Metropolitan Petar v Mitreski

[2008] NSWSC 1021

CITATION:	Metropolitan Petar v Mitreski [2008] NSWSC 1021
HEARING DATE(S):	25/08/08
JUDGMENT DATE :	30 September 2008
JURISDICTION:	Equity Division
JUDGMENT OF:	Young CJ in Eq
DECISION:	Motion dated 18 August 2008 to strike out paragraphs of the defence of the 1st to 6th and 8th defendants to the statement of claim (version 9) granted with costs. Liberty to replead granted on the condition that proposed amendments are furnished to opposing parties no later than 7 October 2008.
CATCHWORDS:	CHURCHES AND RELIGIOUS ASSOCIATIONS [32]- Trust devoting property for church- Whether may be altered by subsequent practice- How far, if at all, acquiescence by another archbishop can bind successor.
LEGISLATION CITED:	Uniform Civil Procedure Rules 2005, Pt 14 r 28
CASES CITED:	Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 C H Magill Pty Ltd v National Australia Bank [2001] NSWCA 221; [2001] Australian Contract Reports 90-131 Davidson v Cooper (1843) 11 M & W 778; 152 ER 1018 Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] NZLR 433 Foley v Wontner (1820) 2 Jac & W 245; 37 ER 621 Free Church of Scotland v Overtoun (Wee Free case) [1904] AC 515 General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144 The Northern Progress [1996] 2 Ll LR 319 Trustees of the Roman Catholic Church v Ellis (2007) 63 ACSR 346
PARTIES:	His Eminence Metropolitan Petar, The Dioscesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (P1) The Very Reverend Father Mitko Mitrev (P2) Lambe Mitreski (D1) Pero Damcevski (D2) Boris Minovski (D3) Eftim Eftimov (D4) Mile Marcevski (D5) Macedonian Orthodox Community Church St Petka Incorporated (D6) Naum Despotoski (D8) Attorney General for the State of New South Wales (D9)
FILE NUMBER(S):	SC 3369/97
COUNSEL:	T G R Parker SC and R E Steele (P) G O Blake SC (D1-6 & 8) M Izzo (D9)
SOLICITORS:	Sachs Gerace Lawyers (P) McConnell Jaffray Lawyers (D1-6 & 8) Crown Solicitor's Office (D9)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

YOUNG CJ in EQ

Tuesday 30 September 2008

3369/97 – METROPOLITAN PETAR v MITRESKI

JUDGMENT

1 HIS HONOUR: These reasons are in connection with the motion filed by the plaintiffs on 18 August 2008 to strike out certain paragraphs of the defendants’ defence. As orally amended, the motion seeks to strike out paras 7A.2, 7A.11 to 7A.14, 7A.26 to 7A.41, 7A.45 to 7A.60 and 7A.67 to 7A.75 of the defence of the 1st to 6th and 8th defendants to the statement of claim (version 9) and all other paragraphs of the defence to the extent that they rely upon, repeat or otherwise incorporate those paragraphs. The application is made under Pt 14 r 28 of the Uniform Civil Procedure Rules 2005.

2 The motion came on for hearing before me on 25 August 2008. Mr T G R Parker SC and Mr R E Steele appeared for the plaintiffs, Mr G O Blake SC for the 1st to 6th and 8th defendants and Mr M Izzo for the 9th defendant (the Attorney General for NSW). There is no current 7th defendant.

3 Paragraph 7A of the statement of claim (version 9) is as follows:

“On the true construction of the Church Trust, in the circumstances set out in paragraphs 2 to 7 above,
(a) the Macedonian Orthodox Religion referred to in the Church Trust means the faith taught and practised by the Church; and accordingly
(b) the church and associated activities provided for by the Church Trust must be conducted in accordance with Church Law, or alternatively in accordance with fundamental provisions of Church Law, applicable from time to time to that church and those activities.”

4 Some of the terms used in para 7A are defined elsewhere in the statement of claim.

5 Paragraph 7 of the statement of claim says:

“On or about 5 April 1977, John Sergius Peetz acquired 65 Railway Street [Rockdale] and from that day forward held 65 Railway Street upon trust for the purpose of using 65 Railway Street as a site of a church of the Macedonian Orthodox Religion and for other purposes concerned with or ancillary to the encouragement practice and promotion of that Religion (the trust pleaded in this paragraph or such other trust for purposes involving the practice of the Macedonian Orthodox Religion as the Court may find to have been constituted being hereinafter referred to as ‘the Church Trust’).”

6 “Church Law” is defined in para 3.2 of the statement of claim in the following way:

“The Church has been self-governing in accordance with the Holy Scripture and Holy Tradition of the Orthodox Church, the Holy Canons of the Orthodox Church, the Church Constitution and in accordance with statutes, by-laws, regulations, rules, determinations and usage adopted by the various organs of the Church within their respective fields of competence (collectively referred to as ‘Church Law’).”

7 The defence to para 7A is also numbered 7A. Paragraph 7A.1 of the defence denies the allegations in the statement of claim. Paragraph 7A.2 pleads that the 1974 Constitution of the Church provided that the organisation and work of each church community outside of Macedonia was to be administered in a certain way.

8 Paragraphs 7A.11 to 14 plead that since 8 March 1977, the trusts have been subject to what is defined as “Church Practice” being the practice of the initiative committee up to 28 October 1977, the unincorporated association from that date to 27 April 1992 and the 6th defendant from that date until January 1996.

9 Paragraphs 7A.26 and following plead that the trust deed on its proper construction incorporated as from 28 October 1977 the unincorporated association constitution and say that the expression “Macedonian Orthodox Religion” means the faith taught and practised consistently with the unincorporated association constitution.

10 Furthermore (see eg paras 7A.34 and following) the pleading asserts that previous Metropolitans Kiril and Timotej acquiesced in this and that this binds the present plaintiffs. They are accordingly estopped from denying that the unincorporated association constitution governed the relationship between the trustees and the Church in relation to 65 Railway Street, Rockdale.

11 Paragraphs 7A.45 to 7A.60 say that the trust deed was altered or varied by what is called the “Peetz Declaration” from 28 October 1977 and incorporated the unincorporated association constitution from thereafter and that the present Metropolitan is estopped by what his predecessors did in acquiescing in that. Paragraphs 7A.67 to 7A.75 again are based on an estoppel.

12 As is usual in this sort of application, I was reminded by Mr Blake of the principles laid down by the High Court in General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125 that one only strikes out material where it is abundantly clear that the material to which objection is taken is material which, even if true, cannot lead to the success of the party pleading it. I have, of course, kept this principle in mind. However, as the material objected to in the instant case can clearly be dealt with on well established principles of law I have no difficulty with that particular principle.

13 Essentially Mr Parker put to the Court that the defence is bad in two respects:

(a) paragraphs such as 7A.2, 7A.13 and 7A.14 etc say that Church practice which came into being after 8 March 1977 can form part of a trust. This, he puts, is just not possible; and

(b) one cannot have an estoppel against the terms of a trust. Estoppel is a plea in confession and avoidance which operates in personam only.

14 I need to refer to some factual material which is common ground before proceeding further. I will then deal with objections (a) and (b) globally.

15 It must be remembered that at an earlier stage of these proceedings, Hamilton J dealt with some separate questions. There were three issues before Hamilton J which can be shortly summarised as follows:

(1) Was there a trust in respect of the property to which his Honour answered “Yes”.

(2) Was the trust a trust for purposes or persons? His Honour said it was a charitable trust.

(3) If there was a charitable trust, was the trust extinguished as a result of the incorporation of the previously unincorporated association to which his Honour answered “No”.

16 Mr Parker puts it is clear that a trust was established by 8 March 1977, though strictly speaking, it may well have been established in 1976 when the money was first collected.

17 A deed was made on 8 March 1977 as pleaded in para 5 of the statement of claim between certain of the founders of the Parish on the one part and John Sergius Peetz, a solicitor, on the other part. That deed required Mr Peetz to acquire the property and stand possessed of it to permit it to be used as the site of a church of the Macedonian Orthodox Religion. On about 5 April 1977 Mr Peetz did this.

18 However, to be precise about the matter, I should note that in paras 5, 6 and 7 of the defence, the 1st to 6th and 8th defendants say that 65 Railway Street was to be used by the proposed association as a site for the Church of the Macedonian Orthodox Religion and for other purposes concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox Religion and refer to this as the identified Church Trust or Association Church Trust or Declared Trust.

19 As Mr Parker put it, the structure of the paragraphs is to set up a number of limitations on the meaning of the words “Macedonian Orthodox Religion”. Mr Parker says that the plaintiffs accept that it is open to the defendants to seek to argue that that phrase means the faith taught and practised by the Church applicable to a church community outside Macedonia. What is not accepted is that it is open to say that the practice of the “Macedonian Orthodox Religion” must be consistent with the Church practice. He says the reason for that is simple, the Church was established on 8 March 1977, the terms of the trust must be fixed at that time, and it is not legitimate as a matter of construction to determine what the terms of the trust are by the subsequent conduct of the parties whether acquiesced in or not.

20 The trust deed is Exhibit DXZ7. The first recital notes that the appointors (four named individuals) are the founding members of a religious group to be organised and known as “The Macedonian Orthodox Church St Petka Rockdale NSW Australia” (hereafter called “the Proposed Beneficiary”).

21 Paragraph 1 of the trust deed is as follows:

“1. The trustee shall acquire the trust property and stand possessed of the trust property upon trust to permit the trust property to be used by the proposed beneficiary as a site for a Church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox Religion.”

22 Paragraph 12 reads as follows:

“The trustee may, with the approval of the management committee of the proposed beneficiary or other governing body of the proposed beneficiary, by deed executed by the trustee or trustees wholly or partially revoke, alter or vary or add to any of the provisions of this Deed.”

23 On a strike out application such as this, one takes the facts to be as they are pleaded. Thus I must assume that between 8 March 1977 and 28 October 1977 the practice of the initiative committee included the matters set out in para 7A.11 of the defence.

24 Paragraphs 7A.17, 7A.18 and 7A.20 alleged that the trust deed was duly varied to take up at least some of these matters on 28 October 1977, the document being called the “Peetz Declaration”. If that is so, then that was in accordance with the trust deed, and indeed, there is no application to strike out that part of the defence. What is being attacked is the allegation that the trusts were affected by the practice which is not covered by the trust deed.

25 Mr Parker says that the answer is simple. It is a simple “Not at all”.

26 Mr Blake has put up a number of arguments as to why the paragraphs are proper pleadings.

27 It seems to me that there are three possible scenarios and each is to be pleaded in different ways. Scenario (1) is that on a true construction of the trust deed, provisions such as “the practice and promotion of the Macedonian Orthodox Religion” includes those matters which were the common practice of the Church from 1977 to date. Scenario (2) is that there has been a variation of trust as a result of those practices, and scenario (3) is that on its true construction the trust deed was subject to some later contract which when it came into existence was incorporated retrospectively into the trust deed.

28 As to (1), as Mr Parker points out, there is no deed for any of the matters pleaded in paras 7A.11 to 7A.14 because these matters are matters of evidence.

29 It is axiomatic that the trusts laid down in the founding instrument continue in force and the members for the time being of the Church or religious association have no power to change the objects: Foley v Wontner (1820) 2 Jac & W 245; 37 ER 621 (Lord Eldon) and Free Church of Scotland v Overtoun [1904] AC 515 at 626 (Wee Free case) (Halsbury LC).

30 This, of course, is subject to the proviso that if the trust deed itself provides for methods of changing the trusts, then, if that method is followed, the trusts may be altered.

31 It must be remembered that as soon as a conveyance becomes operative in one sense, it becomes merely a deed of record. As Lord Abinger CB said in Davidson v Cooper (1843) 11 M & W 778 at 800; 152 ER 1018 at 1027:

“The moment after their execution, the deeds become valueless, so far as they relate to the passing of the estate, except as affording evidence of the fact that they were executed.”

32 When performing the exercise of construction, it may be permissible to look at surrounding circumstances, though where one has a semi public document such as a deed setting up a charitable trust, this may be more circumscribed than in the case of an ordinary contract between two individuals.

33 However, what one cannot do on the best authority, see Sportsvision Australia Pty Ltd v Tallglen Pty Ltd (1998) 44 NSWLR 103 (Bryson J), endorsed by the Court of Appeal in C H Magill Pty Ltd v National Australia Bank [2001] NSWCA 221 at [53] reported [2001] Australian Contract Reports 90-131 at 91-610, is to use subsequent conduct to construe the contract. [It is rather amazing that although contrary first instance decisions are cited, no major Australian book on contract law seems to have realised that C H Magill is the leading NSW authority being a decision of the Court of Appeal on this point in NSW].

34 If a trust deed involving a church is silent as to a particular matter such as the qualifications for being the minister, then the cases show that one can look at practice over a long period. However it must be remembered that one looks at the practice not for seeing how one construes the trust deed, but rather what the intentions of the founders were on a matter which the trust deed is actually silent. In other words, it is a question of what was the contract rather than what the contract means.

35 I dealt with the sort of evidence that could be adduced under this head in Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 at 667 [150]-[151]. I noted that Lord Lyndhurst’s Act, that is the Nonconformists Chapels Act 1844, said that 25 years’ evidence of usage was sufficient, however that rule has not been adopted in Australia. I then said that:

“If there is evidence as to the founders’ intention, that prevails. If there is insufficient evidence, then the court can act on evidence of long practice in the relevant religious body and from that deduce what the founders’ intention was. No particular length of time is necessary to establish usage. Further, the court will be loath to hold that longstanding practice is in breach of trust … .“

36 In para [152] I reminded the readers of the judgment that unless there was provision in the trust as laid down for amendment, then it is not open to the members for the time being even over a long period to change the trusts. Both parties relied on those utterances in the present argument.

37 Accordingly, in so far as these paragraphs plead that the trusts have been changed by Church practices, they are not a proper answer to the claim.

38 (2) The second way of putting the argument is that the trusts have been varied. This is in fact pleaded in other parts of para 7A and there has been no move to strike these out.

39 (3) Mr Blake, who appeared for the 1st to 6th and 8th defendants, indicated that there are situations such as that envisaged by Rix J in The Northern Progress [1996] 2 Ll LR 319, where a contract can be made on day 1 anticipating that at a date subsequent to day 1, facts will come into existence which will mean that a subsequent contract will be engrafted on to the original contract. The Northern Progress involved the transport of goods by ship, the contract indicating that the identity of the ship and various other matters were only to be nominated at a later date and at that date various things were to be incorporated into the original contract. Rix J found no problem with that.

40 In the ordinary case I would have no problem with it either. It is very common these days in commercial contracts to say that parties do not so much enter into a contract but rather into a contractual regime which will involve them in making mandatory sub-contracts or agreeing to variations of the main contract as the history of their relationship progresses.

41 This is no novel principle. In Terrex Resources NL v Magnet Petroleum Pty Ltd (1988) 1 WAR 144 at 159, Kennedy J said:

“An agreement does not have to be worked out in meticulous detail. A bargain can be made containing certain terms, regarded as essentials, whilst the parties recognise that a formal document will eventually be drawn up in the full expectation that a number of additional terms will, by consent, be included in that document.”

42 In Anaconda Nickel Ltd v Tarmoola Australia Pty Ltd (2000) 22 WAR 101 at 110 (FC), Ipp J said:

“It is well recognised that parties may enter into a valid contract containing a limited number of terms comprising those terms essential to the bargain that they wish to conclude, in the expectation that at a later date a further contract will be arrived at containing additional terms that would facilitate and clarify the initial contract. That is to say, a binding contract may be arrived at even though it leaves unresolved many matters which might arise in future.”

43 See also Fletcher Challenge Energy Ltd v Electricity Corporation of New Zealand Ltd [2002] 2 NZLR 433.

44 What I do find difficult, however, is to see how that type of situation can relate to a trust deed setting up a charitable trust. If there is a provision (as there is in the present trust deed) for alteration of the trusts, then the trust may be altered in accordance with that provision. However, the mere fact that the parties envisage that regulations may be made in the future as to the administration of the trusts would not be sufficient to alter the trusts.

45 Accordingly, in my view paras 7A.2 and 7A.11 to 7A.14 must be struck out. Mr Blake asks that if I am of that view, he should have leave to replead. I think leave should be given. However, I should say a few things about it.

46 The first is that on 25 August 2008 when I heard oral argument I indicated that my then feeling was that these paragraphs should be struck out and suggested that if Mr Blake wished to replead, he commence thinking about the final terms of his pleading immediately and that he should be in a position to indicate all such amendments by 7 October 2008 so that any debate on them could take place when the matter is next set down for directions, that is, before me on 13 October 2008. Secondly, the pleadings may not need amendment because if all that is to be alleged is that the deed is ambiguous and that evidence is to be admitted as to what the practice was, then this is mainly a matter of evidence rather than that of pleading and will be disclosed by the affidavits which have to be filed before the hearing starts on 17 November 2008

47 I now pass to the series of paragraphs in the defence which are based on an estoppel. These are really the balance of the matters complained about in the notice of motion.

48 Mr Parker essentially says that one cannot have an estoppel in the face of a trust deed for a charitable trust. He says that essentially a plea in estoppel is a plea of confession and avoidance. It confesses the truth of the allegation but then says it cannot be relied upon in the litigation because of certain personal reasons. Where one has a public matter such as a charitable trust (indeed when one has a matter dealing with defined property), in personam relations that might be affected by an estoppel are almost invariably irrelevant.

49 The truth of this proposition is borne out by the fact that if one looks at the index in the leading books on trust law, with the exception of some references in Scot which do not bear on the present problem, estoppel is not mentioned. Justice Handley in his book Estoppel by Conduct and Election (Thomson Sweet & Maxwell, London, 2006) does deal with some estoppels with respect to trusts, but mainly in the area of consents to breach or in situations where a person enters land with permission of a trustee and then seeks to set up an adverse title: see particularly pp 152-3.

50 The lack of references in the books is understandable because whether a trust exists or not is a matter of proprietary right. It is a matter more or less in rem and estoppels belong to the field of personal relations with a few exceptions.

51 Indeed, the books do not even contain examples of cases where there have been estoppels against successors in office. They say that estoppels work as against the parties, that is, the representor and the representee, and persons who are privy in estate and privy in contract, but there does not appear to be a reported case, nor did counsel cite any to me where a successor in office has been considered to be a privy.

52 Now the reason for this may be that, in England, bishops, and indeed the parson of a parish, is or is treated as a corporation sole. Indeed, on the continent, particularly before the Reformation and this rule still seems to be the basis of the continental concept of a foundation, a church, monastery or charitable institution was considered by the papal curia to be a corporation with perpetual succession.

53 In Australia, as was recently held by the Court of Appeal in Trustees of the Roman Catholic Church v Ellis (2007) 63 ACSR 346 (see particularly [162] at p 377), bishops of churches are not corporation sole and as Mr Parker submitted and was not gainsaid, the European law as to foundations is no part of Australian law.

54 Accordingly, one cannot treat Metropolitan Petar as the same legal person as Metropolitan Kiril who is alleged to have been the first Metropolitan estopped.

55 There are some ways in which a prior Metropolitan or Archbishop can bind his successor. For instance, if a faculty is required to install a new font in a church and in 1977 the Archbishop gives his faculty for that to happen, then that font will be an authorised ornament of the church even after that Archbishop has retired. Such an exercise of the dispensing power once and for all binds successors, the reason being that, at least in the western church, the rule is that changing the ornaments of a church must be consented to by the bishop but once the bishop has given his consent, then the ornament is legal.

56 That situation is to be contrasted with an ongoing situation such as, for instance, the appointment of diocesan officials or consent to some ongoing breaches of church law which do not have any effect on persons other than the prelate who acquiesced, and indeed, it may even not affect him.

57 I should note that although I raised it during argument, there was no reliance on the principle that a Metropolitan is alterius orbis papem (as to which see Phillimore’s Ecclesiastical Law, 2nd ed (Sweet & Maxwell, London, 1895) at p 68. I assume that this was either because counsel considered that the principle did not apply in the eastern church or that Metropolitan Petar was not an actual Metropolitan but merely had the style of a Metropolitan.

58 All the paragraphs of the defence which are attacked fall foul either of the principle that subsequent acts cannot be used to construe a trust deed or of the unavailability of estoppels in this case. They should all be struck out. There should be liberty to replead, but as I announced on 25 August 2008, that liberty is conditional on the text of the proposed amendments being furnished to opposing parties no later than 7 October 2008 and I will finally deal with them on 13 October 2008.

59 Just to act as a reminder that I have rejected the present application to deal with separate questions, I indicated that if I was notified by 22 September 2008 that new questions were agreed and how long it would take to try them, that could be revisited, but as nothing was received by 22 September 2008 I have assumed that this matter is not being pursued.

60 I have extended the time to comply with the order for discovery until 10 October 2008. I indicated that my feeling on 25 August 2008 was that the defence would be struck out on 13 October 2008 if this order was not then complied with.

61 The 13 October 2008 is then set aside to deal with the motion for security for costs, any application to amend the defence (assuming that the order for discovery has been complied with) and whether anything other than the motion to release the plaintiffs from undertakings is to be dealt with during November 2008. However, at the moment, 17 November 2008 onwards is reserved for the trial of the proceedings.

62 The 1st to 6th and 8th defendants must pay the costs of the motion to strike out.

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