Rosenberg v Fifteenth Eestin Nominees Pty Ltd (No.2)
[2010] VSC 38
•24 FEBRUARY 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 7433 of 2004
| BARRY ROSENBERG (AS EXECUTOR OF THE ESTATE OF EMANUEL ROSENBERG, DECEASED) AND GLEN OAK NOMINEES PTY LTD (ACN 110 045 737) | Plaintiffs |
| v | |
| FIFTEENTH EESTIN NOMINEES PTY LTD (ACN 005 291 882) SABRINA PHILLIPA BERGER AND IAN BARRY BERGER | Defendants |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 25 NOVEMBER AND 8 DECEMBER 2009 | |
DATE OF JUDGMENT: | 24 FEBRUARY 2010 | |
CASE MAY BE CITED AS: | ROSENBERG v FIFTEENTH EESTIN NOMINEES PTY LTD (NO.2) | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 38 | |
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Trusts – Extent of trustee’s right of indemnity – Whether it included interest agreed by former trustee to be paid on outstanding debt to third party – Whether vesting order with respect to real property should be made before former trustee’s right of indemnity satisfied – Costs of the proceeding – Whether successful plaintiffs should be deprived of costs of some issues – Trustee Act 1958, ss.45, 51, 58; Transfer of Land Act 1958, s.58.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr PB Murdoch QC | B2B Lawyers |
| For the Defendants | Mr GR Ritter QC with Mr R Greenberger and Ms L Powderly | Kalus Kenny |
HIS HONOUR:
Introduction
On 27 April 2007 I published my reasons for judgment in this proceeding.[1] I held that the claims by the second and third defendants, Sabrina Phillipa Berger and Ian Barry Berger, that the first plaintiff, Emanuel Rosenberg, the father of Mrs Berger, was estopped from removing the first defendant, Fifteenth Eestin Nominees Pty Ltd (“Fifteenth Eestin”), as the trustee of the E Rosenberg Investment Trust (“the Investment Trust”), and that Mr Rosenberg held the whole of his assets and wealth on a constructive trust involving Mrs Berger, both failed.[2] Thus, I rejected the challenge by the defendants to Mr Rosenberg’s appointment of the second plaintiff, Glen Oak Pty Ltd (“Glen Oak”) on 15 July 2004 as trustee of the Investment Trust in place of Fifteenth Eestin.
[1]Rosenberg v Fifteenth Eestin Nominees Pty Ltd [2007] VSC 101.
[2][2007] VSC 101, [156].
By agreement of the parties, one issue not dealt with in the first hearing was whether any vesting of trust property in Glen Oak would be subject to Fifteenth Eestin’s equitable charge or lien over the property of the Investment Trust to secure its right to be indemnified in respect of the liabilities of the Investment Trust.[3]
[3][2007] VSC 101, [10] and [191].
Following the judgment, it was not disputed by the plaintiffs that Fifteenth Eestin was entitled to an indemnity in respect of the liabilities of the Investment Trust. The issue was simply the extent of the indemnity. In the end, the dispute came down to one issue, namely, whether the indemnity included interest said to be payable on the debt owed by Fifteenth Eestin to Project Hardware Pty Ltd (“Project Hardware”). This was the first issue dealt with in the second hearing before me.
The second issue in the second hearing was the form of final order to be made in circumstances where Fifteenth Eestin’s claim for indemnity had yet to be satisfied, including in particular whether there should now be an order for the vesting of the real property of the Investment Trust or whether that step should be deferred pending satisfaction of Fifteenth Eestin’s right to indemnity.
The third issue in the second hearing was what orders for the costs of the proceeding should now be made. The plaintiffs sought, and the defendants opposed, an order that the defendants pay all of the costs of the proceeding.
This judgment deals with each of these issues.
The Background to the Outstanding Issues
On 5 June 2007, I heard argument on the question of whether I should then make a vesting order. Following the receipt of further written submissions, I decided on 14 June 2007 that, having received undertakings from the defendants protecting the assets of the Investment Trust in the meantime, I should not make such an order, at least until the question of the extent, if any, of Fifteenth Eestin’s lien or charge over the trust fund had been determined. The judgment of the Court entered that day was accordingly limited to declarations that Fifteenth Eestin ceased to be the trustee of the Investment Trust on 15 July 2004 and that Glen Oak was, and had been since 15 July 2004, the trustee of the Investment Trust. Further, I ordered that there be an inquiry as to the extent of Fifteenth Eestin’s right of indemnity from the Investment Trust, and the extent of its lien or charge against the assets of that Trust, and a declaration of Fifteenth Eestin’s entitlement for the amount found in pursuance of the inquiry. A timetable was set for the necessary steps preceding such inquiry and the application was adjourned to 13 August 2007 and later by consent to 23 August 2007. Finally, the time for service of a notice of appeal was extended.
In an affidavit in support of the inquiry sworn by Mr Berger on 26 June 2007, he referred to Fifteenth Eestin’s indebtedness to Project Hardware in the sum of $4,413,020.71 and to S & I Investments Pty Ltd (“S & I Investments”) in the sum of $47,000.00. He also referred to Fifteenth Eestin’s future liability “to pay tax on the profit earned by the Trust since 1 July 2006”, and to the legal costs Fifteenth Eestin had incurred “by reason of its claim for indemnity being contested”. The amounts of these later two items were not yet known. Mr Berger also deposed that on 1 June 2007 Project Hardware had demanded repayment of the debt and exhibited a copy of the written demand signed by him as a director of Project Hardware. He said that Fifteenth Eestin therefore also sought indemnity for any interest found to be repayable in respect to the debt.
It would have been obvious to the parties that if the alleged $4.4 million debt by Fifteenth Eestin to Project Hardware was made out, then Fifteenth Eestin did not have sufficient liquid assets to repay that amount. The only way Fifteenth Eestin could do so would be to sell, or borrow against, its three real estate properties in Clifton Hill. In Fifteenth Eestin’s balance sheet for the year ended 30 June 2006, which was exhibited to an affidavit by Mr Berger sworn on 23 May 2007, these three properties, including their plant and equipment, were valued at just over $5 million. However, that figure was based on an asset revaluation carried out by Fifteenth Eestin in 1998, so the true value was likely to be considerably greater.
The defendants appealed by notice dated 28 June 2007. They sought to expedite the appeal, which was granted by Master Lansdowne (as her Honour then was) on 22 August 2007. An exceptionally tight timetable for the delivery of appeal books and submissions was set in the hope that the appeal could be heard before the end of the year. A further preliminary hearing in the Court of Appeal was set for “on or after 1 November 2007”.
At the directions hearing on 23 August 2007 senior counsel for the plaintiffs agreed that Fifteenth Eestin was entitled to indemnity in respect of the debts to Project Hardware and S & I Investments and the liability to pay any income tax. However, he disputed the claims for interest and legal costs. I gave directions for the filing of further affidavits about the extent of the indemnity and adjourned the application for mention on 14 September 2007, on the basis that I might be able to hear the arguments about the extent of the indemnity and the costs of the proceeding later in September.
On 6 September 2007, Mr Berger swore a further affidavit in which he referred to further debts of Fifteenth Eestin, namely to Mrs Berger in the sum of $64,801.54, to Antony Berger in the sum of $400.00 and to Macquarie Bank Limited in the sum of “about $925,000”. He also referred to Fifteenth Eestin’s continuing liability to pay the goods and services tax and to its continuing liability to pay interest on the debts to Project Hardware, S & I Investments and Macquarie Bank.
By a letter dated 13 September 2007 from the plaintiffs’ solicitors to the defendants’ solicitors, the plaintiffs agreed that Fifteenth Eestin was entitled to indemnity in respect of the debts to Mrs Berger and Antony Berger and the liability to pay any goods and services tax and legal costs “incurred solely in respect of its claim for indemnity against the assets of the Trust in respect of liabilities it has incurred as trustee of the Trust”.
By 14 September 2007, the opportunity for a hearing before me later in September had disappeared. At the hearing on that day, yet further directions were given for the defendants to complete the filing of their supporting material and the application was adjourned to be re-listed for mention on two days’ written notice after the mention before the Court of Appeal. I indicated at this hearing that as the opportunity for me to hear the application in September had been lost, I would be disposed not to list it for hearing if the appeal looked as though it would come on quickly.
Mr Berger swore another affidavit on 8 November 2007 in which he deposed that the proceeds from the sale of the apartment in Surfers Paradise owned by Jassi Investments Pty Ltd (“Jassi”) were used to repay in full the loan from Macquarie Bank. Accordingly, the claim for indemnity in respect of that debt disappeared. In this affidavit Mr Berger quantified the claim for interest on the Project Hardware debt as follows:
Interest from 1.6.07 - 7.11.07 (161 days @ 12%) $233,587.83.
He also said that interest on the debt owing to Project Hardware continued to accrue. However, the claim for indemnity in respect of interest on the debt to S & I Investments was not pursued by Fifteenth Eestin.
The defendants’ appeal was heard on 22 and 23 January 2008. The Court of Appeal gave judgment on 27 May 2009 and, after an argument on costs, ordered, on 13 August 2009, that the appeal be dismissed with costs. On 28 August 2009 there was a directions hearing at which I set the remaining issues down for hearing on 26 October 2009. Subsequently, the hearing date was adjourned by consent to 25 November 2009.
On 10 September 2009, the defendants applied to the High Court of Australia for special leave to appeal. That application was refused on 12 February 2010.
In Mr Berger’s affidavit sworn on 21 September 2009 he set out a calculation of the interest payable on the debt owing to Project Hardware for the month of June 2007 and for the period from 1 July 2007 to the end of October 2009. For the first period, after setting off the rent payable by Project Hardware to Fifteenth Eestin for that month, the interest came to the sum of $24,275.68. For the second period, he adjusted the principal each month by adding on the net amount of interest for the past month after setting off the rent otherwise payable by Project Hardware for that month. This calculation came to a net total of $700,569.08 for interest.
In Mr Berger’s affidavit sworn on 19 November 2009 (“the sixth affidavit”) he said that Fifteenth Eestin was unable to pay the debt of $4,413,020.71 demanded by Project Hardware on 1 June 2007. He continued:
Accordingly, since the date of the demand, I have understood and accepted that if PH [Project Hardware] sued Fifteenth [Eestin] and obtained a judgment, PH would also be entitled to interest pursuant to section 58 of the Supreme Court Act 1986. Accordingly, since 1 June 2007 PH has claimed, and Fifteenth has agreed to pay, interest at the rate prescribed pursuant to section 2 of the Penalty Interest Rates Act 1983 (“the Act”).
Mr Berger also exhibited copies of the signed accounts and lodged tax returns for Fifteenth Eestin for the financial years ended 30 June 2007 and 30 June 2008 which showed its liability to pay interest to Project Hardware at the prescribed rate, and copies of the lodged tax returns for Project Hardware for the same two financial years which showed its receipt of that interest from Fifteenth Eestin. He deposed that the accounts and tax returns of Fifteenth Eestin and Project Hardware for the financial year ended 30 June 2009 had not yet been prepared.
The Extent of the Indemnity
By the second hearing the parties were agreed that Fifteenth Eestin was entitled to an indemnity in respect of the following liabilities:
(a) its indebtedness to Project Hardware in the sum of $4,413,020.71;
(b) its indebtedness to Sabrina Berger in the sum of $64,801.54;
(c) its indebtedness to S & I Investments in the sum of $47,000.00;
(d) its indebtedness to Antony Berger in the sum of $400.00;
(e)in principle, any properly incurred ongoing liability as trustee to pay goods and services tax on behalf of the Investment Trust;
(f)in principle, any properly incurred ongoing liability as trustee to pay income tax on behalf of the Investment Trust; and
(g)legal costs incurred by Fifteenth Eestin solely in respect of its claim for indemnity against the assets of the Investment Trust in respect of the above liabilities.
As stated previously, the argument about the extent of Fifteenth Eestin’s indemnity was concerned with only one issue, namely, whether it extended to cover interest said to be payable on the debt owed by Fifteenth Eestin to Project Hardware.
The plaintiffs cross-examined Mr Berger about his evidence in his numerous affidavits concerning the claim for the interest said to be covered by the indemnity. He said that since at least 1 July 1991 the debt had been in excess of $1 million. Mr Berger agreed that it was not until 1 June 2007, shortly after it had been held that Glen Oak had been validly appointed as trustee, that Project Hardware had asked Fifteenth Eestin to repay the moneys owed or to pay interest on the moneys owed. He added that this was “because of the relationship that existed between Project Hardware and Fifteenth Eestin at the time”. He also agreed that no such step had been taken by Project Hardware after Mr Rosenberg purportedly replaced Fifteenth Eestin as trustee. He said that at that time “there was still hope … that there could have been a resolution to the matter”. Further, in answer to the proposition that “even after the proceeding commenced and while his Honour’s judgment was reserved, Project Hardware made no demand for payment of either the moneys outstanding or interest”, Mr Berger said:
Well, we’re hoping to win the case so there was no demand made, no.
When Mr Berger was pressed for a response as to whether he regarded it as in the commercial interest of Project Hardware and the Investment Trust not to seek the repayment of the moneys or the payment of interest, he said:
Well, commercially you would charge interest if it was an arms length transaction and it wasn’t an arms length transaction, they were two associated companies, so I can’t honestly say whether or not it was or wasn’t in the commercial interest because of the relationship that existed.
Mr Berger said that in 2007, after discussing the matter with his solicitor, it had been decided that Project Hardware would charge interest on the loan and that Fifteenth Eestin would pay it. He said that at the time he was the sole director of Project Hardware and a director of Fifteenth Eestin together with Mrs Berger and Mr Rosenberg. Mr Berger said that he would have discussed the question with his wife, but not Mr Rosenberg as they had not been talking for a number of years and Mr Rosenberg did not come to meetings of Fifteenth Eestin’s directors. Mr Berger agreed that there was no board minute of Fifteenth Eestin recording the agreement to pay interest to Project Hardware.
The plaintiffs submitted that Mr Berger’s evidence about the making of the agreement should not be accepted because there was no mention of any such agreement until his sixth affidavit. However, I am satisfied that there was an agreement made between Fifteenth Eestin and Project Hardware on 1 June 2007 that interest would be payable at the statutory rate on the outstanding debt of $4,413,020.71. Given the inclusion of the accruing interest in the tax returns of Fifteenth Eestin and Project Hardware for the financial years ending 30 June 2007 and 30 June 2008, there is no reason to doubt Mr Berger’s evidence about the making of the agreements. I reject the plaintiffs’ argument that there was no agreement because there was no formal offer and acceptance. An agreement can be inferred from all the circumstances.[4]
[4]See Brambles Holdings Limited v Bathurst City Council (2001) 53 NSWLR 153, [1] (Mason P) and [74]-[81] (Heydon JA); Vroon BV v Fosters Brewing Group Limited [1994] 2 VR 32, 81-83 (Ormiston J).
Counsel for the first defendant submitted that it was not unreasonable for Fifteenth Eestin to defer repayment on the basis that interest would be payable and that it was not necessary for Fifteenth Eestin to go through the charade of being sued by Project Hardware and submitting to a judgment against it bearing statutory interest (including ongoing interest) and costs. So much may be accepted. The issue is, of course, not whether Fifteenth Eestin is contractually bound to pay interest at the agreed rate to Project Hardware (I have found that it is), but whether that interest is covered by the indemnity.
Counsel submitted that the interest was covered by the indemnity because the obligation of Fifteenth Eestin to pay interest to Project Hardware was incidental to the existing liability of Fifteenth Eestin, as the former trustee, to repay the principal debt owing to Project Hardware. It was submitted that the trustee’s entitlement to be indemnified out of trust property extended to liabilities incurred by the trustee, including future, potential, and even contingent liabilities.[5] The right of indemnity did not cease on the retirement or removal of the trustee.[6] It survived the trustee’s loss of office.
[5]Hewett v Court (1983) 149 CLR 639, 663 (Deane J); X v A [2000] 1 All ER 490, 493-494 (Arden J).
[6]Kemtron Industries Pty Ltd v Commissioner of Stamp Duties [1984] 1 Qd R 576; Coates v McInerney (1992) 7 WAR 537; Dimos v Dikeakos Nominees Pty Ltd (1996) 68 FCR 39, 40 (Jenkinson J) and 43-44 (Heerey J); Collie v Merlaw Nominees Pty Ltd (2001) 37 ACSR 361, [54] (Warren J), on appeal Nolan v Collie (2003) 7 VR 287, [66] (Ormiston JA, with whom Batt and Vincent JJA agreed).
It was further submitted that the scope of the indemnity, at general law[7] and under statute,[8] applied to expenses which were not “improperly” or “unreasonably” incurred. It was submitted that there was nothing improper or unreasonable about Fifteenth Eestin incurring the liability to pay interest on the admitted debt. It had no choice and no means of stopping interest from running. Fifteenth Eestin could not sell any of the three properties, which constituted most of the assets of the Investment Trust, because it was no longer the trustee. As the holder of an equitable lien or charge, it could only have applied to the Court for an order for judicial sale. Nor could Fifteenth Eestin have borrowed against the Investment Trust’s assets in order to pay out Project Hardware, even assuming that it would have been possible to obtain such a loan.
[7]Worrall v Harford (1802) 8 Ves Jun. 4, 8 (Lord Eldon LC); 32 ER 250, 252.
[8]See s.36(2) of the Trustee Act 1958 which permits a trustee to “reimburse himself or pay or discharge out of the trust premises all expenses incurred in or about the execution of the trusts or powers”.
It was further submitted on behalf of the first defendant that it could not now be said that, by asking the Court to defer its indemnity and lien assessment and any argument on costs pending an early appeal, the defendants had acted improperly or unreasonably. The appeal was bona fide. The delay was expected to be relatively short. Counsel argued that “the ball was really in the plaintiffs’ court”. Glen Oak was the trustee, Fifteenth Eestin was not. Glen Oak had powers of sale, Fifteenth Eestin did not. Glen Oak had to discharge the indemnity and lien, but took no steps to do that.
Counsel for the first defendant submitted that after 14 September 2007 the plaintiffs made no further attempt:
(a) to deal with the lien issue, or satisfy the lien;
(b) to put forward any proposal to satisfy the indemnity and lien;
(c)to put forward any suggestion which (co-operatively or otherwise) was directed to satisfying the indemnity and to discharging Fifteenth Eestin’s lien; or
(d)to re-list the proceeding for mention as provided for in the order of 14 September 2007.
Counsel for the first defendant submitted that while the appeal was pending, neither party sought to upset the status quo, by sale or otherwise. They pointed out that the Investment Trust had had the benefit or use of Project Hardware’s funds for an extra two years. If Glen Oak had borrowed elsewhere in order to allow Fifteenth Eestin to repay Project Hardware (assuming it could have done so, about which there was no evidence) it would have paid interest and other charges on that borrowing. If it had sold the Investment Trust’s assets in order to allow Fifteenth Eestin to repay Project Hardware, the Trust assets would have been depleted and the opportunity to derive rental would have been reduced or lost.
On the other hand, counsel for the plaintiffs submitted that Fifteenth Eestin’s alleged agreement to pay interest to Project Hardware was not a liability which was “incidental” to the principal debt. It was submitted that it was an additional and separate liability which Fifteenth Eestin voluntarily assumed after its removal as trustee and at a time when it was under no obligation to do so. When Fifteenth Eestin as trustee borrowed the principal amount there was no agreement to pay interest. Further, counsel pointed out that at the time the demand was made by Mr Berger, in his capacity as a director of Project Hardware, he knew that Fifteenth Eestin had no ability to pay the debt at that time, other than by approaching the new trustee and/or the Court to bring about a sale of the Trust’s assets, which Fifteenth Eestin did not do.
It was further submitted on behalf of the plaintiffs that it was:
the unstated objective of those who stand behind Fifteenth Eestin and the defendants to create a situation where little by little significant sums of money will move from the trust assets to Project Hardware because of their driven fear that something might happen to the trust assets in the future as a result of the control of the trust changing.
The defendants’ concern, it seemed to me, related not so much as to what might happen to the trust assets but to changes that might in the future be made, or even might already have been made, to the identity of the trustee or the beneficiaries, especially since Mr Barry Rosenberg, the estranged brother of Mrs Berger, was now the appointor. Thus, in the course of their submissions, the defendants’ counsel handed up a document entitled “Actual or Potential Trust and Beneficiary Changes” which listed a number of matters which could possibly affect the status of Mrs Berger and her children as the only beneficiaries of the Investment Trust.[9]
[9]Although I made no specific finding in my earlier judgment, I am not prepared to act on the basis that Project Hardware and S & I Investments were properly added as beneficiaries. See [2007] VSC 101, [172]-[177].
In my opinion, Fifteenth Eestin’s right of indemnity does not extend to the interest payable since 1 July 2007 on the debt owed to Project Hardware. First, the agreement to pay interest arose not only after Fifteenth Eestin had ceased to be the trustee but also after its challenge to its replacement as trustee by Mr Rosenberg had been rejected by the Court. Thus, in making its agreement with Project Hardware, Fifteenth Eestin was not acting in its capacity as trustee, and the making of the agreement to pay interest was not an incident of its contracting of the principal debt. It voluntarily incurred the obligation to pay a penalty rate of interest for reasons not connected with its former role as trustee.
Secondly, it seems clear that the reason why no steps were taken to satisfy the indemnity, including bringing the issue of the extent of the indemnity to a conclusion, was that the defendants were hopeful that their appeal would be successful and they did not want the status quo changed in the interim. It is true that the argument, and my decision, about the vesting order given on 14 June 2007, did not refer to, or depend on, the possibility of an appeal. But this does not detract from the fact that it was the existence of the appeal which resulted in the maintenance of the status quo. For example, during the directions hearing before me on 23 August 2007 senior counsel for the plaintiffs argued that it was inappropriate for Fifteenth Eestin, rather than Glen Oak, to decide whether or not there should be sale of the properties to enable it to repay Project Hardware. He said:
We need to have something done to ensure that the moneys that are owed to Project Hardware are paid.
In response, senior counsel for the defendants said that they had made their intention to appeal plain from shortly after the publication of my reasons for judgment and that they were pressing on with the appeal. He then referred to the undertakings from the defendants being in place and continued:
There’s no suggestion of any sale, and certainly one would have thought that’s utterly inappropriate on our part, or for that matter on Mr Adams’ part, pending appeal.
Mr Adams was, of course, the sole director of the new trustee, Glen Oak.
This attitude continued virtually to the end of the second hearing. Senior counsel for the plaintiffs drew to my attention a letter dated 11 September 2009 from the solicitor for the defendants to the solicitors for the plaintiffs concerning in part their inability to comply with the timetable for the delivery of affidavits. Having explained why, he continued:
In any event, given my client’s application for leave to appeal to the High Court, may I suggest that as an alternative, the parties agree to hold all steps in abeyance, and adjourn the further hearing of this matter sine die, pending the outcome of my clients’ application for special leave to appeal.
In practical terms, no vesting order should be made until that application, and the appeal (if any) have been dealt with. If your clients are going to sell the properties to satisfy the lien, that should not occur until then.
Further, in the defendants’ written submissions filed before the hearing on 25 November 2009, the following passage appeared:
An application for special leave to appeal to the High Court has been filed and is likely to be heard on 11 December 2009. If leave is granted and the appeal is successful, the question of the validity of the removal of Fifteenth Eestin may be decided differently. In that event it would be prejudicial to the interests of Fifteenth Eestin and the Investment Trust if Glen Oak were to sell or otherwise deal with the properties of the Trust.
In the circumstances, it seems to me to be incongruous for the defendants to argue that the interest was covered by the indemnity because it had always been open to the plaintiffs to seek an order that the properties be sold. Clearly, that would have been strenuously opposed by the defendants. Moreover, it was quite unrealistic, in my opinion, for the defendants’ counsel to submit that Glen Oak could have easily reached agreement with them about selling or mortgaging the properties in order to satisfy Fifteenth Eestin’s right of indemnity.
This contradictionary stance by the defendants was only abandoned at the conclusion of the second day of the second hearing when senior counsel announced in his reply that the defendants were “prepared to cooperate in the sale of the properties”. Whilst a welcome indication of future cooperation, it came too late, in my opinion, to assist the defendants on the question of whether the indemnity extended to the interest payable on the debt owed to Project Hardware.
Thirdly, it seems to me that the first defendant’s justification for the claim that the interest was covered by the indemnity was contradictory of its submission (considered below) that there should be no order vesting the real property in Glen Oak until Fifteenth Eestin’s indemnity had been satisfied. In the circumstances it was up to Fifteenth Eestin, not Glen Oak, to take steps to have its indemnity satisfied by, for example, seeking a court order for the sale of the properties so that it would have the funds to repay Project Hardware. If this had been opposed by Glen Oak, and no other solution had been proposed by the new trustee, then it would have been open to Fifteenth Eestin to argue that it had no alternative but to agree to pay interest to Project Hardware at the statutory penalty rate. But this it did not do because it wanted to retain the status quo in the hope that eventually it would be declared to still be the trustee of the Investment Trust and thus the legal owner of the three pieces of real estate.
Fourthly, I consider that it is difficult to see that the agreement to pay penalty interest was an obligation that was not improperly or unreasonably incurred. It had the potential of depriving the beneficiaries of the Investment Trust of any equity remaining in the three properties if the amount of interest payable exceeded any increase in their capital value. Moreover, it would seem that the agreement to pay interest at the statutory rate was made without any consideration being given to whether a lesser, more commercial rate of interest should be struck. It was not, therefore, an agreement made with the interests of the beneficiaries in mind, but rather one made for the benefit of Project Hardware, which was safely within the Berger camp.
Finally, I note that, in any event, in my opinion the calculation made by Mr Berger on behalf of the first defendant was not in accordance with the terms of the agreement deposed to by him in his sixth affidavit. His calculation was based on monthly rests, with the principal increasing monthly as a result of the interest exceeding the set off rent, whereas the agreement which he says was made was that Project Hardware would “be entitled to interest pursuant to section 58 of the Supreme Court Act 1986 … at the rate prescribed pursuant to section 2 of the Penalty Interest Rates Act 1983”. In my opinion, s.58 does not authorise the computation of interest on interest.
The Vesting Order
The parties were agreed that there should be a declaration that the execution by Emanuel Rosenberg of the Deed of Removal and Appointment made 15 July 2004 operated to vest the property of the Investment Trust, other than real property subject to the Transfer of Land Act 1958 (“the TLA”), in Glen Oak as trustee, subject to the lien or charge of Fifteenth Eestin to secure its right of indemnity in respect of the liabilities of the Investment Trust. That is the effect of the provisions of the Trustee Act 1958, in particular s.45(1). What is vested by that sub-section is title to the trust property, other than real property subject to the TLA. However, the vesting of title does not carry with it a right to possession where the former trustee has a charge or lien securing its right of indemnity.[10]
[10]Jennings v Mather (1901) 1 KB 108, 114.
The reason for the exclusion of real property subject to the TLA is that both the Trustee Act 1958 and the TLA make special provision for such trust property. Section 45(3)(c) of the Trustee Act states that sub-sections (1) and (2) do not apply to certain property, including property subject to the operation of the TLA. Section 45(4) of the Trustee Act provides that in such a case the instrument of appointment of the new trustee vests in the new trustee the right to call for a conveyance of the property. Section 51(1) of the Trustee Act then provides that a court may make a vesting order “which shall have effect” as provided in s.58 of this Act. Section 51(2) provides that a vesting order may be made in a number of cases, including:
(o)where property is vested in a trustee and it appears to the Court to be expedient to make a vesting order.
Section 58(3) of the Trustee Act states in effect that despite the making of a vesting order, in the case of land subject to the operation of the TLA “the land shall not vest until the appropriate recordings are made in accordance with the provisions of that Act”. Turning then to the provisions of the TLA, s.58(1) states in part that where there is a trustee of land and “any vesting order is made” by a court, the Registrar on being served with an office copy of the order “shall make a recording of the order in any relevant part of the Register”. However, s.58(2) states that:
Until a recording is made as aforesaid no vesting order referred to in this section shall have any effect or operation in transferring or otherwise vesting the land.
As previously stated, there was disagreement about whether there should be an order for the vesting of the real property of the Investment Trust or whether that step should be deferred pending satisfaction of Fifteenth Eestin’s right to indemnity. The argument had some similarity with that on which I ruled on 14 June 2007, when I decided that I would not make such a vesting order, at least until the question of the extent, if any, of Fifteenth Eestin’s lien or charge over the trust fund had been determined.
Senior counsel for the plaintiffs submitted that orders should be made vesting title to the Investment Trust’s real property assets in Glen Oak as trustee and requiring the delivery up by Fifteenth Eestin to Glen Oak of all other assets of the Investment Trust. He submitted that Fifteenth Eestin’s right of indemnity would remain protected by its equitable charge. For example, it could lodge caveats against the properties owned by the Investment Trust.
It was further submitted that, having found that Fifteenth Eestin had failed to act in the interests of all of the beneficiaries of the Investment Trust, and that it would continue to so act,[11] it would be incongruous for the Court to allow Fifteenth Eestin to continue to exercise dominion over the Investment Trust’s assets or to bring about or control a sale of the Investment Trust’s assets. Counsel submitted that it was for Glen Oak as trustee, and not Fifteenth Eestin, to decide whether, in the exercise of its discretion, it was in the best interests of the beneficiaries to sell the properties or to try to borrow against them in order to pay the liabilities in respect of which Fifteenth Eestin was entitled to be indemnified.
[11][2007] VSC 101, [183].
Counsel for the first defendant submitted that neither a vesting order nor an order requiring it to deliver up the other assets should be made until the lien was satisfied. Until that had occurred, Fifteenth Eestin was entitled to retain possession of the trust property. Counsel referred to what was said by the High Court of Australia in Commissioner of Stamp Duties (NSW) v Buckle:[12]
[48]Until the right to reimbursement or exoneration has been satisfied, "it is impossible to say what the trust fund is".[13] The entitlement of the beneficiaries in respect of the assets held by the trustee which constitutes the "property" to which the beneficiaries are entitled in equity is to be distinguished from the assets themselves. The entitlement of the beneficiaries is confined to so much of those assets as is available after the liabilities in question have been discharged or provision has been made for them.[14] To the extent that the assets held by the trustee are subject to their application to reimburse or exonerate the trustee, they are not "trust assets" or "trust property" in the sense that they are held solely upon trusts imposing fiduciary duties which bind the trustee in favour of the beneficiaries.[15]
[49]The entitlement to reimbursement and exoneration was identified by Lindley LJ as "the price paid by cestuis que trust for the gratuitous and onerous services of trustees".[16] The right of the trustee has been described as a first charge upon the assets vested in the trustee,[17] as one upon the "trust assets",[18] and as conferring upon the trustee an "interest in the trust property [which] amounts to a proprietary interest".[19]
[50]However, the starting point in the class of case under consideration is that the assets held by the trustee are "no longer property held solely in the interests of the beneficiaries of the trust".[20] The term "trust assets" may be used to identify those held by the trustee upon the terms of the trust, but, in respect of such assets, there exist the respective proprietary rights, in order of priority, of the trustee and the beneficiaries. The interests of the beneficiaries are not "encumbered" by the trustee's right of exoneration or reimbursement. Rather, the trustee's right to exoneration or recoupment "takes priority over the rights in or in reference to the assets of beneficiaries or others who stand in that situation".[21] A court of equity may authorise the sale of assets held by the trustee so as to satisfy the right to reimbursement or exoneration. In that sense, there is an equitable charge over the "trust assets" which may be enforced in the same way as any other equitable charge.[22] However, the enforcement of the charge is an exercise of the prior rights conferred upon the trustee as a necessary incident of the office of trustee. It is not a security interest or right which has been created, whether consensually or by operation of law, over the interests of the beneficiaries so as to encumber them in the sense required by s 66(1) of the Act. In valuing the interests of beneficiaries which are conveyed by an instrument, there is no encumbrance which the Act requires to be disregarded.
[12](1997) 192 CLR 226, [48]-[50] (Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ). See also Xebec Pty Ltd (in liq) v Enthe Pty Ltd 87 ATC 4570 (Derrington J).
[13]Dodds v Tuke (1884) 25 Ch D 617 at 619.
[14]Kemtron Industries Pty Ltd v Commissioner of Stamp Duties (Q) [1984] 1 Qd R 576 at 587.
[15]Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 370.
[16]In re Beddoe [1893] 1 Ch 547 at 558.
[17]Staniar v Evans (1886) 34 Ch D 470 at 477.
[18]Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367. See also Re Exhall Coal Co (Ltd) (1866) 35 Beav 449 at 452-453 [55 ER 970 at 971].
[19]Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 370.
[20]Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 370.
[21]Vacuum Oil Co Pty Ltd v Wiltshire (1945) 72 CLR 319 at 335.
[22]See Hewett v Court (1983) 149 CLR 639 at 663.
In my opinion, the first defendant’s lien or charge securing its right of indemnity should be satisfied before the making of any vesting order in relation to the Investment Trust’s three real estate assets and before the making of any order requiring Fifteenth Eestin to deliver up to Glen Oak all other assets of the Investment Trust. That is Fifteenth Eestin’s entitlement as the former trustee and I see no reason why the normal situation should not prevail. It should not be forced to run the risk (however remote) that the Investment Trust’s assets might be disposed of without payment in full of its lien or charge securing its right of indemnity.
I reject the plaintiffs’ argument that it would be incongruous to allow the first defendant to continue to exercise dominion over the Investment Trust’s assets, when I have previously found that it had failed to act, and would continue to fail to act, in the interests of all of the beneficiaries of the Investment Trust. As I said in my ruling on 14 June 2007 that breach of trust related solely to the process by which distributions had been made. That is not this situation.
Further, it seems to me that, whether or not the orders sought are made before the indemnity is satisfied, the parties will have to do what should have been done a long time ago, and that is, to co-operate with each other in arranging the best way to put Fifteenth Eestin in sufficient funds to pay all of its debts covered by the indemnity. Failing such co-operation, this already lengthy family squabble will likely result in even more costly and distressing litigation. Despite the sad history of this dispute, I remain hopeful that agreement can now be reached on the way forward, by either selling the properties or borrowing against them in order to raise the required amount.
The Costs of the Proceeding
The plaintiffs’ position with respect to costs was simple. They submitted that having succeeded in the proceeding, they should be awarded all of the costs of the proceeding, both the claim and the counterclaim, including reserved costs, on a party and party basis.
The plaintiffs submitted that, in substance, the proceeding concerned three issues:
(a)the plaintiffs’ claim that Mr Rosenberg had properly exercised his power of removal and appointment of the trustee of the Investment Trust and the defendants’ corresponding claim that Mr Rosenberg was estopped from removing Fifteenth Eestin as trustee;
(b)the plaintiffs’ alternative claim that Fifteenth Eestin should be removed as trustee of the Investment Trust; and
(c) the defendants’ counterclaim that Mr Rosenberg was estopped from changing his will.
The plaintiffs correctly submitted that they succeeded on the first and third issues, and would have succeeded on the second issue had it been necessary for the Court to determine it.
The defendants submitted that, pursuant to r.63.04 of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”), they should be awarded their costs of, or that the plaintiffs’ costs should be significantly reduced as a result of, issues which the plaintiffs had abandoned or in respect of which they had failed.
As a general response, the plaintiffs submitted that, had it not been for the defendants’ unsuccessful opposition to Mr Rosenberg’s actions, there would not have been all of these other issues. Further, the plaintiffs relied on the principle that not every failure on a minor issue should be penalised by an order for costs. In Australian Conservation Foundation v Forestry Commission,[23] Burchett J held, in the case of a successful defendant who failed in respect to some issues:
A party against whom an unsustainable claim is prosecuted is not to be forced at his peril, in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument; he is entitled to raise his earthworks at every reasonable point along the path of assault. At the same time if he multiplies issues unreasonably, he may suffer in costs. Ultimately the question is one of discretion and judgment.
[23](1988) 81 ALR 166, 169.
In Henderson v Amadio,[24] Heerey J observed:
In my respectful opinion the same reasoning applies to a successful plaintiff if he fails on some issues. To extend Burchett J’s military metaphor, the plaintiff is not to be regarded as culpable because he attacked at points of the defendant’s fortifications other than the place where success came. He is not to be forced at his peril in respect of costs, to abandon every flank attack.
[24][1996] FCA 1341, [42].
A similar approach was taken by Balmford J in Thomson v Ronstan International Pty Ltd (No. 2).[25] Her Honour referred with approval to the passage from Burchett J’s judgment quoted above and continued:
With appropriate changes, the same can be said of a plaintiff, who is not to be forced, at his peril in respect of costs, to bring up in assault only those guns which he considers strong enough to breach the earthworks of his adversary; he is entitled to employ also other weapons which may in the end prove less effective. I did not find the plaintiff to have multiplied issues unreasonably.
[25][2000] VSC 294, [17].
It is necessary, therefore, to examine on an individual basis each of the issues relied on by the defendants. Perhaps the most important of these is that of the costs of the interlocutory application for the appointment of a receiver by a summons filed and served on 23 December 2004. By chance, this matter came before me in the Practice Court on 28 February 2005. On that day, after discussion between the parties at my suggestion, the application was resolved by the defendants giving undertakings to the Court. No receiver was appointed The costs were reserved.
The defendants submitted that the application for the appointment of a receiver was unnecessary and that it had failed. Undertakings had previously been volunteered by the defendants, and although the undertakings actually given to the Court went beyond those volunteered by including an undertaking not to sell the property in Queensland owned by Jassi without notice, that had not previously been sought by the plaintiffs. In the circumstances, the defendants sought an order that the plaintiffs pay the defendants’ costs of the receivership application, alternatively that the parties bear their own costs of that application. In the end, the latter alternative became the primary submission.
I agree with the plaintiffs’ submission that it is not correct to describe the interlocutory application as having “failed”. Without the proffering of the wider undertakings, the application may have been decided on the merits and a receiver may have been appointed. That cannot now be determined. Therefore, it seems to me that it is appropriate that the costs of the receivership application should follow the event.
I note in passing that some part of the costs of the interlocutory application would in any event have been treated as the costs of the proceeding because five of the affidavits sworn in opposition to the interlocutory application were relied on as part of the evidence in chief of Mr and Mrs Berger and Mr Norman Same.
The next issue is that of the costs of the allegation by the plaintiffs that in breach of trust Fifteenth Eestin had sold units in the Blue Boy Art Gallery Unit Trust at an undervalue.[26] On the second day of the trial, the defendants’ counsel pointed out that this claim had not been mentioned in the plaintiffs’ opening. Early on the third day, counsel for the plaintiffs announced that this issue was “no longer persisted in”. The defendants submitted that had formal orders been made under r.25.02(2)(b) of the Rules giving the plaintiffs leave to withdraw that part of their statement of claim, the plaintiffs would have been liable for the costs of that part of the proceeding under r.63.15. Accordingly, the defendants submitted that they should be awarded their costs of that issue, having wasted “considerable pre-trial time” in preparing to meet this allegation. Alternatively, they submitted that “a just allowance” in reduction of the plaintiffs’ costs of the proceeding should be made.
[26]Paragraphs 46 to 49 of the statement of claim dated 24 March 2005.
The plaintiffs submitted that this allegation was “a very minor issue” which, as a result of its abandonment early in the trial, added nothing to the length of the trial and which could not have taken up much pre-trial time given that no positive allegations of fact regarding this issue were made in the defendants’ amended defence[27] and the only time it was mentioned in the affidavits relied on at the trial was in four short paragraphs of the affidavit of Mr Same sworn on 16 February 2006.
[27]Paragraphs 82 to 85 of the amended defence and counterclaim dated 20 March 2006.
Rule 63.15 is, of course, subject to the Court ordering “otherwise”. In my opinion, this is a case where the approach suggested by Burchett J and approved by Heerey J and Balmford J should be adopted. The allegation about the Blue Boy Art Gallery Unit Trust was always a minor issue prior to the hearing and by abandoning it at an early stage in the trial, the plaintiffs contained rather than “multiplied” the issues.
The third issue is that of the costs of the allegations by the plaintiffs that Fifteenth Eestin acted in breach of trust in making loans to the Bergers and to companies associated with them (“the Berger loans”).[28] The defendants submitted that this was an issue on which they succeeded, because the Court did not uphold any of the claims. The defendants submitted that after the plaintiffs’ own expert witness, Mr Nahum, conceded in effect that he could see nothing wrong with the loans, this issue all but disappeared and attracted only a fleeting reference in the plaintiffs’ final written submissions. Nevertheless, the defendants submitted that this was an issue which had taken up considerable time both in preparation and during the trial and had always remained a “live” issue. Accordingly, they submitted that they should be awarded their costs of this issue, alternatively that “a just allowance” in reduction of the plaintiffs’ costs should be made.
[28]Paragraphs 22 to 27 of the statement of claim.
The plaintiffs submitted that, contrary to the above submission, the Court did not find against the plaintiffs (or in favour of the defendants) in relation to the allegations that the Berger loans were made in breach of trust. They submitted that those matters, as put by the plaintiffs, were merely particulars of the defendants’ habitual use of trust funds to advance the personal interests of Mr and Mrs Berger, or for the purpose of “the Berger Group”, without considering whether to do so was in the interests of the Investment Trust or the beneficiaries as a whole. However, my findings in that regard, were really limited to the particular case of the making of distributions,[29] rather than the making of the loans which had to a large extent ceased to be an issue of any real importance. Given my conclusions in respect of the first and third principal issues, as identified by the plaintiffs, even my findings in respect of the making of distributions was strictly unnecessary.
[29][2007] VSC 101, [180], [182]-[183].
Therefore, I consider that the costs of this issue should follow the event because there really was no finding against the plaintiffs in respect of their allegations. Alternatively, to the extent that the plaintiffs were unsuccessful, this was only one issue relied on by the overwhelmingly successful plaintiffs and in doing so they did not, in my opinion, unreasonably multiply the issues.
The fourth issue is that of the costs of the allegation by the plaintiffs that Fifteenth Eestin acted in breach of trust in entering into a $3 million facility with Macquarie Bank Limited.[30] The submissions and the reasoning are similar to the previous issue. Accordingly, the defendants’ claim that these costs should not follow the event also fails.
[30]Paragraphs 37 to 41 of the statement of claim.
The final issue is that of the costs of the allegations by the plaintiffs that neither Project Hardware nor S & I Investments were beneficiaries of the Investment Trust and that the income distributions to them were made in breach of trust.[31] The defendants submitted that they were successful on this issue, because the Court decided that Mr Berger was entitled to act on the basis that the 1993 amending documents were legally effective,[32] that Mr Rosenberg had signed a series of documents amending the Trust Deed, that he was well aware of and participated in distributions to Project Hardware, that he had no objections to those distributions, and that he would willingly have participated in arrangements to make Project Hardware a beneficiary of the Investment Trust,[33] and that similarly no issue arose as to the legality of the income distributions to S & I Investments.[34] Accordingly, the defendants sought an order that the plaintiffs pay their costs of this issue, alternatively that “a just allowance” in reduction of the plaintiffs’ costs should be made.
[31]Paragraphs 22, 28, 31, 33 and 36 of the statement of claim.
[32][2007] VSC 101, [175].
[33][2007] VSC 101, [176].
[34][2007] VSC 101, [177].
The plaintiffs submitted that the unusual circumstances surrounding the amending documents meant that it was not unreasonable for the plaintiffs to have pursued their allegations that Project Hardware and S & I Investments were not beneficiaries of the Investment Trust and therefore that the income distributions made to them were in breach of trust. They submitted that the Court did not reject these allegations. Instead, the finding was that, the amending documents having been prepared by a solicitor, Mr Berger was entitled to act on the basis that they were legally effective. The plaintiffs also submitted that Mr Berger’s misleading and evasive evidence as to the circumstances in which the amending documents were prepared and signed resulted in the Court making adverse findings about his credit which were important to the overall determination of the proceeding.[35]
[35][2007] VSC 101, [125]-[127].
In my opinion, the costs of this issue should follow the event, despite my finding that even if the distributions to Project Hardware and S & I Investments were in breach of trust, in the circumstances such conduct by the directors of Fifteenth Eestin would not have warranted its removal as trustee at the suit of Mr Rosenberg. The validity of these distributions was an issue which the plaintiffs were justified in pursuing. Although it was not necessary to determine it, there was a very real question as to whether the amendments were illegitimate or ineffective because they contravened the intention that underpinned the settlement,[36] but such a conclusion may not have helped the plaintiffs given my findings about Mr Rosenberg’s involvement in the events of 1993. Nevertheless, the trial was prolonged by Mr Berger’s evasive evidence about the creation of the amending documents, including in particular his reluctance to agree that one of the reasons for the backdating of the documents in 1993 was that, if the distributions had to be reversed because they were in breach of trust, there would be taxation issues. Further, as submitted by the plaintiffs, his overall evidence about this issue was very damaging to his credit. There is no reason, therefore, in my opinion, to single out this issue for a special order for costs when it was only one issue in a proceeding in which the plaintiffs were overwhelmingly successful.
[36][2007] VSC 101, [175].
Finally, I should note that as part of the alternative form of costs order sought by the defendants, they submitted the appropriate “just allowance” for all of the above issues, excluding the costs of the interlocutory application for the appointment of a receiver, would be to reduce the plaintiffs’ costs to 80% of their costs of the proceeding. In my opinion, this would have been an excessive reduction for the costs of these issues. In all probability, I would not have been prepared to allow more than a 5% reduction if I had decided that an order along those lines was appropriate, given the minor nature of these issues. The figure of 5% was that suggested by the plaintiffs as their fall back position, and it seems to me to be about right.
The above discussion deals with the costs up to the delivery of my reasons for judgment on 27 April 2007. As previously stated, the plaintiffs did not oppose an order that they pay the costs of the first defendant relating solely to the issue of the extent of its indemnity, on an indemnity basis, since that date. That order should be limited to the costs of successfully establishing the extent of the indemnity. That is, it should not extend to the costs of the defendants’ unsuccessful argument that the indemnity should also include interest on the debt to Project Hardware. On the contrary, in my opinion, the first defendant should pay the plaintiffs’ costs of that issue. There should also be an order that the defendants pay the plaintiffs’ costs of the argument about the costs of the proceeding.
The Final Order
Although, at the conclusion of the second hearing, counsel for both the plaintiffs and the defendants submitted drafts of the respective final orders sought by them, it seems appropriate to give counsel the opportunity to comment on my proposal for the final order, in the light of my rulings on the above issues.
A preliminary issue is the question of what, if any, undertakings should be required. Undertakings from each of the plaintiffs about not changing the status quo were sought by the defendants. Although the undertakings were included in both of the draft orders submitted by the defendants (one including an immediate vesting order in respect of the real property and the other not), in reality they were only relevant to the former draft order. As I have accepted the defendants’ submission that such an order should not be made, I see no reason to require any undertakings from the plaintiffs.
Another preliminary issue was whether any declaration should be made about the first defendant’s right to be indemnified for liability for goods and services tax and income tax in the absence of specified claims by it. Counsel for the plaintiffs submitted that the Court should not make a declaration, as it were in a vacuum without knowing the particular facts of any future claim. Whilst there is merit in the submission, I consider that the first defendant’s right to be indemnified in principle for any such proper claims can, and should be, spelt out in the declaration of the extent of the indemnity.
Accordingly, subject to hearing from counsel, the declarations and orders I would propose are as follows:
1.Declare that the first defendant is entitled to be indemnified by the second plaintiff, and has a lien or charge over the assets of the E Rosenberg Investment Trust (“the Investment Trust”), in respect of:
(a)its indebtedness to Project Hardware Pty Ltd in the sum of $4,413,020.71;
(b) its indebtedness to S & I Investments Pty Ltd in the sum of $47,000.00;
(c) its indebtedness to Sabrina Berger in the sum of $64,801.54;
(d) its indebtedness to Antony Berger in the sum of $400.00;
(e)any properly incurred ongoing liability of the first defendant as trustee to pay goods and services tax on behalf of the Investment Trust;
(f)any properly incurred ongoing liability of the first defendant as trustee to pay income tax on behalf of the Investment Trust; and
(g) the legal costs referred to in paragraph 5 hereof.
2.Declare that the execution by Emanuel Rosenberg of the Deed of Removal and Appointment on 15 July 2004 vested the property of the Investment Trust, other than real property subject to the Transfer of Land Act 1958, in the second plaintiff as trustee, subject to the lien or charge of the first defendant to secure its right of indemnity in respect of the liabilities of the Investment Trust.
3.Declare that upon payment by the second plaintiff to the first defendant of the amount which fully satisfies the indemnity under paragraph 1 hereof any real property of the Trust be vested in the second plaintiff as trustee, and direct that the first defendant then forthwith:
(a)do all such things and take all such steps to convey to the second plaintiff all such real property; and
(b)deliver up to the second plaintiff all property of the Investment Trust in its possession or control.
4. Order that the defendants’ counterclaim be dismissed.
5.Order that the plaintiffs pay the first defendant’s costs incurred by it solely in respect of its claim for indemnity against the assets of the Investment Trust in respect of the above liabilities between 27 April 2007 and 28 August 2009, including the costs reserved on 5 June, 14 June, 23 August and 14 September 2007 and 28 August 2009, such costs to be taxed, in default of agreement, on an indemnity basis.
6.Order that the defendants pay the plaintiffs’ costs of the proceeding including the costs of the claim, the counterclaim and both hearings, and all reserved costs other than those referred to in paragraph 5 hereof, such costs to be taxed, in default of agreement, on a party and party basis.
7.Order that the second plaintiff’s costs of and incidental to this proceeding, insofar as they are not recovered from the defendants, be taxed and when taxed paid out of the assets of the Investment Trust.
8. Order that liberty to apply be reserved.
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