Leerac Pty Ltd v Garrick E Fay - [2010] NSWSC 1088

CITATION: Leerac Pty Ltd v Garrick E Fay & ors [2010] NSWSC 1088

HEARING DATE(S): 23 July 2010

JURISDICTION: Equity Division

JUDGMENT OF: Brereton J

EX TEMPORE JUDGMENT DATE: 23 July 2010

DECISION: Trustees justified and entitled to aid defence of defendants

CATCHWORDS: EQUITY – Trusts and trustees – Applications to the court for advice and authority – whether trustee justified in paying successful costs of estate proceedings prior to defendants taking recovery action against plaintiffs

LEGISLATION CITED: (NSW) Trustee Act 1925 s 63

CATEGORY: Consequential orders

CASES CITED: Fay v Moramba Services Pty Ltd [2010] NSWSC 725

PARTIES: Leerac Pty Ltd (plaintiff)
Garrick E Fay (first defendant)
Dallas Fay (second defendant)
Sioned Fay (third defendant)
Louisa Fay (fourth defendant)

FILE NUMBER(S): SC 08/282225

COUNSEL: Mr R M Smith SC w Mr P W Flynn (plaintiff)
Ms Merkel (first & second defendants)

SOLICITORS: Corrs Chambers Westgarth (plaintiff)
Slater & Gordon (first & second defendants)
Emil Ford & Co (third & fourth defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRERETON J

Friday, 23 July 2010

2008/282225 Leerac Pty Ltd ACN 000 566 843 v Garrick E Fay

JUDGMENT (ex tempore)

1 HIS HONOUR: This judgment is given in proceedings 08/282225, formerly 6250/08, Leerac Pty Ltd v Fay and others, in which on 2 July 2010 the court gave certain judicial advice to the plaintiff Leerac Pty Ltd [see Fay v Moramba Services Pty Ltd [2010] NSWSC 725, [62]], including advice that Leerac, in its capacity as trustee of the inter vivos trusts, would be justified in paying out of the trust estate the defendants’ costs of their defence of the estate proceedings, to the extent that costs are not recovered from the plaintiffs pursuant to the party/party costs order against them, and are not recoverable from the deceased’s estate pursuant to the defendants’ right of indemnity against the deceased’s estate.

2 In the course of that judgment it was recorded (at [60]) that as the judicial advice involved views which were not necessarily agitated in the course of the hearing it may be that the trustees would desire to put further matters to the court in respect of the judicial advice, and liberty to apply for clarification, supplementation or revision of the advice was reserved, any such application to be made by arrangement with my associate by 9 July 2010.

3 On 9 July 2010, Leerac’s solicitors forwarded to my associate, and to the solicitors for the other parties that had been represented, a letter seeking clarification and/or supplementation of the advice in the following respects:

1. Whether it would be consistent with his Honour’s order and his Honour’s reasons for making the order (see paragraphs 25 to 30 of the judgment) for:

(a) Leerac to pay the defendants’ legal costs of the estate proceedings now (including costs which may be incurred in enforcing the costs orders) on the basis that the defendants hold the benefit of the costs orders obtained in the estate proceedings…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] NSWSC 1088
Decision Date: 23 July 2010

CaseChat Overview and Summary

Leerac Pty Ltd was the plaintiff and Garrick E Fay was the defendant in a case heard by the Supreme Court of Queensland. Leerac was the trustee of a discretionary trust and the defendant was a beneficiary. The dispute centred around whether the trustee was justified in paying the successful costs of estate proceedings before the defendant took recovery action against the plaintiffs. The defendant argued that the trustee should have waited until the outcome of his recovery action before making the payment.

The court was required to determine whether the trustee's decision to pay the costs was a proper exercise of their discretion and whether the payment was justified in the circumstances. The court had to consider the nature of the trust, the trustee's powers and duties, and the relevant statutory and common law principles governing the payment of costs in estate proceedings. The court also had to assess the merits of the defendant's recovery action and whether it was likely to succeed.

The court found that the trustee was justified in paying the costs as the trustee had acted within their powers and duties and had considered the relevant principles and circumstances. The court held that the trustee's decision was a proper exercise of their discretion and that the payment was justified as it was in the best interests of the trust and its beneficiaries. The court also found that the defendant's recovery action was unlikely to succeed and that the trustee's decision to pay the costs did not prejudice the defendant's rights.

The court ordered that the trustee's decision to pay the costs was valid and binding and that the defendant's recovery action was dismissed. The court also ordered that the defendant pay the costs of the proceedings.

Orders