Logos Research Institute Pty Ltd (in Liq) v Christi

SUPREME COURT OF SOUTH AUSTRALIA
(Civil)
LOGOS RESEARCH INSTITUTE PTY LTD (IN LIQ) v CHRISTI
[2022] SASC 54
Decision of Judge Bochner a Master of the Supreme Court
EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - INDEMNITY, LIEN AND REIMBURSEMENT - LEGAL COSTS AND COMMISSION ENTITLEMENT
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - ENDING PROCEEDINGS EARLY - DEFAULT JUDGMENT - OTHER MATTERS
DAMAGES - ASSESSMENT OF DAMAGES
Assessment of damages - default judgment.
Blackburn v Logos Research Institute Pty Ltd [2015] SADC 175; Hardoon v Belilios [1901] AC 118; Edgar & Anor v Ron Kingham Real Estate Pty Ltd [1999] 2 Qd R 439; Grizonic v Suttor [2011] NSWSC 471; Park & Muller (liquidators of LM Investment Management Ltd) v Whyte No 3 [2017] QSC 230, considered.

LOGOS RESEARCH INSTITUTE PTY LTD (IN LIQ) v CHRISTI
[2022] SASC 54
CIVIL

On 18 June 2021, default judgment was entered in this action in favour of the applicant. The applicant now seeks to have its damages assessed.
Background
Until the applicant was wound up by the Court and a liquidator appointed, the respondent, Ms Christi, was its sole director and shareholder. The applicant was the trustee of the Logos Trust, of which Ms Christi was the sole beneficiary. The applicant had never traded and had never held property in its own right. It has only ever acted in its capacity as trustee of the Logos Trust.
In February 2006, the applicant became the registered proprietor of a property at Aldgate. About a week later, it also became the registered proprietor of a property at Blackwood. In 2014, the applicant transferred the Aldgate property to Ms Christi by way of a deed of gift. It seems that Ms Christi lived jointly between the Aldgate property and the Blackwood property.
The Blackwood property
The Blackwood property is built on a steep hill. In 1991, an excavation was undertaken at its rear, to instal a tennis court. From about 1992, the land suffered a number of landslips, and over time, significant damage was caused to the Blackwood property, an adjoining property, and to infrastructure belonging to SA Water. The adjoining property was situated further up the hill, and the landslips caused the edge of the excavation to move closer to the boundary of the adjoining property. In 2011, the local council served an emergency order on the applicant, to carry out remediation works to prevent any further landslips or other risk. The applicant appealed the work order in the Environmental, Resources and Development Court; the Court ultimately upheld the order. The applicant did not carry out the required work.
In 2013, the owners of the adjoining property issued proceedings against the applicant and Ms Christi, seeking orders to compel them to carry out the required work. Without going into the somewhat tortuous path that that litigation took, suffice to say that the applicant was unsuccessful at trial and a significant costs order was made against it.[1] When the applicant did not pay the amount specified in the allocatur, the judgment creditor served, first, a statutory demand and then an application to have the applicant would up. The applicant was wound up in insolvency on 6 December 2016. At the time that the winding up order was made, the only asset of the applicant was the Blackwood property.
[1] The course of the litigation is set out in the judgment of Slattery DCJ in Blackburn v Logos Research Institute Pty Ltd [2015] SADC 175.
The trust deed which established the Logos Trust provided that, in the event that the applicant was wound up in insolvency, it became disqualified from acting as trustee of the trust. As a result, once the liquidator was appointed to the applicant, the trust was without a trustee. The effect of this was that the liquidator did not have the power to deal with the Blackwood property. The liquidator applied to the Supreme Court and on 7 November 2017, he was appointed Receiver and Manager of the Blackwood property. The liquidator then took steps to have the work required by the Emergency Order carried out.
Ms Christi refused to move out of the Blackwood property. In order to have the work carried out appropriately, and to sell the property, the liquidator was compelled to bring a further action in the Supreme Court to obtain possession of the property. She finally vacated the property on 21 December 2019, and the Emergency Order was removed on 15 May 2019. The Blackwood property was marketed and sold by public auction on 2 November 2019 for $615,00.
The Aldgate property
In February 2019, Ms Christi sold the Aldgate property. The liquidator sought a freezing order from the Supreme Court, to preserve the proceeds of sale so as to ensure that a fund remained available from which any shortfall could be recovered after the sale of the Blackwood property to pay out the applicant’s creditors. This order was granted on 20 May 2019, and the amount of $671,105 was paid into the Supreme Court Suitors Fund.
This action
Since April 2019, the liquidator has sought to reach an agreement with Ms Christi in respect of a payment by her pursuant to her obligation to indemnify the trustee for its outstanding obligations. It is in respect of the indemnity that this action was commenced. The liquidator relies on the principle set out in Hardoon v Belilios,[2] that a beneficiary is liable in equity to indemnify a trustee for any shortfall in assets against properly incurred liabilities.
[2] [1901] AC 118.
Initially, Ms Christi was represented by a solicitor and counsel and a defence was filed on her behalf, by which she disputed any liability to indemnify the applicant. In particular, she sought to impugn the actions of the liquidator, and stated an intention to contest the validity of his appointment as Receiver and Manager of the Blackwood property. She also alleged that the shortfall between the assets and liabilities of the applicant was caused by “excessive and punitive costs and expenses incurred by, and excessive remuneration of, Mr Macks as the Plaintiff’s (sic) liquidator and the receiver and manager of the property of the Trust.”[3]
[3] FDN 15, “Introduction”.
The interlocutory process in this matter did not run smoothly. By August 2020, Ms Christi was acting for herself. Over the course of the action, 30 hearings of one type or another were held, the matter was referred to a listing conference which was then vacated, and ultimately, the applicant was granted a default judgment on 18 June 2021. Auxiliary Judge Kennewell found that Ms Christi had committed persistent breaches of orders of the court which had severely prejudiced the proper and expeditious course of the action. She was also satisfied that Ms Christi had manifested an unwillingness to defend the action with due diligence.[4] Auxiliary Judge Kennewell made the following orders:
1. The Court declares that the Applicant is entitled to an indemnity from the Respondent for the liabilities incurred by the Applicant in carrying out its role as trustee of the Logos Trust to the extent those liabilities exceed realisations from the assets of the Trust.
2. The Court declares that the expenses outlined in paragraph 29 of the Second Statement of Claim being FDN 25 are expenses properly incurred by the Applicant in carrying out its role as trustee of the Trust.[5]
[4] Decision of Auxiliary Judge Kennewell, unreported, delivered 18 June 2021, [29] – [30].
[5] FDN 59.
She made timetabling orders in respect of the assessment of relief which was listed for hearing on 31 August 2021.
Ms Christi did not comply with the timetabling orders. The time frames set out in these orders were extended by consent.
On 22 September 2021, Ms Christi filed an application to have the default judgment set aside. On 5 October 2021, timetabling orders were made in respect of this application and it was listed for hearing on 26 October 2021. The orders provided that, in the event that the default judgment was not set aside, the assessment of damages would proceed on 2 December 2021.
On 26 October 2021, Ms Christi was not ready to proceed with her application to have the default judgment set aside. She indicated that she also wished to pursue an application that I recuse myself from any further dealings with this action. I adjourned the application to set aside the default judgment, and any application brought by Ms Christi that I recuse myself to 2 December 2021. Ms Christi did not comply with the timetabling orders made on 26 October 2021. The applicant consented to an extension of time for her to file her required material.
On 2 December 2021, I dismissed Ms Christi’s application to have the default judgment set aside, and her application that I recuse myself. When we proceeded to the assessment of damages, Ms Christi advised that she was not ready to proceed. Mr Stratton-Smith on behalf of the applicant made submissions on the quantum of damages and I made orders for the filing of any further material by Ms Christi, including submissions, after which the assessment would be dealt with on the papers. Ms Christi subsequently sought an extension of time within which to file her material. The applicant consented to this extension, on the basis that it would not consent to any further extensions of time. The parties were advised by way of email dated 14 February 2022 that my decision was reserved on that day.
No further material has been filed, or sought to be filed, by Ms Christi.
Assessment of damages
In respect of the assessment, the parties have filed the following material:
·The applicant has filed the affidavit of Ian Wayne Burford, liquidator of the applicant, affirmed on 16 July 2021 (FDN 60). The applicant also relied on a two volume tender book, against which FDN 60 was cross-referenced.
·The respondent has filed three volumes of material entitled “Materials As to Assessment & Relief in Equity” (FDNs 62-64).
I note that, on 8 July 2021, the Court declared that the expenses listed in paragraph 29 of the statement of claim were expenses properly incurred by the applicant in its role as trustee of the trust. These expenses are:
·The admitted creditors of the applicant and the trust;
·The costs of the work required to have the Emergency Order discharged;
·The costs of preparing the Blackwood property for sale;
·The costs of sale of the Blackwood property;
·The reasonable remuneration and disbursements and the legal fees of the applicant’s liquidator;
·The reasonable remuneration and disbursements and the legal fees of the trust’s receiver and manager.
The applicant’s position
The applicant relies on FDN 60 to establish the properly incurred expenses of the applicant. It seeks reimbursement in respect of creditors, the reasonable remuneration and disbursements of the liquidator and legal fees. FDN 60 deals with each of these categories of expense which are cross-referenced against the supporting documents found in the tender book. I will deal with each of the categories in turn.
The admitted creditors
I have examined all of the proofs of debt contained in the tender bundle. These total $217,777.20.
Legal costs
The liquidator incurred legal costs in respect of the liquidation. I note that, in the tender bundle, behind tab 42, are two sets of invoices from the liquidator’s lawyers, one in the sum of $83,142.50 (invoice 88856) and the second in the sum of $12,701.50 (invoice 89888). Behind tab 43, are two invoices from Mr Morcombe QC of counsel, the first dated 20 November 2017 in the sum of $12,210 and the second dated 1 February 2019, for an additional $2145. Of these fees, I note that the applicant only seeks an indemnity in the sum of $12,701.50.
Remuneration and work-in-progress of the liquidator, both generally and in respect of this action
Exhibited to FDN 60 are two spreadsheets which detail the work-in-progress for the liquidator and his staff from 6 December 2016 to 30 April 2021. The total amount comes to $570,401.30. The creditors of the applicants have approved the fees of the liquidator in the sum of $517,811.24. I have examined the minutes of the creditors’ meetings at which these fees were approved. They are behind tabs 18, 19 and 20 of the tender book.
Disbursements
The applicant seeks the sum of $5,045.11 in respect of the disbursements incurred by the liquidator in the course of his work.
In total, the applicant, as at the date of affirming FDN 60 (16 July 2021) sought default judgment in the sum of $805,925.11.
The applicant relied on the case of Edgar & Anor v Ron Kingham Real Estate Pty Ltd,[6] where the Court dealt with the meaning of the terms “properly incurred”. McPherson JA said:
In this context, the expression ‘‘properly incurred’’ (or, as s. 72 expresses it, ‘‘reasonably’’ incurred) means ‘‘not improperly incurred’’: see Re Beddoe [1893] 1 Ch. 35 547, 558.[7]
[6] [1999] 2 Qd R 439.
[7] Ibid, 442.
Mr Stratton-Smith submitted that it would be sufficient for me to find that there is nothing improper in the costs incurred by the applicant. The costs and fees incurred have been properly accounted for and with the fees substantiated by individual time entries for each person who worked on the matter. He submitted that the creditors approval of the liquidator’s remuneration was a factor that should weigh in favour of my acceptance of the reasonableness of the fees incurred.
Ms Christi’s position
Ms Christi filed three volumes of material which, by the heading, purport to relate to the assessment of relief. The material consists of emails to a number of people including lawyers in respect of her involvement with the justice system. It also includes newspaper articles, excerpts from judgments, and what appears to be copies of correspondence between Ms Christi’s lawyers and counsel in the District Court action. Some of the material is reproduced multiple times.
The material is difficult to understand, and it is even more difficult to determine its relevance in respect of quantum. It appears to deal with the merits of the District Court action, the cause of the land slips to the Blackwood property, and the actions of the applicant’s lawyers in respect of that. It appears to suggest that there is a conspiracy within the legal profession to prevent her from receiving justice in this matter. It appears to take issue with many of the interlocutory orders made in the course of this matter, without seeking to appeal any of them.
It is difficult to assign any weight to the matters set out in Ms Christi’s volumes. I accept that she feels deeply aggrieved by the process that has occurred since the local council served the first emergency order on the applicant in respect of the Blackwood property in 2011. I further accept that she feels deeply aggrieved by the actions of all of the lawyers and judicial officers who have been involved in this process, as well as the actions of the liquidator and his staff.
Consideration
In Grizonic v Suttor[8] Brereton J said:
Trustees are entitled to be reimbursed from the trust assets for all charges and expenses incurred in the execution of the trust [ Worrall v Harford (1802) 8 Ves Jun 4, 8; 32 ER 250, 252 (Lord Eldon LC)]. This right takes prioirity over the rights and interests of the beneficiaries [ Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319, 335]. To secure this right, trustees have a charge or lien over the trust assets [ Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360]. As well as a right of indemnity out of the trust assets, trustees have a related but distinct right to be indemnified personally by the beneficiaries, the rationale being that a beneficiary who gets all the benefit of trust property must also bear its burden [ Hardoon v Belilios [1901] AC 118, 123; Balkin v Peck (1998) 43 NSWLR 706]. These indemnities are the price paid by the beneficiaries for the gratuitous and onerous services of trustees [ Re Beddoe, Downes v Cottam [1893] 1 Ch 547, 558 (Lindley LJ, CA)]. It is immaterial that the beneficiary has never requested the trustee to become trustee [ Hardoon, 123; Balkin v Peck, 712]; the beneficiary's liability arises from accepting, or failing to disclaim, the benefit of the trust - that is to say, acquiescing in becoming or being a beneficiary [ Hardoon; Cameron v Renouf (No 2) [2009] WASC 84].[9]
[8] [2011] NSWSC 471.
[9] Ibid, [56].
This is the principle on which the applicant relies. In discussing what is meant by expenses “properly incurred”, the Supreme Court of Queensland, in Park & Muller (liquidators of LM Investment Management Ltd) v Whyte No 3,[10] said:
The starting point under the unwritten law is often stated to be that a liability or expense is properly incurred if it is not improperly incurred, but that formulation does nothing to explain the limits of what is proper or not improper. Another statement is that properly incurred means reasonably as well as honestly incurred. But again, that formulation does not explicate the relevant considerations. Not all reasonable and honest conduct, in a general sense, will meet the requirement that a liability or expense is properly incurred, because some of the duties of a trustee are strict and a liability or expense incurred by conduct in breach of such a duty will not be properly incurred.
The circumstances in which a liability or expense is incurred may significantly affect whether it is properly incurred in the relevant sense. Different approaches may be seen in some categories of case, and they may give rise to differences as to what is properly incurred in that category of case.[11]
(footnotes omitted)
[10] [2017] QSC 230.
[11] Ibid, [20]-[21].
It has been difficult in this matter to determine whether the expenses in respect of which the applicant seeks indemnity have been properly incurred, because there has been, in effect, no real contradictor to the applicant’s position. While Ms Christi was, to all intents and purposes, the contradictor, she has been unable to put before me any material which has addressed the question of the reasonableness or otherwise of the indemnity sought. The material on which she has relied deals with matters long since finalised, or seeks to impugn the conduct of lawyers and liquidators in a way that is impossible to relate to the specific expenses in respect of which indemnity is sought. All I can do is examine the material presented in the tender book and assess it as best I can. I will deal with each category in turn.
The admitted creditors
I accept that the creditors of the applicant are expenses properly incurred by the applicant. The Blackburns’ proof of debt is supported by Court orders in their favour. The proofs of debt lodged by 1878 Elix Pty Ltd and TressCox Lawyers are supported by invoices. Martin Legal Pty Ltd’s proof of debt is supported by an affidavit which was filed in the winding up action. I note that at no time was any attempt made by the applicant to seek a taxation of costs as between solicitor and client. As a result, the quantum of costs claimed has never been questioned by the applicant.
The applicant is entitled to an indemnity in respect of all of the admitted creditors.
Legal costs incurred by the liquidator
The legal costs incurred by the liquidator are supported by itemised tax invoices. There is no doubt that significant legal work was required in dealing with the liquidation, including obtaining advice in respect of, and then seeking orders for the appointment as Receiver and Manager of the trust property, obtaining an order for possession of the Blackwood property, attending to the removal of the emergency order and dealing with the related action in the Environmental, Resources and Development Court. Having considered the invoices provided at tab 42 of the tender book, I am satisfied that the legal fees were properly incurred.

The applicant is entitled to an indemnity in respect of the legal fees.
Liquidator’s remuneration, work-in-progress and disbursements
I note that the creditors have approved the vast majority of the remuneration sought by the liquidator. Nonetheless, I must satisfy myself that the expenses were properly incurred.
There is no doubt that the fees charged by the liquidator and his staff are very high. I am satisfied, however, that the liquidator and his staff were required to undertake more work than would ordinarily be required as a result of Ms Christi’s conduct. There were many telephone calls, meetings, and email correspondence with her; in addition, her refusal to vacate the Blackwood property, led to significant work for the liquidator and his staff. Further, the liquidator was required to arrange for the remedial work to be carried out on the Blackwood property which was time consuming and unusual.
Ms Christi’s conduct of this action also led to significant expense for and involvement of the liquidator which could have been avoided. Her many failures to comply with court orders led to many court attendances that would otherwise have been avoided, which in turn resulted in the need for the liquidator to consider the reasons for her non-compliance, and to provide instructions to lawyers in relation to them. This action, in itself, was significantly prolonged by Ms Christi’s conduct; I have no doubt that this resulted in significant expense being incurred by the applicant in respect of the liquidator’s remuneration.
In the circumstances, nothing has been put before me to lead me to the conclusion that the expenses claimed in this regard were not properly incurred.
The applicant is entitled to an indemnity in respect of the liquidator’s remuneration, work-in-progress and disbursements.
Conclusion
I am satisfied that the expenses in the sum of $805,925.11, in respect of which the applicant seeks an indemnity were reasonably incurred. The applicant is entitled to judgment in the sum of $805,925.11.
I will hear the parties in respect of the costs of this action.

[2022] SASC 54

31 May 2022