In The Matter Of An Application By Olrey Pty Ltd (ACN 140 494 319) (as trustee Of The FRG Investments Trust) Applicant

[2016] VSCA 8

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2015 0130

IN THE MATTER OF AN APPLICATION BY OLREY PTY LTD (ACN 140 494 319) (AS TRUSTEE OF THE FRG INVESTMENTS TRUST) Applicant

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JUDGES:	MAXWELL P, WHELAN and SANTAMARIA JJA
WHERE HELD:	Melbourne
DATE OF HEARING:	21 January 2016
DATE OF JUDGMENT:	21 January 2016
MEDIUM NEUTRAL CITATION:	[2016] VSCA 8
JUDGMENT APPEALED FROM:	Re Olrey Pty Ltd  [2015] VSC 643 (McDonald J)

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TRUSTS AND TRUSTEES – Trustee – Judicial advice – Claims against trustee – Whether trustee justified in defending claims – Whether costs of trustee’s defence to be paid out of trust fund – Judicial advice given – Leave to appeal sought – Original claims against trustee abandoned – New claims pleaded – No practical utility in considering appeal – Question moot – Leave to appeal refused – Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 54.02.

PRACTICE AND PROCEDURE – Appeal – Mootness – Trustee – Judicial advice – Leave to appeal sought – Change of circumstances – Fresh advice required – No practical utility in considering appeal – Question moot – Leave to appeal refused.

APPEARANCES:	Counsel	Solicitors
Applicant	Mr S Wotherspoon	Thomson Geer

THE COURT:

1. This is an application for leave to appeal from a decision of McDonald J handed down on 17 November 2015.[1]

   [1]Re Olrey Pty Ltd [2015] VSC 643.

1. The present applicant, Olrey Pty Ltd, is trustee of the FRG Investment Trust. The trustee applied to his Honour, as it was entitled to do under r 54.02 of the Supreme Court Rules, for judicial advice about a question arising in the execution of the trust. 

1. The specific issue on which advice was sought concerned the position of the trustee as a defendant to a proceeding (‘the 2012 proceeding’) and as a plaintiff by counterclaim.  The application raised two related questions, namely—  

(a)  whether the trustee would be justified in defending the 2012 proceeding and in bringing the counterclaim;  and

(b)  whether the trustee was entitled to have recourse to the assets of the trust to pay its costs of:

·the application for advice;

·the defence of the proceeding;  and

·the prosecution of the counterclaim.

1. In his decision, the judge answered the questions in the following terms:

1.Olrey Pty Ltd is directed that it would be appropriate and that it would be justified in defending the claims made against it in its capacity as trustee of the FRG Investments Trust in [the 2012] proceeding;

2.Subject to further order of the Court, Olrey Pty Ltd is directed that it would not be appropriate and Olrey Pty Ltd is not justified in paying the costs of defending the 2012 proceeding and pursuing a counterclaim in that proceeding out of the assets of the FRG Investments Trust;

3.Olrey Pty Ltd’s costs of the [application for advice] are to be paid out of the assets of the FRG Investments Trust.[2]

[2]Ibid [29].

1. Almost immediately, the litigation landscape changed dramatically, as described in the Summary for the Court of Appeal filed by the applicant on 14 December 2015:

On 19 November 2015 the plaintiffs in the [2012] Proceeding gave notice of their intention to withdraw the two Barnes v Addy claims against the Trustee as part of proposed amendments to their statement of claim.  The proposed claim sought entirely new relief against the Trustee, namely the removal of the Trustee from its trusts and a declaration that the Trustee had committed a breach of trust by executing a property management agreement on 8 March 2011 with Frank Hoh and one of his corporate clients.

On 11 December 2015 an order was made in the [2012] Proceeding granting the plaintiffs leave to file and serve a further amended statement of claim. Until the day before the 11 December 2015 hearing, the plaintiffs had resisted paying the Trustee’s costs thrown away by reason of the withdrawal of the Barnes v Addy claims.  In the event the plaintiffs were ordered to pay the costs thrown away by the Trustee by reason of the amendments.  However, the Court declined to order that the Trustee’s costs be paid forthwith.  The Trustee thus remains in the position where it will have no access to fund or an alternative source of funds with which to pay its defence costs.

1. In short, the claims against the trustee which were at the heart of the 2012 proceeding at the time the judge was considering it — that is, two claims of “knowing receipt” — were withdrawn and the plaintiffs now seek ‘entirely new relief’ against the trustee.  It is also to be noted that, on 11 December 2015, when the plaintiffs in the 2012 proceeding were given leave to amend their statement of claim, they were ordered to pay the trustee's costs thrown away by reason of the amendments.

1. This application for leave to appeal was filed on 16 December 2015.  A week later, on 23 December, the trustee gave notice to McDonald J that it would be making a fresh application to his Honour for judicial advice.  We were only informed this morning that the application had been made, and that it is to be heard by his Honour next Monday, 25 January 2016. 

1. It seems quite clear that the trustee and those advising it have been aware, since not later than 23 December 2015, that there was a proper basis for seeking fresh advice, precisely because the subject-matter by reference to which the judge had given his decision had disappeared.  It is plain from an examination of his Honour's reasons that his key conclusions turned on the nature of the knowing receipt claims and on his Honour’s view as to the course which was likely to be adopted by the directors of what was said to be the errant trustee, in defending claims of breach of fiduciary duty against them.

1. On examination of the papers in advance of this hearing, the Court noted that the judge’s decision and reasons turned on claims against the trustee which had since disappeared.  We therefore wrote the legal advisers to the applicant yesterday afternoon, in the following terms:

·The decision of McDonald J, delivered on 17 November 2015, turned on the nature of the ‘knowing receipt’ claims against the trustee: see paras 8, 11 and 18-20.

·Subsequent to his Honour’s decision, those claims were abandoned, ‘[e]ntirely new relief’ is now being sought against the trustee:  see Summary for Court of Appeal paras 11-13.

·In those circumstances what effect, if any, do the existing directions have and what utility is there in pursuing an application to appeal them?

1. In response to the Court’s question, the applicant submits that there is still utility in appellate examination of order 2.  It is said that, if the order stands, it is likely to have a constraining effect on the trustee’s ability to fund costs incurred since the ruling of 17 November 2015, alternatively, it is likely to inform the judge's consideration of the fresh request for advice in a way which will diminish the prospects of the trustee getting affirmative advice to the questions now being asked.

1. We are not persuaded by that submission.  In our view, the proper course was the one which was taken on 23 December 2015, that is to say, the making of a fresh application for judicial advice about the trustee's position with respect to the new claims against it.  There is a further development which will also need to be considered.  We have been informed that directors of the trustee company have been given leave to institute a counterclaim of their own, to which the trustee will be a defendant.

1. In our view, an application for fresh advice is precisely what would be expected in that advisory jurisdiction when circumstances change, especially when they change as radically as they have changed here, so as effectively to render the first advice redundant or irrelevant.

1. Different considerations will now apply to the issues his Honour addressed last time, namely, whether it is proper for the trustee to defend the claims and/or prosecute the counterclaim and whether the trustee can fund its costs out of the trust.  The considerations bearing on those questions are likely to be quite different in the light of the change in the nature of the proceeding.  In our view, it would be wholly inappropriate for us to express a view about an order made in the entirely different context, and on the entirely different basis, which we have described.

1. It is not to the point that something we might say now might be helpful to the applicant in its fresh application next Monday.  That could not, in our view, satisfy the well‑known requirement that there must be some practical utility in the consideration of an appeal before an appeal will be entertained.[3]

   [3]See, eg, Shire of Yarra Ranges v Russell (2009) 25 VR 560; South Australia v Lampard-Trevorrow (2008) 260 LSJS 185, 187-8, [20]-[24].

1. In our opinion, the subject-matter of this application for leave to appeal is moot.  Its mootness is demonstrated by the circumstances which we have described. Accordingly, in the exercise of the discretion which arises in such circumstances, we refuse the application for leave to appeal.

1. We will direct that there be a transcript prepared of the argument and of these reasons as soon as practicable.  That should be not later than tomorrow, in the experience of the Court.

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