His Eminence Metropolitan Petar, Diocesan Bishop of The Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorporated (No 2)

[2007] NSWCA 142

New South Wales

Court of Appeal

CITATION:	His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142
HEARING DATE(S):	25 July 2006
JUDGMENT DATE:	19 June 2007
JUDGMENT OF:	Beazley JA at 1; Giles JA at 1; Hodgson JA at 1
DECISION:	1. The costs of the hearing at first instance are to be the plaintiffs’ costs in the proceedings; 2. The first respondent is to pay the appellants’ costs of the appeal; 3. The respondent is to have a certificate under the Suitors' Fund Act 1951 (NSW) if so entitled; 4. The question whether the Association should be entitled to have recourse to any part of the Schedule A property and the non-Schedule A property to pay the costs as ordered is referred to the trial judge to be determined at the conclusion of the proceedings.
CATCHWORDS:	COSTS – costs of appeal from interlocutory application – whether costs of appeal should be plaintiff’s ‘costs in the cause’ - COSTS – costs of successful appellant – effect on costs of appellant withdrawing proposed paragraph from Notice of Appeal and proposing alternate orders – whether appellant should only have 90 per cent of their costs - COSTS – Rule 42.7 Uniform Civil Procedure Rules 2005 (NSW) – costs of hearing at first instance – interlocutory injunction – whether on application for interlocutory injunction costs should be ‘costs in the cause’ - COSTS – Suitors’ Fund Act 1951 (NSW) – application for a Suitors’ Fund Certificate – rationale of legislation that mistake of court system not be visited on one party – whether conduct of respondent such that it should not be entitled to a Certificate - COSTS - Suitors’ Fund Act 1951 (NSW) – whether appellant’s costs should be limited to maximum amount payable under a Suitors’ Fund Certificate - COSTS – whether costs of appeal should not become payable until conclusion of proceedings
LEGISLATION CITED:	Suitors’ Fund Act 1951 (NSW) s 6(1), 6(2A) Supreme Court Act 1970 (NSW) s 101(2)(e) Uniform Civil Procedure Rules 2005 (NSW) rr 42.1, 42.7, 42.25
CASES CITED:	Ausino International Pty Limited v Apex Sports Pty Limited [2006] NSWSC 1119 Boscolo v TCN Channel Nine Pty Limited (No 2) (New South Wales Supreme Court, Eq Div, 28 April 1994, unreported) Devereaux Holdings Pty Limited v Pelsart Resources NL (No 2) (Supreme Court of New South Wales Eq Div, 24 July 1985, unreported) Glen Eight v Home Building [2005] NSWSC 907 Ingersoll-Rand (Aust) Ltd v Industrial Rollformers Pty Ltd [2000] NSWSC 178 JT Stratford Ltd v Lindley [1969] 1 WLR 1547 R v Hookham (1993) 32 NSWLR 345 Russ Australia v Benny [2006] NSWSC 1118 Scholten v Mobilesoft Pty Ltd [1999] NSWSC 234 Wickstead v Browne (1992) 30 NSWLR 1
PARTIES:	His Eminence, Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand (First Appellant) Very Reverend Father Mitko Mitrev (Second Appellant) Macedonian Orthodox Community Church St Petka Inc (First Respondent) Attorney-General for the State of New South Wales (Second Respondent)
FILE NUMBER(S):	CA 40313/06
COUNSEL:	TGR Parker SC & R E Steele (Appellants) GO Blake SC (First Respondent) C Tassone (Solicitor) (Second Respondent)
SOLICITORS:	Sachs Gerace Lawyers (Appellants) McConnell Jaffray (First Respondent) Crown Solicitor (Second Respondent)
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 3369 of 1997
LOWER COURT JUDICIAL OFFICER:	Hamilton J
LOWER COURT DATE OF DECISION:	27 April 2006
LOWER COURT MEDIUM NEUTRAL CITATION:	Metropolitan Petar v Mitreski [2006] NSWSC 336

- 19 -

CA 40313/06

BEAZLEY JA
GILES JA
HODGSON JA

19 June 2007

HIS EMINENCE METROPOLITAN PETAR, DIOCESAN BISHOP OF THE MACEDONIAN ORTHODOX CHURCH OF AUSTRALIA AND NEW ZEALAND & ANOR v THE MACEDONIAN ORTHODOX COMMUNITY CHURCH ST PETKA INCORPORATED & ANOR (No 2)

Judgment

1 THE COURT: The Court made orders on 6 October 2006, in which it granted leave to appeal and allowed the appeal from orders made by Hamilton J on 27 April 2006. The effect of this Court’s Order was to extend the injunction granted by his Honour, so as to restrain the first respondent from paying costs out of its property other than as specified in the Order. The question of costs was reserved to allow the parties to formulate the orders they sought as to costs and to provide written submissions in support of their respective claims.

2 In the principal judgment, the appellants were referred to as Metropolitan Petar and the first respondent as the Association. We will maintain that terminology. Likewise, we will maintain the terminology of the Schedule A and non-Schedule A assets, consistently with the terminology of that judgment.

3 Metropolitan Petar contends that as they succeeded on the appeal, costs should follow the event and they should have an order that the Association pay their costs of the appeal. They also contend that the costs of the hearing before Hamilton J should be their costs in the cause.

4 The Association accepts that Metropolitan Petar is entitled to an order for costs. However, it seeks a series of costs orders both in respect of the hearing at first instance before Hamilton J and of the appeal other than an order that costs follow the event. The orders sought by the Association are:

(1) that 45 per cent of the appellants’ costs of the appeal be the costs of the plaintiffs in the proceedings on the issues in paragraphs 29F, 29O, 29S, 29U and 30 of the Statement of Claim (version 7) limited to one-half of the amount payable under the indemnity certificate in respect of the appeal granted pursuant to s 6(1) of the Suitors’ Fund Act 1951 (NSW);

(2) that 45 per cent of the appellants’ costs of the appeal to be the costs of the plaintiffs in the proceedings on the issues in paragraphs 19B and 19C of the Statement of Claim (version 7) limited to one-half of the amount payable under the indemnity certificate in respect of the appeal granted pursuant to s 6(1) of the Suitors’ Fund Act ;

(3) that one-half of the costs of the Notice of Motion filed on 14 March 2005 be costs in the proceedings on the issues in paragraphs 29F, 29O, 29S, 29U and 30 of the Statement of Claim (version 7):

(4) that one-half of the costs of the Notice of Motion filed on 14 March 2005 be costs in the proceedings on the issues in paragraphs 19B and 19C of the Statement (version 7);

(5) that the first respondent be granted an indemnity certificate in respect of the appeal pursuant to s 6(1) of the Suitors’ Fund Act ;

(6) that 10 per cent of the first respondent’s costs of the appeal be costs of the sixth defendant in the proceedings on the issues in paragraphs 29F, 29O, 29S, 29U and 30 of the Statement of Claim (version 7).

The reference to paras 29F, 29O, 29S, 29U and 30 of the Statement of Claim (Version 7) in the orders sought in (1), (3) and (6) above is a reference to the non-Schedule A assets. The reference to paras 19B and 19C in (2) and (4) is a reference to the Schedule A assets.

5 The Association also submits that any costs payable by it should not become payable until the conclusion of the Main Proceedings.

6 It is necessary to deal with each of the orders sought by the Association in turn and convenient first to deal with Orders 3 and 4, which relate to costs at first instance. Before doing so, a brief reminder of the question that arose on the appeal is appropriate.

7 The interlocutory application was an injunction to restrain the use of property for the payment of legal fees. The Schedule A property has already been determined to be held on trust and there remains an unresolved dispute between the parties as to whether the non-Schedule A property in the ownership of the first respondent is also held on certain claimed trusts. There has been an application for Judicial Advice (the Judicial Advice Proceedings) in relation to the Schedule A property. At the time that judgment was given in this matter, the Judicial Advice had not been given. That advice was subsequently given by Palmer J on 26 November 2006.

8 On the appeal, the Court concluded that the acceptance of the evidence of Mr McConnell, solicitor for the Association, was central to his Honour’s determination of the balance of convenience. However, the Court was of the opinion that his Honour should have treated the evidence of Mr McConnell as being in dispute and thus determined the application for the injunction “by having closer regard to other objective considerations”: see judgment [51]-[52].

9 The Court also determined that his Honour erred in respect of his approach to the injunction in respect of the non-Schedule A property. Those errors are identified at [58]-[61] in the principal judgment. In brief, those errors were that his Honour had failed adequately to assess the question of the recoverability of costs should it be determined that the non-Schedule A property was trust property and that his Honour applied an incorrect principle when determining that the case should be approached on the basis of the same or similar principles to those that applied in relation to the grant of a ‘Mareva injunction’. In the re-exercise of discretion, the Court determined that, with some modification, the interlocutory injunction as sought by Metropolitan Petar should be made. It followed that the appeal was allowed and certain different orders to those made by Hamilton J were made by this Court.

10 In respect of the injunction insofar as it related to the Schedule A property, the Court considered that, contrary to Mr McConnell’s understanding, Metropolitan Petar had requested undertakings from the Association’s solicitors that they would not deal with the Schedule A property otherwise than for the purposes of the Macedonian Orthodox Church. Mr McConnell had, in his affidavit evidence, stated that the Association had continued to incur costs because it was not aware that any objection would be taken to that course: see judgment at [51]. This Court found that Mr McConnell had misunderstood the correspondence that had been forwarded to him on 4 and 15 April 2003.

11 It is apparent that after the receipt of correspondence in November 2003, Mr McConnell appropriately gave his clients advice to obtain Judicial Advice when he realised that it was being alleged that the Association was in breach of trust by using the Schedule A property for the payment of costs. If it were not for this misunderstanding, the steps subsequently taken by the Association in seeking Judicial Advice would, most likely, have been taken earlier and the need for the injunction proceedings relating to that property would have been unnecessary. However, even at the appeal stage the Association continued to assert that Mr McConnell’s understanding was correct.

12 The Court determined that an injunction should be granted to restrain the use of the non-Schedule A property to fund legal costs. The Court’s reasoning in this regard is to be found in the principal judgment at [78]-[86]. The Court’s essential reason for the grant of the injunction is to be found at [85], namely, that there is a prima facie case that the non-Schedule A property is trust property and the Court should be attentive to the protection of trust property. The Court considered that if the non-Schedule A property was used up in payment of costs and if, on the final hearing of the matter Metropolitan Petar was successful in establishing that the non-Schedule A property was trust property, there was no real prospect of being able to recover the property or the value of the property from the first respondent.

13 The Court made orders relating to the Schedule A property, insofar as was necessary to protect that property from 4 April 2003. At this point, we should refer to one matter. In the Judicial Advice given by Palmer J on 23 November 2006, his Honour observed that this Court’s judgment made two factual errors. The first was that it had omitted from its calculation of the value of the Schedule A property the Arncliffe childcare centre and secondly, that it had stated that the amount of the first Association’s liability to its bank was $750,000, whereas the correct amount was $655,000.

14 As to the first, it is apparent from [22] of this Court’s judgment that the Arncliffe childcare centre was omitted. That was an omission. There was evidence to that effect and the Court was aware that that property was Schedule A property. There was significant discussion of the issue on the hearing of the appeal. The omission appears to be due to a clerical error during the course of consideration of the Court’s draft judgment. However, the omission to make reference to that in the judgment as delivered does not affect the reasoning of the Court in relation to the injunction insofar as it related to Schedule A property. Likewise, it did not affect the Court’s consideration of the use of the non-Schedule A property for the payment of costs, for the simple reason that the Court’s consideration in respect of the Schedule A property related to its status as trust property and that if it wished to use any of that property for the purposes of costs, it should have first sought Judicial Advice: see judgment at [75].

15 The second error relates to the liability to the bank which the Court stated was $750,000. It appears from the information provided to Palmer J that there has been a reduction of the indebtedness to $655,000. At the hearing of the appeal, the Court was informed that the amount of the loan was in the order of $750,000. Nonetheless, as is apparent from our judgment, especially at [80]-[81], the lesser indebtedness would not have affected this Court’s reasoning process. As already indicated, the Court considered that once it had been determined that the Schedule A property was trust property, the Association should have acted promptly to obtain Judicial Advice if it wished to use that property for legal costs. It did not and does not have that facility available to it in relation to the non-Schedule A property, the status of which presently remains undetermined. However, and again as already stated above, the Court’s concern in respect of that property was to ensure that trust property was protected.

Orders 3 and 4: costs of hearing at first instance

Principles governing costs of interlocutory proceedings

16 The general rule as to costs is that costs follow the event unless it appears to the court that some other order ought to be made as to the whole or part of the costs: see r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR). Rule 42.7 deals with interlocutory applications. It provides that unless the court otherwise orders:

“The costs of any application or other step in any proceedings … are to be paid and otherwise dealt with in the same way as the general costs of the proceedings.”

17 The Association contends that in the case of an application for an interlocutory injunction, the Court will exercise its discretion and order that costs be ‘costs in the cause’. The Association described this as the ‘usual rule’ as to costs on such an application.

18 An order that the costs be ‘costs in the cause’ or ‘costs in the proceedings’ (the terms are interchangeable) means that the costs of the interlocutory proceedings correspond with the final order for costs in the action. Thus if, in the final proceedings, the plaintiff is successful and an order for costs of the final hearing is made in the plaintiff’s favour, the plaintiff gets the costs of the interlocutory proceedings as part of the costs of the action against the defendant, regardless of who was successful on the interlocutory application: see J T Stratford Ltd v Lindley [1969] 1 WLR 1547 at 1553 per Lord Denning MR.

19 In Stratford v Lindley, Lord Denning observed that the House of Lords had made an order on an interlocutory application that costs be “costs in the cause”. His Lordship observed that the case was “finely balanced” and that, on final hearing, a slight turn in the evidence might have made all the difference to the outcome. He considered (at 1554) that in those circumstances, the House “thought it right to make the costs of the interlocutory proceedings depend on who won or lost in the main action”. In that case, however, the matter settled prior to trial, and the question for the Court of Appeal’s consideration was what order should be made in respect of the interlocutory application when the matter had not proceeded to finality. That matter is not in issue here. However, his Lordship’s remarks indicate a circumstance in which it is appropriate to make an order of the kind which is sought by the Association in respect of the costs at first instance.

20 In Boscolo v TCN Channel Nine Pty Limited (No 2) (New South Wales Supreme Court, Eq Div, 28 April 1994, unreported) Young J (as his Honour then was) dealt with costs in relation to an application for an interlocutory injunction. The application had been commenced ex parte but during the course of the ex parte hearing, legal representatives for the defendants arrived at Court and sought to be heard. His Honour permitted that course so that the matter became a contested application for an interlocutory injunction. In respect of costs, his Honour said:

“Although costs are always in the discretion of the court, the usual rule that is applied in the exercise of the court’s discretion is that if a person succeeds in getting an interlocutory injunction costs should be costs in the cause …”

21 His Honour did not explain the basis of the rule. That is not of itself unexpected, as practices grow up within particular jurisdictions which routinely deal with a particular type of application. The rationale for making an order that costs be costs in the cause is that, at the stage of granting an interlocutory injunction, the court is not in a position to adjudicate on the ultimate outcome of the proceedings. Rather, provided there is a reasonable case to be tried, the Court’s focus in deciding whether to grant the application for interlocutory relief is on other considerations and, in particular, on determining whether, on the balance of convenience, an injunction ought to be granted. Accordingly, if a plaintiff who applies for an interlocutory injunction is not ultimately successful in the proceedings, that plaintiff should not receive the costs of the application for an injunction which, when the matter is considered in overview cannot be sustained. However, as already explained, each case must depend upon its own facts.

22 Metropolitan Petar submits that the “usual practice” referred to in Boscolo and upon which the first respondents rely does not represent the entirety of the jurisprudence in this area, and that in accordance with both principle and practice of the courts at first instance the order that ought to be made is that the costs of the hearing of the Notice of Motion at first instance should be their costs in the cause. An order that costs be a party’s costs in the cause or the proceedings, for example, a plaintiff’s costs in the proceedings, means that if that party succeeds on the final hearing, then that party is awarded the costs of the interlocutory proceedings: Stratford v Lindley at 1153, but if that party loses on the final hearing, it will not be liable to pay the costs of the other party on the interlocutory hearing.

23 In Devereaux Holdings Pty Limited v Pelsart Resources NL (No 2) (Supreme Court of New South Wales Eq Div, 24 July 1985, unreported), an earlier decision of Young J, his Honour was concerned with the question as to the costs order that should be made when an interlocutory injunction is granted but the proceedings are dismissed on final hearing. His Honour observed (at 2) that there were not any definitive rules governing that circumstance, but that the following seemed to be “what commonly happens”. Relevantly for present purposes, his Honour stated:

“(a) If the material before the Judge on the interlocutory hearing discloses that there is an arguable or prima facie case and it is more or less conceded in argument that such is the case so that an interlocutory injunction is granted, then costs of the interlocutory injunction are costs in the cause, though sometimes they may be made plaintiff’s costs in the cause; (b) If in the situation set out in (a), the defendant does not concede the inevitability of an interlocutory injunction being granted, then the proper order is that the plaintiff’s costs be his costs in the cause, or even that the defendant pay the plaintiff’s costs in any event …” (Emphasis added)

24 Young J, in determining what costs order should be made in the matter before him, stated:

“… I think it follows from what I have said above that the defendant being successful in the action, it should not have to pay any of the plaintiff’s costs. This is because unless there was some extraordinary factor, the appropriate order on the interlocutory motion would have been either that the costs would have been costs in the cause, or alternatively, plaintiff’s costs in the cause.”

25 In Ausino International Pty Limited v Apex Sports Pty Limited [2006] NSWSC 1119 Campbell J (as his Honour then was) stated:

“[55] … the present proceedings before me are brought on the basis that they are an interlocutory process. The usual order which is made as to costs concerning interlocutory processes, is that if the plaintiff is the applicant, and succeeds, then the costs of the interlocutory process become the plaintiff’s costs in the cause , while, if the plaintiff is the applicant, and loses, the usual order is that the plaintiff pay the defendant’s costs of that application.

[56] The rationale for that arises from the way that interlocutory proceedings are intended to advance the final hearing. If a plaintiff has a victory on the way to a final hearing, whether that victory is ultimately one which is fruitful will depend upon whether the plaintiff succeeds in the final hearing. However, if the plaintiff brings an interlocutory application and loses, then that interlocutory hearing is one which will, irretrievably, have cost the defendant money, and the justice of the situation is that the defendant should be indemnified for those costs, regardless of the outcome of the proceedings.” (Emphasis added)

26 It is unclear from the decision in Ausino International whether there has been some mutation in the “usual order” over the last decade, or whether in Ausino International Campbell J’s comments were reflecting the matters to which Young J adverted in Deveraux Holdings. This in itself may reflect a trend of greater contestability of issues once a dispute engages the court process. However, it seems to me there is force in Young J’s analysis of the circumstances which justify the making of one order rather than another on an interlocutory application. It should be noted that Campbell J consistently applied that rule in the Equity Division of the Supreme Court: see Russ Australia v Benny [2006] NSWSC 1118; Glen Eight v Home Building [2005] NSWSC 907; see also the decisions of Hamilton J: Scholten v Mobilesoft Pty Ltd [1999] NSWSC 234; Ingersoll-Rand (Aust) Ltd v Industrial Rollformers Pty Ltd [2000] NSWSC 178.

27 Applications for interlocutory injunctions are commonplace. If there is nothing to distinguish an application from the typical case that comes before the court, then the underlying jurisprudence relating to the exercise of the discretion may warrant the making of what is referred to in the legal vernacular as the “usual order”, whether that be costs in the cause or the plaintiff’s costs in the cause. The making of such an order does not displace the exercise of the court’s discretion. Rather, it is a shorthand form of giving effect to the principles that govern the court’s discretion in circumstances where there are no countervailing or different circumstances to warrant the exercise of the discretion in a different manner.

28 We have already referred to r 42.7 of the UCPR, which is the rule that applies to costs on an interlocutory application unless some other order is made. We have also referred to the fact that if some other order is to be made, that order is made in the exercise of the court’s discretion. That discretion cannot be fettered. For the reasons we have given, the making of an order in accordance with a “usual rule” does not, however, involve any fettering of discretion provided a court applies the rule in the exercise of its discretion, and not as a matter of course. It is not necessary, however, that a court explain its reasons for applying the usual rule in every case. The favourable exercise of the court’s discretion in ordering the costs to be costs in the cause, or plaintiff’s costs in the case, if otherwise unexplained, should be taken to reflect the fact that there is already an established jurisprudence as to the basis upon which the court’s discretion should be exercised in a given circumstance.

29 There are a number of considerations which are relevant to the question whether the order for costs sought by the Association should be made. For the reasons given in the principal judgment, the Association should have been restrained from using the Schedule A property other than in accordance with Judicial Advice and its vigorous resistance to Metropolitan’s application for an injunction was misplaced. That consideration leads to the conclusion that at least an order that the costs be the plaintiff’s costs in the cause is appropriate.

30 If Metropolitan Petar is ultimately successful in its claim that the non-Schedule A property is trust property, then that property should have been protected from use for costs. That was the point of granting the injunction. On the other hand, if Metropolitan Petar is unsuccessful then, although there were good reasons to preserve the property in the interim, the Court’s ultimate determination will be that the property was not held upon the trust that Metropolitan Petar claims and the Association will be and at all times should have been free to use it as it wishes (subject to such constraints as are imposed by its own Constitution). That consideration indicates that the order for costs should either be costs in the cause or the plaintiff’s costs in the cause.

31 A further consideration which is relevant is that regard to both Schedule A and non-Schedule A property was necessary in order to be able to determine what injunctions ought to be granted. That consideration would indicate that whatever order is made in relation to the Schedule A property ought also to be made in respect of the non-Schedule A property.

32 In our opinion, having regard to the consideration referred to by Young J in Deveraux Holdings, particularly the Association’s resistance to the relief sought, the appropriate order in this case is that the costs at first instance be the plaintiff’s costs in the cause. That order is also consistent with the more usual costs order made in the court’s discretion in applications such as this. The consistent application of a court’s discretion should also result in, relevantly, consistent outcomes.

Orders 1 and 2: costs of the appeal

33 The Association seeks an order that Metropolitan Petar’s costs of the appeal be the plaintiff’s costs in the cause. It cites Wickstead v Browne (1992) 30 NSWLR 1 at 20 as authority for the making of such order. There is no doubt that such an order may be made. The question is whether, in the exercise of the Court’s discretion, such Order should be made. The Court did not give reasons for the making of such Order in that case.

34 In our opinion, different considerations may arise in the case of an appeal from a judgment on an interlocutory application than in the case of the costs of that application at first instance. In the first instance, the basic rule, unless the Court makes some different order, is that costs follow the event. It is not necessarily usual that a party to an interlocutory application will appeal from an interlocutory application. Unlike an interlocutory application at first instance, such appeals are not commonplace. Indeed, an appeal is not available as of right: Supreme Court Act 1970 (NSW) s101(2)(e).

35 In this case, the considerations relating to the proper costs order on the appeal are these. First the appellants, although successful at first instance, sought wider relief than that granted by the trial judge. That might indicate that the same costs order as made in respect of the first instance proceedings ought to be made on the appeal. On the other hand, as has already been explained, the Association maintained a position at first instance in respect of the Schedule A property which was misplaced. The appeal proceedings were fought vigorously on the same misunderstanding. Having regard to that factor, and given that the appellants had to bring further proceedings by way of an appeal to obtain the full extent of the relief to which they have been held entitled, we consider that the appellants ought to have their costs of that aspect of the appeal, either because there is no reason to displace the rule that costs follow the event or because it falls within the discretionary considerations discussed in Devereaux Holdings.

36 We are also of the opinion that the appellants should have their costs of the appeal insofar as they relate to the non-Schedule A property. We have already recounted the issues that arose on the appeal and their determination. Again, these issues were defended vigorously. Whilst it could not be said that the grant of interlocutory relief in respect of the non-Schedule A property was inevitable, the fact that the proceedings related to claimed trust property meant the overwhelming likelihood was that the Court would make some Orders that would protect that property. Further, for the reasons given, the costs in respect of both aspects of the appeal should be the same. Neither party sought to argue otherwise.

37 The Association seeks a number of qualifications to any such order. It says that the order for costs should relate to portion only of the costs of the appeal. It also seeks to have the order limited in amount to one half of the amount payable under any indemnity certificate granted under s 6(1) of the Suitors’ Fund Act 1951 (NSW) (the Suitors’ Fund Act) and in that regard seeks such certificate.

Whether Metropolitan Petar should only have 90 per cent of their costs

38 The Association proposes that there be separate costs orders in respect of the Schedule A and non-Schedule A property issues. It submits that each constituted 45 per cent of the issues before this Court and that there was a further issue which they assess as constituting 10 per cent of the issues argued.

39 The Association contends that regardless of how the Court fashions its costs orders, Metropolitan Petar should only have an order in respect of 90 per cent of the costs of the appeal on the basis that its success was limited to 90 per cent of the issues on the appeal. This submission is based upon the Association’s contention that Metropolitan Petar had withdrawn a proposed paragraph 2(b) of the Notice of Appeal. In the proposed para 2(b), an order was sought the effect of which was to prevent the Association from repaying loans obtained for the payment of legal fees. The matter was resolved when Metropolitan Petar withdrew the proposed ground of appeal.

40 Metropolitan Petar submits that it should be entitled to an order in respect of the whole of the appeal. It disputes the first respondent’s recitation of facts made in support of the application as being incomplete and unsupported by evidence. It also submits that a full review of the relevant facts would include the communications between counsel.

41 The matters upon which the Association relies, namely, the fact that there was an order sought in the Notice of Appeal which was subsequently withdrawn, is a matter of record, as is the fact that the Court directed that there be short written submissions made in respect of that order as sought and that written submissions were made. That might indicate that the Association should have the costs of dealing with that issue. However, if the Court acceded to that order that would not, in the Court’s assessment, constitute 10 per cent of the costs of the appeal, and if any order was to be made, it would be a matter which could properly be attended to as a matter of costs assessment.

42 However, the Court does not know what the circumstances were that caused Metropolitan Petar to withdraw para 2(b) of the Notice of Appeal. Metropolitan Petar asserts that there were communications between counsel and this has not been controverted by the Association.

43 The Court has reviewed the written submissions of the parties in respect of order 2(b). It is not clear that the order as sought would have had the effect of which the Association complains. Nonetheless it is reasonable to infer from the submissions and the conduct of Metropolitan Petar in withdrawing order 2(b) and proposing alternate orders as contained in a Notice of Appeal which was forwarded to the Court on 11 September 2006, that the order was unnecessary. However, given that the amount involved in preparing the submission would have been very small in contrast to the time involved in the preparation and presentation of the main issues in the proceedings, we do not consider that this is a case where the Court should make a particular order in respect of an issue which was not pursued by the successful party and which was minor in the overall context of the appeal.

Application for a Suitors’ Fund Certificate

44 The Association seeks a Certificate under the Suitors’ Fund Act.

45 In R v Hookham (1993) 32 NSWLR 345, Priestley JA (Wood and Sully JJ agreeing) looked at the factors that govern the court’s discretion in the granting of a certificate. His Honour observed (at 346) that the rationale underpinning the legislation must be that the costs of a mistake within the court system ought not, at least in some circumstances, be visited on a respondent. That is particularly so when a respondent has not been the effective progenitor of the court’s mistake by, for example, pursuing irresponsible or baseless arguments in the court below, or persuading a court to act upon the basis of a decision which has been overruled: see Priestley JA at 346.

46 There was nothing in the conduct of the Association in the manner in which it defended the Application in the Court below so as not to entitle it to the Certificate. That order should be made.

Limitation of costs to the amount paid under the Certificate

47 The Association then seeks orders having the effect that Metropolitan Petar’s costs are limited to the amount payable under that Certificate. The maximum amount payable from the fund is $10,000: see s 6(2A). The costs that the Association will be ordered to pay will undoubtedly exceed that amount. Notwithstanding that, the Court is of the opinion that the costs should not be limited in the way sought. The effect of making such an order would be seriously to limit the costs that Metropolitan Petar would be able to recover on the appeal. There is no basis for making such an order, other than the fact that the funding of this litigation by the Association is precarious for the reasons which have been agitated in other judgments. That is not a reason to limit Metropolitan Petar’s costs to no more than $10,000. The Association should bear the costs of the litigation in which it unsuccessfully engages, just as is the case with any unsuccessful litigant, notwithstanding its financial circumstances, except to the extent that relief is otherwise available to it such as by way of a partial indemnity under a Suitors’ Fund Certificate.

Should an order be made that the costs do not become payable until the conclusion of the proceedings?

48 The Association submits that if the Court makes an order that it pay the appellants’ costs of the appeal (or some percentage thereof), then the Court should order that those costs be payable at the conclusion of the proceedings. The Association submits that in this regard, the principle underlying r 42.7 of the UCPR that the costs of interlocutory applications do not become payable until the conclusion of the proceedings unless the Court makes some other order, ought to apply. It further submits that there is currently a preponderance of costs orders in its favour at first instance, so that it should not have to pay any amount until the final costs position is known between the parties.

49 Metropolitan Petar resists the making of such an order. They point out that in Appeal Proceedings [2006] NSWCA 160 between these parties, the Court made an unqualified order for costs, the payment of which was not postponed and for that reason, as a matter of fairness, the Court should take the same approach here. The direct answer to that contention is that each matter has to be considered on its own merits. But in any event, the provisions of r 42.7 of the UCPR apply to the costs of an appeal. An order, as sought by the Association, is not necessary. Contrary to Metropolitan Petar’s understanding, an order for costs in respect of interlocutory proceedings is not immediately enforceable. The parties may, of course, take steps to quantify any such order, but that is a different matter to the question of enforceability. A specific order that costs be immediately enforceable would need to be made to displace the operation of r 42.7 We do not think that a displacing order should be made.

50 Metropolitan Petar also disputes the Association’s assertion that it is likely, on balance, that the quantum of costs ordered as between the parties will favour it. It is not necessary to enter into that dispute. The fact is that there have been orders for costs made against each of the parties and, as we have already stated, at the end of the day there will have to be an accounting between the parties in respect of those orders.

Recourse to the trust property

51 The Association submitted that, if the Court does not order that the costs be limited to the amount received from the Suitors’ Fund, then the question whether the Association should be entitled to have recourse to any part of the Schedule A property and the non-Schedule A property to pay those costs should be referred to the trial judge to be determined at the conclusion of the proceedings.

52 Metropolitan Petar, as we understand the submission, agrees that this is an appropriate order. Both parties accept that it is not until these proceedings have been finalised and there is a determination, including by way of appeal, as to whether all of the property, both Schedule A and non-Schedule A, is held upon the declared trust, that a full understanding as to whether the costs should be paid out of the property can be made. It will not be until then that it will be known whether the Association will have any final liability in costs, for the reasons already given. At that point, the parties can apply to the Court under r 42.25 of the UCPR, or otherwise under the general law. In this latter regard, Metropolitan Petar submits that r 42.25 of the UCPR represents a codification of the common law. It is not necessary for this Court to determine that issue. The question for our determination is the procedural one that has been discussed and it is appropriate that that order be made.

53 Accordingly, the Orders we make are as follows:

1. The costs of the hearing at first instance are to be the plaintiffs’ costs in the proceedings;

2. The first respondent is to pay the appellants’ costs of the appeal;

3. The respondent is to have a certificate under the Suitors’ Fund Act 1951 (NSW) if so entitled;

4. The question whether the Association should be entitled to have recourse to any part of the Schedule A property and the non-Schedule A property to pay the costs as ordered is referred to the trial judge to be determined at the conclusion of the proceedings.

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