Gee Dee Nominees Pty Ltd v Tower Hill One Investments Pty Ltd (No 2)
[2015] VSC 140
•24 April 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
S CI 2013 03307
IN THE MATTER OF TOWER HILL ONE INVESTMENTS UNIT TRUST AND TOWER HILL THREE INVESTMENTS UNIT TRUST AND ELCHO NORTH INVESTMENTS UNIT TRUST
BETWEEN
| GEE DEE NOMINEES PTY LTD (ACN 006 233 870) AS TRUSTEE OF THE G & D PETSINIS FAMILY TRUST AND GEORGE PETSINIS | Plaintiffs |
| And | |
| TOWER HILL ONE INVESTMENTS PTY LTD (ACN 127 533 975) AS TRUSTEE OF THE TOWER HILL ONE INVESTMENTS UNIT TRUST & ORS (According to the Schedule attached) | Defendants |
| And | |
| BETWEEN | |
| S CI 2013 3938 | |
| TOWER HILL ONE INVESTMENTS PTY LTD (ACN 127 533 975) AS TRUSTEE OF THE TOWER HILL ONE INVESTMENTS UNIT TRUST & ORS (According to the Schedule attached) | Plaintiffs |
| And | |
| GEE DEE NOMINEES PTY LTD (ACN 006 233 870) AS TRUSTEE OF THE G & D PETSINIS FAMILY TRUST | Defendant |
---
JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 20 April 2015 |
DATE OF JUDGMENT: | 24 April 2015 |
CASE MAY BE CITED AS: | Gee Dee Nominees Pty Ltd & Ors v Tower Hill One Investments Pty Ltd & Ors (No 2) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 140 |
---
COSTS — Plaintiffs successful as against defendant Trustees — Whether defendant Trustees liable for costs — Whether trustees entitled to indemnification out of trust assets in respect of the plaintiffs’ costs and their costs.
COSTS — Whether non-trustee defendants, required to be joined were the driving force behind the proceedings and are liable for the plaintiffs’ costs — Whether the plaintiffs should pay the non-trustee defendants’ costs.
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs in proceeding S CI 2013 03307 and the Defendants in proceeding S CI 2013 3938 | Mr C E Shaw | Norton Gledhill |
| For the First to Third Defendants in proceeding S CI 2013 03307 and the Plaintiffs in proceeding S CI 2013 3938 | Mr P J Booth | Obst Legal |
| For the Fourth to Seventh Defendants in proceeding S CI 2013 03307 | Mr M Rivette | Davis Lawyers |
HIS HONOUR:
On 20 February 2015 I published my reasons[1] for holding that the Plaintiffs were not obliged to make payment pursuant to calls made by the Defendant Trustees. The Defendant Trustees were obliged to sell the Trust Land and only expenditure directed to this end (which I called Permitted Expenditure) could properly be the subject of any call. As the call extended beyond Permitted Expenditure, and for other reasons, I held that the Plaintiffs were not obliged to meet the call. The other Unitholders however paid the calls.
[1]Gee Dee Nominees Pty Ltd & Ors v Tower Hill One Investments Pty Ltd & Ors [2015] VSC 39 (‘Judgment’). I will assume familiarity with the issues in the case and the Judgment. Defined terms bear the same meaning.
In addition to resisting a claim by the Trustees, the Plaintiffs, unhappy with previous attempts to sell the Trust Land by the Trustees (‘the Attempted Sale’) and for numerous other reasons, sought the removal of the Trustees and the appointment of new trustees, essentially for the purposes of conducting a proper independent and arm’s length sale of the Trust Land as required. On the sixth day of the trial I appointed Wayne Edward Benton (‘the Receiver’) as receiver of the Trust Land and gave the Receiver all of the powers needed to sell the Trust Land. Although the order was made by consent, it was largely at the prompting of the Court. The appointment of a receiver was not part of the relief sought by the Plaintiffs.
Following a marketing and advertising campaign, the Trust Land has been sold for an amount far in excess of amounts previously offered and the subject of the Attempted Sale. Paradoxically, it is not without relevance to note that the conduct of the Trustees, and the payment of the calls by other Unitholders, has to some extent at the very least caused the Trust Land to increase in value. This begs the question of how the Court should deal with conduct that in part causes a gain!
This judgment deals with costs. All parties have filed written submissions dealing with costs. These were supplemented by oral submissions on 20 April 2015. I do not propose to either set out or deal with all of the arguments. It is not necessary.
Clearly the Plaintiffs have effectively succeeded in their claim and are entitled to their costs. No adequate reason has been advanced as to why the Plaintiffs should not have their costs. The suggested reasons are dealt with below.
The primary submission of the Plaintiffs is that the Defendants (other than the Trustees) should pay their costs. They were, it was submitted, the driving force behind the litigation which was primarily for their benefit, were appropriately joined, and ought to bear the costs. Alternatively, the Plaintiffs submitted that the Trustees should pay their costs and be indemnified out of the assets of the respective Trusts. The Trustees submitted that the Plaintiffs should bear their own costs and the other Defendants submitted that the Plaintiffs should in fact pay their costs as the attack was on the conduct of the Trustees and no allegations or orders were sought against them.
In my opinion the Trustees should pay the Plaintiffs’ costs. They defended the proceeding and effectively, and to a sufficient extent, lost.
It is correct, as submitted by the Trustees, that the Plaintiffs did not seek the appointment of a receiver, and that the application for removal of the Trustees was not determined and in any event involved facts and matters well beyond the Attempted Sale. It is also correct, as submitted, that the Trustees consented to the appointment of the Receiver and such consent was entirely appropriate and consistent with the obligations of a litigant under the Civil Procedure Act 2010 (Vic). Finally it is true, as submitted, that there has been no loss to any beneficiary.
Although there is some substance in these submissions there are two additional factors that are relevant. First, the Plaintiffs succeeded in another key issue in the case, namely the suggested obligation to meet the calls. This was effectively the only remaining issue and the Plaintiffs were successful. Secondly, despite the form of relief (the appointment of a receiver at the suggestion of the Court) it is clear that the Plaintiffs were seeking the appointment of an independent party to conduct an arm’s length sale given the acrimonious relationship between the parties. In whatever form, I think this was not only desirable but inevitable. This result, and defeating the improper calls made by the Trustees, as I have found, would not have happened if the Plaintiffs had not commenced this proceeding. The Plaintiffs are entitled to and should have their costs.
The remaining two questions in relation to the Plaintiffs’ costs are whether the Trustees should be indemnified out of the Trust assets (which Gee Dee would in effect, to the extent of 20%, contribute to) and whether in addition to any such order (or in substitution) the remaining Defendants should pay the Plaintiffs’ costs, given their obvious participation in the litigation by standing behind and directing the Trustees.
In my opinion and in the peculiar circumstances of this case, the remaining Defendants should not be ordered to pay the Plaintiffs’ costs. If the Trustees are entitled to indemnity out of the trust assets, which in my opinion they are, there is no warrant for requiring the non-trustee defendants to pay these costs. I accept that their liability does not depend on whether indemnification is ordered. I will revert back to this issue after dealing with the indemnification issue.
Accordingly, the Plaintiffs should recover their costs (on the standard basis) from the Trustees and the Trustees should be indemnified out of the Trust assets.
Again, in light of the peculiar circumstances of this case, I propose to permit the Trustees to recover their costs and expenses out of the Trust assets. They were entitled to make a more limited call and were in effect at least partly responsible for bringing about a position where the Trust Land was sold for considerably more than the Attempted Sale. Although the Trustees may well have obtained judicial advice at an earlier stage, they did not do so, and on balance, and notwithstanding such failure should be indemnified both for their costs and the costs of the Plaintiffs.
The Plaintiffs submitted with some force that indemnity should be refused because the Trustees did not act reasonably and with sufficient care and diligence. The Plaintiffs pointed to a number of factors —
·The Trustees should have sought judicial advice at the first opportunity.
·The other joint venturers in effect used the Trustees to ventilate their dispute with the Plaintiffs. The Trustees should not have permitted this.
·The Trustees did not obtain legal advice regarding their position in ‘the battle of the joint venturers’.
·The Trustees should have in the circumstances conceded that because there was friction and hostility their position was untenable.
·The Trustees proceeding was not appropriate and revealed that they were in effect doing the bidding of the Unitholders other than Gee Dee and not seriously trying to resolve Trustee related issues.
The Trustees contended that they are entitled to a contractual and statutory right of indemnity, and that the reasonableness or otherwise of their actions, are not to the point. Even if they were mistaken or misguided, this was, it was submitted, not a sufficient ground to deny indemnity. It was submitted further, that in any event they had acted reasonably. They submitted that the failure to obtain judicial advice — which they contended was problematic and impractical in this case — was not a bar to indemnity. Further, they submitted that as Trustees and in the interests of all Unitholders they were desirous of continuing with the project, despite the intense acrimony and disagreement between the joint venturers or Unitholders. Despite the friction and hostility they resolved to continue, to the ultimate substantial benefit of all parties. Finally they contended that they were entitled to defend the substantial and far reaching allegations made against them and also continue to endeavour to resolve any deadlock and at the same time advance the project. As no findings were made against them and as the appointment of a Receiver was not part of the original relief claimed by the Plaintiffs, it was submitted that there was no basis to conclude that they had acted unreasonably or with insufficient care and diligence.
The issue is finely balanced and of course minds may differ. However, I am of the opinion that in all of the circumstances the Trustees did not act sufficiently unreasonably or with insufficient care and diligence so as to be denied indemnification.
The effective (albeit limited but sufficient) success of the Plaintiffs does not mean that the Trustees acted unreasonably or with insufficient care and diligence. It must be recalled that although they were in the middle of a very acrimonious dispute between the joint venturers, this does not of itself compel a resignation where much of the criticism against them, fuelled by the falling out of the parties and consequent mistrust, was disputed and remain unresolved. Trustees often have unitholders who do not agree. This does not mean every time there is a dispute they should resign. The Trustees wanted to continue, had the support of the majority of Unitholders, had substantial knowledge of the project, and disputed much of the criticism made by the Plaintiffs. They did not act unreasonably in refusing to resign in these circumstances, particularly given that they, together with the other unitholders, were continually negotiating with the Plaintiffs in order to endeavour to resolve the matter. They were entitled to take the view that in a commercial dispute of this nature, so long as they were negotiating and trying to resolve the dispute, they should remain on rather than hand over to an expensive independent trustee with no knowledge of the project and objected to by most of the Unitholders. The Trustees did explore all possibilities. They were dealing with, it may fairly be said, a difficult joint venture party and presumably in frustration it is not surprising that they commenced their own unnecessary and misconceived proceeding.
I do not propose to make any order for costs in favour of or against the non-trustee Defendants. They will each have to bear their own costs. There is no reason why they should pay the Plaintiffs’ costs. The Trustees were entitled to run their own case. They were entitled to defend their position in the circumstances, and as I have found, did not act unreasonably in doing so. The fact that the position of the Trustees was supported by all parties other than the Plaintiffs does not make them liable for the costs. They paid their calls and were entitled to support the Trustee against what they perceived (not without some justification) was a very difficult joint venturer. Their position although perhaps a little misguided was not unreasonable and was in any event partly vindicated. In the exercise of my discretion in relation to costs I am not prepared to hold them liable.
I do not propose to make any order for costs in the Trustee proceeding. In any event most matters were dealt with in the Gee Dee proceeding so the costs should be minimal. I do not consider that the Trustees are entitled to indemnity out of the Trust assets in respect of their costs of the Trustee proceeding.
Finally, I should say that in determining the issue of costs, and in the exercise of my discretion I have taken into account all matters including the submissions of the parties, the conduct of the trial and interlocutory stages and the events that have occurred after the trial. The dispute was undignified and at times vindictive and personal. There was no moral high ground and the matter should have been resolved without recourse to the court.
0
1
0