholder of the APT Unit Trust is contrary to cl 69 of the Unit Trust Deed.
[795]For these reasons, it is my view that the counterclaim should be dismissed.
There are some fundamental things to note about the above passages. First, the primary judge does not recognise that the counterclaim is brought only by Bright Image. This is not just a technical matter.
Secondly, the primary judge determines the counterclaim on the basis of provisions in the Oral Agreement when Bright Image was not a party to the Oral Agreement.
Thirdly, in [629] ‑ [631], the primary judge writes of 'the parties', and 'the entire agreement between the parties', no doubt meaning the Carbone interests on the one hand, and the Lamers interests on the other. However, a proper legal analysis ought to have started with the two agreements. Mr Lamers and Mr Carbone were parties to the Oral Agreement; it could bind no‑one but them. Arvind, Bright Image and Mr Lamers had rights and obligations under the unit trust deed. Even assuming, for the sake of argument, that the Oral Agreement created obligations in respect of the transfer of showrooms, Arvind was not a party to the Oral Agreement, and it owned the showrooms which it held on terms of the unit trust deed.

Notice of Contention

These difficulties were the subject matter of Mr Lamers' notice of contention filed in this appeal. Because they are so fundamental, it is convenient to deal with the notice of contention before coming to the appeal grounds.
The notice of contention was to the effect that the reasoning at [631] of the primary judge’s decision was erroneous because: 1) not all the parties to the unit trust deed were parties to the Oral Agreement, so that the terms of the Oral Agreement could not take precedence over the unit trust deed in the event of conflict between the two documents, and 2) Bright Image's rights and obligations in respect of the unit trust were governed by the unit trust deed [rather than the Oral Agreement].
For the reasons already discussed, the points raised in the notice of contention are correct and ought to have succeeded below as the primary reason to dismiss the counterclaim. No change is necessary to the orders made below as a result of this finding, for the primary judge dismissed the counterclaim for other reasons.
The points Bright Image wished to advance by counterclaim could have been advanced in a proper legal framework. For the reasons given by the primary judge at [629] ‑ [631], the Oral Agreement continued to govern rights and obligations between Mr Carbone and Mr Lamers after the unit trust deed came into being. Mr Lamers was one beneficiary of the unit trust, and Mr Carbone controlled Bright Image, the other beneficiary. Had there been terms of the Oral Agreement as Mr Carbone alleged, he could have sued Mr Lamers for specific performance of the Oral Agreement, including seeking an order that Mr Lamers join Bright Image in directing Arvind to deal with the trust property in accordance with the Oral Agreement. This rather convoluted remedy was the result of the convoluted corporate and trust structure which Mr Carbone and Mr Lamers chose to use to develop the land.
Even though Bright Image cast its counterclaim in an incorrect legal framework, it would have been open to the primary judge to recognise the substance of the rights asserted, notwithstanding the poor pleading, had Bright Image run the trial on this basis. However, Bright Image steadfastly refused to accept the correct legal analysis of its rights (even on this appeal). Bright Image was represented at the trial by counsel and a firm of solicitors, Effective Legal. Bright Image was represented by Effective Legal until 4 October 2024 when Vaughan JA granted Effective Legal leave to cease to act for Bright Image in the counterclaim appeal and the costs appeal.
This court cannot consider Bright Image's substantive claim when the factual basis for it was not the subject of evidence at trial. Further, on the evidence which was led at trial, even reframed according to a proper legal analysis, the counterclaim would still fail, as is apparent when the grounds of Bright Image's appeal are considered.

Grounds of Appeal

There were three grounds of appeal. The first was that the primary judge erred in failing to find that it was a term of the Oral Agreement that after the issuance of strata titles for the three showrooms, Mr Lamers would receive title to one showroom and Bright Image would receive title to two showrooms. This ground must fail, for the primary judge plainly did make that finding ‑ see [578], [586] and [793] of the judgment below.[58]
[58] For completeness, the pleadings between the parties showed no contest in relation to this being a term of the Oral Agreement: paragraph 8.3(b) of the statement of claim filed most recently before trial and paragraph 8.1(h) of the corresponding defence.
The second ground of appeal was that the primary judge erred in finding that, because neither Mr Carbone nor Mr Lamers gave evidence of any discussions to the effect that Mr Lamers was to receive showroom 3 (Lot 1) when the showrooms were transferred by the trustee to Mr Lamers and Bright Image, she could make no finding that it had been agreed that Mr Lamers was to receive showroom 3 (Lot 1).
The judge below found that:
[578]Both Mr Lamers and Mr Carbone gave evidence that it was a term of the agreement that on completion of the showrooms, the showrooms would be leased and the rental income generated would be distributed in accordance with their interest in the trust, namely one-third (Mr Lamers) ‑ two‑thirds (Mr Carbone). Each also gave evidence that they agreed that at some stage after the showrooms had been completed, an application would be made for strata titles to be issued for each of the showrooms. When this occurred, Mr Lamers would receive one showroom and Mr Carbone two showrooms. Neither gave any evidence of discussions they had as to which specific showroom each was to receive. For this reason, I am not satisfied on the balance of probabilities that it was an express term of the Agreement that after strata titles were issued, [Mr Lamers] would receive showroom 3 and [Bright Image] showrooms 1 and 2. The discussions as to the allocation of the showrooms did not occur until about September 2016 and has not yet been agreed.
The Oral Agreement did not make any provision as to which showroom Mr Lamers would receive. No party pleaded that there was such an agreement, whether as part of the Oral Agreement, or at a later time. The primary judge was correct to find that there were no discussions as to which showroom Mr Lamers would receive until September 2016, and no direct evidence of an agreement that Mr Lamers would receive showroom 3 (Lot 1) at any time.
In support of this ground of appeal Bright Image relied upon various written documents which show that from September 2016, Mr Lamers asserted to his bank; in a caveat lodged over the land and in a statutory declaration supporting that caveat, and in affidavits filed on interlocutory matters in this litigation, that he was to receive showroom 3 (Lot 1).
The third ground of appeal also relied upon this documentary evidence. That ground of appeal was that the primary judge erred in failing to find that, having regard to this documentary evidence, there must have been 'an agreement between Carbone and Lamers as to which showroom Lamers was to receive …'. That is, ground 3 asserted that the primary judge ought to have found an agreement made at some other time than the Oral Agreement.

There is no arguable basis for the idea that there was insufficient opportunity for the appellant or his lawyers to prepare for this hearing and that, therefore, the application was in some way analogous to an ex parte application. I would comment that if, for some reason, lawyers are not able to properly prepare to meet an application, the proper approach is to ask for an adjournment, not to simply consent to the orders sought being made.
As to any limitations defence, the trial judge found that time ran from the date of registration of the mortgage sought to be impugned ‑ [678] below, although perhaps more correctly it ran from the time the mortgage was granted. This was a fact readily discernible by any competent lawyer acting for Arvind. In any case, even if an action for monetary compensation was out of time, an injunction could still be granted to prevent further drawings on the loan secured by the mortgage wrongfully registered by Arvind as trustee; the injunction would prevent further detriment to the trust property.

Ground of Appeal 4

Ground 4 was that in making the special costs orders, the primary judge failed to have regard to how much of the pleadings and preparation for the trial were in relation to matters which failed. While recognising that there is a need to adjust the percentage of Mr Lamers' costs which the appellant is to pay (above, ground 2), I cannot see that Mr Lamers' mixed success at trial is any reason for making an independent adjustment to the special costs order.

Ground of Appeal 5

By ground of appeal 5 Arvind challenged the decision of the judge below that it was not entitled to indemnity from the property of the unit trust for its costs of the legal proceedings. During oral argument counsel for Arvind accepted that this ground of appeal related only to Arvind’s own legal costs; he accepted that Arvind was not entitled to an indemnity from the trust funds in respect of the costs it must pay Mr Lamers. That must be correct, and I deal with this ground of appeal on that basis.
The origins of this dispute were found in the counterclaim at trial: Bright Image sought an order that showroom 3 (Lot 1) should be transferred to Mr Lamers in satisfaction of his entitlement under the Oral Agreement and asked that the court order, 'that upon registration of the transfer of [showroom 3 (Lot 1)] from [Arvind] to [Lamers] the said property be charged in favour of [Arvind] to secure [Arvind's] right to indemnity'.[73]
[73] Paragraph 69.4 of the counterclaim below.
The costs judgment records that on the costs hearing, lawyers for Mr Lamers asked for an order that Arvind was not entitled to an indemnity from property of the unit trust for its costs, or for any of the costs it was ordered to pay him. As to Arvind's position, the judge below recorded, 'While the defendants did not specifically address this question in their oral or written submissions, [Arvind] relied on his (sic) contractual right of indemnity at trial' ‑ [38] of the costs reasons below. It is very poor practice that the same lawyers who made no submissions as to this matter below now raise the matter on appeal.
The reasons of the primary judge for her order denying Arvind indemnity were as follows:
[106]     In this case, [Arvind] resisted its removal as trustee of the Arvind Property Trust. Having found that [Arvind] should be removed as trustee, as a general rule, [Arvind] is not entitled to an indemnity from the trust for its costs of the proceeding.
[107]For the following reasons, I am satisfied in this case that the general rule should apply.
[108]     First, this was adversarial litigation. Nothing in these proceedings concerned the proper construction of the trust deed nor the nature of the trustees' duties under the trust deed. [Arvind] was not successful in resisting its removal as trustee.
[109]     Second, in my view, Arvind acted unreasonably in resisting its removal as trustee of the Arvind Property Trust. I have found that Arvind preferred the interests of [Bright Image] over the interest of [Lamers] and failed to separate the issues concerning the trust from the issues arising from the estate of Mr Lamers Snr. Notwithstanding these matters, Arvind defended the proceedings on the basis that its conduct was justified.
[110]     Third, in acting in the manner referred to at [109], Arvind misunderstood the nature of its duties as trustee and the obligations to which it was subject. In my view, the defence of the proceedings by Arvind was not for the benefit of the trust but was for the benefit of [itself, Carbone and Bright Image].
[111]     Fourth, the failure by Arvind to carry out its duties as trustee and to act impartially, particularly in seeking to raise issues which were not connected with the trust, is what, in my view, caused or at least significantly contributed to this litigation.
Earlier in her reasons the primary judge had referred to Cardaci v Cardaci (No 5).[74] That decision of Le Miere J was particularly useful as many of the issues it considered were raised before the primary judge. In Cardaci, Le Miere J said this of the statutory starting point for consideration of a claim by a trustee for indemnity from the trust assets:
[12]Order 66 r 9(2) of the Rules of the Supreme Court 1971 (WA) (RSC) provides relevantly:
Where a person is or has been a party to any proceedings in the capacity of trustee... he shall, unless the Court otherwise orders, be entitled to the costs of those proceedings, in so far as they are not recovered from or paid by any other person, out of the fund held by the trustee...; and the Court may otherwise order only on the ground that the trustee... has acted unreasonably, or ... has in substance acted for his own benefit rather than for the benefit of the fund.
[13] The authors of the Red Book say that r 9 is a complete code as to the circumstances in which costs will be awarded to trustees, citing Grljusich v Grljusich in support of that proposition. Professor Dal Pont says that the rule reflects the general proposition that a trustee will remain personally liable to meet the relevant costs order if he has in the course of the litigation acted unreasonably or for his own benefit rather than for that of the trust. It is unnecessary to explore the differences, if any, between the general law and RSC O 66 r9(2) because they yield the same result in this case. (footnotes omitted).
[74] Cardaci v Cardaci (No 5) [2021] WASC 331 (S).
The authorities discussed by Le Miere J in Cardaci support the proposition that the common law grounds for awarding costs against a trustee might be wider than O 66 r 9(2). However, like Le Miere J, this court need not consider this, or the exclusivity or otherwise of the rule at O 66 r 9(2), because on the factual findings made below, it makes no difference whether this court applies the provisions of O 66 r 9(2) or the common law.
There were five separate arguments advanced in relation to this ground of appeal. The first was that on 13 December 2019 (more than a year before the trial) the primary judge made an order that Arvind be permitted to pay its legal costs from the assets of the trust pursuant to clause 68 of the unit trust deed. Written submissions on behalf of Arvind re-stated this ground but made no argument in support of it. No argument could reasonably be made in support of it; it is wholly without merit.
On 13 December 2019 the primary judge heard an interlocutory application brought by Mr Lamers to have a receiver and manager appointed to the unit trust. The basis for the application was that Mr Lamers had received disclosure of documents in the proceedings. These included bank statements which showed that amounts were being paid to Mr Carbone other than in accordance with the unit trust deed; outside the normal course of business of the trust, and that Arvind was paying the legal costs of itself, Mr Carbone and Bright Image from the trust funds.
The primary judge refused an order for the appointment of a receiver and manager, although she made injunctions to address the concerns raised by Mr Lamers. She also made an order that Arvind 'be permitted to pay its legal costs pursuant to the indemnity in clause 68 of the unit trust deed'. Unfortunately the reasons for decision do not address why this particular order was made. However, it is clear, as lawyers for Mr Lamers submitted on appeal, that the order was interlocutory and allowed payments by the trustee 'on account' subject to final orders made in the proceedings. That this is so is apparent from [17] of the reasons given on 13 December 2019:
[17] [Arvind, Carbone and Bright Image] referred me to authorities, which support their submission that it is not a breach of trust to resort to trust assets to fund the defence of litigation brought against the trustee. [Arvind, Carbone and Bright Image] submit that, before the outcome of these proceedings is known, it is not possible for me to make a finding that [Arvind] has committed a breach of trust by paying the legal costs from the [unit trust bank account]. (emphasis added)
The second argument made in support of this ground of appeal is one already dealt with above. It was incorrectly asserted as a matter of fact that the removal of Arvind as trustee was on grounds not pleaded before September 2020. As already discussed, there is nothing in this submission.
The third argument was that the primary judge erred in finding that the proceeding brought by Mr Lamers 'did not concern the proper construction of the trust deed or the nature of the trustee's duties under the trust deed'.[75]
[75] Paragraph 5(3) of the notice of appeal and paragraph 45 of the appellant's written outline of argument.
There is a substantial body of case law as to when, at common law, a trustee is entitled to recover costs of litigation from the trust fund. One broad distinction discussed in the case law is between litigation which is brought to establish the extent of a trustee's powers or obligations under a trust deed, and litigation which is hostile or adversarial. Litigation which is brought so that the court can give directions to a trustee falls into the former category: 'in exercising its jurisdiction to give directions on a trustee's application the court is essentially engaged solely in determining what ought to be done in the best interests of the trust estate and not in determining the rights of adversarial parties'.[76] Authorities making this distinction were discussed in Cardaci, to which reference was made by the primary judge. Many non‑adversarial cases involving trustees concern the proper construction of the trust deed and the nature of the trustee's duties and powers under it. No doubt that accounts for reference to those matters at [108] of the costs reasons below.
[76] Marley v Mutual Security Merchant Bank and Trust Co Ltd [1991] 3 All ER 198, 201, cited in Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66, 102, [104].
The tangential argument advanced on behalf of Arvind in this appeal appears to misunderstand that reference. It is not to the point that there were aspects of the current litigation which did concern the proper construction of the unit trust deed. The real point recognised by the primary judge was that this litigation was hostile, adversarial litigation, in which Mr Lamers proved that Arvind breached its duties as trustee such that it should be removed. As the primary judge found, Arvind acted unreasonably in resisting that removal. These were very relevant considerations supporting the order which the primary judge made. There is nothing in this argument.
The fourth argument advanced in relation to this ground of appeal is that the primary judge failed to provide sufficient reasons for the factual findings in [109] ‑ [111] of her costs reasons. This point was not arguable. In these paragraphs the judge was not making findings, but referring to findings which she had made in the primary judgment. There was no appeal, and could not have been any appeal, from that judgment on the grounds that the primary judge failed to give reasons for her findings.
The fifth and last argument in support of this ground of appeal is that in refusing indemnity from the trust assets, the primary judge failed to have regard to the fact that many of the claims made by Mr Lamers in the proceeding failed, or as the appellant puts it, were successfully defended by the appellant.[77]
[77]Paragraph 5(b) of the Notice of Appeal.
This is a separate point for consideration which goes beyond those matters mentioned in [108] ‑ [110] of the costs judgment below. From her reasons, it appears that the primary judge did not consider that the proceedings run by Mr Lamers against Arvind were more than proceedings for removal of Arvind as the trustee of the unit trust. As discussed in relation to grounds 1 and 2 of this costs appeal, the proceedings did involve substantially more than that. Mr Lamers' other claims in this litigation were for monetary amounts which would have substantially depleted, if not overtopped, the assets of the unit trust, and for a winding‑up of the unit trust. The trustee successfully defended those other claims, preserving the property of the unit trust. In this respect the appellant has demonstrated appellable error: the trial judge has erred in her consideration of the factual matters relevant to the question of whether Arvind was entitled to an indemnity from the trust fund. This court must therefore consider the question whether Arvind should be deprived of the right to an indemnity in respect of its costs of the litigation.
Section 71 of the Trustees Act 1962 (WA) provides that, 'A trustee may reimburse himself for or pay or discharge out of the trust property all expenses reasonably incurred in or about the execution of the trusts or powers'. As at common law,[78] this general power applies notwithstanding the expense in question is legal costs incurred by the trustee defending themselves in proceedings brought against the trust.[79] Further, the common law was that the trustee had a right to reimbursement from the trust fund; that is, the trustee was entitled to take costs from the trust fund without an order of the court. A court might decide that the right had been lost by the trustee in an appropriate case.[80]
[78] Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth [2019] HCA 20; (2019) 268 CLR 524, [29], cited in Cardaci (above), [4].
[79] Tucker, Le Poidevin and Brightwell, Lewin on Trusts, 20^th ed, Sweet & Maxwell, [48-004] citing Armitage v Nurse [1998] Ch 241, 262 ‑ 263, amongst other authorities.
[80] Perpetual Trustee Co Ltd v Attorney-General (NSW) [2018] NSWSC 1456, [126].
In my view, both at common law, and pursuant to the terms of O 66 r 9(2), it would be open to the court to make an order depriving a trustee of a right to indemnity from the trust fund in respect of all the costs of litigation, even where the trustee had enjoyed some mixed success in the litigation. Here, however, the trustee succeeded in defending a substantial and important part of the litigation. Those costs could not be said to have been incurred unreasonably or for the trustee's own benefit, rather than the benefit of the trust fund, to use the words of O 66 r 9(2). Nor can I see any reason why a court would otherwise deprive the trustee of its right to these costs.
I have considered whether or not the breaches of trust which Mr Lamers did establish, and the matters referred to in [111] of the costs reasons, were such that this court should deny Arvind recourse to the trust fund in relation to all its costs of the litigation below. However, I cannot see that these matters outweigh considerations relating to Mr Lamers' independent conduct in making a large number of complex claims which he failed to prove, and in some cases did not even attempt to prove.[81] Here, because the trustee succeeded in defending a considerable proportion of the litigation, and so succeeded in defending the trust fund, I would allow Arvind indemnity from the trust assets in relation to 50% of its own costs of the litigation.
[81]See for example [44] of the costs decision below.
For clarity, the indemnity that I would grant to Arvind relates only to Arvind's costs, not any costs of Mr Carbone or Bright Image; I note that for much of the time the litigation was on foot the same lawyers acted for Arvind as acted for Mr Carbone and Bright Image.

Result of the Costs Appeal

Arvind should be granted leave to appeal. It has succeeded on two of the points it raised on the costs appeal. However, it raised many points on the appeal and, as noted, several of the points raised on appeal were not reasonably arguable. In these circumstances, subject to any submissions by the parties at judgment delivery, I would allow that Mr Lamers should pay 30% of the costs of Arvind on this appeal.

Cross-appeal by Carbone and Bright Image

As noted above, Mr Carbone and Bright Image made a cross‑appeal in which they relied upon the same asserted errors as Arvind did on the costs appeal. The issues in the cross‑appeal must be resolved in the same way as the issues on the main appeal brought by Arvind. That means that the cross-appeal succeeds in part.
Subject to any submissions by the parties at judgment delivery, I would not make any costs order on this cross‑appeal. It is true that Mr Carbone did have a separate interest in the costs orders made below. He could have been an appellant in appeal CACV 76 of 2023. While Mr Carbone should not be penalised for mistakenly joining in the appeal as a cross‑appellant rather than an appellant, I cannot see that there could be any separate costs in respect of the issues on which he was successful on the cross‑appeal: he raised nothing separate to that raised by Arvind on the appeal proper.
I struggle to see that Bright Image had any legitimate interest either in the appeal or this cross‑appeal. No costs orders had been made against it, and it advanced no separate arguments to those raised by Arvind on the appeal proper.

Lamers' Cross-appeal as to Costs

Mr Lamers cross-appealed in respect of order 1 of the costs orders below. He contended that Bright Image should also have been liable to pay the costs under this order. That submission was made on the costs hearing and the primary judge rejected it. She said:
[63]       In this case, Mr Carbone was a party to the proceedings in his own name. At trial, Mr Carbone accepted that he made the decisions about the actions taken by [Bright Image] and effectively controlled it. While Mr Carbone was not the sole director of Arvind, all the matters which were found to be breaches of the trust involved conduct of Mr Carbone as the controlling mind of Arvind.
[64]       I do not accept [Carbone and Bright Image's] submission that this is a case about piercing the corporate veil. In my view, the issue is whether these defendants are the ‘effective litigants’ or ‘real parties’.
[65]       I accept [Lamers'] submission that the issue in these proceedings was whether Arvind should be removed as trustee of the APT Unit Trust due to Mr Carbone's conduct. I also accept that Mr Carbone caused [Arvind and Bright Image] to defend these proceedings, including to resist the removal of [Arvind] as trustee of the trust. While I accept that, in these circumstances, Mr Carbone was the effective defendant to [Lamers'] claim and should, accordingly, be liable for [Lamers'] costs of the proceedings, for the following reasons, I do not consider this should extend to [Bright Image]. First, [Bright Image] is a beneficiary of the APT Unit Trust and was joined to the proceedings in that capacity. Second, the conduct relied upon by [Lamers] in the proceedings to justify the removal of Arvind as trustee was conduct of Mr Carbone as the controlling mind of Arvind. There was no suggestion that any of this conduct was conduct of [Bright Image]. Third, I do not accept [Bright Image] was the 'effective litigant' or 'real party' to the proceedings.
[66]       On this basis, I consider the appropriate costs order is that Arvind and Mr Carbone should pay 75% of [Lamers’] costs of the proceedings jointly and severally. (footnotes omitted).

The appeal focused on the three enumerated reasons given at the second half of [65]. Bright Image was joined to the litigation about a year after the litigation commenced, and it was not for another year that any relief was sought against it by Mr Lamers' pleading. The primary judge found that there was no conduct on the part of Bright Image which justified removal of Arvind. There was no appeal from that finding. There was no finding of any other wrongful conduct on the part of Bright Image. It is difficult to see that Mr Lamers had any real claim against Bright Image and perhaps that is what the primary judge meant by the second and third of her remarks at the end of [65].[82]
[82] It was suggested in argument that the primary judge's reference to the concept of a real and effective litigant came from the case of Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178. Knight was a case dealing with costs against a stranger to the litigation and not applicable here; Bright Image was a party.
Bright Image was a proper party to the proceedings and was properly joined by Mr Lamers; it ought to have been bound by the result of the litigation. However, I find it very difficult to see that Mr Lamers had any further basis for claim against Bright Image. In the year between its being joined as a party to the litigation and relief being sought against it, Bright Image could simply have filed a document relying upon the defence of Arvind or Mr Carbone, or indicating that it would abide the result of the litigation. It did not. It played an active role in defending the litigation. To do so was to risk a costs order being made against it.
Nonetheless, in all the circumstances of this litigation I would not make a costs order against Bright Image. From 2019 Mr Lamers made claims against Bright Image, so that it had no option but to actively defend them. All the claims against Bright Image failed. The primary judge made costs orders which were generous to Mr Lamers on these Barnes v Addy claims, and orders against Bright Image on the counterclaim. Bright Image raised nothing by way of its defence which would have caused Mr Lamers extra cost; that is, it defended on the same grounds as Mr Carbone. In all these circumstances, my view is that the first ground of cross‑appeal should fail.
The second ground of cross‑appeal has been dealt with above. It was that having regard to [45] of the costs reasons, and Bright Image's success on its notice of contention in appeal CACV 22 of 2023, Mr Lamers should have all his costs, or 90% of his costs, of the proceedings below. For the reasons given above, that part of Mr Lamers' cross‑appeal should fail.
The cross‑appeal brought by Mr Lamers has failed in its entirety and I can see no reason why costs in relation to it ought not follow the event.
Leave to cross‑appeal should be refused.

Result

On the costs appeal and cross‑appeals I would make the following orders:
1.Leave is granted to Arvind to appeal the costs decision of 26 June 2023.
2.Leave is refused to Saro Vinzi Carbone, Bright Image Dental Pty Ltd and Bernard Henricus Lamers to cross‑appeal the costs decision of 26 June 2023.
3.Costs order number 1 made on 26 June 2023 is set aside and instead it is ordered that, subject to orders 2 and 3 made on 26 June 2023, Arvind Pty Ltd and Saro Vinzi Carbone pay 50% of the costs of Bernard Henricus Lamers in the proceedings, including reserved costs, to be assessed if not agreed.
4.Costs order number 7 made on 26 June 2023 is set aside and instead it is ordered that Arvind is entitled to an indemnity from the assets of the APT Unit Trust in an amount equivalent to 50% of its costs of the proceedings.
5.(Subject to any submissions by the parties at judgment delivery) Bernard Henricus Lamers is to pay Arvind 30% of its costs on this appeal, to be assessed if not agreed.
6.(Subject to any submissions by the parties at judgment delivery) no order is made as to the costs of the cross‑appeal brought by Saro Vinzi Carbone and Bright Image Dental Pty Ltd.
7.The cross‑appeal brought by Bernard Henricus Lamers is dismissed (and subject to any submissions by the parties at judgment delivery, is dismissed) with costs, to be assessed if not agreed.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
TCG
Associate to the Honourable President Buss
7 FEBRUARY 2025