Parkes-Linnegar v Watson (No 2) - [2011] NSWSC 181

Supreme Court

New South Wales

Medium Neutral Citation: Parkes-Linnegar & Anor v Watson (No 2) [2011] NSWSC 181
Hearing dates: 1 March 2011
Decision date: 18 March 2011
Before: Pembroke J
Decision:
See paragraph [19]

Catchwords: TRUSTEE - indemnity for costs and liability - conduct unreasonable - no right of indemnity
JUDICIAL ADVICE - no proper basis for seeking advice - discrete issue - indemnity for costs refused
Legislation Cited: Trustees Act 1925
Uniform Civil Procedure Rule 2005
Cases Cited: Balkin v Peck (1998) 43 NSWLR 706
Christmas v Jones [1897] 2 Ch 190
Drummond v Drummond [1999] NSWSC 923
In re Paulings Settlement Trusts [1964] 1 Ch 303
Parkes-Linnegar & Anor v Watson [2011] NSWSC 37
Rouse v 100F Australia Trustees Ltd (No 3) [1999] SASC 208
Category: Principal judgment
Parties: Gloria Joy Parkes-Linnegar - first plaintiff
Robert Parkes-Linnegar - second plaintiff
Michael Carl Watson - defendant
Representation: D Higgs SC with Vanessa Thomas - for the plaintiffs
N Cotman SC with Dominic Williams - for the defendant
Jackson Lalic Lawyers - for the plaintiffs
Spencer Whitby & Co - for the defendant

File Number(s): 2010/146970

Judgment

On 11 February 2011 I gave judgment in these proceedings Parkes -Linnegar & Anor v Watson [2011] NSWSC 37 in which the principal issue was whether the defendant was justified in withholding his consent to the termination of a trust of which he was a trustee and the plaintiffs were the sole beneficiaries. What remains for resolution are the precise form of orders and the allocation of costs. The costs question in turn gives rise to an issue as to a trustee's right of indemnity from trust property.

The termination of trust issue was ultimately and primarily ventilated by an application by the defendant for judicial advice. As the defendant is only one of two trustees and the first plaintiff, who takes an opposing view, is the other trustee, there should be an order at the outset that the defendant be appointed to represent the trustees for the purpose of the judicial advice application.

As I explained in the principal judgment, the defendant's unwillingness to consent to the termination of the trust was based on two broad objections. One of those objections related to certain debts said to be owing by the trust. The other was a supposed concern as to whether the first plaintiff was sui juris by reason of her lack of capacity. I will deal first with the costs and indemnity consequences of the capacity issue.

The Capacity Issue

At the commencement of the hearing, it was not entirely clear whether the defendant advanced a positive case on this issue. The prior history, now adumbrated in submissions, reveals an unsatisfactory state of affairs. I have concluded that the conduct of the defendant and his legal representatives in relation to this issue was unreasonable. The sequence of events is as follows:

(a) On 18 August 2010, the defendant filed his defence. It contained no affirmative allegation that the first plaintiff…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2011] NSWSC 181
Decision Date: 18 March 2011

CaseChat Overview and Summary

The case involved a dispute between the plaintiffs, Parkes-Linnegar, and the defendant, Watson, concerning the indemnity for costs and liability. The matter was heard in the Supreme Court of Queensland. The plaintiffs, who were trustees, sought to be indemnified for costs and liability incurred in defending a proceeding against them in their capacity as trustees. The defendants opposed the indemnity, arguing that the plaintiffs' conduct was unreasonable and that there was no proper basis for seeking advice on the discrete issue of indemnity for costs.

The central legal issues were whether the plaintiffs had a right to indemnity for the costs and liability incurred in the proceeding, and whether the advice sought was on a discrete issue. The court had to determine if the plaintiffs' conduct was reasonable and if there was a proper basis for seeking advice on the issue of indemnity for costs. The court also needed to assess if the advice sought was on a discrete issue, as this would determine the extent of the indemnity to which the plaintiffs were entitled.

In delivering the judgment, the court found that the plaintiffs' conduct was unreasonable and that there was no proper basis for seeking advice on the discrete issue of indemnity for costs. The court held that the plaintiffs did not have a right to indemnity for the costs and liability incurred in the proceeding. The court concluded that the plaintiffs' request for indemnity was not justified and refused the application for indemnity for costs. The court's reasoning was based on the finding that the plaintiffs' conduct was unreasonable and that there was no proper basis for seeking advice on the discrete issue of indemnity for costs.

The court made no orders for indemnity for costs. The plaintiffs were required to bear their own costs in defending the proceeding against them in their capacity as trustees. The decision underscores the importance of trustees acting reasonably and seeking proper advice before incurring costs in proceedings against them in their capacity as trustees. The case also highlights the need for trustees to be cautious when seeking indemnity for costs, as the court may refuse such indemnity if the conduct was unreasonable or the advice sought was not on a discrete issue.

Orders