Metropolitan Petar v Mitreski - [2012] NSWSC 16

Supreme Court

New South Wales

Medium Neutral Citation: Metropolitan Petar v Mitreski [2012] NSWSC 16
Hearing dates: 2 - 30 August 2010
Decision date: 03 February 2012
Jurisdiction: Equity Division
Before: Brereton J
Decision:
(1)The plaintiffs are entitled to a declaration to the effect that all the property of the Association other than the litigation funds are held as trustee on the trust declared by Hamilton J. If the defendants desire to contend that any litigation funds remain, they may have an account of the litigation funds at their own risk as to costs.
(2)The plaintiffs are entitled to declarations to the effect that the Association has, in breach of trust: (a) excluded the diocesan Bishop, (b) excluded the parish priest appointed by the Bishop, (c) prevented a priest licensed by the Bishop to conduct services in the church from doing so, (d) employed priests not appointed by the Bishop, and (e) failed to accept applications for membership from believers in the doctrines of the Macedonian Orthodox Church who have satisfied the criteria for membership specified in the 1994 Church constitution, the diocesan statute and the by-laws.
(3)The plaintiffs are entitled to injunctive relief that has the effect of compelling the Association to comply with the rules of Macedonian Orthodox Church as they apply to parishes of the Macedonian Orthodox Church in respect of not excluding or impeding the Bishop, not excluding or impeding Fr Mitrev, and admitting into membership those who meet the requirements of church law for membership of a parish assembly.
(4)The plaintiffs are entitled to an order that the Association account to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski, save those paid prior to November 1997 in respect of which the claim is statute barred.
(5)The plaintiffs are entitled to an order that each of the Committee Members accounts to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski while that Committee Member remained in office, save those paid prior to November 1997 in respect of which the claim is statute barred .
Direct that the parties bring in Short Minutes to give effect to these this judgment.

Catchwords: TRUSTS AND TRUSTEES - Charitable trusts - church trust - trust property - where certain property held by trustees to permit its use by unincorporated association as a church of the Macedonian Orthodox Religion - whether income generated by church and parish activities is trust income - whether other property acquired with trust income is held upon same trusts.
ASSOCIATIONS AND CLUBS - Incorporated associations - where property held by trustees to permit its use by a predecessor unincorporated association as a church of the Macedonian Orthodox Religion - where constitution of successor incorporated association provides that funds of association shall be applied to carry out the objects of the association - whether legislation and constitution impedes acquisition by incorporated association of further property on same trust.
TRUSTS AND TRUSTEES - Charitable trusts - church trust - whether certain provisions of church law were sufficiently fundamental to be terms of trust.
TRUSTS AND TRUSTEES - Breach of trust - defence of proceedings brought against trustee - whether resort to trust assets to fund defence is breach of trust.
LIMITATIONS - Breach of trust - charitable trusts - whether claim by plaintiffs suing not for the benefit of the public at large but by virtue of special interest in enforcing the trust is "an action on a cause of action in respect of a breach of trust" accruing to a plaintiff within Limitation Act, s 48(a).
TRUSTS AND TRUSTEES - Rights of trustees - Judicial advice - where advice obtained irrelevant to breaches established.
TRUSTS AND TRUSTEES - Excusable breaches - whether trustee ought fairly to be excused for omitting to obtain the direction of the Court in the matter in which the trustee committed the breach - where trustee did not believe that it was a trustee - whether trustee ought fairly to be excused for the breach of trust - relevant considerations - whether trustee has acted honestly and reasonably - where breaches involved repudiation of sworn promise to adhere to church law and to knowledge of trustee could achieve no religious purpose.
TRUSTS AND TRUSTEES - Charitable trusts - accessorial liability - whether mere engagement in conduct causative of breach attracts accessorial liability - necessity for consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour - where breaches involved repudiation of sworn promise to adhere to church law and to knowledge of trustee could achieve no religious purpose.
Legislation Cited: (CTH) Corporations Act 2001, s 1318
(CTH) Trade Practices Act 1974, s 52
(NSW) Associations Incorporation Act 1984, s 6
(NSW) Associations Incorporation Act 2009 s 95
(NSW) Limitation Act 1969 s48(a)
(NSW) Trustee Act 1925, s 59(4), s 63, s 85, s 93(3),
UCPR 42.25
UCPR 42.7
Cases Cited: Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247
Application of Macedonian Orthodox Community Church St Petka Inc (No 4) [2007] NSWSC 254
Armitage v Nurse [1998] Ch 241
Attorney-General (ex rel Elisha) v Holy Apostolic and Catholic Church of the East (1989) 98 ALR 327
Attorney-General (Queensland); Ex rel Nye v Cathedral Church of Brisbane [1977] 136 CLR 353
Attorney-General v Cocke [1988] Ch 414
Attorney-General v Gould (1860) 28 Beav 485
Attorney-General v Wylde (1948) 48 SR(NSW) 366
Banque Commerciale SA v Akhil Holdings Limited [1990] 169 CLR 279
Barnes v Addy (1874) LR 9 Ch App 244
Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226
Corrigan v Farrelly (1897) QLJ 105
Craigdallie v Aikman (1820) 2 Bligh 529
Edwards v Attorney-General (2004) 60 NSWLR 667
Farah Constructions v Say-Dee (2007) 230 CLR 89
Fay v Moramba Services Pty Ltd [2010] NSWSC 725
Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) [2002] NSWCA 29
General Assembly of Free Church of Scotland v Lord Overtoun [1904] AC 515
His Grace Metropolitan Petar v Aco Kostovski; Alexander v Branov (unreported, VSC, 27 October 1997)
In re Beddoe; Downes v Cottam [1893] 1 Ch 547
In re Grimthorpe [1985] Ch 615
Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar (2008) 237 CLR 66
Mead v Watson (2005) 23 ACLC 718
Metropolitan Petar v Mitreski [2003] NSWSC 262
Metropolitan Petar v Mitreski [2009] NSWSC 106
Miller v Cameron (1936) 54 CLR 572
Mitreski v Metropolitan Petar [2009] NSWSC 319
National Trustee Co of Australasia Ltd v General Finance Co of Australasia Pty Ltd [1905] AC 373
National Trustees Executors and Agency Co of Australasia v Barnes (1941) 64 CLR 268
Nolan v Collie [2004] HCATrans 22
Paul A Davies (Australia) Pty Limited v Davies [1983] 1 NSWLR 440
President and Scholars of St Mary Magdalen, Oxford v Attorney-General (1857) 6 HLC 189
Radmanovich v Nedeljkovic (2001) 52 NSWLR 641
Re Buckton [1907] 2 Ch 406
Re Llewellin; Llewellin v Williams (1887) 37 Ch D 317
Re Tollemache [1903] 1 Ch 457
Re Turner [1897] 1 Ch 536
Re Application of Macedonian Orthodox Community Church St Petka Inc [2004] NSWSC 388
Re Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441; [2005] NSWSC 558
Scandrett v Dowling (1992) 27 NSWLR 483
Solicitor-General v Wylde (1945) 46 SR(NSW) 83
Wylde v Attorney-General (NSW) ex rel Ashelford (1948) 78 CLR 224
Texts Cited: Jacobs on Trusts, 7th edition, 2006
Lewin on Trusts, 18th edition, 2008
Category: Principal judgment
Parties: His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia & New Zealand (first plaintiff)
The Very Reverend Father Mitko Mitrev (second plaintiff)
Lambe Mitreski (first defendant)
Peco Damcevski (second defendant)
Boris Minovski (third defendant)
Eftim Eftimov (fourth defendant)
Mile Marcevski (fifth defendant)
Macedonian Orthodox Community Church St Petka Incorporated (sixth defendant)
Naum Despotoski (eighth defendant)
Attorney-General for the State of NSW (ninth defendant)
Representation: Counsel:
Mr TGR Parker SC w Mr RE Steele (Ps)
Mr M Leeming SC w Ms L Goodchild (D1-6, 8)
Mr M Izzo (D9)
Solicitors:
Sachs Gerace Lawyers (Ps)
McConnell Jaffray Lawyers (D1-6, 8)
Crown Solicitor (D9)

File Number(s): 1997/25609

Judgment

HIS HONOUR : The first plaintiff his Eminence Metropolitan Petar is the diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand. The second plaintiff the Very Reverend Father Mitko Mitrev was appointed by the Bishop as the parish priest of the parish of St Petka, located in the vicinity of the Sydney suburb of Rockdale, on 1 April 1996. The first five defendants Lambe Mitreski, Pero Damcevski, Boris Minovski, Eftim Eftimov and Mile Marcevski were in April 1997 elected members of the executive council of the sixth defendant the Macedonian Orthodox Community Church St Petka Incorporated, an incorporated association which is the legal owner of the land on which the church of St Petka stands and of other real and personal property associated with the parish. The eighth defendant Fr Naum Despotoski acted as parish priest, purportedly appointed by the Association, from March 1998 until June 2003. Proceedings against the former seventh defendant, Fr Kliment Dzeparovski, who acted as parish priest, also purportedly appointed by the Association, from 17 July 1997 until early 1998, have been discontinued. The ninth defendant, the Attorney-General, is a party because these are, in form, charitable trust proceedings. [References in this judgment to the defendants collectively are not intended to include the Attorney]. But at their core is a contest for control of the affairs of the parish of St Petka between the Church hierarchy represented by the Bishop and his appointed priest on the one hand, and on the other the Association which claims to represent the parishioners. At the heart of the dispute is a dichotomy between adherence to church law, and adherence to the constitution of the Association: those in control of the Association maintain that ownership and disposition of Association property reside with it, and are not amenable to control by the Bishop - in short that, except perhaps in relation to spiritual matters, they are legally bound by the constitution of the Association and not by the laws of the Church; whereas the Bishop contends that the Association is no more than a manifestation of the parish assembly, and that its affairs must be conducted not only in accordance with its constitution but also in accordance with church law.

BACKGROUND

For the following background concerning the Macedonian Orthodox Church, the foundation of St Petka, and the origins of the dispute, I am indebted to the submissions of Mr T.G.R. Parker SC, who appeared for the plaintiffs, from which it is largely taken.

The Macedonian Orthodox Church

The Macedonian Orthodox Church is an episcopal church, with the Archbishop of Ohrid and Macedonia as its head. The Church is organised into dioceses, each of which is administered by a diocesan Bishop, and comprises a number of parishes, each of which is headed by a parish priest appointed by the diocesan Bishop.

Although it shares the doctrines and traditions common to all churches in the Orthodox Church, the Macedonian Orthodox Church is independent and self-governing, with a written constitution as its over-arching governing document. A diocese may establish rules of government for the diocese, known as a "statute"; and a parish may establish rules of government for the parish, known as "by-laws". Together this body of doctrine, tradition and rules of government, as it relates to the Macedonian Orthodox Church, comprises "church law".

As an episcopal church, the Macedonian Orthodox Church is hierarchical, but there is substantial lay involvement in its work, on a participative basis. Each parish is administered by a parish council, elected by a parish assembly to which all adult parishioners belong. Members of the parish council are required to take an oath to uphold church law and to defend the interests of the Church. Day-to-day management is delegated by the parish council to a parish committee. The parish priest is ex officio a member of the parish council or the parish committee or both.

Foundation of St Petka

The parish of St Petka was founded as a result of an initiative by a group of Macedonian Orthodox Christians in the Rockdale area in the mid-1970s, who approached the Church hierarchy seeking to establish a new parish, within the diocese that then covered Australia, New Zealand and the United States. On 20 November 1976, they held a public meeting at which it was resolved to proceed with the plan. It was specifically resolved that the new parish would comply with the terms of the Macedonian Orthodox Church's constitution, and a "community council" was elected.

Subsequently, a set of proposed by-laws - which had either been approved at the meeting of 20 November 1976, or had been prepared pursuant to a resolution of that meeting - was sent to Macedonia. In May 1977, the Church authorities formally established the new parish and approved the proposed by-laws, with some amendments. Subsequently, the then diocesan Bishop approved a parish council, largely comprising those who had been elected to the community council on 20 November 1976.

In the meantime, moneys had been raised towards the acquisition of a property at No 65 Railway Street, Rockdale, as land upon which to build the new parish church; indeed, a holding deposit had been paid even before the public meeting in November 1976. Contracts were exchanged in December 1976, with the purchase being completed in April 1977. Construction of the church was completed, and the first service took place, in August 1977. The church was formally consecrated by the then Archbishop and the then diocesan Bishop in February 1978.

The purchase of No 65 Railway Street was completed in the name of a local solicitor, John Peetz, who in March 1977, before the purchase was completed, had executed a Deed of Trust whereby he agreed to acquire and hold the land on 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".

In October 1977, an unincorporated association was constituted under the name "Macedonian Orthodox Church St Petka Rockdale New South Wales Australia". Its constitution provided for the property of the parish to be vested in ten individual trustees ("the Trustees"). Mr Peetz then transferred No 65 Railway Street into the names of the Trustees.

The affairs of the parish was conducted through the unincorporated association for more than 14 years. During this period, additional land adjoining No 65 Railway Street was purchased in the name of the Trustees, and a church hall constructed on it; subsequently, the titles were consolidated into a single parcel ("the Church Land"). Premises in Firth Street, Arncliffe were also acquired in the name of the Trustees - with the assistance of a Commonwealth government grant - and used as a child-care centre ("the Child Care Centre"). Three company title units in a residential block at No 64 Railway Street were later acquired in the name of the Trustees, for investment purposes.

In April 1992, the sixth defendant ("the Association") was incorporated pursuant to the provisions of the Associations Incorporation Act 1984 , as successor to the unincorporated association. Under its constitution, the new Association itself replaced the Trustees as the owner of the parish property, and the property previously held by the Trustees was transferred to the Association. Otherwise, the constitution of the new Association was essentially the same as the constitution of the former unincorporated association, and thereafter, the affairs of the parish were conducted through the Association in the same manner as they had previously been conducted through the unincorporated association.

Under the Association's constitution (and that of the unincorporated association before it), its structure essentially reflected the organs for administration of a parish under church law: the powers of the Association were vested in an executive council, corresponding (in this respect) with a parish council. The executive council was elected by the full (voting) members of the Association in general meeting, corresponding with a parish assembly. The constitution provided for a priest, who was to be an additional member of the executive council.

There were, however, some differences. Under church law, a parish council is a relatively large body that may comprise twenty or more members, whereas the Association's executive council has a lay membership of five, and in this regard is more analogous to a parish committee. Under the Association's constitution, the priest is appointed by the executive council, rather than holding office ex officio as a result of his appointment by the Bishop as parish priest, whereas the Association's constitution makes no provision for the Church hierarchy, or the priest, to have any role in convening and participating in general meetings, or otherwise directing the affairs of the Association. Nor does the constitution contain any requirement for executive council members to take the oath required under church law of members of a parish council.

While the evidence does not fully reveal how these divergences were resolved in practice, it appears that the parish priests appointed from time to time by the diocesan Bishop (including, initially, Fr Mitrev) were automatically accepted as members of the executive council. And, at least in October 1996, the election was (or purported to be) for an expanded committee, and oaths were administered to those elected in accordance with the applicable church law.

The origins of the dispute

Bishop Petar was appointed as diocesan Bishop in November 1995. In April 1996, he appointed Fr Mitrev as the parish priest for St Petka. By early 1997, not only in St Petka but also in some other Australian parishes of the Macedonian Orthodox Church, a faction in the Macedonian community opposed to Bishop Petar emerged. On 14 April 1997, this faction purported to convene a "special general meeting" of the Association, at which the first to fifth defendants ("the Committee Members") were elected as the five lay members of the executive council. Notwithstanding that the "special general meeting" was apparently convened without the notice required by the relevant provisions of church law and the relevant provisions of the Association's constitution, practical control has remained in the hands of the faction opposed to the Bishop, although the membership of the executive council has changed from time to time since then.

There was a meeting held in Newcastle on 10-11 May 1997 of communities who were opposed to the Bishop's initiatives. The Association sent a delegation, led by Mr Mitreski. The Newcastle meeting adopted a number of resolutions, including that moneys from weddings and other ceremonies that would have been remitted to the Diocese be used instead for the work of a new (national) association. The executive council decided to act in accordance with the Newcastle resolutions, copies of which were posted on the parish notice board.

After the Newcastle meeting, the executive council ceased remitting moneys to the Diocese in respect of fees collected for baptisms, funerals and weddings. In June 1997, the executive council received a letter from the Diocese to the effect that all fees for christenings and weddings were to be paid to the Diocese, until arrears were recouped. The executive council resolved not to comply with this diocesan direction. Fr Mitrev commenced to collect the fees for weddings, baptisms and funerals and remit them to the Diocese in reduction of outstanding diocesan contributions.

In July 1997, the Committee Members purported, on behalf of the Association, to dismiss Fr Mitrev as parish priest for disobedience to their instructions as to how moneys received by him from parishioners should be accounted for, and to employ Fr Kliment Dzeparovski to act as parish priest. When he left in the first half of 1998, they employed the Eighth Defendant, Fr Naum Despotoski, in his place. Neither purported appointment was sanctioned by Bishop Petar, and both Fr Dzeparovski and Fr Despotoski were defrocked.

Under the Association's constitution, the executive council determines whether to accept applications for membership of the Association, and this has perpetuated the status of voting control of the Association since 1997. Parishioners of St Petka loyal to the Church hierarchy have continued to accept the ministry of Fr Mitrev, and worship at a nearby former Uniting church.

THE PREVIOUSLY DECIDED QUESTIONS

The present proceedings were commenced in July 1997.

This case does not come before me as a clean slate. Earlier judgments of Hamilton J and Young CJ in Eq (as his Honour then was) on separate questions determine the questions that were subject to them. It would not only be wrong in law, but also wasteful in resources, to revisit the issues that have been decided by them.

Judgment of Hamilton J

In April 2003, in a judgment given following the hearing of separate preliminary questions [ Metropolitan Petar v Mitreski [2003] NSWSC 262], Hamilton J held, first , that the unincorporated association did not acquire a beneficial interest in the real property (including the company title investment units) acquired up to the incorporation of the Association in 1992 ("the Schedule A property"), but held it upon trust for the purpose of permitting its use by the parish organisation (then being the unincorporated association) as a church for the worship of the Macedonian Orthodox Religion, and ancillary purposes. This involved rejection both of the plaintiffs' primary case (that the Association held the property on trust for the purposes of the Macedonian Orthodox Church), and of the defendants' primary case (that the Association was the beneficial owner), in favour of the position that while the Association held the Schedule A property on trust, that trust was one to permit use of the property by a specified entity, namely the Association (originally, its predecessor unincorporated association) as a church of the Macedonian Orthodox Religion. Thus his Honour said (at [87]):

... the trust at its inception was not a gift to an unincorporated association. ... In my view, the use of the word "beneficiary" cannot be taken in the context to denominate that unincorporated association as the beneficial recipient of the gift. In my view, the intention of the settlors to be derived from the use of the expression in the particular context of the deed of trust is that there was a gift to a trustee for a purpose. The purpose was to permit the use of the property for a church of the Macedonian Orthodox Religion by a specified entity, namely the parish organisation denoted by the defined expression "the proposed beneficiary". It was not a gift for religious purposes of the Macedonian Orthodox Religion or the MOC in general terms, but a gift to a trustee to permit the use of the property by the specified entity for a specified purpose, ie, its use as a church for the worship of the Macedonian Orthodox Religion, and ancillary purposes. What the unincorporated association received under the terms of the gift was a nomination as the entity to use the land for the specified purpose. But in my view it was not the intention of the settlors by the deed of trust to confer any beneficial interest on that unincorporated association or its members.

His Honour observed (at [88]) that the parish organisation became incorporated as the sixth defendant and had until 1997 been regarded by all, including the authorities of the Church, as being the duly appointed parish organisation to manage the trust property under the deed of trust. But his Honour also observed (at [91]) that, if it were necessary, the principle that the parish organisation should be governed on a democratic basis - which was embodied in the by-laws (which were the only existing form of constitution at the time of the execution of the deed of trust) and has continued to be embodied in all constitutional documents which have, or may have, applied since that time to the parish organisation, and took the form of provision for openness of membership to all relevant believers on a basis of equality and for election of the committee by democratic vote of the members, and was in the forefront of the minds of the settlors at the time of the execution of the deed of trust - should be incorporated into the terms of the trust as declared; but this course was unnecessary because the principle was in any event incorporated in the terms of the trust as appeared from the deed of trust, by the specification of the parish organisation as the body which under the trust was to be permitted to use the property for the purposes of a church of the Macedonian Orthodox Religion and ancillary purposes:

91 The principle that the parish organisation should be governed on a democratic basis was embodied in the by-laws which were the only existing form of constitution at the time of the execution of the deed of trust. It took the form of provision for openness of membership to all relevant believers on a basis of equality and for election of the committee by democratic vote of the members. (Indeed, those provisions have continued to be embodied in all constitutional documents which have, or may have, applied since that time to the parish organisation.) I infer that the principle was in the forefront of the minds of the settlors at the time of the execution of the deed of trust. It is my view that, if it were necessary, it should be incorporated into the terms of the trust as declared by me in the manner laid down by Young CJ in Eq in the Serbian Church case at [202]. However, that in my view is unnecessary. This is because that principle is in any event incorporated in the terms of the trust as they appear from the deed of trust itself. The incorporation is effected by the specification of the parish organisation as the body which under this trust is to be permitted to use the property for the purposes of a church of the Macedonian Orthodox Religion and ancillary purposes. Although it had perhaps not taken final form, that body was organised with rules which embodied the contemplated democratic principle by providing for openness of membership and democratic election of the governing body. It is therefore my view, whether one approaches the situation with or without the evidence of surrounding circumstances, the terms of the trust were simply as specified in the deed of trust, namely, that the property was given:

"... 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."

That is upon the understanding that the proposed beneficiary is now represented by the incorporated association that is the sixth defendant.

Secondly, his Honour held (at [92]) that the trust was a valid charitable trust for the purposes of the Macedonian Orthodox Religion, although limited to the use of the subject property as a property for a church of that religion and ancillary purposes:

92 In my view the trust is a valid trust for the purposes of the Macedonian Orthodox Religion, although limited to the use of the subject property as a property for a church of that Religion and ancillary purposes. As I have already said, I take the view that the gift was a gift for that religious purpose and not a gift to an unincorporated association that conferred any beneficial estate or interest in the property: the only right of the unincorporated association was its entitlement to be the body permitted by the trustee to use the property for those purposes. Although there are many cases in which doubts have been cast upon whether a trust for the purposes or particular purposes of a church is bad as a charitable trust by being so wide as to extend to non-charitable purposes of the church ( Roman Catholic Archbishop of Melbourne v Lawlor (1934) 51 CLR 1; In re Moroney; Maguire v Reilly (1939) 39 SR(NSW) 249; McCracken v Attorney-General for Victoria [1995] 1 VR 67; and see generally G Dal Pont, Charity Law in Australia and New Zealand (2000) 154 - 157), that has not been argued in this case. No one has submitted that the ancillary purposes as defined in the deed of trust are so wide as to extend beyond charitable purposes. In my view that is the correct view. It is emphasised by the fact that the other buildings and activities must be concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox Religion. I am therefore of the view that the trust at its inception was a valid charitable trust.

Thirdly, his Honour held that when the properties after the first were acquired, they became subject to the same trust (at [93]):

93 So far as properties other than the first property are concerned, it is my view that, as they were acquired, they became subject to a trust on the same terms as the purpose stated above in respect of the first property. The only one of the properties in respect of which there is a separate declaration of trust is the Arncliffe property. There, in my view, the "Church Trust" referred to in the Arncliffe declaration of trust upon which that property was to be held was the trust as declared in the deed of trust and set out above. In relation to the other properties, all parties have proceeded on the basis, in the absence of any separate declarations of trust, that they became subject to the same trust upon acquisition. The only ones in relation to which there can be any difficulty arising from this are the second unit and the third unit, where the legal title upon acquisition was vested, not in separate trustees, but in the Macedonian Orthodox Church St Petka, which must be taken to have been at the time the unincorporated association. However, in my view, despite some awkwardness arising from the trustee and the proposed beneficiary being identical in those cases, the second unit and the third unit became subject to the same trust as the other properties. The trust was to permit the use by itself (or itself to use) the properties for the purpose of the original trust. It could be argued that the result would be different if those units were the only properties held on the trust. However, where there is a body of property, of which they were only a small part, held upon the same trust, in my view the trust should be regarded as being identical in respect of each property. I do not see in the evidence any indication that the second unit and the third unit were to be held on different terms. Everything in the evidence points to the intention that the whole body of property should be held on the same trust.

Fourthly, his Honour held (at [96]) that the subsequent vesting of the property in the incorporated Association did not affect the subsistence of the trust.

Accordingly, his Honour concluded (at [102]):

(1) that all of the Schedule A property was, prior to the transfer of the legal titles to the incorporated Association, held upon trust to permit the trust property to be used by the Macedonian Orthodox Church St Petka Rockdale (the unincorporated association that was the parish organisation) 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;

(2) that the trust was a valid charity; and

(3) that the subsequent vesting of the property in the sixth defendant incorporated Association did not have the effect that it thereafter held the property free of the trust.

His Honour was not, on the evidence available, able to determine the trust status of property of the Association other than the Schedule A property.

The making of formal orders to give effect to his Honour's judgment was deferred, but ultimately, on 7 February 2007, his Honour made formal declarations in the following terms:

1. Declare that the property referred to in Schedule A hereto ("the trust property") was prior to the transfer of the legal titles to the sixth defendant held upon trust to permit the trust property to be used by the Macedonian Orthodox Church St Petka Rockdale NSW Australia 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 ("the trust").

2. Declare that in accordance with the terms of the trust and in the events which have happened the trustee is bound to permit the sixth defendant to use the trust property 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.

Hamilton J did not address in detail the particular terms of the trust upon which the Schedule A property had been, and continued to be, held. His Honour did however explain that, when property was held upon charitable trust for an organised church, if it is to be used in accordance with the purpose of the charitable trust, the property must be used in accordance with the doctrines, rituals and practices laid down by the church hierarchy:

66 One of the questions to be determined by me at this trial is simply the question of what were the terms of the trust as created. This must be answered by reference to the intent of the settlors at the time of the creation of the trust. The effect upon subsidiary matters of the disputes between the combatants in these proceedings is a question for another day. In answering the question it is important to bear in mind the legal background as to trusts for organised churches. By organised churches I mean churches consisting of more than one parish or congregation, where precepts as to doctrine, ritual and practice are laid down by a central or common body of the church, or, as in the case of an established church, by statute or otherwise by the law of the land. If a church is a church in this sense, then when property is held on a charitable trust for the church, to be used in accordance with the purpose of the charitable trust the property must be used in accordance with the doctrines, rituals and practices laid down as set out above. It has been said in the US jurisprudence on this subject that churches may be characterised as hierarchical, presbyterian or congregational. The first two of these models both fall within the rule that the doctrines, rituals and practices laid down by the centralised church must be followed; the rule is not limited to hierarchical churches in the sense of churches which have bishops and a multi-layered hierarchical order; it applies to all churches with a centralised governance in the above sense. The rules were thus applied by the House of Lords to the Free Church of Scotland in the well known case of General Assembly of Free Church of Scotland v Lord Overtoun [1904] AC 515. The very notion of a church was enunciated in that case by the Earl of Halsbury LC at 612 - 613 as follows:

"Speaking generally, one would say that the identity of a religious community described as a Church must consist in the unity of its doctrines. Its creeds, confessions, formularies, tests, and so forth are apparently intended to ensure the unity of the faith which its adherents profess, and certainly among all Christian Churches the essential idea of a creed or confession of faith appears to be the public acknowledgment of such and such religious views as the bond of union which binds them together as one Christian community."

67 The consequences of a gift for the purposes of a church in this sense were set out as follows by Latham CJ in the Red Book case supra at 255:

"The suit is brought for the purpose of securing the performance of charitable trusts. The trusts upon which the church property is held are religious trusts and are therefore plainly charitable in character. Property devoted to a charitable trust must be used for the purposes, and only for the purposes, of the trust. Changes in circumstances may make it probable that the founder of the trust would, if he had been able to do so, have varied the terms of the trust for the purpose of meeting conditions created by such new circumstances. But when proceedings are instituted in a court for the purpose of securing the performance of such a trust there is no authority in the court to 'vary the original foundation, and to apply the charity estates in a manner which it conceives to be more beneficial to the public, or even such as the Court may surmise that the founder would himself have contemplated could he have foreseen the changes which have taken place by the lapse of time' ( Attorney-General v Sherborne Grammar School (1854) 18 Beav 256, at pp 280, 281 [52 ER 101 at p 111])."

His Honour also referred to the principle that in an hierarchical church, there was a strong presumption in favour of the property being the property of the national church, not of a local parish, which presumption was not affected by the circumstance that the physical property of the local church was purchased by the local congregation without any financial assistance from the parent body [at [70], with reference to Young J, as his Honour then was, in Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 ("the Serbian Church Case ") , [168]; and also in Attorney-General (ex rel Elisha) v Holy Apostolic and Catholic Church of the East (Assyrian) Australia NSW Parish Association (1989) 37 NSWLR 293 , [315]], and that where one finds in Australia a group of persons of ethnic origin proclaiming that they are members of an overseas church with an identical name of an overseas church which services their people, one can assume that they are members of that overseas body or alternatively that the canon law and discipline of their church is mutatis mutandis identical with that of the overseas body [at [70]; Church of the East, [316]]; although it has been recognised that even in a hierarchical church it is possible that a local church's property can belong to it and not be subject to control by the hierarchy [ Church of the East, [317]].

In the course of his judgment, Hamilton J (at [73]) cited the following passage from the judgment of Byrne J in His Grace Metropolitan Petar v Aco Kostovski; Alexander v Branov (unreported, VSC, 27 October 1997) , which concerned a corresponding dispute in the Parish of St Nikola in Victoria:-

Moreover the evidence before me shows that, at least until 1994, the community which comprised the parish of St Nikola saw themselves as part of the Macedonian Orthodox Church under the canonic jurisdiction of the Archbishop in Skopje and the organs of that Church. They gladly accepted the priests which the Holy Synod sent them at their request; they sent delegates to the Archbishoprical Council of the Church and the People in Skopje which adopted the 1994 Constitution of the Church; they accept the validity of this Constitution; they submitted their by-laws to the Holy Synod for its approval in 1976 and again in 1981; and they accepted at least the canonical jurisdiction of Bishop Petar as Metropolitan of the Australian and New Zealand diocese. Further, it is clear from this and from the successive constitutions of the Macedonian Orthodox Church that that church falls within the class of church structures or polities described as hierarchical by Miller J in Watson v Jones 80 US 679 (1871). This is a structure in which the government of the church is entrusted to the superior clergy. The legal consequence of this is that the members of the parish are members of the world-wide Macedonian Orthodox Church of which the Metropolitan is the diocesan head and the Archbishop in Skopje is the ultimate head; as members of that Church they are bound by its doctrines, its ordinances, its rules and its discipline: Bishop of Natal v Gladstone (1866) LR 3 Eq 1 at 37, per Lord Romilly; Attorney-General (ex rel Elisha) v Holy Apostolic and Catholic Church of the East (Assyrian) Australia NSW Parish Association (1989) 98 ALR 327 at 348 - 9, per Young J.

Inasmuch as I am concerned with the trusts upon which the real property of the St Nikola parish is held, these are religious and charitable trusts. Although Article 3 speaks of the property belonging to 'the members of the Church General Meeting - the members of the Church', it is clear from Article 66 of the by-laws that the legal estate vests in the trustees. As a charitable trust the trustees hold the property, not for the benefit for particular individuals, but for the benefit of the relevant community as a whole. The charitable trust is a trust for a purpose not for a person: Attorney-General for New South Wales v The Perpetual Trustee Co (Ltd) (1940) 63 CLR 209 at 222, per Dixon and Evatt JJ. The purposes for which the trustees hold the trust property are the religious and charitable purposes of the St Nikola Church community as a community established as part of the Macedonian Orthodox Church and subject to its ordinances in force from time to time, including its constitution, any diocesan statute and its by-laws. Articles 66(g) and (h) confer and impose upon the trustees certain powers and obligations but these are to be exercised and observed within the framework of the purpose trusts to which I have referred. Insofar as the trusts are expressed in terms of 'the members of the church community of St Nikola', the religious and charitable purposes are those of these members in their capacity as members, not of an isolated community in Preston, but of the Macedonian Orthodox Church. See, Hall v Job (1952) 86 CLR 639 at 650. It is in this sense that the declaration pronounced by the Court in April must be understood, for the trusts described in the by-laws are trusts for those religious and charitable purposes. The real property of the parish, therefore, is held not upon trust for the purposes of only that part of the Macedonian Orthodox Church which comprises the parish, nor for the purposes of the Macedonian Orthodox Church only insofar as those purposes are approved by the members of the parish or only insofar as those purposes benefit or are thought by the parishioners to benefit all or some of the members of the parish. It is neither necessary nor desirable that I go further to specify how or to what extent the superior clergy or the organs of that church may exercise dominion over the church property in the parish notwithstanding the wishes of the parishioners, for that is a matter for the church as an institution. Provided the church property of St Nikola is held and applied for the charitable or religious purposes of the Macedonian Orthodox Church, this Court will not intervene.

In this case, the Court is asked to enforce the terms of a charitable trust for religious purposes. This Court does not regulate the practice of religions, nor enforce church law. However, it enforces trusts, and in particular the application of trust property in accordance with the terms of the trust. Where property is given on trust for the purposes of a particular church, there may be a breach of trust if it is applied to a purpose inconsistent with the law of that church. Use of trust property for purposes other than worshipping in accordance with the doctrine for the maintenance and furtherance of which the trust was settled is a breach of trust [ Craigdallie v Aikman (1820) 2 Bligh 529, 545 [4 ER 435, 441]; General Assembly of Free Church of Scotland v Lord Overtoun [1904] AC 515, 613-7; Wylde v Attorney-General (NSW) ex rel Ashelford (1948) 78 CLR 224 , 271, "the Red Book Case "]. In the context of a charitable trust for the purposes of a religion, where it is alleged that trust property is being used in breach of trust in the sense of preaching doctrines inconsistent with those intended by the settlor, the court's role is simply to determine what was the original purpose of the trust and whether it is being observed [ Free Church of Scotland , 613 (Lord Halsbury), 644-5 (Lord Davey); Wylde v Attorney-General , 263 (Latham CJ)]. According to Dixon J, albeit in dissent, before the Court finds that the manner of conduct of a religious service amounts to a breach of trust, it must be satisfied that the forms of worship depart so completely from those of the faith for which the property is held that the use of the building for the purpose is in truth the diversion of the property to another object [ Wylde v Attorney-General, 295]. Similarly, in Attorney-General v Gould (1860) 28 Beav 485, Lord Romilly said (at 495) that the question was whether the use of the building for the purpose of open communication was "such a perversion of the objects and trusts for which it was established, that is, whether it is a violation of those trusts which this Court will interfere to prevent".

As Young CJ in Eq explained in the Serbian Church case , it is not every provision of the church rules nor every matter of church doctrine that will necessarily be a term of the trust, breach of which will give rise to an action, but only those elements of them which are "fundamental" or "essential", and even then only if they affect property or its use; what must be decided is whether each relevant rule is so fundamental that it is a term of the trust, or whether it is merely an "incidental matter of regulation" which does not go to the core of the trust [ Radmanovich , 668-9]. In the present case, his Honour explained that there was no hard and fast rule for determining which church rules were fundamental, or which would be incorporated into a church trust, although decided cases did provide some guidance [ Metropolitan Petar v Mitreski [2009] NSWSC 106, [487]]: thus, in Attorney-General v Gould , the practice of strict or free communion was found to be "no part of what was essential for the maintenance of a congregation of particular Baptists" and consequently not to form a part of the foundation trusts on which the Church was held; whereas in Wylde v Attorney-General, Latham CJ and Williams J found that uniformity of worship in the Anglican Church of Australia as it existed in 1948 was a fundamental principle of the Church, breach of which constituted a breach of trust; while in Scandrett v Dowling (1992) 27 NSWLR 483, the Court of Appeal found that breaching a church rule that priests must be male would not be a breach of trust.

In this case, Young CJ in Eq's judgment relieves me largely, but not entirely, of the necessity to undertake this exercise.

Judgment of Young CJ in Eq

In March 2009, following a further separate question hearing (in circumstances where the parties were not ready to proceed to the final hearing at the time appointed), Young CJ in Eq (as his Honour had by then become) delivered a decision as to the terms of the trust, as they related to the plaintiffs' allegations of breach: Metropolitan Petar v Mitreski [2009] NSWSC 106. His Honour considered issues as to the content of the relevant church law applicable to St Petka, and whether church law (or all of it) was incorporated into the terms of the trust.

The plaintiffs advanced ten alleged breaches of church law said to amount to breaches of trust, designated in the judgment as (a) to (j). His Honour found (at [375] ff) that each of the matters complained of by the plaintiffs if established was a breach of church law. For present purposes, the following seven are relevant:

(a) preventing the diocesan Bishop from conducting services in the church (see judgment at [375]-[380]);

(b) preventing a priest appointed by the diocesan Bishop as parish priest from conducting services in the church ([381]-[[387]);

(d) excluding the parish priest appointed by the diocesan Bishop from the executive council of the body responsible for the administration of the parish ([396]-[397]);

(e) employing a priest not appointed by the diocesan Bishop to act as the parish priest ([398]-[422]);

(i) refusing or failing to accept applications for membership from believers in the doctrines of the Macedonian Orthodox Church who have satisfied the criteria for membership specified in the 1994 Church constitution, the diocesan statute and the by-laws ([445]-[455]); and

(j) failing to remit the parish's contribution to the diocese in accordance with the diocesan statute ([456]-[474]).

His Honour then considered (at [475] to [497]) whether the relevant provisions of church law were "fundamental", and concluded, relevantly, that those involved in alleged breaches (a), (b) "and their associated breaches" (which must include (c) and (e)) were fundamental (at [496]). His Honour said that there might be some doubt as to breaches (d), (i) and (j) (at [497]). Ultimately, his Honour answered (at [499]) the question posed, what were the terms of the trust "in so far as material" to the alleged breaches, as follows:

The question should be answered by saying that the terms of the relevant trust do not justify the exclusion of the Bishop from the parish Church of St Petka nor the employment of any priest not authorised by the Bishop nor the closing, alteration, addition to the Church building or its ornaments without the Bishop's approval.

The remaining issues

It is convenient to address the remaining issues in the proceedings in the following sequence:

(1) Trust property: whether property of the Association other than the Schedule A property is held by it on trust;

(2) Breaches: whether any breach of trust is established. This involves:

a. whether breach is established of any of those provisions of church law held by Young CJ in Eq in Metropolitan Petar v Mitreski [2009] NSWSC 106 to be terms of the trust;

b. whether any other provisions of church law relevant to the plaintiffs' complaints is a term of the trust and if so whether breach of it is established;

c. which if any established breaches have pecuniary consequences that might found a liability to account or pay compensation.

(3) Defences: in respect of any breach that is established, whether any of the affirmative defences raised (NSW) Limitation Act 1969 , s 48(a); (NSW) Trustee Act 1925 , s 63; and Trustee Act, s 85 are made good;

(4) Accessorial liability: whether the individual defendants (that is, the Committee Members and Fr Despotoski) are liable as accessories in respect of any breach of trust that is established; and

(5) Relief: what if any relief should be given.

TRUST PROPERTY

It is convenient first to deal with the status of such of the property held by the Association as was not dealt with by Hamilton J ("the non-Schedule A property"). At first the Trustees (until the incorporation of the Association), and subsequently the Association itself, have acquired property in categories that, conformably with the descriptions they were given during the proceedings, I shall call:

(a) the Church Land;

(b) the Child Care Centre, which was acquired in about August 1978;

(c) the church's Holy Objects. In the Orthodox Church, including the Macedonian Orthodox Church, a church is furnished with various objects of religious significance, including an altar upon which a holy cloth (antimensis) rests, icons, an iconostasis upon which the icons are placed, and a throne for the Bishop. I will refer to these, as they have been described in the proceedings, as "Holy Objects". A collection of icons and other Holy Objects had been installed in the church by the time of the inaugural service in August 1977. Presumably, the original Holy Objects were donated in specie or acquired with funds that had been donated for the establishment of the church. Over the following years they were supplemented, or in some cases replaced, with other Holy Objects, again presumably acquired by donation or from Association Funds;

(d) other moveable property such as furniture, supplies, office equipment etc ("Ancillary Property");

(e) the company title units in No 64 Railway Street ("Investment Properties"). Three of these (the "Pre-incorporation Investment Properties") were acquired before incorporation of the Association, namely Unit 2 (acquired in January 1985) and Units 1 and 5 (acquired in November 1991), while Units 4, 6 and 7 were acquired after incorporation;

(f) Church Donations. Worshippers traditionally make donations in a number of ways to support the Church and its work. Those who visit the church (whether or not services are being conducted at the time) light candles for themselves, their family and friends; for that purpose, a supply of candles is maintained in the church, and worshippers make a donation when they are used. Worshippers who wish to acknowledge the intercession of Jesus, the Virgin Mary, or a Saint place money on or near the relevant icon, which is later collected. Collections are also made in the course of church services. At Epiphany, the icons may be temporarily taken from the church and kept in worshippers' homes, for which privilege the worshippers make donations. It is also customary for worshippers to donate textiles and oils, the surplus of which is sold. Together, I refer to these donations as "Church Donations";

(g) other moneys received ("Other Funds").

As has been recorded, Hamilton J held that the Church Land, the Child Care Centre and the three Pre-incorporation Investment Properties ("the Schedule A Property") were trust property, and in reaching that conclusion, observed (at [93]) that he saw in the evidence no indication that the second unit and the third unit were to be held on different terms from the first; and that everything in the evidence pointed to the intention that the whole body of property should be held on the same trust. However, his Honour did not determine whether or not the Holy Objects, Ancillary Property and Other Funds acquired before as well as after incorporation of the Association, and the three post-incorporation Investment Properties, were trust property.

Other pre-incorporation property

The plaintiffs contend that the Holy Objects, Ancillary Property and Other Funds acquired pre-incorporation ("the Other Pre-incorporation Property") were and are held upon the same trust as applies to the Schedule A property. The defendants contend that personal property of the Association acquired by the trustees before its incorporation, and which subsequently vested in the Association upon incorporation, was acquired by the Association in the course of its business and operations and is held for the benefit of the Association pursuant to its constitution, and particularly clause 26 which provides:

The funds of the Church shall be applied to carry out the objects of the Church. Any surplus resulting from its operation during a financial year, after providing for depreciation in value of the Church's property or for contingent liabilities or loss shall be carried to reserve for the future and continued operation of the Church.

In the Association's constitution, "Church" means the Association.

The pre-incorporation accounts of the unincorporated association are incomplete. Those for the year ended 30 June 1991 record fixtures and office equipment, a pay phone, furniture, equipment and floor coverings, books, towels and face washers, toys and education equipment, plumbing installations and crockery, with a total (depreciated) value of $25,689; and current assets of $66,273. These assets appear to have been sourced, at least predominantly, from Church Donations and from income from the Child Care Centre and the Investment Properties. The acquisitions of 65 Railway Street and Units 1 and 5 were funded, at least in part, with bank loans, which were serviced and gradually repaid out of the unincorporated association's funds.

At least prior to 1993, no one drew the distinction, and no practical distinction existed or was recognised, between the unincorporated association and the parish assembly. Church Donations were made by worshippers in accordance with their religious tradition, for religious purposes, to further the objects of the church. The context in which they were made (to buy candles, borrow icons, and in the course of religious services) bespeaks a religious context and purpose. These donations were made as a result of the use of the Church Land, which was trust property.

The defendants submit, correctly, that income from trust property is not necessarily held upon the same trusts as the capital - as is reflected in the complex rules in respect of capital and income. However, while as a matter of principle a settlor can establish distinct trusts of capital and income, that requires specific provision, and there is not the slightest indication that that was done, or intended, here; to the contrary, the property was held "... 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", and there is nothing to suggest that diversion of income generated from the trust property to some other purpose was to be permissible.

It follows, in my view, from the purpose for which they were made, and their source in the use of trust property, that the Church Donations were trust income. It also follows that, insofar as the Other Pre-incorporation Property was acquired with or comprised of funds sourced in Church Donations, it too represented and constituted trust property. Insofar as such property was acquired with or comprised of funds derived from income generated by the Child Care Centre and the Investment Properties, it was acquired with income generated by trust property, and likewise upon acquisition became trust property. No other sources for the acquisition of the Other Pre-incorporation Property have been identified or are apparent. So far as the evidence reveals, the Other Pre-incorporation Property was acquired for the same purposes as, and as a result of ownership or use of, the Schedule A property; it was therefore held on the same trusts as the Schedule A property.

Accordingly, the Holy Objects, Ancillary Property and Other Funds held at the time of incorporation of the Association passed to the Association subject to the same trust, and - to the extent that any such property is still held by the Association - remain held upon the same trust. Indeed, in the appeal proceedings resulting from Hamilton J's February 2007, the defendants apparently at one stage accepted that, insofar as the Schedule A property was held on trust, the trust extended to the Other Pre-incorporation Property [Submissions of the First to Seventh Cross-Appellants dated 20 July 2007, [80]], and although this position was not maintained in the submissions before me, it was acknowledged that in the context of this litigation the assets in question were so slight as not to warrant more detailed refutation.

Hamilton J's conclusion that vesting of the Schedule A property in the Association upon its incorporation did not affect its trust status is dispositive of the same question in respect of the Other Pre-incorporation Property. I otherwise deal with the effect of the Associations Incorporation Acts in connection with the post incorporation property, below.

Post-incorporation property

Following incorporation, further and replacement Holy Objects and Ancillary Property were acquired by the Association, and further Funds were received by it. The Association also acquired three further Investment Properties: Unit 6, in June 1992; Unit 7, in March 2002; and Unit 4, in April 2003.

The trust status of this property ("the Post-incorporation Property") was not determined by Hamilton J. Indeed, the defendants emphasise his Honour's conclusion (at [102]) that he was unable on the then evidence to answer the question as to the trust status of the non-Schedule A property, and submit that the plaintiffs bear the onus of establishing, by evidence additional to that before Hamilton J, that there was an intention that property acquired post-incorporation be held on charitable trust (said to be inconsistent with some of the terms of its constitution) by the Association, or some reason in law why it should be so held. However, I am unable to read his Honour's conclusion as determining any issue as to the status of the non-Schedule A property, or indeed as anything more than a statement to the effect that at that stage, in the context of a preliminary hearing which was not required to resolve all issues, the evidence was insufficient to enable a conclusion one way or the other. In particular, I do not read it as a determination that (as the evidence was insufficient to establish otherwise) it was not trust property, nor as in any way telling more against than in favour of a conclusion that the non-Schedule A property was held on the same trust as the Schedule A property. It simply left the question open, for later resolution.

The plaintiffs contend that the Post-incorporation Property is trust property. The defendants say that it is property of the Association for its own benefit in accordance with its constitution. Elaborate submissions were made in respect of the impact of the Associations Incorporation Act (in both the 1984 and 2009 versions) on the contention that the Association acquired property on trust; in particular, it was said that to hold property on terms of the trust declared by Hamilton J would be inconsistent with the Association's constitution and thus contrary to the legislation. However, I can see nothing in the legislation, or the constitution of the Association, that precludes it from acquiring or holding property on trust. Insofar as its constitution prescribes how the Association will deal with its property, that is to be construed as a reference to its beneficial property, not property that it holds as a trustee. I do not accept that the legislation gives paramountcy to the Association's constitution over the terms of any trust affecting property that it might acquire. In particular, clause 26 of the Association's constitution does not mean that the Association cannot receive and hold property upon trust, nor that property previously held upon trust by the trustees of the predecessor unincorporated association vested absolutely and free of any trust in the incorporated association upon incorporation.

The defendants submitted, correctly, that there was no suggestion at the time of the acquisition of the Post-incorporation Property that the directing minds of the Association believed that there was any such trust as has been declared, and that in those circumstances the requisite intent to establish a trust in respect of such property could not be established. However, the absence of subjective belief that there was such a trust, if accepted, does not preclude a conclusion that the property upon acquisition became trust property, if for example it was acquired with funds sourced in trust property, or it was acquired for the purposes of the trust.

It is also correct, as the defendants submit, that after the incorporation of the Association, one matter that told in favour of the pre-incorporation property being held in trust no longer operated, namely the legal difficulties then inherent in gifts to unincorporated associations. However, while mentioned by Hamilton J (at [63]), this did not loom large in his Honour's judgment, which in this respect depended primarily on ascertaining the settlor's intention from the terms of the trust deed and the circumstances surrounding the acquisition of the church land, and then on attribution to the settlors of the same intention in respect of the other Schedule A property. And contrary to the defendants' submissions, there are sound reasons why the express trust established by and pursuant to the 1977 deed should extend to property acquired later by a different legal entity, namely the incorporated Association, including first, that the Association is the successor of the Trustees; secondly, that the pre-incorporation trust property vested in it upon incorporation; and thirdly, that there was thereafter no segregation between trust and non-trust assets, income, expenditure, and activities. In those circumstances, at the very least the defendants bore the onus of showing what of its property was not attributable to the trust, which they did not essay to do - with one exception to which I shall come.

Association Funds . Although a full set of the Association's accounts is not available, there does not appear to have been any change in the manner in which the parish's finances were managed after its incorporation. Servicing of the loans obtained to acquire properties was taken over by the Association. There was no apparent change in the sourcing and collection of funds: Church Donations, income from the Investment Properties and income from the Child Care Centre continued to be received, and appear to have been applied as they were before incorporation. Post-incorporation assets, and the income derived from them, do not appear to have been segregated or treated differently in any way from the pre-incorporation assets.

When, in 1997, the faction opposed to the Bishop came into control of the Association, it kept the church open and services according to Macedonian Orthodox Church liturgy were celebrated there, at first by Fr Dzeparovski and then by Fr Despotoski. In 2001, these moved to the adjacent church hall, while the Church itself was renovated. Fr Despotoski's services appear to have ceased when Hamilton J granted an injunction in July 2003, but further (unauthorised) Orthodox Christmas services were conducted in January 2004. In March 2004, Hamilton J granted an injunction restraining the conduct by the Association of any services at St Petka, and income from collections in church services presumably substantially ceased from this point. However, the Association continued to open the church, at least from time to time, and to collect moneys donated for candles and other icons when this happened.

Even if some parishioners of St Petka were conscious, in making Church Donations, that the Association had become a corporate entity, this was no more than the uncommunicated subjective intention of a handful of parishioners, and does not prove the objectively ascertained intentions that informed the bulk of the Church Donations. And even if the Church Donations were, at law, gifts to the Association, equity would not permit the Association to assert its legal ownership free of any trust obligation where it received such gifts as a result of its status as trustee or as a result of its use of the trust property. In my view, this was clearly the case here. The church, and the icons and other Holy Objects in it, were used to solicit the Church Donations, while the Association purported to be carrying out its obligations under the trust to operate the church as a parish church of the Macedonian Orthodox Church. The Church Donations would never have come into the Association's hands otherwise. Accordingly, their proceeds are trust property.

A similar analysis applies to donations other than Church Donations (that is, donations made directly to the Association by will, or by gift inter vivos , including, for example, government grants shown in the accounts). Although such gifts may not have been solicited through the church, they were received by the Association because of its position as the entity that owned the church and administered the affairs of the parish; that is to say, because of its role as trustee.

The Association also continued to operate, and derive income from, the Child Care Centre, and to receive income from the Investment Properties (both pre-incorporation and, as they were purchased, post-incorporation as well). Income from the Child Care Centre and the pre-incorporation Investment Properties flowed from the ownership of trust property and is impressed with the same trust: a trustee is not allowed to profit personally from his status as trustee or from the use (authorised or not) of trust property [ Jacobs on Trusts (7 th edition, 2006), [1742]; Paul A Davies (Australia) Pty Limited v Davies [1983] 1 NSWLR 440].

This suffices to establish that the Parish Funds were substantially comprised of trust moneys. Once that conclusion is reached, the trustee will not be permitted to say, as against the interests of the trust, that it breached its obligations as trustee, one of which is an obligation not to mix trust funds with the trustee's personal funds. So far as can be ascertained, neither after the change in control of the Association in 1997, nor even after Hamilton J's decision in April 2003, was there any segregation of pre-incorporation assets or the income derived from them. Even if the Association were permitted to assert that other moneys in its accounts were its own personal property, at the least the onus falls upon the Association to make good such an assertion and to prove what component represents its personal funds.

Litigation Funds . The Association has contended - through an affidavit of Mr Kotevich - that certain donations made to it from about May 2004 were made specifically for the purpose of assisting it with the costs of these and related proceedings. The evidence relating to these so-called "litigation funds" is less than satisfactory, as it does not disclose in any admissible way the circumstances in which they were raised, and there is no evidence that they were segregated from the trust property. The Association would only be justified in treating a donation received by it as not being trust property if the donation were solicited otherwise than as trustee and without the use of any of the existing trust property - including the church, the Holy Objects and the Child Care Centre. That is unlikely to be so in respect of much of the "litigation funds"; for example, it appears from Mr Kotevich's affidavit that he has classified Church Donations received after December 2006 as "litigation funds".

Holy Objects and Ancillary Property . The same conclusions follow in respect of post-incorporation Holy Objects and Ancillary Property. To the extent that they were acquired out of Association Funds, they are impressed with the trust that attached to the funds applied to their acquisition. To the extent that any Holy Objects or Ancillary Property were acquired by donation, the conclusions set out above with respect to donations of money apply: Holy Objects at least were self-evidently donated for religious purposes because of the role of the Association in furthering the religion of the Macedonian Orthodox Church.

Investment Properties . Units 7 and 4 were acquired, in 2002 and 2003 respectively, after incorporation of the Association, with deposits, apparently sourced from Association Funds. It is probable that the same was so for the earlier acquisition of unit 6 in 1992. The balance of the purchase moneys for Units 7 and 4 was sourced in funds borrowed for that purpose from the National Australia Bank, and again it is probable that the same was so for the earlier acquisition of unit 6. All three units have since been sold.

There are many bases for concluding that, notwithstanding that the then directing minds of the Association may not have believed that there was any such trust as has since been declared, these properties upon acquisition became trust property. One is that these units were in the same building as the pre-incorporation investment units, and were acquired as part of a long-term plan to acquire all of the units in the building and then convert it to strata title, presumably in the hope of increasing its value as a result. As trustee in respect of the pre-incorporation units, the Association was bound to use the opportunity of acquiring the later units, if at all, in its capacity as trustee for the benefit of the trust. It is beside the point that under its constitution the Association's purposes were substantially if not wholly charitable, if they were not the purposes of the trust. For example, if a professional trustee company were the trustee of several charitable trusts, and it used the trust property of one to acquire property upon trust for another of them, the property would nonetheless be held upon constructive trust for the first charity. A second is that the loans were secured, not only on the newly purchased units, but also on the existing (pre-incorporation) units, representing a use of trust property. Related to that is that the borrowings were supported by the availability of ongoing income (including Church Donations and income from the pre-incorporation Investment Units and the Child Care Centre). This is not irrelevant: while it is correct that whether land is subject to a trust is assessed at the time of acquisition, the circumstance that at that time it was intended that trust assets and/or income be used to service loan repayments informs a judgment that it was intended to be held on those trusts. In these circumstances, the proceeds of the loans, and the properties into which they can be traced, are trust property [ Paul A Davies (Australia) Pty Limited v Davies, 448B, 451, 457]. A third is that the Association did not maintain any segregation of trust and non-trust assets, but treated all as held on the same basis and for the same purposes. This manifests an intention that the post-incorporation units be held on the same basis and for the same purpose as the Schedule A property.

Conclusion

The characterisation of the non-Schedule A property depends on the Association (and its unincorporated predecessor) receiving it in the capacity of, or because of its status as, a trustee. Before 1993, there was no corporation, and the legal owner was a number of individuals - the Trustees - expressly as trustees. As at 1993, bank accounts were held in names of the Trustees; it could not have been for themselves, and it could not have been for a trust different from that applicable to the Church land. Until 1993, all property was held on the same trust. Later, when the older (trust) properties were used as security for borrowings to acquire the newer properties, and income was generated from use of trust properties, and where there was no segregation of pre- and post-incorporation funds, with all being deposited into general bank accounts, so that all were mixed, there is no basis for supposing that they were held on different bases, and all should be regarded as an accretion to the single pool of trust property. While it is not impossible that accretions to a charitable trust can be held on narrower terms than the original corpus, as in Attorney-General for the State of Queensland; ex rel Nye and Others v The Corporation of the Lesser Chapter of the Cathedral Church of Brisbane and Another (1977) 136 CLR 353, that was in circumstances where the accretion was sourced in donations and intent of the donors that their gifts be for a particular narrower purpose was plain, a situation far removed from accretions arising from the use of extant trust property.

Accordingly, the whole of the Association's assets acquired up to May 2004 were and are trust property, as also are its assets acquired since then, except to the extent that the Association demonstrates that identifiable moneys held by it were donated for the purpose of funding the litigation. As expenditure on costs of litigation has exceeded, by a very substantial margin, moneys received from such donations, it is improbable that any remaining property of the Association represents these donations.

My reasoning supports the conclusion that, if the Court of Appeal were to uphold the plaintiffs' appeal from Hamilton J's judgment, to the effect that the trust was not as declared by Hamilton J for use of the property by the Association, but rather for religious purposes of the Macedonian Orthodox Religion or the Macedonian Orthodox Church in more general terms, the non-Schedule A property would still be held on the terms of any trust that applied to the Schedule A property.

BREACHES

In so far as Young CJ in Eq has found the terms of the trust, the question for me is simply whether breach of those terms is established. In so far as it has not yet been determined whether certain provisions of church law said to have been breached are terms of the trust, the questions for me are first, whether (notwithstanding that his Honour did not so hold) I should conclude that any of them is a term of the trust, and secondly, if so, whether breach of any such term is established.

The plaintiffs contend that I should find alleged breaches (a), (b), (c) and (e) established in fact (Young CJ in Eq having held that if established they would be breaches of trust), and that I should also find that alleged breaches (d), (i) and (j) would if established be of fundamental provisions of church law such as to be breaches of trust (Young CJ in Eq not having done so), and to be established in fact. The defendants submit that I should go no further than Young CJ in Eq's conclusions, and not proceed to make any findings in respect of breaches other than (a), (b) and (h), and that to do so would be inconsistent with Young CJ in Eq's conclusions on the question he determined. [Breach (h), though found by Young CJ in Eq to be a term of the trust, was not further agitated by the plaintiffs, because it was of historical interest only]. However, the Court of Appeal, in the application for leave to appeal from the judgments of Hamilton J and Young CJ in Eq [ Mitreski v Metropolitan Petar [2009] NSWSC 319], suggested that I should not so limit myself, Allsop P saying:

17 Given the passage of time and the continued complexity and burden of this case both on the Court and on the parties, in any further hearing in the Equity Division one would have thought that the case managing judge and/or the trial judge, if they be different, would be alive to the clear necessity to ensure that the totality of the controversy between the parties was quelled at first instance. That aim, one would have thought, would outweigh any technical consequence of the earlier employment of the separate issue process, though, of course, any such questions are matters for the judge in the Equity Division. There would be the mechanisms available for the reception of any evidence subject to relevance and the making of findings which may only be relevant on the hypothesis that Justice Hamilton was wrong in some respect in his earlier reasons.

In my view, Young CJ in Eq's answer to the question was not intended to be exhaustive, in the sense of excluding the potential for other breaches of church law to be found to be fundamental and thus breaches of trust, and in any event, given the pending appeals, it is preferable that, within reason, I endeavour to cover alternative permutations that might prevail on appeal, insofar as they are relevant.

Alleged breaches of terms found by Young CJ in Eq

Young CJ in Eq's conclusion, to the effect that the terms of the trust "do not justify the exclusion of the Bishop from the parish church of St Petka nor the employment of any priest not authorised by the Bishop", is an express finding that breaches (a) (exclusion of the diocesan Bishop) and (e) (employment of a priest not appointed by the Bishop) are breaches of trust. His Honour plainly regarded alleged breach (b) (exclusion of the parish priest appointed by the Bishop) as raising the same issue (see [398]), and as his Honour concluded that it too was fundamental (see [496]), it necessarily involves also a finding that exclusion of the duly appointed parish priest is a breach of trust, even though that was not expressly referred to in his Honour's formal order. It seems highly likely that his Honour regarded alleged breach (c) (preventing a priest licensed by the Bishop to conduct services in the church from doing so) as in the same category, but in the circumstances it adds little if anything to alleged breach (b).

Bishop Petar was not welcome at St Petka after the events of mid-1997. As has been recorded, when - at the Bishop's direction - Fr Mitrev commenced to collect the fees for weddings, baptisms and funerals and remit them to the Diocese in reduction of outstanding diocesan contributions, the Association, under the governance of the Committee Members, purported to dismiss him as parish priest, for disobedience to their instructions as to how moneys received by him from parishioners should be accounted for, and to appoint Fr Dzeparovski to act as priest in his place.

The defendants successfully opposed an interlocutory application for the reinstatement of Fr Mitrev made at or about the time of the commencement of the proceedings in July 1997, which Hamilton J refused in late August. In January 1998, following attempts by supporters of the Bishop to get Fr Mitrev back into the Church, the defendants made application for injunctions to restrain both Bishop Petar and Fr Mitrev from conducting any services in the Church, which was settled by the giving of undertakings not to do so, which undertakings thereafter remained in force. These undertakings underpinned the continuing refusal of the defendants to permit Bishop Petar and Fr Mitrev to fulfil their roles as diocesan Bishop and parish priest.

However, as the defendants submit, he gave value for what he was paid (even if not in the eyes of the Church hierarchy), by officiating at services, and - save for the want of authorisation - performed the role of priest. Moreover, his presence resulted in revenue for the Association - and thus for the trust. Without a priest, the revenue declined. There was no loss to the Association; to the contrary, his employment generated income - which I have found was trust income - that far exceeded his wage. In those circumstances, he is entitled to a just allowance for his labours, which corresponds to the modest amount he was in fact paid. The result is that he is not liable to account to the trust.

Claim against Committee Members

The principles for which Barnes v Addy (1874) LR 9 Ch App 244 is commonly cited have been stated in the context of trusts for persons, not trusts for purposes. In the context of charitable trusts, injunctive relief has been granted against a person other than the trustee who instigated or encouraged a breach of trust. In the Red Book Case , the churches in question were vested in various bodies under trusts which provided (as was ultimately held) for worship in accordance with the Book of Common Prayer. Bishop Wylde, who was using and promoting a different form of worship, was not himself a trustee. Nonetheless injunctions were granted against him personally to restrain conduct on his part which would result in a breach of trust, and costs were also awarded against him. In Solicitor-General v Wylde (1945) 46 SR(NSW) 83, Jordan CJ said (at 97):

When the objects of a voluntary association are in law charitable, any property which it acquires becomes impressed with a charitable trust for its application to those objects, and anyone who participates in its application for any purpose inconsistent with those objects is guilty of a breach of trust, a breach of the law of the land. A court of equity has, and will exercise, jurisdiction to restrain such a breach. ...

A church, that is, a voluntary association which is charitable because it has as its object the practice of a lawful form of religion in accordance with lawful rules of the association, stands in the same position as any other charitable voluntary association in the respects to which I have referred ...

As the plaintiffs submit, this statement contains no reference to "knowledge" as a requisite element of liability; and it was applied by Roper CJ in Eq in the subsequent proceedings, Attorney-General v Wylde (1948) 48 SR(NSW) 366, to restrain the Bishop from committing an act that caused the public charitable trust to be breached, again without any mention of knowledge as a requisite element (at 388.4-5):

The next question which arises is whether the Bishop commits a breach of trust and is personally subject to injunctions in respect of it. He is not the trustee because the trust property is not vested in him. True he is a member, by requirement of the Act of Parliament creating it, of the defendant corporation which is the trustee; but here he is being dealt with in his personal capacity and not as one of the corporators of that corporation. He is, however, entitled under the rules of the Church to conduct services in the churches in his diocese. The corporation, that is the trustee, cannot prevent him from doing so and in my opinion on principle and on authority he is personally liable to be injuncted if his acts cause the church property to be used in breach of trust: see Solicitor-General v Wylde (1945) 46 SR 83; Attorney-General v Murdoch (1849) 7 Hare 445 at 469-470; 68 ER 183].

In the High Court appeal [78 CLR 224], the judgment of Roper CJ in Eq was upheld. Dixon J, as he then was, who was one of the dissentients, observed (at 289) that the orders against the Bishop appeared to have been made on the footing that he was instigating breaches of trust. Analysis of the judgments at the various stages of the litigation reveals that the predominant view was that it was sufficient to impose liability upon Bishop Wylde personally that he was himself deliberately engaging in, and inducing others to engage in, conduct which resulted in the church buildings being used in a manner inconsistent with the terms of the trusts.

The plaintiffs submit that, on the application of this principle, the intentional and deliberate conduct of the Committee Members is sufficient to render them personally liable for the proven breaches of trust. Once again, only the pecuniary breaches involving payment of remuneration to the two priests are practically relevant. On this approach, it would be unnecessary to consider whether the Committee Members were dishonest participants in the Association's breaches of trust so as to attract personal liability under the second limb of Barnes v Addy . However, t he researches of counsel and of the Court revealed no case in which this doctrine has been used to found liability to account or to pay compensation. It is one thing to restrain conduct by a third party which is causing a breach of trust; it is another to impose on that third party a liability to account. It is difficult to see why a more stringent liability to account would apply to third parties in respect of a charitable trust than a conventional trust. In my view, if the plaintiffs are to succeed against the Committee Members, they must bring the case within the established bases on which a third party may be held personally liable for a breach of trust.

Lord Selborne's classical statement of the law relating to accessorial liability for breach of trust in Barnes v Addy was cited by the High Court of Australia in Farah Constructions v Say-Dee (2007) 230 CLR 89 (footnotes omitted):

[111] The "rule in Barnes " stated : In Barnes Lord Selborne LC said:

Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort , or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust . But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.

The form of liability referred to in the first part of the last sentence is often called the "first limb" of Barnes , and the form of liability referred to in the second part of the last sentence is often called the "second limb".

The Court observed that the second limb was not an exhaustive statement of the circumstances in which a third party who has not received trust property and who has not acted as a trustee de son tort nevertheless may be accountable as a constructive trustee, and did not address the situation of a third party who intentionally procures an (unwitting) trustee to commit a breach of trust (footnotes omitted):

[161] Several points of a general nature should be made here. The first concerns the scope of the second limb. This was not expressed by Lord Selborne LC as an exhaustive statement of the circumstances in which a third party who has not received trust property and who has not acted as a trustee de son tort nevertheless may be accountable as a constructive trustee. Before Barnes , there was a line of cases in which it was accepted that a third party might be treated as a participant in a breach of trust where the third party had knowingly induced or immediately procured breaches of duty by a trustee where the trustee had acted with no improper purpose; these were not cases of a third party assisting the trustee in any dishonest and fraudulent design on the part of the trustee.

[162] Secondly, the distinction has been recognised in the Australian case law but, on one reading of Royal Brunei , may have been displaced by the Privy Council in favour of a general principle of "accessory liability" expressed as follows:

A liability in equity to make good resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation. It is not necessary that, in addition, the trustee or fiduciary was acting dishonestly, although this will usually be so where the third party who is assisting him is acting dishonestly. "Knowingly" is better avoided as a defining ingredient of the principle.

[163] Thirdly, while the different formulations of principle may lead to the same result in particular circumstances, there is a distinction between rendering liable a defendant participating with knowledge in a dishonest and fraudulent design, and rendering liable a defendant who dishonestly procures or assists in a breach of trust or fiduciary obligation where the trustee or fiduciary need not have engaged in a dishonest or fraudulent design. The decision in Royal Brunei has been referred to in this court several times but not in terms foreclosing further consideration of the subject in this court: in particular, further consideration of the apparent necessity to displace the acceptance in Consul Development of the formulation of the second limb of Barnes were Royal Brunei to be adopted in this country. Until such an occasion arises in this court, Australian courts should continue to observe the distinction mentioned above and, in particular, apply the formulation in the second limb of Barnes .

[164] On the present appeal, specific reliance was not placed by Say-Dee upon Royal Brunei , although there was a suggestion, not soundly based, discounting any difference between what might be called the traditional approach and that adopted in Royal Brunei . The changes to the law in Australia which were sought by Say-Dee did not include any adoption of a cause of action of the kind expressed in the passage in Royal Brunei set out above. Accordingly, it is unnecessary to decide now how far Royal Brunei , and subsequent decisions in the House of Lords and Privy Council, have modified the second limb of Barnes or, rather, restated the form of liability operating antecedently to and independently of Barnes , and if so, whether these changes should be adopted in Australia.

[165] However, for the sake of completeness, we should add that whatever view be taken of Royal Brunei , whether it be an independent doctrine or a replacement of the second limb of Barnes , its requirements are not satisfied in the present case. To apply the most recent formulation, by Lord Hoffmann in Barlow Clowes , on the evidence there is nothing to show that Mrs Elias and her daughters had "consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour".

In my view, the effect of what the High Court here said is that quite apart from accessorial liability under the so-called first and second limbs, a stranger to a trust can still be held liable for breach of trust on the footing of knowingly inducing or immediately procuring a breach of trust. This is consistent with the emphasis that the second limb is not exhaustive. In distinction from the decisions, referred to above, in the Red Book Case, it involves an element of knowledge.

Unlike the so-called first limb, but like the second limb, liability on this basis does not depend on receipt of the trust funds. Accordingly, the "knowledge" requirement should be treated as the same as that for the second limb. This accords with the High Court's description of this basis of accessorial liability in Say-Dee as " rendering liable a defendant who dishonestly procures or assists in a breach of trust or fiduciary obligation where the trustee or fiduciary need not have engaged in a dishonest or fraudulent design" [ Say-Dee , [163]], which in turn requires "consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour" [ Say-Dee , [165]].

For substantially the same reasons that found my conclusion that, for the purposes of s 85, the Association did not act honestly and reasonably, I am compelled to conclude that the Committee Members were conscious of those elements of the engagement of the two priests that made their participation transgress ordinary standards of honest behaviour. They knew, or at the least ought to have known, that what they were doing involved repudiation of a recently sworn undertaking to uphold church law, and yet would achieve no religious purpose in the eye of the Church for want of the Bishop's approval. While I accept that considerable doubt attended whether the Association would be held to be a trustee, about which minds could reasonably differ, until Hamilton J's judgment, and that the Committee Members did not understand the niceties of church law, I cannot accept that it accorded with ordinary standards of honest behaviour for them to repudiate their recent oath of office. Mr Eftimov's evidence establishes that all the Committee members were present when the oaths were taken.

Although the defendants submitted that there was insufficient particularisation of any allegation of dishonesty for the purpose of a "second limb" case, they accepted that a "participation" case was open on the pleadings. In any event, the issue of the oaths of office was raised in cross-examination on multiple occasions, and the Committee Members had ample opportunity to address it. In this respect, I am unpersuaded that lack of earlier, further or better particularisation of the allegation deprived them of a fair opportunity to address it.

Accordingly, I would hold each of the Committee Members liable as an accessory to account to the trust for the emoluments paid to Fr Dzeparovski and Fr Despotoski while that Committee Member remained in office - except payments made prior to November 1997, in respect of which the claim is statute-barred.

CONCLUSION

My conclusions may be summarised as follows.

The Other Pre-incorporation Property was acquired for the same purposes as, and as a result of ownership or use of, the Schedule A property, and was held on the same trusts as the Schedule A property, namely the trust declared by Hamilton J. The Holy Objects, Ancillary Property and Other Funds held at the time of incorporation of the Association passed to the Association subject to the same trust, and - to the extent that any such property is still held by the Association - remain held upon the same trust.

The Post-incorporation Property - including further and replacement Holy Objects and Ancillary Property acquired by the Association, further Funds received by it and the three further Investment Properties: Units 6, 7, and 4 were acquired and held by the Association subject to the same trust. Accordingly, the whole of the Association's assets acquired up to May 2004 were and are trust property, as also are its assets acquired since then, except to the extent that the Association demonstrates that identifiable moneys held by it were donated for the purpose of funding the litigation. As expenditure on costs of litigation has exceeded, by a very substantial margin, moneys received from such donations, it is improbable that any remaining property of the Association represents these donations.

My reasoning supports the conclusion that, if the Court of Appeal were to uphold the plaintiffs' appeal from Hamilton J's judgment, to the effect that the trust was not as declared by Hamilton J for use of the property by the Association, but rather for religious purposes of the Macedonian Orthodox Religion or the Macedonian Orthodox Church in more general terms, the non-Schedule A property would still be held on the terms of any trust that applied to the Schedule A property.

Alleged breaches (a) (exclusion of the diocesan Bishop), (b) (exclusion of the parish priest appointed by the Bishop), (c) (preventing a priest licensed by the Bishop to conduct services in the church from doing so), and (e) (employment of a priest not appointed by the Bishop) are established. Breaches (a), (b) and (c) are continuing.

Alleged breach (d) (exclusion of the parish priest from the executive body responsible for administration of the affairs of the parish) adds little if anything of substance to breach (b) (exclusion of the parish priest appointed by the Bishop). I am not satisfied that this requirement of church law that the priest be a member of the parish council is so fundamental that breach of it is a breach of trust. To the extent that Fr Mitrev was excluded from the executive council, that did not amount to a breach of trust.

As to alleged breach (i), to exclude from membership a significant number of believing Macedonian Orthodox Christians within the parish is to exclude a portion of those who were intended to be able to use the Church, and divert use of the trust property from its proper use for the Macedonian Orthodox Church or religion, to a schismatic purpose. Accordingly, this was not just a breach of church law, but of a term of the trust. While the Association says that eligibility for membership is determined by its constitution, and that applications for membership must comply with the requirements prescribed by or under its constitution, it is open to the executive council under Article 8(1) to alter the form of application. Alleged breach (i) is established, is a breach of trust, and is continuing.

In respect of alleged breach (j) (failure to remit to the diocesan Bishop the contribution from parish income specified in the diocesan statute), I am not satisfied that the obligation is so fundamental as to be a term of the trust., and while the Association's admitted failure since 1997 to pay diocesan contributions since 1997 is a breach of church law, it was not a breach of trust.

The employment of Fr Dzeparovski to act as parish priest being a breach of trust, payment of his remuneration out of trust property was a breach of trust.

Similarly, the employment of Fr Despotoski to act as parish priest being a breach of trust, payment of his remuneration out of trust property was a breach of trust.

A trustee who is not improperly defending proceedings brought against it as trustee, is entitled to resort to the trust assets to fund the defence. Only if the trustee takes more than the proper limit of its right of indemnity would there be a breach of trust. What costs orders will be made, and to what extent the Association will be held entitled or disentitled to indemnity out of the trust assets, will be known only following the outcome of these proceedings. It is not possible to say now that the Association has, by resorting to trust assets to fund the defence of these proceedings and the associated litigation, thereby committed a breach of trust; it may have done no more than it was entitled to do in exercise of its right of indemnity. If, when the question of costs is ultimately determined and quantified, it transpires that the Association has helped itself to more than its entitlement, that will then be a different question.

Claims in respect of the payments made to Fr Dzeparovski prior to November 1997 are statute-barred.

The judicial advice given by Palmer J related to the defence of these proceedings, and recourse to trust assets to fund that defence. It may be relevant on any ultimate exercise of the court's power under Trustee Act, s 93(3), but it is not a defence in respect of any of the established breaches.

The judicial advice given by Adams J does not protect the Association in respect of Fr Mitrev's exclusion, except potentially on one occasion, on which nothing turns. It does not provide a defence to breaches (b) and (c) as found. As nothing depends on the one-off exclusion of January 2009, there is no utility in examining in detail whether the proviso is satisfied in respect of this advice.

In those circumstances, it is unnecessary to resolve whether the proviso to s 63(2) was satisfied in connection with any of the judicial advices given by Palmer J, and preferable not to do so, before the resolution of questions of costs and indemnity, first because it would be premature to do so, when it is conceivable that the issue may never arise; and secondly because had it been necessary to resolve the issue at this point, I would have refused to allow the plaintiffs to rely on their particulars belatedly delivered on 27 August 2010, whereas in a future hearing of this issue they will be available to be relied upon.

Notwithstanding that the Association's constitution provides that the priest is appointed by the executive council, I cannot reconcile the conduct of the Committee Members, having sworn an oath of allegiance to church law, in engaging and remunerating the two priests without the Bishop's approval, to achieve no useful religious purpose, with what would commonly be regarded as honest behaviour. While I accept that they did not understand the niceties of church law, they did understand at least (and if they did not, ought to have by reason of the oath they took) the fundamental proposition that the Bishop's approval was essential for the effective appointment of a priest. Resort to the provision of the Association's constitution, in the face of the oath of office, savours of the type of unconscionable insistence on strict legal right on which equity has always frowned. In my judgment, those considerations preclude me from being satisfied that in engaging the two priests, the Association acted honestly and reasonably.

Accordingly, I am not prepared to relieve the Association of liability for the established pecuniary breaches under s 85. The Association is liable to account to the trust for payments made to Fr Dzeparovski and Fr Despotoski, save in so far as they are statute-barred.

Although I would accept that Fr Despotoski had the requisite notice to be liable under the first limb of Barnes v Addy in respect of the emoluments received by him, he gave value for what he was paid, and his employment generated trust income that far exceeded his remuneration. In those circumstances, he is entitled to a just allowance for his labours, which corresponds to the modest amount he was in fact paid. The result is that he is not liable to account to the trust.

For substantially the same reasons that found my conclusion that, for the purposes of s 85, the Association did not act honestly and reasonably, I am compelled to conclude that the Committee Members were conscious of those elements of the engagement of the two priests that made their participation transgress ordinary standards of honest behaviour. They knew, or at the least ought to have known, that what they were doing repudiated their recently sworn undertaking to uphold church law, and yet would achieve no religious purpose in the eye of the Church for want of the Bishop's approval. While I accept that considerable doubt attended whether the Association would be held to be a trustee, about which minds could reasonably differ, until Hamilton J's judgment, and that the Committee Members did not understand the niceties of church law, I cannot accept that it accorded with ordinary standards of honest behaviour for them to repudiate their recent oath of office. Mr Eftimov's evidence establishes that all the Committee members were present when the oaths were taken. Accordingly, I would hold each of the Committee members liable as an accessory to account to the trust for the emoluments paid to Fr Dzeparovski and Fr Despotoski while that Committee Member remained in office, but not in respect of moneys so paid prior to November 1997 as to which extent the claim is statute-barred.

RELIEF

I will direct that the parties bring in Short Minutes to give effect to these this judgment. In principle:

(1) The plaintiffs are entitled to a declaration to the effect that all the property of the Association other than the litigation funds are held as trustee on the trust declared by Hamilton J. If the defendants desire to contend that any litigation funds remain, they may have an account of the litigation funds at their own risk as to costs.

(2) The plaintiffs are entitled to declarations to the effect that the Association has, in breach of trust:

(a) excluded the diocesan Bishop,

(b) excluded the parish priest appointed by the Bishop,

(d) employed priests not appointed by the Bishop, and

(e) failed to accept applications for membership from believers in the doctrines of the Macedonian Orthodox Church who have satisfied the criteria for membership specified in the 1994 Constitution, the diocesan statute and the by-laws.

(3) The plaintiffs are entitled to injunctive relief that has the effect of compelling the Association to comply with the rules of Macedonian Orthodox Church as they apply to parishes of the Macedonian Orthodox Church in respect of not excluding or impeding the Bishop, not excluding or impeding Father Mitrev, and admitting into membership those who meet the requirements of church law for membership of a parish assembly.

(4) The plaintiffs are entitled to an order that the Association account to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski, save those paid prior to November 1997 in respect of which the claim is statute barred.

(5) The plaintiffs are entitled to an order that each of the Committee Members accounts to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski while that Committee Member remained in office, save those paid prior to November 1997 in respect of which the claim is statute barred .

(6) Upon the voting membership of the Association being brought into line with the requirements of the diocesan statute, the state of hostilities between the Association and the Macedonian Orthodox Church will probably come to an end, and there is no requirement to consider removal of the sixth defendant as trustee. In any event, there would be significant difficulties in removing and replacing the trustee, given the nature of the trust and the role of the Association as user of the church. This is all the moreso in the absence of a viable proposal for a replacement trustee.

(7) Save in the limited respects to which I have referred, I am not inclined to order a general account. An account is a discretionary remedy, and particularly in the case of a charity the Court has regard to the utility of an account, and the prejudice to the charity of prolonged litigation. The liability to account can be sufficiently identified from and limited to the proven breaches.

**********

Decision last updated: 23 February 2012

Medium Neutral Citation:	Metropolitan Petar v Mitreski [2012] NSWSC 16
Hearing dates:	2 - 30 August 2010
Decision date:	03 February 2012
Jurisdiction:	Equity Division
Before:	Brereton J
Decision:	(1)The plaintiffs are entitled to a declaration to the effect that all the property of the Association other than the litigation funds are held as trustee on the trust declared by Hamilton J. If the defendants desire to contend that any litigation funds remain, they may have an account of the litigation funds at their own risk as to costs. (2)The plaintiffs are entitled to declarations to the effect that the Association has, in breach of trust: (a) excluded the diocesan Bishop, (b) excluded the parish priest appointed by the Bishop, (c) prevented a priest licensed by the Bishop to conduct services in the church from doing so, (d) employed priests not appointed by the Bishop, and (e) failed to accept applications for membership from believers in the doctrines of the Macedonian Orthodox Church who have satisfied the criteria for membership specified in the 1994 Church constitution, the diocesan statute and the by-laws. (3)The plaintiffs are entitled to injunctive relief that has the effect of compelling the Association to comply with the rules of Macedonian Orthodox Church as they apply to parishes of the Macedonian Orthodox Church in respect of not excluding or impeding the Bishop, not excluding or impeding Fr Mitrev, and admitting into membership those who meet the requirements of church law for membership of a parish assembly. (4)The plaintiffs are entitled to an order that the Association account to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski, save those paid prior to November 1997 in respect of which the claim is statute barred. (5)The plaintiffs are entitled to an order that each of the Committee Members accounts to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski while that Committee Member remained in office, save those paid prior to November 1997 in respect of which the claim is statute barred . Direct that the parties bring in Short Minutes to give effect to these this judgment.
Catchwords:	TRUSTS AND TRUSTEES - Charitable trusts - church trust - trust property - where certain property held by trustees to permit its use by unincorporated association as a church of the Macedonian Orthodox Religion - whether income generated by church and parish activities is trust income - whether other property acquired with trust income is held upon same trusts. ASSOCIATIONS AND CLUBS - Incorporated associations - where property held by trustees to permit its use by a predecessor unincorporated association as a church of the Macedonian Orthodox Religion - where constitution of successor incorporated association provides that funds of association shall be applied to carry out the objects of the association - whether legislation and constitution impedes acquisition by incorporated association of further property on same trust. TRUSTS AND TRUSTEES - Charitable trusts - church trust - whether certain provisions of church law were sufficiently fundamental to be terms of trust. TRUSTS AND TRUSTEES - Breach of trust - defence of proceedings brought against trustee - whether resort to trust assets to fund defence is breach of trust. LIMITATIONS - Breach of trust - charitable trusts - whether claim by plaintiffs suing not for the benefit of the public at large but by virtue of special interest in enforcing the trust is "an action on a cause of action in respect of a breach of trust" accruing to a plaintiff within Limitation Act, s 48(a). TRUSTS AND TRUSTEES - Rights of trustees - Judicial advice - where advice obtained irrelevant to breaches established. TRUSTS AND TRUSTEES - Excusable breaches - whether trustee ought fairly to be excused for omitting to obtain the direction of the Court in the matter in which the trustee committed the breach - where trustee did not believe that it was a trustee - whether trustee ought fairly to be excused for the breach of trust - relevant considerations - whether trustee has acted honestly and reasonably - where breaches involved repudiation of sworn promise to adhere to church law and to knowledge of trustee could achieve no religious purpose. TRUSTS AND TRUSTEES - Charitable trusts - accessorial liability - whether mere engagement in conduct causative of breach attracts accessorial liability - necessity for consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour - where breaches involved repudiation of sworn promise to adhere to church law and to knowledge of trustee could achieve no religious purpose.
Legislation Cited:	(CTH) Corporations Act 2001, s 1318 (CTH) Trade Practices Act 1974, s 52 (NSW) Associations Incorporation Act 1984, s 6 (NSW) Associations Incorporation Act 2009 s 95 (NSW) Limitation Act 1969 s48(a) (NSW) Trustee Act 1925, s 59(4), s 63, s 85, s 93(3), UCPR 42.25 UCPR 42.7
Cases Cited:	Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247 Application of Macedonian Orthodox Community Church St Petka Inc (No 4) [2007] NSWSC 254 Armitage v Nurse [1998] Ch 241 Attorney-General (ex rel Elisha) v Holy Apostolic and Catholic Church of the East (1989) 98 ALR 327 Attorney-General (Queensland); Ex rel Nye v Cathedral Church of Brisbane [1977] 136 CLR 353 Attorney-General v Cocke [1988] Ch 414 Attorney-General v Gould (1860) 28 Beav 485 Attorney-General v Wylde (1948) 48 SR(NSW) 366 Banque Commerciale SA v Akhil Holdings Limited [1990] 169 CLR 279 Barnes v Addy (1874) LR 9 Ch App 244 Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 Corrigan v Farrelly (1897) QLJ 105 Craigdallie v Aikman (1820) 2 Bligh 529 Edwards v Attorney-General (2004) 60 NSWLR 667 Farah Constructions v Say-Dee (2007) 230 CLR 89 Fay v Moramba Services Pty Ltd [2010] NSWSC 725 Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) [2002] NSWCA 29 General Assembly of Free Church of Scotland v Lord Overtoun [1904] AC 515 His Grace Metropolitan Petar v Aco Kostovski; Alexander v Branov (unreported, VSC, 27 October 1997) In re Beddoe; Downes v Cottam [1893] 1 Ch 547 In re Grimthorpe [1985] Ch 615 Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550 Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar (2008) 237 CLR 66 Mead v Watson (2005) 23 ACLC 718 Metropolitan Petar v Mitreski [2003] NSWSC 262 Metropolitan Petar v Mitreski [2009] NSWSC 106 Miller v Cameron (1936) 54 CLR 572 Mitreski v Metropolitan Petar [2009] NSWSC 319 National Trustee Co of Australasia Ltd v General Finance Co of Australasia Pty Ltd [1905] AC 373 National Trustees Executors and Agency Co of Australasia v Barnes (1941) 64 CLR 268 Nolan v Collie [2004] HCATrans 22 Paul A Davies (Australia) Pty Limited v Davies [1983] 1 NSWLR 440 President and Scholars of St Mary Magdalen, Oxford v Attorney-General (1857) 6 HLC 189 Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 Re Buckton [1907] 2 Ch 406 Re Llewellin; Llewellin v Williams (1887) 37 Ch D 317 Re Tollemache [1903] 1 Ch 457 Re Turner [1897] 1 Ch 536 Re Application of Macedonian Orthodox Community Church St Petka Inc [2004] NSWSC 388 Re Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441; [2005] NSWSC 558 Scandrett v Dowling (1992) 27 NSWLR 483 Solicitor-General v Wylde (1945) 46 SR(NSW) 83 Wylde v Attorney-General (NSW) ex rel Ashelford (1948) 78 CLR 224
Texts Cited:	Jacobs on Trusts, 7th edition, 2006 Lewin on Trusts, 18th edition, 2008
Category:	Principal judgment
Parties:	His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia & New Zealand (first plaintiff) The Very Reverend Father Mitko Mitrev (second plaintiff) Lambe Mitreski (first defendant) Peco Damcevski (second defendant) Boris Minovski (third defendant) Eftim Eftimov (fourth defendant) Mile Marcevski (fifth defendant) Macedonian Orthodox Community Church St Petka Incorporated (sixth defendant) Naum Despotoski (eighth defendant) Attorney-General for the State of NSW (ninth defendant)
Representation:	Counsel: Mr TGR Parker SC w Mr RE Steele (Ps) Mr M Leeming SC w Ms L Goodchild (D1-6, 8) Mr M Izzo (D9) Solicitors: Sachs Gerace Lawyers (Ps) McConnell Jaffray Lawyers (D1-6, 8) Crown Solicitor (D9)
File Number(s):	1997/25609