Mandie v Memart Nominees Pty Ltd [No 2]
[2020] VSCA 320
•11 December 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2018 0160
| EDWARD NICHOLAS MANDIE & ORS (according to the attached Schedule) | Appellants |
| v | |
| MEMART NOMINEES PTY LTD (ACN 005 024 617) (as trustee of the DAVID MANDIE FAMILY TRUST) [No 2] | Respondent |
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| JUDGES: | TATE, NIALL and EMERTON JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | Determined on the papers |
| DATE OF JUDGMENT: | 11 December 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 320 |
| JUDGMENT APPEALED FROM: | [2018] VSC 719 (Ginnane J) |
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COSTS – Rule that costs follow the event – Leave to appeal granted and appeal allowed – Mixed success on appeal – Declaratory relief sought on appeal refused – Appropriate to adopt broad pragmatic approach – Each party bear their own costs of appeal – Order dismissing proceeding below set aside – Appellants awarded 50 per cent of their costs below on the standard basis.
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| WRITTEN SUBMISSIONS: | Counsel | Solicitors |
| For the Appellants | Mr A J Myers QC with Mr A P Young QC and Mr R W Short | Cornwalls |
| For the Respondent | Mr P D Herzfeld SC | Allens |
TATE JA
NIALL JA
EMERTON JA:
On 13 November 2020 this Court delivered its principal judgment in Mandie v Memart Nominees Pty Ltd.[1] This judgment assumes a familiarity with the principal judgment.[2]
[1][2020] VSCA 281 (‘principal judgment’).
[2]The terms used here, including ‘the Trust’, ‘May Declaration’, ‘September Declaration’, ‘1995 Settlement Agreement’, and ‘the Deed’, are as defined in the principal judgment.
The orders made by this Court included a grant of leave to appeal from the order of Ginnane J dismissing the proceeding[3] and an order allowing the appeal.[4] The appellants[5] now seek an order that the respondent pay on the standard basis the appellants’ costs (including all reserved costs) of the proceeding before Ginnane J and the application for leave to appeal, and the appeal, in this Court. They do so in reliance on the settled rule that, in the ordinary case, costs follow the event; that is, a successful litigant should receive its costs and, unless there are special circumstances, on a successful appeal the successful litigant will be entitled not only to the costs of the appeal but also to its costs of the proceeding below.
[3]Mandie v Memart Nominees Pty Ltd [2018] VSC 719 (‘trial reasons’).
[4]In what follows, for convenience, where relevant, we refer simply to ‘the appeal’ and to ‘grounds of appeal’.
[5]Edward Mandie is the first appellant, Jane is the second, Isabella is the third, Amanda is the fourth, Nicholas is the fifth and Daniella is the sixth. Edward and Isabella are the children of Ian and Jane Mandie. Nicholas and Daniella are the children of Stephen and Amanda Mandie. The appellants were named below, as plaintiffs, in the same sequence. First names are used because of the common surname without any disrespect. We do not consider that it is feasible to distinguish individual members of the group of appellants. All the appellants were successful on Grounds 3 and 5 (the first, third, fifth and sixth appellants were also successful on Ground 1) and they shared the same legal representation throughout.
The appellants submit that they are successful litigants.
The application for costs is opposed. The respondent submits that the appellants have had ‘decidedly mixed’ success on the appeal and that each party should bear its own costs of the appeal. It further submits that the appellants ought pay 80 per cent of the respondent’s costs of the proceeding below on the standard basis.
In summary, the appellants (as plaintiffs) brought a proceeding before Ginnane J challenging the validity of two declarations that had been made by the respondent (‘the Trustee’), namely, the May Declaration and the September Declaration.[6] Both declarations involved an exercise of the exclusion power under the Deed. The May Declaration removed Ian and Stephen as General Beneficiaries under the Trust. For Ian and Stephen this was largely symbolic as they had already disclaimed any interest in the Trust in the 1995 Settlement Agreement, pursuant to cl 9.2 of that agreement. The September Declaration removed the appellants as General Beneficiaries under the Trust. Questions arose as to how the May and September Declarations should be construed and whether they aimed to do more than remove Ian and Stephen, and the appellants, respectively, as General Beneficiaries.
[6]These were also referred to as ‘the First Declaration’ and ‘the Second Declaration’ respectively in the pleadings.
In the proceeding before Ginnane J, the appellants alleged that the May Declaration was made without power and for an improper purpose and that the September Declaration was made in bad faith and for an improper purpose. The appellants also sought the removal of the Trustee by reason of having made: the May Declaration; the September Declaration; and distributions of income of the Trust for the financial years ending in 30 June 2012, 30 June 2013 and 30 June 2014.
In their Further Amended Statement of Claim (‘FASOC’) the appellants sought the following relief:
A. An order pursuant to section 41 of the Trustee Act 1958 (Vic) removing the trustee of, and appointing a replacement trustee in respect of, the David Mandie Family Trust.
B. All incidental accounts, enquiries, directions and orders (including as to the payment of interest and costs) as to the Court seems appropriate.
BA. Declarations that:
(a) the first, third, fifth and sixth plaintiffs are not bound by the 1995 settlement agreement;
(b)insofar as clause 9.2 of the 1995 settlement agreement purports to affect the rights or entitlements of the first, third, fifth and sixth plaintiffs, it is:
(i) of no effect;
(ii) not enforceable as against the first, third, fifth and sixth plaintiffs.
BB. A declaration that each of the first, third, fifth and sixth plaintiffs is a child of a Specified Beneficiary within the meaning of sub-clause 5(2) of the trust deed.
C. Declarations that:
(a) the making of the First and Second Declarations is in breach of trust; and
(b) the First and Second Declarations and any resolution of the defendant authorising the making of the First and Second Declarations, are invalid and of no legal effect.
D. Costs on an indemnity basis, alternatively costs.
E. Interest.
F. Further or other relief.
During the course of the trial, the parties agreed that the determination of the issue of the removal of the Trustee should be left until the other issues had been decided.
Ginnane J determined that the May Declaration was valid and was not actuated by an improper purpose. He also held that the September Declaration had not been made in bad faith or for an improper purpose. He held that the question of whether the Trustee had power to make the September Declaration had not been pleaded and therefore did not fall to be decided. He indicated in the trial reasons that he would discuss with the parties the necessary directions for the determination of any remaining issues in the proceeding, noting that he had not yet heard argument on the claim for the replacement of the Trustee.
Subsequently, and without further hearing, on 3 December 2018 Ginnane J ordered (in paragraph 1 of his orders) that the proceeding be dismissed.[7]
[7]On 12 April 2019 Ginnane J made various orders in respect of costs that are not material, although we set aside paragraph 2 of those orders and directed that the parties file and serve costs submissions addressing the costs of the proceeding below.
In their amended application for leave to appeal from the orders of Ginnane J the appellants, relevantly,[8] relied upon the following grounds of appeal:
[8]The appellants also relied upon grounds of appeal in respect of the costs orders made as a consequence of the proceeding having been dismissed. These are not material.
The 3 December 2018 order
Ground 1
The primary judge erred in holding, notwithstanding clause 5(2) of the Deed of Settlement (Trust Deed) of the David Mandie Family Trust (Trust), that:
(a) the First and Third Applicants, children of Ian Mandie, were not takers in default of appointment, with vested interests in the Trust property, from the time of their father’s disclaimer of all of his interest in the Trust in 1995;
(b) the Fifth Applicant, a son of Stephen Mandie, was not a taker in default of appointment, with a vested interest in the Trust property, from the time of his father’s disclaimer of all of his interest in the Trust property in 1995; and
(c) the Sixth Applicant, a daughter of Stephen Mandie, was not a taker in default of appointment, with a vested interest in the Trust property, from the time of her birth on 2 October 1997.
Ground 2
The primary judge erred in:
(a) holding that the Respondent’s 27 May 2014 declaration (May Declaration) that ‘from the date of this declaration ... neither Ian Mandie nor Stephen Mandie shall have any interest whether as a ... Specified Beneficiary or otherwise ...’ did not purport to exclude Ian Mandie and Stephen Mandie as Specified Beneficiaries of the Trust; and
(b) failing to hold that the Respondent made the May Declaration for an improper purpose.
Ground 3
The primary judge erred in:
(a) refusing to permit the Applicants to submit that the Respondent did not have power to make its 18 September 2014 declaration (September Declaration); and if any amendment to the Further Amended Statement of Claim (FASOC) were necessary to enable them to do so;
(b) refusing the Applicants leave to amend the FASOC to add an express allegation that the Respondent did not have power to make the September Declaration; and
(c) failing to hold that the Respondent did not have power to make the September Declaration.
Ground 4
The primary judge erred in failing to find that, in the circumstances appearing in the evidence, the balance of probabilities favoured the drawing of an inference (the inference) that in making the September Declaration the Respondent acted:
(a) in bad faith, arbitrarily, capriciously;
(b) without any real or genuine consideration; and or
(c) otherwise than for the purpose for which the power in the further proviso to clause 1(2) of the Trust Deed was conferred.
Ground 5
Further to Ground 4 above, the primary judge erred in:
(a) refusing to permit the Applicants to submit that the circumstances appearing in the evidence included the matters identified in paragraph 164 of the Applicants’ Outline of Closing Submissions; and, if any amendment to the FASOC were necessary;
(b) refusing the Applicants’ application for leave to amend paragraph 27 of the FASOC by adding as particulars to it the matters set out in paragraph 164 of the Applicants’ Outline of Closing Submissions.
Ground 6
The primary judge erred in failing to hold that an inference of the kind referred to in Ground 4 above was open from facts proved by direct evidence and the circumstance that the Respondent might have proved the contrary had it chosen to adduce any evidence from any of its officers was properly to be taken into account as a circumstance in favour of drawing the inference.
Ground 7
In considering the wishes of the de facto settlor of the Trust, the late David Mandie, the primary judge erred in:
(a)holding that there was no conclusive evidence that the wishes expressed in David Mandie’s Statement of Wishes dated 28 September 1995 (Statement of Wishes) had changed by the time of his death in 2011;
(b) holding that the bequests made by David Mandie to each of his grandchild Applicants in his Will dated 14 October 2004 were equivocal; and
(c) failing to hold that the wishes expressed in the Statement of Wishes were not David Mandie’s wishes at the time of his death in 2011.
Ground 8
The primary judge erred in finding, in the absence of any evidence as to any provision made for, or settled upon, the First, Third, Fifth and Sixth Applicants by their parents, that it is likely that the Respondent knew that the First, Third, Fifth and Sixth Applicants had been well provided for by their parents.
On the appeal, the appellants sought the following relief:
Orders sought:
I. The application for leave to appeal be granted.
2. The appeal be allowed with costs.
3.Set aside paragraph 1 of the Order made by the Honourable Justice Ginnane on 3 December 2018 and, in lieu thereof, declare that:
(a) the making of the May Declaration is in breach of trust;
(b) the making of the September Declaration is in breach of trust;
(c) the May Declaration and any resolution of the Respondent authorising the making of the May Declaration is invalid and of no legal effect;
(d) the [September][[9]] Declaration and any resolution of the Respondent authorising the making of the [September] Declaration is invalid and of no legal effect.
4. Set aside paragraph 2 of the Order made by the Honourable Justice Ginnane on 12 April 2019 and, in lieu thereof, order that the Respondent pay the Applicants’ costs of the proceeding below.
5. Such further or other order as to the Court seems fit.
[9]The Amended Application for Leave to Appeal referred in paragraph 3(d) to ‘the May Declaration’ but it was clarified at the hearing of the appeal that this should have referred to ‘the September Declaration’.
It is apparent that the heart of the relief sought lay in paragraph 3 involving declarations of breach of trust and the invalidity of the May and September Declarations.
In the principal judgment, this Court refused to make any of the forms of relief sought in paragraph 3.
On the appeal, this Court upheld Ground 1 and accepted that the first, third, fifth and sixth appellants were takers in default of appointment and that they have a vested but defeasible (and therefore inherently unstable) interest in the Trust Fund which is equal to the amount that their fathers would have taken on the Vesting Day if their fathers had not disclaimed their interest.[10] We accepted that the doctrine of acceleration applied in the circumstances, contrary to the Notice of Contention relied upon by the respondent, and rejected the conclusion reached by Ginnane J that the doctrine did not apply here because of a contrary intention in the Deed.
[10]Principal judgment [165], [167].
With respect to Ground 2, we took the view, contrary to the construction adopted by the judge, that the May Declaration ought be construed as purporting to effect, as of the date it was made, in respect of Ian and Stephen, a complete and immediate termination of all their interests in the Trust.[11] It was apt to convey an operative decision to remove any entitlement of Ian and Stephen as both General Beneficiaries and as Specified Beneficiaries under the Deed. We concluded that to the extent that the May Declaration purported to exclude Ian and Stephen as Specified Beneficiaries, it went beyond the powers conferred by the Deed.[12] However, given that Ian and Stephen had irrevocably disclaimed any interest in the Trust by the 1995 Settlement Agreement, they suffered no prejudice.[13] We were not persuaded that the directors of the Trustee knew that the May Declaration was beyond power in the manner described nor that the appellants (especially the grandchildren) were the targets of the power.[14] As the allegation of improper purpose was not established and the appellants were not affected by the May Declaration, we rejected Ground 2.[15]
[11]Ibid [188].
[12]Ibid [192].
[13]Ibid [198].
[14]Ibid [195]–[196].
[15]Ibid [199].
Ground 3 was upheld on a limited basis. We upheld Grounds 3(a) and (b) and considered that the judge erred by refusing leave to amend the FASOC to add [26D] and that his discretion miscarried.[16] We considered that the September Declaration, in its use of the words ‘or otherwise’ purported to convey that the named General Beneficiaries in the September Declaration had no entitlements at all under the Deed, even as takers in default.[17] Given our conclusion on Ground 1, this meant that the text of the September Declaration travelled beyond the power conferred by the Deed.[18] To that extent, we upheld Ground 3(c).[19] However, we rejected the submission that the September Declaration altered the original purpose or substratum of the Trust[20] or that the power of exclusion could only be exercised in response to disentitling conduct.[21]
[16]Ibid [227].
[17]Ibid [237].
[18]Ibid.
[19]Ibid [245].
[20]Ibid [238].
[21]Ibid [243].
Ground 4 was rejected.[22] We were not persuaded that the September Declaration was made in bad faith or for an improper purpose. This issue was central to the appeal and to the relief sought by the appellants with respect to alleged breaches of trust, invalidity of resolutions, and invalidity of the May and September Declarations. We considered that the judge was correct to observe that the power of exclusion necessarily has the potential to prejudice those who are excluded and benefit the remaining General Beneficiaries.[23] We also considered that the judge was correct to reject the pleaded case of the appellants that the September Declaration was made in response to the information proceeding.[24] We further rejected the submission that the words ‘or otherwise’ in the September Declaration had been inserted as a deliberate misuse of power.[25] We did not consider that the status of the grandchildren as takers in default informed the making of the September Declaration.[26]
[22]Ibid [280].
[23]Ibid [269].
[24]Ibid [270]–[271].
[25]Ibid [275].
[26]Ibid [279].
Ground 5 was upheld on the basis that the judge ought to have permitted the allegations in [164] of the appellants’ closing submissions, subject to omitting the allegation of spite on behalf of Evelyn, to have been considered in the context of determining whether the September Declaration was made for an improper purpose.[27]
[27]Ibid [260].
Ground 6 was rejected because the Trustee was not obliged to disclose its reasons, by evidence or otherwise.[28]
[28]Ibid [264].
Ground 7 was rejected because we considered that the judge was correct to take into account the wishes of David and Minnie expressed in the Statement of Wishes.[29]
[29]Ibid [283].
Ground 8 was rejected because we considered that the judge’s finding was undoubtedly correct on the evidence.[30]
[30]Ibid [286].
In the light of our reasons in the principal judgment, as described above, we accept the respondent’s submission that the success of the appellants was ‘decidedly mixed’. Furthermore, this is apparent not only from a consideration of the limited number of grounds of appeal that were successful but, equally as importantly, in the form of relief that this Court was prepared to make. Apart from granting leave to appeal, and allowing the appeal, this Court was only prepared to make, and did make, the following declarations in paragraph 3 of its orders:
Paragraph 1 of the orders of the Honourable Justice Ginnane made on 3 December 2018 is set aside, and in its place the Court makes the following declarations:
(1) a declaration that:
(a) the first, third, fifth and sixth appellants are not bound by the 1995 Settlement Agreement;
(b) insofar as clause 9.2 of the 1995 Settlement Agreement purports to affect the rights or entitlements of the first, third, fifth and sixth appellants, it is:
(i) of no effect, and
(ii) not enforceable as against the first, third, fifth and sixth appellants.
(2) a declaration that each of the first, third, fifth and sixth appellants is a child of a Specified Beneficiary within the meaning of clause 5(2) of the Deed.
(3) a declaration that, to the extent that the September Declaration purported to have effect beyond removing the first, third, fifth and sixth appellants as General Beneficiaries, it is invalid.
The declarations this Court made in paragraph 3 (1)(a) and (b), and (2), of its orders reflected some of the declarations sought before Ginnane J.[31] We refused to make the declarations sought in paragraph 3 of the application for leave to appeal.[32] As we remark above, the declarations sought in paragraph 3 lay at the heart of the relief sought and reflected the issues that were at the heart of the appeal. Amongst the relevant matters to consider in an award of costs is ‘the importance of the matters upon which the parties have been successful or unsuccessful’.[33]
[31]These reflected the declarations sought in paragraphs BA(a) and (b) and BB of the prayer for relief below.
[32]See [12] above. The relief sought in paragraph 3 of the application for leave to appeal reflected that sought at trial in paragraphs C(a) and (b) of the prayer for relief. See [7] above.
[33]Chen v Chan [No 2] [2009] VSCA 233, [10(5)] (Maxwell P, Redlich JA and Forrest AJA).
We consider that, because the appellants and the respondent each enjoyed a substantial measure of success on the appeal, the appropriate order is that each party should bear their own costs of the appeal.
With respect to an award of costs of the proceeding below, we consider that it is appropriate in this case to adopt a pragmatic approach, in light of the conclusions reached in our principal judgment.
This Court observed in Paragreen v Lim Group Holdings Pty Ltd [No 2][34] that:
[I]t is recognised that where multiple issues have been agitated, and the successful party has only enjoyed mixed success in respect of some of them, a court may, in an appropriate case, adopt a pragmatic approach by which it awards the successful party a proportion of its costs, but not the full amount.[35]
[34][2020] VSCA 97.
[35]Ibid [5] (citations omitted) (Tate, Kaye and Niall JJA).
We consider that the proper approach here to the exercise of our discretion to award costs[36] is a broad-based one, based on impression and evaluation,[37] rather than an attempt at arithmetical precision on a strictly issue-by-issue basis.
[36]Supreme Court Act 1986 s 24.
[37]See Major Engineering Pty Ltd v Helios Electroheat Pty Ltd [No 2] [2006] VSCA 114, [5] (Chernov, Ashley JJA, Mandie AJA).
In our view, the appellants succeeded in reversing the judge’s findings only on those grounds that were ultimately marginal to the overall proceeding. With respect to Grounds 3 and 5, overturning the judge’s refusals of leave on matters of practice and procedure did not ultimately lead the appellants to success on the question of whether the respondent engaged in breaches of trust or acted for an improper purpose. With respect to Ground 1, overturning the judge’s application of the doctrine of acceleration provided only a limited recognition of the grandchildren’s continuing interest in the Trust and no recognition of any continuing interest enjoyed by the spouse of either Ian or Stephen (the second and fourth appellants).
We reject the respondent’s submission that the appellants should pay 80 per cent of the respondent’s costs below primarily because it is undeniable that the appellants have been successful in setting aside the order of Ginnane J dismissing the proceeding. Therefore, they must be treated as having ultimately become the winning party in the proceeding below, noting that the issue of whether the Trustee ought be removed was expressly removed from the scope of the trial. Nevertheless, as we observed in the principal judgment, ‘[t]he focus of the trial was the decision to remove the [appellants] as General Beneficiaries and not the nature of the residual interests of the grandchildren as takers in default’.[38] As discussed, on the appeal the appellants have principally been successful in establishing the residual interests of the grandchildren as takers in default and this was less significant at trial. It is apparent from the trial reasons that, by contrast, the primary focus below was whether the May and September Declarations could be invalidated by reason of having been made by the Trustee for an improper purpose. On those issues the appellants were unsuccessful at trial and they have remained unsuccessful on those issues on appeal. Accordingly, we consider it would be inappropriate for the appellants to be awarded all of the costs of the proceeding below.
[38]Principal judgment [100].
However, we do not accept that this Court should conclude that the appellants, before trial, ought to have abandoned their claim that the Trustee had acted for an improper purpose. We consider that there was a proper factual basis for an arguable case on those issues, particularly given that we have accepted that, to a limited extent, both the May and September Declarations were made by the respondent beyond the power conferred on the Trustee by the Deed.
We consider that a fair and appropriate award is for the appellants to receive a proportion of their costs below from the respondent. In accordance with a broad-based approach, we consider that the respondent ought pay 50 per cent of the appellants’ costs below.
We will make the following orders:
(1) Each party bear their own costs of the application for leave to appeal and the appeal;
(2) The respondent pay 50 per cent of the appellants’ costs of the proceeding below (including all reserved costs) on the standard basis.
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SCHEDULE OF PARTIES
EDWARD NICHOLAS MANDIE First appellant JANE ELIZABETH MANDIE Second appellant ISABELLA MANDIE Third appellant AMANDA MANDIE Fourth appellant NICHOLAS ELLIOTT MANDIE Fifth appellant DANIELLA MANDIE Sixth appellant and MEMART NOMINEES PTY LTD (ACN 005 024 617) (as trustee of the David Mandie Family Trust) Respondent
9
4
0