Moyes v J & L Developments Pty Ltd (No 2)

Case [2007] SASC 261

SUPREME COURT OF SOUTH AUSTRALIA

(Civil: Application)

MOYES & ANOR v J & L DEVELOPMENTS PTY LTD & ANOR (No 2)

[2007] SASC 261

Judgment of The Honourable Justice Debelle

11 July 2007

PROCEDURE - COSTS - RECOVERY OF COSTS

EQUITY - TRUSTS AND TRUSTEES - POWERS, DUTIES, RIGHTS AND LIABILITIES OF TRUSTEES - INDEMNITY, LIEN AND REIMBURSEMENT - IN RESPECT OF LEGAL COSTS AND COMMISSION

Recovery of costs ordered on appeal – applicants had benefit of order for costs against first respondent – first respondent registered proprietor of land as trustee – first respondent entitled under trust deed to indemnity for liability incurred as trustee – trust deed amended to negate the indemnity – whether amendment enforceable whether applicants entitled to be subrogated to indemnity – first respondent resigned as trustee - first respondent transfer land to new trustee - whether costs payable by new trustee  – application allowed.

Corporations Act 2001 (Cth) s 197, s 565(1); Supreme Court Act 1935 s 40(1); Supreme Court Act 1981 (UK) s 51(1); Supreme Court Rules 1987 r 101; Trustee Act 1936 s 35(2); Trusts Act 1973 (Q) s 65; Trustee Act 1958 (Vic) s 2(3), s 36(2), referred to.
Aiden Shipping Co Ltd v Interbulk Ltd [1986] AC 965; Bowmaker Limited v Tabor [1941] 2 KB 1; JA Pty Ltd v Jonco Holdings Pty Ltd (2000) 33 ACSR 691; Jessup v Queensland Housing Commission [2002] 2 Qd R 270; Kemtron Industries Pty Ltd v Commissioner of Stamp Duties [1984] 1 Qd R 576; Knight v F P Special Assets Ltd (1992) 174 CLR 178; Mogul Steamship Company v McGregor, Gow and Co [1892] AC 25; Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360; RWG Management Ltd v Commissioner for Corporate Affairs (Vic) [1985] VR 385; Worrall v Harford (1802) 8 Ves Jun 4; 32 ER 250, applied.
ex parte Edmonds (1862) 4 De GF & J 488; 45 ER 1273; Marginson v Ian Potter & Co (1976) 136 CLR 161; National Trustees Executors and Agency Co of Australasia v Barnes (1941) 64 CLR 268; Re Jacob Morris deceased (1943) 43 SR (NSW) 352; re Johnson (1880) 15 Ch D 548; re Raybould [1900] 1 Ch 199; re Staff Benefits Pty Ltd [1979] 1 NSWLR 207; Vacuum Oil Company Pty Ltd v Wiltshire (1945) 72 CLR 319, considered.

MOYES & ANOR v J & L DEVELOPMENTS PTY LTD & ANOR (No 2)
[2007] SASC 261

Land and Valuation Division

  1. DEBELLE J.        This is an application for an order for payment of costs against a non-party or, in the alternative, that the costs be paid out of the assets of a trust.  The application is made by the appellants, Professor and Mrs Moyes and by Mr and Mrs Brooks as well as by the second respondent, the Adelaide Hills Council (“the Council”).  The application follows the hearing of an appeal to the Land and Valuation Division of this Court…

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AGLC
Moyes v J & L Developments Pty Ltd (No 2) [2007] SASC 261
Case
[2007] SASC 261
Decision Date

CaseChat Overview and Summary

In the matter of Moyes v J & L Developments Pty Ltd (No 2), the applicants sought recovery of costs from J & L Developments Pty Ltd (the first respondent) after obtaining a favourable outcome in litigation. The first respondent, acting as a trustee for a trust, held land as the registered proprietor. The dispute centred on the enforceability of an amendment to the trust deed which negated the trustee's entitlement to indemnity for liability incurred as trustee. The first respondent had resigned as trustee and transferred the land to a new trustee, Palm Hills. The applicants argued they were entitled to be subrogated to the indemnity and that the new trustee should be liable for the costs.

The court needed to determine whether the amendment to the trust deed was enforceable, whether the applicants were entitled to be subrogated to the indemnity, and whether the new trustee should pay the costs. The court examined the nature of the trustee's role and the steps taken to avoid liability for costs, including the amendments to the trust deed, the appointment of a new trustee, and the transfer of the land. The court also considered whether the trust asset could be traced through to the proceeds of sale and whether it was proper for the trust assets to be available for the payment of the costs.

The court found that the amendment to the trust deed was unenforceable and that the applicants were entitled to be subrogated to the indemnity. The court emphasised that the trust assets should be available to pay the costs since the trustee had engaged in litigation for the benefit of the trust. The court exercised its discretion to order that the costs be paid out of the proceeds of the sale of the trust asset, which had been paid into court. The court held that it would not allow the first respondent to avoid liability for costs by divesting itself of the trust asset.

The court allowed the application to join Palm Hills as a respondent and ordered that the costs of the applicants and the Council be paid out of the proceeds of sale. This decision recognised that the amendment to the trust deed was unenforceable and gave effect to the principles that a creditor of a trust is entitled to be subrogated to the trustee and indemnified out of the assets of the trust.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

DEBELLE J
The present case does not fall precisely within that prescription. This is a case where a trustee held an asset as trustee and engaged in litigation on behalf of and for the benefit of the trust and the trust asset. The trustee has disposed of the trust asset in order to avoid any liability for costs. However, the discretion invested in the Court is sufficiently wide for the Court to go behind the dealings in the trust asset and order that the costs be paid out of the proceeds out of the sale of that asset. The fact that it is possible to trace the trust asset through to the proceeds of sale reinforces the propriety of doing so. The Court will not stand by and allow a corporate trustee deliberately to divest itself of the only asset of the trust in order to defeat the successful parties from recovering their costs. Each of the transactions, that is to say, the amendments to clause 20(b) of the trust deed, the appointment of a new trustee and the transfer of the land to Palm Hills, was each a step taken with the clear intent of avoiding any liability to costs. It is because every step in relation to the obtaining of planning consent and, once having obtained it, every step was taken to defend the grant of development consent was a step taken for and on behalf of the trust, that it is proper for the trust assets be available for the payment of the costs ordered against the trustee. In making such an order, the Court is recognising that the amendment to clause 20(b) is unenforceable and giving effect to the principles by which a creditor of a trust is entitled to be subrogated to the trustee in being indemnified out of the assets of the trust. Conclusion For these reasons, there will be an order joining Palm Hills as a respondent to these proceedings and a further orders that the costs of the appellants and the Council be paid out of the proceeds of sale which have been paid into Court.

Ratio Decidendi

Legal Principle Established

Established by: DEBELLE J

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