James v James (No 2)

[2019] NSWSC 116

Supreme Court

New South Wales

• Amendment notes

Medium Neutral Citation:

James & Ors v James (No. 2) [2019] NSWSC 116

Hearing dates:

3 October, 6 and 23 November 2018

Date of orders:

20 February 2019

Decision date:

20 February 2019

Jurisdiction:

Common Law

Before:

Slattery J

Decision:

Proceedings to remain in the Supreme Court of New South Wales to decide issues of apportionment between co-owners of the Property.

Catchwords:

TRUSTEES - trustees for sale – trustees for sale appointed under the Conveyancing Act 1919, s 66G - dispute between co-owners and trustees concerning the reasonableness of the trustees’ costs, expenses and remuneration – whether particular costs, expenses and remuneration of the trustees should be allowed – no issue as to the honesty of the trustees or the propriety of their incurring the costs in question.

CROSS VESTING – Jurisdiction of Courts (Cross-Vesting) Act 1987, s 6(3) – proceedings between co-owners of property under the Conveyancing Act 1919, s 66G for the appointment of trustees for sale – trustees for sale appointed – disputes arose among the co-owners and between some of the co-owners and the trustees for sale – costs incurred by the trustees for sale in resolving those disputes – delay occasioned in the sale of the property as a result of the disputes – one co-owner made bankrupt after appointment of trustees for sale – property sold - trustees for sale have concluded their work and seek payment of their costs and expenses from the proceeds of sale – the apportionment of the trustees’ costs among the co-owners, including the bankrupt co-owner constitutes a “special federal matter” under the Jurisdiction of Courts (Cross-Vesting) Act 1987 – whether the proceedings should remain in the Supreme Court of New South Wales or be remitted to the Federal Court of Australia or the Federal Circuit Court of Australia under the Jurisdiction of Courts (Cross Vesting) Act – whether there are special circumstances for retaining the matter in the Supreme Court of New South Wales – whether the administration of justice is better served by retaining or transferring the proceedings – how the convenience of the parties should be considered in the exercise of the Court’s discretion under the Jurisdiction of Courts (Cross-Vesting) Act, s 6(3).

Legislation Cited:

Bankruptcy Act 1966 (Cth), s 58
Conveyancing Act 1919, s 66G
Jurisdiction of Courts (Cross-Vesting) Act 1987, s 6

Cases Cited:

Anson v Anson (2004) 12 BPR 22,303
Beddoe, In re; Downes v Cottam [1893] 1 Ch 547
Bennett, In re; Jones v Bennett [1896] 1 Ch 778
Cordes as Trustee for George v Dr Peter Ironside Pty Ltd [2010] 2 Qd R 235
Coshott v Amirbeaggi [2016] FCA 966
Henry v Hancock [2016] NSWSC 71
Hopkins v Director General of Security [2014] NSWSC 281
In the matter of Galtari Pty Ltd (in liq) [2018] NSWSC 917
James & Ors v James [2018] NSWSC 316
Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380
Perpetual Trustee Co Ltd v Attorney-General of New South Wales (Will of Hon Nesbitt) [2018] NSWSC 1456
Templeton v Australian Securities and Investments Commission (2015) 108 ACSR 545

Category:

Costs

Parties:

First plaintiff: Geoffrey Reginald James
Second plaintiff: Peter Charles James
Third plaintiff: Stephen Robert James
Defendant: Jennifer Elizabeth James
Trustees: Stephen Brotherson and Simon Cathro
Trustee in Bankruptcy/Second Defendant: Shabnam Amirbeaggi

Representation:

Counsel:

 

For trustees: S. Clemmett
For trustees in bankruptcy: S. Golledge (on 6 November 2018)

 

Solicitors:

  For trustees: Edwin Fritchley, Fritchley Solicitors
First and second plaintiff: in person
Third plaintiff: M. Reid, Elliot Tuthill
Trustees in bankruptcy: S. Nash (on 23 November 2018), O’Neill Partners
Defendant: in person

File Number(s):

2017/90823

Publication restriction:

No

Judgment

1. This is the Court’s second judgment in these proceedings. In the Court’s first judgment given on 16 March 2018, the Court granted leave for the issue of a writ for possession, in respect of certain residential property in Clovelly (“the Property”), forthwith in favour of two Trustees for Sale (“the Trustees”): James & Ors v James [2018] NSWSC 316. These and related orders were made because the first defendant, Ms Jennifer James, was refusing to move out of the Property. On 25 September 2017, Emmett AJA had ordered that the Property vest in favour of the Trustees.

2. The plaintiffs are Ms James’ three brothers, Geoffrey, Peter and Stephen, who were co-owners with her as tenants-in-common of the Property. The Court’s March 2018 orders allowed the Property to be vacated. It was sold on 29 May 2018. The Trustees now hold the proceeds of the sale.

3. Other disputes have broken out, both among the parties and between the parties and the Trustees. This judgment resolves some of those residual disputes.

4. The disputes fall into three broad categories. First, a number of the plaintiffs are critical of the expenses charged by the Trustees to effect the sale of the Property. They challenge the right of the Trustees to be reimbursed for those expenses. This judgment wholly resolves that issue by determining which of the Trustees costs will be disallowed, so the Trustees can pay into Court the defined residue of the proceeds of sale.

5. Second, the co-owners are in dispute as to the proper apportionment of the proceeds of sale of the Property among them. The plaintiffs say that the defendant’s alleged obstructive conduct has been the principal cause of an escalation in the Trustees’ costs, which should be substantially apportioned to the account of the defendant’s bankrupt estate. The parties are also in dispute as to whether, and if so in what amount, the defendant should compensate her sibling co-owners in the distribution of the proceeds of sale for her exclusive occupation of the Property before its sale. All these issues are collectively referred to in this judgment as “apportionment issues”. This judgment does not decide the question of the apportionment of the proceeds of sale but invites the parties to bring in short minutes of order to regulate the parties’ preparations for that hearing.

6. The third main issue is related to the second. The first defendant was declared bankrupt on 29 November 2017. Her estate is now vested in her Trustee in Bankruptcy, Ms Shabnam Amirbeaggi. The first defendant is in dispute with her Trustee in Bankruptcy about the position the Trustee in Bankruptcy is taking on the apportionment issues. The first defendant is discontented that the Trustee in Bankruptcy is not sufficiently aggressive in preventing the Trustees’ costs potentially being apportioned against her. The Bankruptcy Act 1966 (Cth) requires her disputes with her Trustee in Bankruptcy to be determined in federal jurisdiction.

7. But the outcome of the apportionment issue, which constitutes the balance of these proceedings, will determine the size of the first defendant’s estate in bankruptcy. For reasons explained later in this judgment, the Bankruptcy Act requires that issue to be determined in the federal jurisdiction. The Court raised with the parties whether this aspect of the proceedings should now be remitted to the Federal Court of Australia or to the Federal Circuit Court of Australia under the Jurisdiction of Courts (Cross-Vesting) Act 1987 (“the Cross-Vesting Act”). But the parties all submitted that, in the Court’s discretion, a cross-vesting order should not be made and the remaining apportionment issues in the proceedings should be determined in this Court, the Supreme Court of New South Wales, not in a Federal Court. This judgment decides under the Cross-Vesting Act that the apportionment issues should remain for determination in this Court.

8. This judgment should be read with the Court’s first judgment. Events, persons and matters are referred to in the same way in both judgments.

9. The appearances in the matter have remained substantially the same as they did at the time of the first judgment. Ms S. Clemmett of counsel, instructed by Edwin Fritchley, Fritchley Solicitors, appears for the Trustees, Stephen Brotherson and Simon Cathro. Mr S. Golledge of counsel (6 November 2018) and Ms S. Nash (23 November 2018) of O’Neill Partners appear for the Trustee in Bankruptcy for Jennifer James. Mr Geoffrey James and Mr Peter Charles James appear in person, as did Ms Jennifer James. Mr S. Hughes, instructed by M. Reid of Elliot Tuthill, appears for the third plaintiff.

Ms James, Her Brothers and the Property

10. Much has happened since my last judgment on 16 March 2018. It was anticipated, at the time of that judgment, that the writ for possession might be executed before the end of April 2018 and the matter was therefore listed for directions on 26 April 2018. But the grant of leave for the issue of the writ became more complicated than expected.

11. The Registry declined to issue a writ without a Statement of Claim being filed. That required Mr Fritchley, the solicitor for the Trustees, to attend the Registry, to explain that although the normal requirement was for the filing of a Statement of Claim before a writ for possession was issued, that these proceedings have been conducted without a Statement of Claim from the first.

12. A writ was ultimately issued. But first it was sent to my chambers rather than to the Sherriff. Mr Fritchley arranged for the Registry to extract the writ and have it sent to the Sherriff, which was done on 17 April 2018. That writ was to be executed on 29 May 2018 and was indeed executed on that day.

13. As a result of this delay, the directions hearing on 26 April 2018 was vacated and the proceedings were stood over to 7 June 2018.

14. When the matter came before the Court on 7 June 2018, the writ had been executed, Ms James had vacated the Property and the Trustees were in possession of the Property. An issue arose as to whether or not the Trustees were justified in maintaining around the clock security at the Property, against the possibility that Ms James may try to re-enter. Given the Court’s experience of Ms James in the course of directions hearings and in the hearing before the first judgment, the Court indicated that it would not regard it as an unreasonable expense for security to be maintained by the Trustees at the Property, until the Property was sold. As a result, the Trustees took that course until the sale of the Property.

15. The Property was listed for public auction on 16 August 2018, but bidding failed to meet the reserve and was passed in at $2,125,000. Following the auction negotions with registered bidders, the Trustees accepted an offer of $2.2 million.

16. After the sale, the matter returned to Court on 3 October 2018. The Court heard evidence about events surrounding the sale and gave directions for the filing and service of evidence relating to the Trustees’ costs and remuneration.

17. The matter came before the Court again on 6 November 2018 for directions and to list the matter for hearing on the questions of costs and remuneration of the Trustees. That hearing took place on 23 November 2018.

18. This timetable covers the formal court appearances and major events between the Court’s last judgment and the present judgment. But the evidence demonstrates that the Trustees have been busy on many fronts. A brief overview of the parties’ involvement and the work the Trustees undertook to manage issues that the parties introduced, follows.

19. The Court’s orders on 25 September 2017 appointed as the joint Trustees: Mr Simon Cathro, a partner at Worrells, a solvency and forensic accountantcy firm, and Mr Stephen Brotherson, a solicitor.

20. Mr Cathro and Mr Brotherson are experienced professional persons, who are partners at their respective firms and who have claimed professional fees for the discharge of their duties.

21. The Trustees’ costs and expenses are proven mainly through the affidavit evidence of Mr Aaron Lucan, a principal at Worrells, and Mr Edwin Fritchley, the solicitor that the Trustees retained to act on the sale and in relation to these proceedings.

22. The Trustees’ appointment parachuted them into a hostile environment. Understanding the structure of who they were dealing with and the threats they faced is important context.

23. From the time of Ms James’ bankruptcy on 29 November 2017, the Trustees were dealing with five stakeholders: the three plaintiffs, the first defendant and the second defendant, the Trustee in Bankruptcy. Of these stakeholders, two had legal representation, the Trustee in Bankruptcy and the third plaintiff; the other three were without legal representation. The Trustees were at all times required to deal with multiple sets of legal representatives and three unrepresented persons. Of those unrepresented persons, the first defendant and the first plaintiff presented strong opinions to the Court about the conduct of the administration of the Trust estate. And separate and independent positions were put by each of the legal representatives of the Trustee in Bankruptcy and the third plaintiff. It was only the second plaintiff who took a relatively low key role in the proceedings.

24. The first defendant has actively hindered the progress of the sale, and has been difficult to contact, to get to co-operate, and to have comply with orders. It may readily be inferred, and the evidence makes clear, that her conduct has generated very significant correspondence not only involving her but among the plaintiffs, the Trustee in Bankruptcy and the Trustees. She was at odds with everyone in the proceedings; her own Trustee in Bankruptcy, the Trustees and her brothers.

25. The hostility between the parties also magnified the range of dealings the Trustees had to have with third parties. Mr Lucan’s evidence makes this clear. The Trustees had dealings with: real estate agents; insurers; removalists; storage companies; cleaners; locksmiths; security services; sheriffs; the executor of the estate of the parties’ late mother, Mr Gordon Salier; valuers, both as to the potential rental of the Property and its prospective sale price; quantity surveyors; conveyancing solicitors, financial institutions in relation to finance for renovations (where finance was never approved); a plumber and a swimming pool inspector. The dealings with many of these third parties were occasioned solely by the conflict between the parties. For example, the dealings with the locksmiths and security services were really the product of concern on the part of the Trustees and, in part, on the plaintiffs that Ms James might re-enter the Property.

26. The conflict between the three plaintiffs and the first defendant spilled over into a denial of authority to the Trustees to borrow money and constricted them in their freedom of financial manoeuvre to manage the sale. This generated an additional problem for the Trustees. Many of their dealings with these third parties involved negotiating an arrangement with the third party, whereby the third party would defer seeking payment of expenses and that those third parties’ goods and services would be recouped or satisfied after the sale of the Property. A simple retainer of these third parties’ services (or materials) without the need for negotiation of a time for payment would have involved less time on the part of the Trustees.

27. The contest between the parties about the value of Ms James’ alleged improvements to the Property since 15 March 2014 also created its own complications in the Trustees’ work. The appointment of the Trustees on 25 September 2017 included orders authorising the Trustees to retain a quantity surveyor to assess the value of improvements that Ms James had made since March 2014. But the quantity surveyor was not able to assess the value of improvements, because Ms James remained in possession of the Property and access for the quantity surveyor was difficult. But as at 21 February 2018, Ms James had not provided the required list of improvements to the Property. So on 14 March 2018, the Court ordered her to provide a list and a similar list was to be provided by the third plaintiff by 28 April 2018.

28. This is a good example of the difficulties the Trustees faced. Ms James asserted that she had provided such a list and that it was contained in the documents that she had filed with the Court. But the Court has been through these documents and a simple list of the kind that was required of Ms James was not readily discernible. The document she had filed were voluminous and difficult to follow. This was obvious to the Court.

29. But it was also obvious to the Trustees. They corresponded with Ms James to get clarity on this issue. Her documentation was provided to quantity surveyors. But correspondence with the quantity surveyors showed that her documentation gave little assistance in ascertaining the value of the improvements to the Property. Indeed the documentation added questions which, despite considerable effort in trying to obtain answers, were never really answered.

30. Whether or not this kind of conduct and the expenses related to it should be apportioned against Ms James’ estate in bankruptcy is a matter for later consideration. But of present relevance is the complexity that it added to the Trustees’ work. Not only were the Trustees required to deal with Ms James to obtain this list, but the Trustees also sought to get further information from the third plaintiff, Mr Geoffrey James, to assist the quantity surveyor to complete his work.

31. That the Trustees pursued this issue with some vigour is not surprising. The Court observed to the parties at directions hearings that the only opportunity that would exist for these claimed improvements to be assessed would be before sale of the Property, so a clear understanding of what was being claimed and assessed before the Property passed to a third party. It was quite appropriate for the Trustees to put in special effort when they did into identifying what Ms James was claiming as an improvement and what its value might be, despite her lack of co-operation.

32. Another example of the additional work the Trustees had to undertake was that they took steps towards apportioning the proceeds of sale as between the plaintiffs and the defendant by gathering evidence relevant to that task. That evidence included a rental assessment from Herron Todd White, obtained on 21 August 2018. This was in accordance with Order 9 of the Court’s 25 September 2017 orders. The Trustees’ task in this direction was further complicated by the fact that Ms James did not provide an affidavit accounting for her dealings and management in respect of monies received from rent or applied in outgoings, as Order 10 of the 25 September 2017 orders had provided.

33. Finally, a further source of additional time the Trustees spent was in seeking to obtain finance so they could undertake work on the Property and pay for the substantial goods and services, including legal services they were obliged to procure to execute their trust. Ordinarily this kind of issue would be resolved co-operatively between co-owners and trustees for sale. But such co-operation on the co-owners part (and principally from the first defendant) was not a feature of this case. Despite investing time on that task, the Trustees could not secure finance at a reasonable cost.

The Trustees’ Costs and Expenses

34. The Trustees’ Claims. The Trustees’ seek approval for total costs and remuneration incurred to date in the sum of $307,201.63. These past costs are the subject of detailed evidence and constitute some 13.9 per cent of the $2.2 million sale price of the Property.

35. These costs are justified by affidavit evidence sworn by Mr Lucan, Mr Fritchley and Mr Brotherson. It is not necessary to go into the detail of these costs and expenses, other than to the extent that they are in dispute. But the Court is satisfied that the invoices attached to Mr Lucan, Mr Fritchley and Mr Brotherson’s affidavits are in respect of work genuinely done. The total amount may be briefly summarised as follows:

Estimate of Past Costs

Trustees: Trustees’ Direct Costs for Sale of the Property	$63,656.20
Trustees: Trustees’ Remuneration Up to 3 October 2018	$102,424.19
Mr Cathro: Remuneration Up to 5 November 2018	$19,474.21
Fritchely Solicitors: Legal Expenses for Counsel	$26,949.99
Fritchely Solicitors: Solicitor’s Legal Expenses	$57,463.04
Mr Brotherson: Remuneration Up to 21 November 2018	$30,018.00
Mr Cathro: Remuneration Up to 21 November 2018	$7,216.00
TOTAL	$307,201.63

36. At the time of hearing on 23 November 2018, the Trustees anticipated further costs would be incurred before the conclusion of their work. The Trustees’ evidence sets out an estimate of those future costs of a further $34,500. But the Trustees’ anticipate that their actual future costs will probably be less than this estimate. These future costs are estimated as follows:

Estimate of Future Costs

Worrells: Provision for Storage and Possible Destruction of Personal Property	$7,500
Worrells: Remuneration for Services in Dealing with Personal Property, Holding Proceeds of Sale and Reporting	$10,000
Fritchley Solicitors: Additional Legal Costs	$15,000
Mr Brotherson: Further Trustees’ Fees	$2,000
TOTAL	$34,500

37. The Trustees’ total claimed remuneration and expenses amount therefore to a total figure of $341,701.63. The Trustees’ point out that this represents some 15 per cent of the total purchase price of $2.2 million. To these Trustees’ claims, the other parties take identified objections. The objections ultimately fielded against the Trustees’ costs were narrower than as first foreshadowed, partly because the Court ordered a schedule of claims and objections to those claims to be prepared which isolated the real matters in issue.

38. These reasons now turn to examine the legal principles applicable to the assessment of the Trustee’s claim for approval of their costs, followed by consideration of the particular objections lodged against the Trustees’ claims.

39. Applicable Legal Principles. The relevant legal principles may be shortly stated. But the starting point for analysis is the orders already made appointing the Trustees on 25 September 2017. Those orders include the following Order 8 covering the payment of the Trustees’ costs, expenses and remuneration of the Trustees in connection with the sale of the Property. The 25 September 2017 order was varied on 14 March 2018 to add the final words in sub-paragraph 8(a) commencing with the words “…which for the avoidance of doubt…”. The orders as made were as follows:

“On 25 September 2017 Emmett AJA made the following orders and directions:

1.   Order that Steven Brotherson and Simon Cathro be appointed Trustees (the Trustees) for the sale of real estate at 17 Keith Street, Clovelly in the State of New South Wales being the whole of the land comprised in Certificate of Title Folio Identifier 5/301996 (the Subject Property).

2. Order that the Subject Property vest in the Trustees subject to any encumbrances affecting the entirety thereof and free of any encumbrances affecting any undivided shares therein upon the statutory trust for sale created pursuant to Division 6 of Part IV of the Conveyancing Act 1919 (NSW).

3.   Order that the Trustees be empowered to offer the Subject Property for sale by public auction with power to fix a reserve price, provided that completion of the sale will not take place before 28 February 2018.

4.   Order that the Trustees have the sole conduct of the sale of the Subject Property and be authorised to instruct a licenced real estate agent for sale and, if necessary, an auctioneer, with the total commission payable not to exceed 2.5% inclusive of GST.

5.   Order that the Defendant do all such things, acts and deeds to:

(a)   Cause the Subject Property to be brought to, and maintained in, a clean and presentable manner as required for the proper and effective marketing of the Subject Property;

(b)   Allow for an inspection of the Subject Property by the Trustees and any selling agent appointed by the Trustees on 48 hours’ notice of a request being made;

(c)   Allow for an inspection of the Subject Property for purposes of marketing on 7 days’ notice of a request made by the Trustees or any selling agent appointed by the Trustees; and

(d)   Give vacant possession of the Subject Property within 28 days of a request made by the Trustees, such request not to be given before 20 January 2018.

For the purposes of this order, all costs associated with any works to be undertaken on the Subject Property will be met equally by the four parties.

6.   Order that, within 21 days of the date of these orders the Defendant deliver up to the Trustees the original Certificate of Title Folio Identifier 5/301996, if it is in her possession.

7.   Order the Trustees to retain a quantity surveyor to assess the value of improvements made by the Defendant since 15 March 2014, such report to be obtained by the Trustees on or before 27 November 2017. For the purpose of this order, the value of any improvements made and paid for by the Defendant be adjusted in favour of the Defendant in accordance with the report of the quantity surveyor.

8.   Order that on completion of any sale of the Subject Property by the Trustees the settlement funds received on completion (“the sale proceeds”) shall be distributed in the following order:

(a)   First, in payment of selling costs and expenses in connection with the sale of the Subject Property including selling agent’s fees and commission, advising fees, auctioneer’s fees, legal costs and disbursements in transferring the Subject Property into the names of the Trustees and Trustees’ legal costs and disbursements associated with the sale;

(b)   Then in payment of any amounts owing in connection with the Subject Property for council rates, water rates, water usage and any other utility or statutory imposts including Capital Gains Tax, Land Tax and Goods & Services Tax (GST).

(c)   Then the remuneration and expenses of the Trustees in respect of the sale;

(d)   Then in payment of the costs of obtaining a report from a Quantity Surveyor and Valuer;

(e)   The then remaining balance of the sale proceeds be paid equally to the four parties, subject to any adjustment which follows from Order 7 above and Orders 9 and 10 below, with the amount calculated by reference to Order 12 to be deducted solely from the Defendant’s share, along with the value of the market rent pursuant to Order 9 (subject to those funds received by the Defendant by way of rent and declared pursuant to Order 9).

9.   Order that the Trustees forthwith instruct an appropriate property valuer to calculate and provide a valuation as to the market rent payable for the Subject Property from 15 March 2014 to date.

10.   Order that the Defendant file and serve on the Plaintiffs and on the Trustees an Affidavit or Affidavits accounting for her dealings and management in respect of all monies disbursed by her, or any person on her behalf, in respect of all monies received by her from the rental of the Subject Property from 15 March 2014 to date, along with any outgoings paid or unpaid by her in relation to the Subject Property, including but not limited to water rates, council rates, penalties associated with late payments and any other utilities, within 21 days of the date of these orders.

11.   Note the agreement of the parties that the Trustees for sale shall not commence to market the Subject Property for sale before 27 November 2017.

12.   Order that the Defendant pay the Plaintiffs’ costs of and incidental to these proceedings other than the costs of today.

13.   Reserve liberty to the parties and the Trustees claiming an interest in the Subject Property to apply on 5 days’ notice with respect to any other matter that may arise with respect to the above Orders, the sale of the Subject Property or distribution of the sale proceeds.”

40. Trustees are not ordinarily entitled to be remunerated for their execution of a trust, except in the circumstances that Campbell J described in Anson v Anson (2004) 12 BPR 22,303; [2004] NSWSC 766 at [75]:

“[75]: As well, if an order for remuneration of the trustees is to be sought at the same time as they are appointed, evidence to justify that order will be needed. Trustees for sale appointed under s 66G, like all trustees, are not entitled to remuneration for their time and trouble in executing the trust, unless (a) all beneficiaries agree, or (b) a person, or people, agree to pay the trustees from their own money, or (c) a case is made for the Court to authorise, in the exercise of its inherent jurisdiction over trusts, the payment of remuneration to the trustee. If the Court grants authorisation of this last mentioned kind, the remuneration of the trustees is treated as an expense of administration of the trust and hence can be recouped from the trust property.”

41. Here, Order 8 of the Orders made on 25 September 2017 was an exercise of the Court’s inherent jurisdiction to authorize payment of the Trustees’ remuneration.

42. The 25 September 2017 orders are broadly framed to cover all of the Trustees’ costs, expenses and remuneration. Practical considerations incline the Court to make such orders allowing for reimbursement of costs and expenses, and for remuneration for Trustees acting in that capacity. As Bromwich J explained in Coshott v Amirbeaggi [2016] FCA 966 (“Coshott”) at [30], another case involving the expenses of trustees for sale appointed under Conveyancing Act, s 66G:

“[30]   Both of the arguments advanced by counsel for the Trustees for Sale were supported by a third public policy argument he advanced to the effect that not allowing for full and proper (and implicitly, reasonable) recompense for acting as a trustee would seriously undermine the efficacious exercise of the accepted jurisdiction to appoint trustees for sale in the first place, regularly exercised by judges of the Supreme Court of New South Wales and also to a more limited extent by judges of this Court in circumstances akin to the present. Such a finding at the level of either power, or of interpretation of the orders made, would make it difficult to find persons willing to act in such a role if they were at risk of not being paid properly and not being fully reimbursed as to the reasonable costs of doing so. This argument directly addresses both the reading down of the power exercised by Buchanan J to limit the scope of recompense that could be ordered to be paid as part of a statutory trust (discussed further below), and to limiting the effect of the orders that were in fact made.”

43. Quite apart from the recovery of the Trustees’ remuneration authorised by Order 8, the Trustees have a general law right to reimbursement for all monies paid for expenses they reasonably incurred in the execution of the trust. Various forms of order are often employed using words such as “property incurred”. Where used, those words mean “not improperly incurred” or “reasonably” as well as “honestly incurred”: Beddoe, In re; Downes v Cottam [1893] 1 Ch 547. Ordinarily the costs of employing accountants and valuers for audit and stock taking of a business operated by the Trustees would be an expense properly incurred: Bennett, In re; Jones v Bennett [1896] 1 Ch 778.

44. The approach the Courts adopt in scrutinising the Trustees’ expenses seeks to avoid two undesirable outcomes: full taxation of the Trustees’ expenses on the one hand, and broad brush discounts on the other. Courts have a long standing and understandable reluctance “to engage in a process of or akin to a full taxation or its equivalent”: Coshott at [56]. But courts have also been critical of judges “for applying an overall discount without identifying the effect that specific issues had on the overall outcome”: Templeton v Australian Securities and Investments Commission (2015) 108 ACSR 545; [2015] FCAFC 137.

45. The applicable test has recently been couched another way. Unless it is shown that something has occurred to deprive the trustee of his right to take his costs out of the trust fund, such as some sort of impropriety, sale trustees are entitled “as a right to be recouped everything that [they have] expended properly in [their] character as …trustee”: Perpetual Trustee Co Ltd v Attorney-General of New South Wales (Will of Hon Nesbitt) [2018] NSWSC 1456 per Leeming JA at [125], [126], and see [122] – [128].

46. The Trustees should be remunerated for all steps taken reasonably and honestly while acting as trustees for sale in execution of the trust. Here, in practical terms, this includes dealing with all the unpredictable obstructions that the Trustees encountered, provided that they dealt with those obstructions reasonably and honestly.

47. No impropriety has been raised against these Trustees in the execution of this trust for sale. The only issue for determination is the reasonableness of the expenses they have incurred in serving the objective of executing the trust.

48. The Trustees submit that all their costs, expenses and remuneration should be recovered, as being reasonable in the circumstances of this case, and should be approved without reduction, save for certain amounts of $97.90 and $275 conceded by Mr Fritchley in evidence. The Trustees submit that the costs and expenses they incurred represent the actual liabilities they incurred in execution of the trust and that their remuneration is reasonable.

49. In my view, subject to the particular matters which are dealt with below that are raised by the third plaintiff, the Trustees have established that all of their costs and expenses incurred and remuneration claimed are properly justified as being reasonable in the circumstances of the case. This conclusion is justified by the detailed explanation the Trustees have provided of their work and of the reasons why they have incurred each of the expenses in question. The Court is wholly satisfied by evidence that each of those expenses claimed was related to the execution of the trust, satisfied not only because Mr Lucan, Mr Fritchley and Mr Brotherson depose to that, but because a review of the expenses objectively shows that they are the kind of expenses which are likely to have been reasonably incurred in the somewhat unusual circumstances of this case. Those circumstances have been canvassed elsewhere in these reasons and do not need repetition here. So far as s 66G proceedings go, this case is at the high intensity end of trustee – beneficiary and co-owner to co-owner conflict. Common sense dictates that, where there are threats of litigation or at least a not unrealistic sense that litigation against the Trustees or among the co-owners is possible, the Trustees will incur levels of expense, partly against the possibility of future litigation, that would not need to be incurred in the ordinary case.

50. The Trustees pressed upon the Court another relevant consideration: Ms James’ conduct in prior litigation. Their contention was that she had a natural tendency to engage in aggressively contested litigation. But the Court is cautious about drawing such an inference from the prior litigation in which Ms James was involved. The Court has not directly experienced that litigation. The Court is certainly entitled to take this into account, and has indeed worked from what it saw of Ms James and her interaction with the plaintiffs and the other parties in these proceedings in the several directions hearings and appearances that have taken place since I was first involved in these proceedings in February 2018.

51. There have been nine appearances of the parties before me. Ms James has appeared on four occasions before me. But even in her absence, many of the issues raised by the plaintiffs related to containing the effects of her conduct in the proceedings.

52. Finally, before proceeding to the individual objections, it is to be noted that Mr Cathro and Mr Brotherson are senior members of their respective professions with considerable experience. They were chosen, one can infer, in this case partly because it was anticipated that the judgment which would accompany their professional experience was thought to be a necessary resource in dealing with the conflicts that were expected in the administration of this trust.

Particular Objections to the Trustees’ Costs

53. The particular objections lodged against the Trustees’ costs and expenses mainly came from the third plaintiff, supported to a degree by the first plaintiff. Ms James did not participate in this part of the hearing and did not lodge any objections. The Trustee in Bankruptcy did not lodge any objections. This section of these reasons only deals with the objections that were ultimately pressed. The balance may be taken as conceded.

54. The narrowing of the focus of the objections in part comes from the critical eye that Mr Hughes of counsel applied to the wide-ranging objections that had originally been deployed. He took a forensic decision not to press a number of objections. His judgment was well made, as many of the initial objections did not appear to be sustainable.

55. The third plaintiff’s objections to individual charges were summarised in two documents, annexures “C” and “D” to the affidavit of Madeleine Joye Reid of 16 November 2018. Annexure “C” is entitled “Schedule of Parties and Charges”. Annexure “D” is entitled “Objections to Costs Charged”. Both schedules set out the third plaintiff’s objections to aspects of Worrells’ claimed fees and charges in alleged performance of the Trustees execution of the trust.

56. Annexure “C” Objections. These reasons deal first with the objections set out in Annexure “C” and then the objections set out in Annexure “D”.

57. (1) Appearances on 14 March 2018. The Court gave its first judgment on 14 March 2018. The third plaintiff objects to some expenses the Trustees incurred on that day and submit that they should not be allowed by the Court as they were unreasonably incurred.

58. The background to this objection is the events of 13 to 16 March 2018. The Court held a hearing on 13 March 2018. I reserved my decision overnight and made orders the following day, 14 March 2018. I published reasons on 16 March 2018. Mr Hughes of counsel was not briefed at that stage of the proceedings on behalf of the third plaintiff. But the third plaintiff objects now to the expenses incurred in one of the Trustees, Mr Brotherson, attending Court on 14 March. The third plaintiff also objects to Mr Cathro having a legal representative from his firm in which he is a partner attending on that day. The third plaintiff submits there is no reason why either person needed to be represented in Court on that day just to take judgment. The submission is that neither Mr Brotherson nor Mr Cathro needed to be represented but they could have been available on the end of a telephone. The charges in question total about $2,500. No issue is taken that Mr Fritchley and Ms Clemmett of counsel did need to attend the Court that day.

59. This objection is not successful. It fails to take proper account of the underlying dynamic of this case, involving Ms James. The Court’s record shows that Ms James was present on 14 March 2018, the day the judgment was given. At the conclusion of the hearing on 13 March 2018, it was not unlikely that Ms James would appear when orders were made the following day. It was certainly not an unreasonable assessment on the Trustees’ part that such attendance was necessary because of the unpredictable fashion in which Ms James had conducted these proceedings up to that point. The two Trustees may well have been required to respond at very short notice to further submissions coming from Ms James. Being in the courtroom to be able to listen to those submissions and give immediate instructions to counsel and solicitors, rather than have the context of what happened in Court conveyed to them, was a considerable advantage to their own clients and to the efficiency of the conduct of the proceedings.

53. As it turned out, events ran more smoothly on 14 March 2018 than might have been anticipated. But Mr Brotherson and Mr Cathro did not know this in advance. In my view, their presence (and therefore attendance cost) was some protection against the possibility of adjournment and better equipped them to give the most apt instructions to deal with events as they unfolded.

54. But this objection raises a matter of incidental relevance to the remaining apportionment contests in these proceedings. One of the reasons the Court rejects this objection, was the need for the Trustees to be there to respond at short notice to Ms James’ unpredictable conduct in the proceedings. Had Ms James not conducted herself in the proceedings the way she did, there would have been less basis for the Trustees to justify such expenditure. Therefore when it comes to the apportionment of expenditure, items such as this, where the Trustees’ expenses are at least in part related to the need to react specifically to Ms James’ conduct, may be the occasion for the plaintiffs to argue that the Trustees’ expenses and remuneration should be to the account of Ms James, rather than the plaintiffs. But in my view, as between the three plaintiffs and Ms James on the one side, and the Trustees on the other, costs such as this were reasonably incurred because of the situation which the Trustees’ faced.

55. (2) Events on 29 May 2018. The writ of possession was executed on 29 May 2018. Ms James was evicted from the Property that day. The third plaintiff objects to expenses incurred by the Trustee that day in having persons in attendance at the eviction. The third plaintiff says that their attendance was not necessary and the expenses associated with their attendance were unreasonably incurred. The Trustees contest the submissions and contend that these expenses were reasonably incurred.

56. A number of charges incurred on 29 May 2018 are the subject of objection. Mr Fritchley attended at the eviction for 2.9 hours that day charging $1,595. Mr Brotherson also attended for the same period, charging $1,885. The third plaintiff’s point is that if Mr Fritchley was present, then Mr Brotherson could have been available by telephone. Various charges were incurred by Worrells the same day. Mr Phillip Christman from Worrells engaged a locksmith, travelled to Clovelly to take possession and took possession, dealt with the Sheriff to co-ordinate the removal of Ms James and then travelled back to the Parramatta office from the Property. Each of these components of Mr Christman’s work was variously charged in amounts of $152.17 (20 mins), $494.54 (65 mins), $2,663.92 (350 mins) and $646.71 (85 mins).

57. None of these charges are objected to, but the third plaintiff submits that it was also not necessary for additional charges to be incurred by Mr Lucan. The Trustees have sought to claim for Mr Lucan to attend the eviction, for Mr Lucan’s time (335 mins), being a total of $3,685, an attendance the third defendant says was unnecessary in the circumstances.

58. The challenge to Mr Brotherson and Mr Lucan’s charges is not persuasive. Once again context is important. It could reasonably have been anticipated by the Trustees that Ms James would be present at the time of eviction. After all, she had stoutly fought her eviction and the appointment of the Trustees with a passionate conviction. She was living in the Property. It was highly probable that she would be present. For reasons somewhat similar to those that apply to the charges on 14 March 2018, it was necessary for Mr Brotherson and Mr Lucan to be present. Unpredictability and chaos were the order of the day with Ms James. No one knew what she was going to do next. The best way for the situation to be managed was to have one of the Trustees there and a senior person from the other Trustee represented. In many ways the presence of Mr Brotherson and Mr Lucan show the Trustees’ good judgment in keeping a close watch on the detail of the important moments in the execution of the trust. And this surely was one of the most important moments of all.

59. But there is another reason to justify their presence at the eviction quite apart from Ms James being there. The state of the premises and the nature of Ms James’ claimed improvements to them all had to be assessed quickly, so that the execution of the trust could move to the next phase. Also there were heirlooms and other property to be moved and decisions to be made about the storage of property. A wide range of items needed to be dealt with under these headings. It would have been very difficult for the Trustees to give sound instructions about the disposition of this property without seeing the premises at the first available opportunity. It is doubtful that a realistic picture of the Property could possibly have been conveyed merely by photographs, as the situation was so varied.

60. Moreover, Mr Brotherson’s and Mr Lucan’s time charged for attendances are not great in the circumstances; they are respectively just under and just over 3 hours. That is the kind of period one would have expected that would have been needed to acquaint both individuals with the Property and to manage Ms James off the Property as smoothly as possible.

61. Other incidental objections are taken to the charges on that day. The third plaintiff questions other charges by Mr Brendan Gyles, an employee of Worrells in the amount of $1,201.20 (126 mins). He was involved in taking various steps around possession, searching for emergency crisis housing, drafting a letter to the occupant and making specific arrangements in relation to taking possession. Mr Gyles was managing the eviction at the human level to make sure that Ms James was properly accommodated and had crisis housing available to her. She was saying on the day to those evicting her, “I have nowhere to go; I will be homeless.”

62. Eviction from accommodation is a stressful and humiliating legal process. It is incompatible with contemporary Australian standards of human dignity for a party taking possession of real estate to leave a traumatised evictee on the footpath with their furniture to fend for themselves. Attempts by the Trustees to soften the worst effects of an eviction by finding crisis housing readily withstand scrutiny as reasonable expenses of this eviction. And that is particularly so here, with an occupant, Ms James, who’s past mental state of high anxiety has been the subject of the psychiatric evidence referred to in my previous judgment.

63. (3) 7 June 2018 Court Attendance. The third defendant challenges claims for attendance by Mr Brotherson ($975) and Mr Brendan Gyles of Worrells ($1,048.67) at Court on the basis that competent counsel and a competent solicitor were present and the charges for the presence of those representatives should not be allowed.

64. This argument is not persuasive. Ms James did not attend that day but that was not known in advance. Moreover, 7 June 2018 was a day of some complexity. The Court made three pages of orders to deal with issues relevant to the sale of the Property after Ms James’ eviction. On 7 June 2018 the matter was listed at 9.30am. The Court had a hearing at 10am. Instructions would therefore most efficiently have been taken directly from the Trustees in Court, who could hear the debate with the Bench. This meant that in practice the matter did not have to be stood down and other costs incurred of counsel coming back to Court at a later time after obtaining instructions. In my view, these costs were reasonably incurred.

65. (4) Court Expenses on 3 October 2018. The third plaintiff also challenges expenses attributed to Mr Gyles of $934 (98 mins) and Mr Lucan from Worrells of $1,188 (108 mins) on 3 October 2018. No objection was taken to charges incurred by Mr Fritchley of $825 (1.5 hours) for Mr Fritchley’s attendance. The objection taken is that charges from either Mr Gyles or Mr Lucan would be appropriate but not from both of them.

66. This argument is not persuasive. Again context is important. The Court made ten orders covering some two pages on that day, giving directions about how the whole process of dealing with the Trustees’ expenses should be managed. The orders included: dealing with submissions, objections, and the joinder of the Trustee in Bankruptcy as a defendant and a timetable in relation to submissions in relation to the Cross-Vesting Act. Much was in play that day concerning the future conduct of the proceedings. Having two persons from Worrells with direct experience of the Bench’s intent with respect to the future management of the case was not unreasonable in my view.

67. The Annexure “D” Objections. The objections set out in annexure “D” are no more successful. Mr Hughes of counsel for the third plaintiff, Steven James, aptly characterised them as objections on the basis that the charges were unreasonable because they involve duplication with other charges. The largest group of Annexure “D” charges relate to a Worrells employee, Ary Su.

68. Expenses Attributable to Ms Ary Su. The third defendant challenges charges of $8,122.50 associated with an employee of Worrells, Ms Ary Su. The task attributed to Ms Su includes work such as “reviewing and saving emails”. The third plaintiff’s point is that this is something that Worrells probably do to make their business more efficient. But it is submitted that it is an overhead expense that Worrells should bear throughout its business and is not a charge that can be passed on by Worrells to these property owners.

69. But this objection is not persuasive. Ms Su’s particular work being charged for seems to relate only to reviewing and saving emails in respect of this matter. It is not a general overhead of the business but is related to Worrells’ work on this particular retainer. As it is so related, it is clearly a candidate for being charged out as an expense of the execution of the trust. Such charges are not really overheads at all. Overheads are in the nature of expenses that are not related to particular clients but are necessary to open a business or provide a working platform keeping the business operational, so that it can then deploy its personnel to make profit providing services to and then charging particular customers.

70. Ms Su’s work could really be likened to organising a particular file in an order that made it more readily accessible by more senior members of the firm. The benefit of the work done is for the file and the client, so the partner does not have to look for things within the file. This in turn makes the provision of services by the partner of the firm more efficient and cost effective. In my view, all these expenses should be allowed as well.

71. The objections raised to the charges unrelated to Ms Su are not persuasive. They do not have to be dealt with item by item. But they can be dealt with here in groups of Items.

72. Items 20 and 21. These objections relate to Mr Cathro reviewing court orders and emails, apparently duplicating a separate similar charge by Mr Philip Christman. But the duplication is necessary. For efficiency, more than one senior professional person within Worrells needs to be familiar with the Court’s orders and the principal email correspondence. This is necessary for the purpose of mutual discussion and also to provide business continuity when one or the other person is not available.

73. Items 23 and 25. These objections relate to charges for travel to and from the Property at full professional charge out rates. But the charges are reasonable. Professionals are involved, even if it is only for travel. Unless the time is spent the professional cannot provide professional service at the Property. The charges listed represent a forgone opportunity cost of the professionals involved. In my view, these charges are unremarkable and should be allowed.

74. Items 26, 28, 29, 32, 34, 35 and 36. These charges and objections relate to 3 separate people within Worrells reviewing the marketing proposals that were provided by real estate agents in relation to the property. The third plaintiff submits that the partner of the firm, Mr Lucan, had prepared a selection criteria matrix for assessing the marketing proposals and that that should have been decisive so that the other charges need not be incurred.

75. But these charges are well justified for several reasons. First, the strengths and weaknesses of each of the marketing proposals needed to be evaluated and discussed. Group decision-making about such matters is apt to produce a better outcome than a single person reviewing such proposals. For that purpose, several people within Worrells would have had to become familiar with all the proposals.

76. Secondly, in contentious appointments of trustees for sale is not uncommon for the trustees to be attacked for failing to sell the subject property at market value. Special care needs to be taken to ensure that the property is marketed to its best advantage. The potential for such criticism in this case is obvious; relations between the plaintiffs and the first defendant are poisonous.

77. Item 63, 64, 65, 66 and 67. These objections relate to administrative charges that the third plaintiff claims should be absorbed into hourly rates and not charges as extras. A few of these charges are for Ms Su. Others are for Mr Giles. The same logic by which the Court has allowed the charges for Ms Su means that these charges should be allowed as well.

78. In the result, the Court has allowed all the charges the Trustees have claimed. The Court’s decision not to disapprove any particular charges is justified by reference to the logic set out earlier in these reasons. But it is not to be forgotten that overall upon a review of Worrells total charges by Mr Giles that reduction of the $4,033.40 was made to reflect work that had been duplicated or otherwise did not contribute to the furtherance of the appointment. The fact that this deduction has already occurred gives the Court greater confidence in judging the remaining work charged for as being reasonable.

Jurisdiction – State or Federal?

86. The determination of the apportionment issues will involve the Court making orders that may affect the bankrupt estate of Ms James. It will do so by either increasing or decreasing (possibly to nil) the amount that would otherwise be payable to her bankrupt estate from the proceeds of sale of the Property. The Trustee in Bankruptcy’s present entitlement to a one-quarter share of the net proceeds of sale from the Property arises by virtue of the vesting of property upon Ms James’ bankruptcy under Bankruptcy Act, s 58.

87. The parties do not contest in their submissions that any Court order that the Trustee in Bankruptcy’s interest in the sale proceeds reduces because of her conduct in relation to the sale or in relation to the Trustees, or is to be charged with an occupation fee, would constitute an order declaring “for or against the title of the Trustee to that property” within Bankruptcy Act, s 31(1)(f).

88. The Court agrees with the position taken by the parties. Bankruptcy Act, s 31(1) lists a wide range of common determinations in the exercise of jurisdiction in bankruptcy: matters ranging from the hearing of creditors’ petitions to the committal of persons to prison and hearings under Bankruptcy Act, Part X involving personal insolvency agreements. All such matters, including a determination under s 31(1)(f), are exercises of “jurisdiction in bankruptcy” within Bankruptcy Act, s 27, which confers concurrent jurisdiction in all such matters on a court of federal jurisdiction in bankruptcy (either the Federal Court of Australia or the Federal Circuit Court of Australia).

89. Bankruptcy Act, s 27 further provides that such jurisdiction “is exclusive of the jurisdiction of all courts”. Indeed the investing of exclusive jurisdiction in bankruptcy under s 27 has been described as “effecting a repeal of the general investing of federal jurisdiction in State courts…by section 39(2) of the Judiciary Act…to the extent any jurisdiction or proceeding arises under or by virtue of the Bankruptcy Act”: Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380; [2008] FCAFC 172 (“Meriton”) (at [81]).

90. The Court’s determination of the apportionment issues would be an exercise of jurisdiction “in bankruptcy” within Bankruptcy Act, s 27. Here wider issues do not arise (as do commonly arise) as to whether this dispute merely involves the recognition of the legal effect of a provision in the Bankruptcy Act and does not actually involve the exercise of the jurisdiction “in bankruptcy”: see In the matter of Galtari Pty Ltd (in liq) [2018] NSWSC 917 at [20] – [65] and Meriton.

91. In this case the claim by the Trustee in Bankruptcy is to the whole of a one quarter in the proceeds of sale. Any determination of the apportionment issues against Ms James, based on the claims of the plaintiffs, would be inconsistent with the Trustees’ claim to that entitlement and by an application of Bankruptcy Act, ss 31(1)(f) and 27, would fall within federal jurisdiction: Cordes as Trustee for George v Dr Peter Ironside Pty Ltd [2010] 2 Qd R 235; [2009] QCA 302.

92. This reasoning means that a ruling upon the apportionment issues also qualifies as a “special federal matter” within Cross-Vesting Act, s 3(1)(e). This is because it is a “matter that is within the original jurisdiction of the Federal Court by virtue of s 39B of the Judiciary Act 1903” and is “a matter in respect of which the Supreme Court of the State or Territory would not, apart from this Act, have jurisdiction”: Cross Vesting Act, s 3(1)(e). Cross -Vesting Act, s 6(1) requires all special federal matters under the Cross-Vesting Act must be transferred to the Federal Court of Australia. For these reasons, subject only to the operation of Cross-Vesting Act, s 6(3), the proceedings would be transferred to the Federal Court of Australia or the Federal Circuit Court of Australia pursuant to the Cross-Vesting Act.

93. But Cross-Vesting Act, s 6(3) modifies the general obligation to transfer special federal matters. It provides that the Court “may order that the proceedings be determined by this Court if it is satisfied there are special reasons for doing so in the particular circumstances of the proceedings, other than reasons relevant to the convenience of the parties”.

94. The Trustee in Bankruptcy and the third plaintiff both submit that there are good reasons for the Court to retain the balance of these matters in this jurisdiction and for this Court to determine the issues which arise between the co-owners, including the estate of Ms James, and that these proceedings should remain in this Court rather than be transferred to the Federal Court of Australia or the Federal Circuit Court of Australia.

95. The starting point for analysis is Cross-Vesting Act, s 6, which provides as follows:

“6.   Special federal matters

(1)   If:

(a)   a matter for determination in a proceeding that is pending in the Supreme Court is a special federal matter, and

(b)   the court does not make an order under subsection (3) in respect of the matter,

the court must transfer the proceeding in accordance with this section to the Federal Court or a court mentioned in subsection (2) (b).

(1A)   However, the court must only transfer so much of the proceeding as is, in the opinion of the court, within the jurisdiction (including the accrued jurisdiction) of the Federal Court, or the court mentioned in subsection (2) (b), as the case may be.

(2)   If the court orders that a proceeding or part of a proceeding be transferred, the proceeding or part of the proceeding must be transferred:

(a)   if the matter for determination in the proceeding is a matter mentioned in paragraph (a), (b), (c), (d) or (e) of the definition of special federal matter in section 3 (1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 of the Commonwealth—to the Federal Court, or

(b)   if the matter for determination in the proceeding is a matter mentioned in paragraph (ab) of that definition—to whichever of the Family Court, the Family Court of Western Australia or the Supreme Court of the Northern Territory, in the opinion of the court, is appropriate in the circumstances.

(3)   The Supreme Court may order that the proceeding be determined by that court if it is satisfied that there are special reasons for doing so in the particular circumstances of the proceeding other than reasons relevant to the convenience of the parties.

(4)   Before making an order under subsection (3), the court must be satisfied that:

(a)   a written notice specifying the nature of the special federal matter has been given to the Attorney-General of the Commonwealth and the Attorney-General of the State, and

(b)   a reasonable time has elapsed since the giving of the notice for the Attorneys-General to consider whether submissions to the court should be made in relation to the proceeding.

(5)   For the purposes of subsection (4), the court:

(a)   may adjourn the proceeding for such time as the court thinks necessary and may make such order as to costs in relation to an adjournment as it thinks fit, and

(b)   may direct a party to the proceeding to give a notice in accordance with that subsection.

(6)   In considering whether there are special reasons for the purposes of subsection (3), the court must:

(a)   have regard to the general rule that special federal matters should be heard by the Federal Court or a court mentioned in subsection (2) (b), whichever is appropriate in the particular case, and

(b)   take into account any submission made in relation to the proceeding by an Attorney-General mentioned in subsection (4).

(7)   Nothing in this section prevents the court granting urgent relief of an interlocutory nature if it is in the interests of justice to do so.

(8)   If, through inadvertence, the Supreme Court determines a proceeding of the kind mentioned in subsection (1) without:

(a)   the court making an order under subsection (3) that the proceeding be determined by that court, or

(b)   a notice mentioned in subsection (4) being given,

nothing in this section invalidates the decision of that court.

(9) This section does not apply to a proceeding by way of an appeal that is instituted in the Full Court of the Supreme Court if the court the decision of which is the subject of the appeal had made an order under subsection (3), or under section 6 (1) as in force before the commencement of the Jurisdiction of Courts (Cross-vesting) Amendment Act 1992, in relation to the special federal matter.”

96. A preliminary question arises. The parties have satisfied the Cross-Vesting Act, s 6(4) pre-condition to the Court exercising s 6(3) jurisdiction. The Trustee in Bankruptcy has served notice of the special federal matter on the Commonwealth Attorney General and the Attorney General of the State of New South Wales. Indeed the Attorneys of all the States of the Commonwealth have been served for more abundant caution. The need to comply with s 6(4) having been raised on 3 October 2018, notices were served well before the hearing on 23 November 2018. The Court is satisfied that a reasonable time has elapsed within s 6(4)(b) and nothing has been heard back from any of the Attorneys served.

97. Cross-Vesting Act, s 6(4) presents something of a puzzle. Its qualification that the retention of the proceedings in this Court must be justified by “special reasons” that are “other than the convenience of the parties” does not suggest that the parties’ convenience is wholly irrelevant. Rather, the provision suggests that there must be some decisive factor telling against the transfer to federal jurisdiction, which is not the convenience of the parties. But a decision not to transfer may still be compatible with the convenience of the parties, provided that is not the sole basis for the decision not to transfer.

98. The Cross-Vesting Act does not itself attempt to define the term “special reasons” used in s 6(3). The term should not demand that the circumstances must be “extraordinary” or “unique”. In a different context, Brereton J (as his Honour then was) considered the meaning of the phrase “special circumstances in relation to an extension of time applications”: Henry v Hancock [2016] NSWSC 71. His Honour said (at [60]):

“The use of the formula “special circumstances” reflects an intention that judicial discretion not be confined by a list of relevant factors, by capturing circumstances of potential relevance which are so various as to defy precise definition. Circumstances are special if they are unusual, uncommon or exceptional in character, quality or degree; if they differ from the ordinary or the usual; or if they are particular or individual; but they need not be unique…”

99. The Trustee in Bankruptcy and the third plaintiff submit that if the Court were to make Cross-Vesting Act, s 6 orders for the transfer of the proceedings to the Federal Court of Australia, the outcome would be likely to delay a determination and potentially interfere with the performance by the Trustee in Bankruptcy (a public official) of statutory obligations: Hopkins v Director General of Security [2014] NSWSC 281. It is further submitted that, added to the prospect of delay, is the additional costs that would be incurred by the transfer before the apportionment issues were resolved.

100. The Trustee in Bankruptcy contrasts the delay and the cost of the transfer with the fact that this Court has had control of these proceedings since their inception and is very familiar with the facts and issues. The Court, over the last 12 months, has been closely involved in the supervision of the administration by the Trustees and the incidental issues that have arisen between the co-owners. It is submitted there is an obvious efficiency in the matter remaining in this Court.

101. In my view, an order should be made that the apportionment issues should be determined by this Court. I am satisfied as required by the Cross-Vesting Act, s 6 that there are “special reasons” for doing so in the particular circumstances of these proceedings and that those reasons are “other than reasons relevant to the convenience of the parties”.

102. Upon the proper construction of s 6(3), the “convenience of the parties” is not excluded from the Court’s consideration provided it is not the determining factor. In my view, a determination by this Court not to transfer these proceedings to federal jurisdiction before the apportionment issues are decided overwhelmingly serves the better administration of justice. The convenience of the parties is to a degree also served by this decision. But the decision is wholly justified by promoting the better administration of justice; the reasons for this are elaborated below.

103. Those reasons are the following. First, I am prepared to continue to hear this matter should it remain in this Court. Although I am strictly not part-heard in the proceedings, once this judgment is given, there is a high likelihood that the matter will be re-listed before me. Such a re-listing brings with it the advantage of my prior direct experience of the conduct of the proceedings to date.

104. In this case that is a particularly important factor. There have been multiple directions hearings and mentions dealing with the following matters: difficulties with Ms James vacating the premises; the continued security of the premises; the opposition of Ms James’ three brothers, the plaintiffs, to any delay or further accommodation to Ms James’ occupation of the property; and the tender of documents associated with Ms James’ claim for compensation of renovations to the Property (even though that issue has not been formally embarked upon). The administration of justice will be better served by a judge who can embark upon the future issues in this matter from a platform of such background knowledge.

105. But that is not all. This case has unusual features which strongly suggest that the continuity of a determination within this Court is appropriate. The case is unusual in the high passions that have been exhibited on both sides. The Court has already described, in its principal judgment, Ms James’ conduct of the proceedings: James & Ors v James [2018] NSWSC 316 (at [24]). Two of the plaintiffs were self-represented. Their conduct of the proceedings showed a wholly committed and defensive response to Ms James’ aggressive conduct of the proceedings. The transcript does not reveal the tone and manner in which Ms James and the plaintiffs conveyed their submissions to the Court. But the Court saw and heard how that occurred. The Court anticipates that the issues that are to come will, in part, involve issues about the ultimate causes of, and responsibility for, the incurring of past costs by the Trustees. It is difficult to divorce from such issues the precise manner and conduct of the proceedings on both sides. I doubt that that could possibly be conveyed to any other judge in another jurisdiction, unless these proceedings were to have been videotaped.

106. Secondly, as counsel for the Trustee in Bankruptcy has submitted, there will inevitably be delays in the determination of the remaining issues in these proceedings, if they were to be transferred to the Federal Court of Australia or the Federal Circuit Court of Australia. The position in this Court is that once the matter goes back before the Registrar in Equity, and she is able to find a suitable date in my diary, the matter can be listed immediately for hearing. It is highly probable this can be achieved within the next few months. Particularly as this Court can make directions from its prior knowledge of the case to reduce face-to-face hearing time in the Court and reduce the range of issues that the parties otherwise wish to litigate. The progress of the proceedings in federal jurisdiction is less certain.

107. The potential effects of delay do not just relate to the convenience of the parties. There are wider interests at stake here. The creditors in Ms James’ bankrupt estate will potentially be waiting longer with a more extended estate administration. The passionate differences between Ms James and her brothers and their deep mutual sense of grievance also means that the early quelling of their controversy is a central consideration for the Court.

108. At those various directions hearings, the contest between Ms James and the Trustees was to the fore. A strong issue between the co-owners on apportionment issues is the plaintiffs’ contention that Ms James had not co-operated with the Trustees or the plaintiffs and had not given any assistance to them, and that she had put on evidence and made submissions which, in substance, were vexatious given that the Court clearly signalled that it was not determining before she vacated the Property many of the issues that she was seeking to agitate. I am best placed to judge the effects of the parties’ actual conduct on these matters.

109. Thirdly, the particular issues that the Court anticipates it will be called upon to determine in the remaining part of these proceedings do not require the Court to draw upon any specialist expertise in bankruptcy. All the Court will be doing is determining the relative responsibility of Ms James’ estate for the various costs incurred in the Trustees selling the Property pursuant to Emmett JA’s orders and considering whether Ms James is liable to account for her occupation of the Property. Once that task is complete, other issues relating to the administration of Ms James’ bankrupt estate can be transferred to and determined by the Federal Court of Australia or the Federal Circuit Court of Australia. To the extent that this Court will retain the conduct of this matter, it will not involve any dealings with creditors in Ms James’ estate but will be confined to a apportionment issues and issues incidental to apportionment.

110. Fourthly, Ms James’ bankruptcy occurred after Emmett JA’s orders appointing the Trustees. Some of the apportionment in question relates to a period of time that is not covered by her bankruptcy and is a routine incident of this Court’s exercise of jurisdiction under the Conveyancing Act 1919, s 66G. In many ways, the period that followed is just an extension of that earlier, pre-bankruptcy period which involves the assessment of legal duties and conduct that commonly arise in this Court’s jurisdiction.

111. This is a proper matter to remain within this Court’s jurisdiction, to the extent here indicated, to deal with the remaining apportionment issues only.

Conclusions and Orders

112. In the result, the Court has decided to allow as reasonable all the costs charges and expenses of the Trustees. And the Court has decided to order pursuant to Cross-Vesting Act, s 6(3) that, notwithstanding these proceedings are a special federal matter, the proceedings should remain in this Court solely for the purposes of determining what these reasons have described as “apportionment” issues. Thereafter, the proceedings can be remitted to the Federal Court of Australia or the Federal Circuit Court of Australia.

113. The parties have been able to agree upon many orders, including an agreed quantum of the Trustees’ future expenses. But many further orders and directions will need to be made to accommodate the effect of these reasons. So the Court has decided to simply direct that the parties consult and bring in short minutes of order to give effect to these reasons.

114. Although these orders contemplate a further short mention on 2 April 2019 to make orders, if substantial agreement is reached before that date, short minutes of order may be delivered to my chambers. The orders may be able to be made at an earlier date, with any remaining disputed issues being the subject of a hearing on 2 April 2019.

115. Accordingly, the Court makes orders and gives directions as follows:

1. Direct the parties to consult and to bring in short minutes order to give effect to these reasons, which should be provided to the Court by Monday, 1 April 2019 at 4pm;

2. Adjourn the proceedings before me to Tuesday 2 April 2019 at 9.30am for the making of orders to give effect to these reasons;

3. The date for mention referred to in order (2) can be vacated by agreement if there is complete consent to the short minutes of order and the Court is satisfied the order should be made in the form agreed; and

4. Grant liberty to apply.

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Amendments

22 February 2019 - Heading formatted

Decision last updated: 22 February 2019