In the matter of Inavas Pty Ltd (Costs)

[2017] NSWSC 1640

Supreme Court

New South Wales

Medium Neutral Citation:	In the matter of Inavas Pty Ltd (Costs) [2017] NSWSC 1640
Hearing dates:	19 October 2017 (written submission)
Date of orders:	29 November 2017
Decision date:	29 November 2017
Jurisdiction:	Equity - Corporations List
Before:	Brereton J
Decision:	New trustee would be justified in paying plaintiff’s costs out of trust fund.
Catchwords:	COSTS – application for costs to be paid out of trust property – where sole person beneficially entitled to the trust fund is impecunious – where that person should bear the cost of legal fees incurred – where that person consents to the application – held, portion of plaintiff’s costs to be paid from trust fund.
Legislation Cited:	(NSW) Trustee Act 1925, s 93
Cases Cited:	Inavas Pty Ltd, In the matter of [2017] NSWSC 1312
Category:	Costs
Parties:	Robert Ihab Rafidi (plaintiff) Inavas Pty Ltd (deregistered) (first defendant) Australian Securities and Investments Commission (second defendant)
Representation:	Counsel: T. Hall (solicitor) (plaintiff)   Solicitors: Hall Partners (plaintiff)
File Number(s):	2017/056807

Judgment

1. On 28 September 2017, I delivered a judgment,[1] with which this judgment should be read, and made orders that:

1. Pursuant to (NSW) Trustee Act, s 71(2)(h), the assets of the Inavas Superannuation Fund, including the proceeds of Zurich Life policy 02063587 currently held by ASIC consequent upon the deregistration of Inavas Pty Ltd, and any interest accrued thereon, vest in Netwealth Investments Limited as trustee of the Netwealth Superannuation Master Fund, account number 1076790.

2. There be liberty to apply in the event of any difficulty arising in connection with the implementation of this order.

   1. In the matter of Inavas Pty Ltd [2017] NSWSC 1312.

2. In respect of costs, I observed that I did not see why the costs should be borne by the trust property, let alone how such an order could be made in the absence of the joinder of Netwealth, which would become the trustee of that property upon making of the vesting order.

3. By letter dated 19 October 2017, Mr Rafidi’s solicitor sought leave, to the extent it be required, to apply for an order that the plaintiff’s costs to the extent of $12,791 (comprising the filing fee of $2,951; 43.6 hours for a consultant solicitor at $165 per hour being $6,540; and $3,300 on account of counsel’s fees), be paid out of the trust property.

4. Given that the substantive application (at least in part) and the vesting order were made under Trustee Act, ample power to make the costs order sought is to be found in Trustee Act, s 93(2), which relevantly provides that the Court may order the costs of any application or any order under the Act to be paid out of the trust property:

93   Costs

(1)    (Repealed)

(2)  The Court may order the costs charges and expenses of and incident to any application or any order under this Act to be paid or to be raised by sale or mortgage out of the property in respect whereof the same is made or out of the income thereof, or to be borne and paid in such manner and by such persons as to the Court may seem just.

(3)  In any proceedings with respect to the management or administration of any property subject to a trust or forming part of the estate of a testator or intestate, or with respect to the interpretation of the trust instrument, the Court may, if it thinks fit, order any costs to be paid out of such part of the property as in the opinion of the Court is the real subject matter of the proceedings.

(4)  This section shall extend to any direction opinion or advice, any payment into or out of court, and any conveyance or transfer in pursuance of an order.

5. I do not question the reasonableness of the amount sought as a matter of quantum; it is plainly a very conservative figure given the number of appearances involved.

6. My observations about costs in the substantive judgment involved two aspects. The first was that there was no apparent reason why they should (as a matter of discretion) be borne by the trust estate, because they were incurred by the delinquency of the trustee (and/or its director Mr Rafidi), in allowing it to become deregistered. In my judgment, in principle, the costs of undoing the results of that delinquency ought to be borne by the trustee and/or Mr Rafidi personally, without depleting the trust fund. The second aspect was that the trust fund was now vested in Netwealth, and any order against the trust fund would have to be made against Netwealth, and ordinarily upon notice.

7. The essential rationale underlying the application is that:

1. Mr Rafidi is impecunious, and the lawyers will not be paid unless out of the trust fund;

2. The costs were necessarily incurred to reconstitute the trust.

8. ASIC does not oppose the application, but it has no beneficial interest in the fund. So far as appears, Netwealth – the trustee of the fund to which the fund is to be “rolled-over” – has not been given notice, but it has no beneficial interest. Mr Rafidi, who is ultimately the person beneficially entitled, consents to the application.

9. In circumstances where the person who in my view should bear the costs is presently impecunious, but is also the sole person beneficially entitled to the trust fund, and the lawyers would otherwise go unpaid for work done to reconstitute the trust for his benefit, and he consents, I am satisfied that the costs may properly be paid out of the trust fund.

Orders

10. Accordingly, the Court orders that:

1. Pursuant to (NSW) Trustee Act, s 93, the plaintiff’s costs of the proceedings fixed in the sum of $12,791 be paid to Hall Partners, solicitors, out of the funds vested in Netwealth Investments Limited as trustee of the Netwealth Superannuation Master Fund, account number 1076790, pursuant to order (1) made on 28 September 2017.

********

Endnote

Decision last updated: 29 November 2017