Pitard Consortium Pty Ltd v Les Denny Pty Ltd (No 2)
[2019] VSC 640
•20 September 2019
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S ECI 2019 03402
| PITARD CONSORTIUM PTY LTD (ACN 634 588 980) AS TRUSTEE FOR THE PITARD TRUST & ORS (according to the Schedule attached) | Plaintiffs |
| v | |
| LES DENNY PTY LTD (ACN 156 618 825) & ORS (according to the Schedule attached) | Defendants |
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JUDGE: | McDonald J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 22 and 26 August 2019, written submissions filed on 16 and 19 September 2019 |
DATE OF RULING: | 20 September 2019 |
CASE MAY BE CITED AS: | Pitard Consortium Pty Ltd & Ors v Les Denny Pty Ltd & Ors (No 2) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 640 |
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COSTS – Whether defendants entitled to their costs of proceeding out of assets of trusts of which they were the former trustees – Whether costs should be awarded on an issues basis – Whether defendants acted reasonably – Civil Procedure Act 2010 s 23.
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiffs | Mr D G Collins QC and Mr B Ryde | Strongman & Crouch |
| For the defendants | Mr R G Craig and Ms V Bell | Allens |
HIS HONOUR:
On 11 September 2019, the Court delivered reasons for judgment in Pitard Consortium Pty Ltd & Ors v Les Denny Pty Ltd & Ors [2019] VSC 614 (‘primary judgment’). On 12 September 2019, the Court made orders, inter alia, that the plaintiffs be entitled to their costs of the proceeding out of the trust assets.[1] When judgment was delivered, counsel for the plaintiffs foreshadowed that the plaintiffs intended to resist an order that the defendants should have their costs paid out of the assets of the Pitard Trusts.[2] The parties were ordered to file submissions in respect of any orders to be made regarding the defendants’ costs of the proceeding. The plaintiffs filed submissions and, without leave of the Court, an affidavit in support of their position that the defendants should only be entitled to 50 per cent of their costs out of the trust assets.[3] Notwithstanding the fact that the affidavit was filed without leave, I have read the affidavit.
[1]Order of McDonald J in Pitard Consortium Pty Ltd & Ors v Les Denny Pty Ltd & Ors (Supreme Court of Victoria, S ECI 2019 03402, 12 September 2019).
[2]As defined in Pitard Consortium Pty Ltd & Ors v Les Denny Pty Ltd & Ors [2019] VSC 614, [1].
[3]Affidavit of Jonathan Joseph sworn 19 September 2019.
When the proceeding was commenced by originating motion filed on 26 July 2019, the defendants were the former trustees of the Pitard Trusts. The principal issue dealt with in the primary judgment is whether the defendants, as the former trustees of the Pitard Trusts, were entitled to retain possession of trust property pending satisfaction of their accrued right of indemnity in respect of liabilities incurred by them in their capacity as trustees.
In the primary judgment I concluded that the defendants were not entitled to retain possession of trust property. This conclusion was inconsistent with the submissions advanced on behalf of the defendants. Nevertheless, the defendants acted reasonably in contending that they were entitled to retain trust property. As set out in the primary judgment, the defendants’ contention derived support from the judgment of the Full Court of the South Australian Supreme Court in Re Suco Gold Pty Ltd (In Liquidation),[4] as well as two judgments of the Victorian Supreme Court: Tolhurst Druce & Emmerson v Maryvell Investments Pty Ltd[5] and Rosenberg v Fifteenth Eestin Nominees Pty Ltd (No 2).[6]
[4](1983) 33 SASR 99.
[5][2007] VSC 271.
[6][2010] VSC 38.
The proceeding was commenced by originating motion filed on 26 July 2019. Prior to the commencement of the hearing on 22 August 2019, the parties identified four issues for determination:
First, whether the deed dated 3 July 2019 (in the case of the first plaintiff) and the notices of removal and deeds dated 8 July 2019 (in case of the second to sixth plaintiffs) (together, the Appointment Deeds) purporting to remove each of the defendants as trustee and appoint each of the plaintiffs as trustee, as referred to in paragraph 23 of the affidavit of Ms Skye Elizabeth Pitard dated 23 July 2019 (the Skye Pitard Affidavit), were effective?
Second, whether the shareholder resolutions of each defendant on or around 1 July 2019 purporting to replace Ms Pitard as director, as referred to in paragraphs 16 to 18 of the Skype Pitard Affidavit, were effective?
Third, if the answer to the first question is that the Appointment Deeds were effective to appoint the plaintiffs as trustees, whether:
a. the plaintiffs are entitled to a vesting order pursuant to section 51 of the Trustee Act 1958 (Vic), subject to each defendant’s equitable lien in respect of any liabilities for which it is entitled to be indemnified?
b. the defendants are entitled to obtain and retain possession of the trust property until their right of indemnity is exercised and all liabilities incurred by virtue of having been trustee are satisfied?
Fourth, whether:
a. the defendants and the second plaintiff (as applicable) acted reasonably, and were therefore justified, in meeting trust liabilities in accordance with the regime proposed (but not yet formally agreed) in correspondence between the parties on 29 and 30 July 2019 and on 5 August 2019?
b. the defendants acted reasonably, and were therefore justified in refraining from transferring trust property to the plaintiffs pending the hearing and determination of this proceeding.[7]
[7]Plaintiffs, ‘Agreed List of Issues’, 7 August 20019, [1]–[4] (emphasis in original).
The plaintiffs submit that only 50 per cent of the defendants’ costs should be paid out of the assets of the Pitard Trusts because the defendants acted unreasonably with the result that unnecessary legal costs were generated. The plaintiffs submit that until the eve of the first day of hearing on 22 August 2019 the defendants maintained that the plaintiffs had not been validly appointed as new trustees of the Pitard Trusts.
In effect, the plaintiffs submit that the defendants acted unreasonably by failing to have acknowledged at an earlier point in time that the plaintiffs had been validly appointed as trustees. Further, the plaintiffs submit that the question of the effectiveness the resolutions purporting to replace Ms Pitard as a director of the defendants was only a live issue if the Court concluded that the plaintiffs were not validly appointed as trustees.[8] The plaintiffs submit that if the defendants had acted reasonably and removed their opposition to issue one prior to the commencement of the proceeding, issue two would have fallen away and not formed any part of the originating motion.[9]
[8]Plaintiffs, ‘Submissions regarding defendants’ costs’, 19 September 2019, [8].
[9]Ibid.
The plaintiffs sought and were granted a declaration that each of the plaintiffs was validly appointed as a trustee of a Pitard Trust. The submissions filed by the defendants on 20 August 2019 indicated that the defendants did not intend to advance any submissions on the question of the validity of the plaintiffs’ appointment. Nevertheless, as the plaintiffs sought declaratory relief it was necessary for Mr Collins QC, who appeared with Mr Ryde on behalf of the plaintiffs, to direct the Court’s attention to the provisions of each trust deed relied upon in aid of the plaintiffs’ contention that they were validly appointed. The relevant provisions are set out in annexure A of the primary judgment.
Plainly, in order for the plaintiffs to succeed in obtaining an order for possession of trust property, it was essential that the Court be satisfied that each of the plaintiffs was validly appointed as a trustee.
On 22 August 2019, both Mr Collins and Mr Craig advanced submissions regarding the effectiveness of resolutions which purported to replace Ms Pitard as a director of the defendants. By agreement between the parties, the Court was advised prior to the second day of hearing that it was not necessary to determine this issue.
The Court’s discretion to award costs must be exercised in light of the particular circumstances of the case at hand. In this proceeding, a relevant consideration is the fact that the proceeding came on for hearing less than one month after the originating motion was filed. The issues raised in the proceeding were not straightforward.
Where a proceeding involving complicated questions of law is heard within a month of the filing of the originating process, a court should be hesitant in criticising a party for not pursuing issues which were initially identified as being contentious. In the circumstances of this proceeding, I do not consider that the defendants acted unreasonably in not pressing a contention that the plaintiffs were not validly appointed. Parties are subject to an overarching obligation pursuant to s 23 of the Civil Procedure Act 2010 to narrow the issues in dispute. I am satisfied that the defendants acted consistently with this obligation.
The primary issue in this proceeding concerned the defendants’ right to retain possession of trust property. The hearing occupied just short of two full days. The majority of the hearing was devoted to the issue of the defendants’ right to retain possession of trust property. If the issue of retention of trust property had been the only issue for determination the hearing would not have concluded in less than two days. I consider this to be a matter which weighs against awarding costs on an ‘issues basis’. I consider it appropriate in this proceeding to adopt a global approach to the assessment of costs. Having identified the primary issue as being the retention of trust property, the question is whether, in respect of that issue, the defendants acted reasonably. I have no hesitation in concluding that the question should be answered in the affirmative.
There will be an order that each of the defendants be entitled to their costs of this proceeding out of trust assets as follows:
(a) The first defendant out of the assets of the Pitard Trust.
(b) The second defendant out of the assets of the Pitard Knowles No 2 trust.
(c) The third defendant out of the assets of the Pitard Knowles No 3 trust.
(d) The fourth defendant out of the assets of the Pitard Knowles No 4 trust.
(e) The fifth defendant out of the assets of the Pitard Knowles No 5 trust.
(f) The sixth defendant out of the assets of the Mary Pitard trust.
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SCHEDULE OF PARTIES
S ECI 2019 03402
BETWEEN:
| PITARD CONSORTIUM PTY LTD (ACN 634 588 980) AS TRUSTEE FOR THE PITARD TRUST | First plaintiff |
| PK NO 7 PTY LTD (ACN 617 437 340) AS TRUSTEE FOR THE PITARD KNOWLES NO 2 TRUST | Second plaintiff |
| PK NO 8 PTY LTD (ACN 617 439 175) AS TRUSTEE FOR THE PITARD KNOWLES NO 3 TRUST | Third plaintiff |
| PK NO 9 PTY LTD (ACN 618 875 620) AS TRUSTEE FOR THE PITARD KNOWLES NO 4 TRUST | Fourth plaintiff |
| PK NO 10 PTY LTD (ACN 618 877 508) AS TRUSTEE FOR THE PITARD KNOWLES NO 5 TRUST | Fifth plaintiff |
| PITARD 3 PTY LTD (ACN 618 907 234) AS TRUSTEE FOR THE MARY PITARD TRUST | Sixth plaintiff |
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| LES DENNY PTY LTD (ACN 156 618 825) | First defendant |
| PITARD KNOWLES NO 2 PTY LTD (ACN 606 899 129) | Second defendant |
| PITARD KNOWLES NO 3 PTY LTD (ACN 606 901 295) | Third defendant |
| PITARD KNOWLES NO 4 PTY LTD (ACN 609 470 313) | Fourth defendant |
| PITARD KNOWLES NO 5 PTY LTD (ACN 609 767 615) | Sixth defendant |
| MARY PITARD PTY LTD (ACN 608 289 792) | Seventh defendant |
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