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

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.