Scaffidi v Montevento Holdings Pty Ltd
[2011] WASCA 146 (S)
•7 JULY 2011
| JURISDICTION | : | SUPREME COURT OF WESTERN AUSTRALIA |
| TITLE OF COURT : | THE COURT OF APPEAL (WA) | |
| CITATION | : | SCAFFIDI -v- MONTEVENTO HOLDINGS PTY LTD [2011] WASCA 146 (S) |
| CORAM | : BUSS JA |
MURPHY JA
HALL J
| HEARD | : | 12 APRIL 2011 & ON THE PAPERS |
| DELIVERED | : | 7 JULY 2011 |
| SUPPLEMENTARY | ||
| DECISION | : | 11 OCTOBER 2011 |
| FILE NO/S | : | CACV 70 of 2010 |
| BETWEEN | : GIUSEPPE DIEGO SCAFFIDI |
Appellant
AND
MONTEVENTO HOLDINGS PTY LTD
First Respondent
EUGENIO SCAFFIDI
Second Respondent
MARIA SCAFFIDI by her guardian ad litem THE
PUBLIC TRUSTEE
Third Respondent
ON APPEAL FROM:
| Jurisdiction | : | SUPREME COURT OF WESTERN AUSTRALIA |
| Coram | : | EM HEENAN J |
| Citation | : | MONTEVENTO HOLDINGS PTY LTD -v- SCAFFIDI HOLDINGS PTY LTD [No 2] [2010] WASC 180 |
| File No | : | CIV 1522 of 2010 |
| Catchwords: |
Costs - Whether costs should be awarded according to success on grounds of appeal - Whether costs should be recovered from the trust property - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 66 r 1(3), r 4(1), r 9(2)
Supreme Court Act 1935 (WA), s 37(1)
Trustees Act 1962 (WA), s 77(1)
Result:
The appellant's costs of the originating summons dated 19 April 2010 and of the
appeal, be taxed as one bill of costs
The third respondent's costs of the originating summons dated 19 April 2010
and of the appeal, be taxed as one bill of costs
Pursuant to O 66 r 4(1) of the Rules of the Supreme Court 1971 (WA), the costs
taxed pursuant to orders 1 and 2 shall be recovered out of the property of the
Scaffidi Family Trust, without recourse against any other party
Category: B
[2011] WASCA 146 (S)
Representation:
Counsel:
| Appellant | : | Mr C L Zelestis QC |
| First Respondent | : | Ms K A Vernon |
| Second Respondent | : | Ms K A Vernon |
| Third Respondent | : | Mr B W Ashdown |
Solicitors:
| Appellant | : | Oldfield Legal |
| First Respondent | : | Butcher Paull & Calder |
| Second Respondent | : | Butcher Paull & Calder |
| Third Respondent | : | Public Trustee |
Case(s) referred to in judgment(s):
Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S)
Currie v Glen [1936] HCA 1; (1936) 54 CLR 445
Fowler v Nield (1961) 61 SR (NSW) 152
Gale v Gale [1914] HCA 53; (1914) 18 CLR 560
Gava v Grljusich (Unreported, WASC, Library No 960082, 22 February 1996)
In re Beddoe [1893] 1 Ch 547
Macedonian Orthodox Community Church St Peka Incorporated v His
Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66
Medical Board of Western Australia v A Medical Practitioner [2011] WASCA
151 (S)
Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572
Murdocca v Murdocca (No 2) [2002] NSWSC 505
Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146
Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119
Stanley v Layne Christensen Company [2006] WASCA 56
Trustees, Executors and Agency Company Ltd v Ramsay [1920] HCA 2; (1920)
27 CLR 279
Watson v Ralph [1982] HCA 35; (1982) 148 CLR 646
| BUSS JA | [2011] WASCA 146 (S) |
| MURPHY JA |
BUSS JA: On the basis of the decision and reasons of the majority (Murphy JA & Hall J) in Scaffidi v Montevento Holdings Pty Ltd [2011] WASCA 146, the orders as to costs proposed by Murphy JA are appropriate, for the reasons he gives, and should be made.
MURPHY JA:
Introduction
2 On 7 July 2011, this court delivered its substantive reasons for
allowing the appeal. The matter was then adjourned for the parties to consider what final orders should be made in light of the court's reasons. The parties were able to agree to the appropriate orders and filed a minute of consent orders on 27 July 2011, which included an order programming the filing of submissions as to costs. The parties agreed that the question of costs could be determined on the papers, without the need for a further hearing. These reasons deal with the parties' submissions concerning costs.
Background
3 The background to the dispute and grounds of appeal are summarised
in the substantive reasons: Scaffidi v Montevento Holdings Pty Ltd
[2011] WASCA 146 [104] - [114].4 The appellant was successful on the first ground of appeal, but not
the second. A declaration was made in the terms sought by the appellant, namely that the appointment of the first respondent as trustee was invalid for breaching cl 11.03 of the trust deed. Further, the court determined that it was expedient to appoint a new trustee under s 77(1) Trustees Act 1962 (WA), and made an order for the appointment of a 'proper person', allowing the second respondent (Eugenio Scaffidi) as appointor the opportunity to nominate a person, the intention being that if no objection were taken to the nomination, the court could then confirm the nomination and make an order for the person's appointment.
5 The first and second respondents had filed a notice of contention
seeking to uphold the primary judge's decision on the basis that the appellant was precluded, by reason of estoppel or res judicata, from asserting that the appointment of the first respondent was invalid. The notice of contention was dismissed unanimously.
| MURPHY JA | [2011] WASCA 146 (S) |
| Parties' submissions on costs | |
| The appellant |
6 The appellant submits that as he is the successful party in the appeal,
the first and second respondents should pay his costs of the originating summons below and of the appeal, including his costs relating to the notice of contention which was dismissed. Further, the appellant seeks an order that, to the extent that his costs are not recovered from the first and second respondents, his costs be recovered from the trust property pursuant to O 66 r 4(1) Rules of the Supreme Court 1971 (WA).
7 Contrary to the first and second respondents' submission, the
appellant says that it would be inappropriate in the circumstances for the court to exercise its discretion under O 66 r 1(3) to make a costs order according to parties' success or failure on particular issues. He says that the issues raised by the two grounds of appeal are incapable of being separated 'except on a quite tortured analysis'.
8 In relation to the third respondent, the appellant says, in effect, that
she ought not be permitted to recover her costs, given that she had actively opposed the appellant's position below and at all times up until she withdrew from the hearing of this appeal.
The first and second respondents
9 The first and second respondents submit that all of the appellant's
costs should be paid out of the trust property pursuant to O 66 r 4(1) as the appellant is a beneficiary exercising his right of due administration of the trust.
10 Further, the first and second respondents say, in effect, that because
the appellant succeeded only on the first ground of appeal, the appellant should be denied half of his costs in the exercise of discretion under O 66 r 1(3). They submit that the two grounds of appeal were not mere alternatives and were discrete grounds for relief.
11 The first and second respondents also say that the appellant should
not be entitled to recover, as part of his costs of the appeal, costs thrown away by reason of his amendments to his submissions and grounds of appeal.
12 In relation to the third respondent, the first and second respondents
say that she ought to bear her own costs because her interests could have been adequately protected by filing a notice of intention to abide by the
| MURPHY JA | [2011] WASCA 146 (S) |
decision of the court. It is said that the trust should not be burdened with the costs of the third respondent's decision to be positively involved in the proceedings, and then withdraw at the last minute.
The third respondent
13 The third respondent submits that the conduct and administration of
the trust, including the removal and appointment of trustees, has a significant impact on her interests as a beneficiary and creditor of the trust and, on that basis, she was a necessary and proper party to take part in the proceedings. She was joined by the appellant as a separate defendant to the primary proceedings and as a respondent in the appeal, and took part in the appeal to protect and represent her legitimate interests. The third respondent submits that her costs should be paid either by the unsuccessful party who is to bear costs generally, or by the trustee with a right for the trustee to be indemnified out of the trust.
Order 66 r 1(3) - costs of issues
The court has a wide discretion to award costs: s 37(1) Supreme Court Act 1935 (WA).
15 Subject to the express provisions of any statute and of the Rules of the Supreme Court, and without limiting the generality of the discretion to make a costs order, the court will generally order that the successful party to any action or matter recover his costs: O 66 r 1(1). Order 66 r 1(1) reflects the common law principle that costs should generally follow the event.
16 Order 66 r 1(3) provides that the court may depart from the general
rule where the successful party in the action has failed on particular
issues. It provides:1. General rules as to costs
… (3) Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the Court may order such party to pay the costs of such issue or issues.
17 This court has recently considered the principles concerning the
exercise of discretion to make an order under O 66 r 1(3). In Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S), the court said [5] - [8]:
| MURPHY JA | [2011] WASCA 146 (S) |
It is clear that while the court has a broad discretion as to costs, generally costs will follow the event: Rules of the Supreme Court 1971 (WA), O 66 r 1(1). It is incumbent upon the unsuccessful party to satisfy the court that there are good reasons why it should not pay the other party's costs: Nikolaou v Papasavas, Phillips & Co (No 2) [1989] HCA 11; (1989) 166 CLR 394, 407.
The court may, in the exercise of its discretion, order that a successful party recover only a portion of its costs where that party has been unsuccessful in respect of certain discrete issues. But that should not be done as a matter of course. To embark as a general practice upon an analysis of which party was successful on each issue, or necessarily to deprive a successful party of some portion of its costs if it has lost on a particular issue, would be likely to add further uncertainty and complexity to the outcome of litigation, derogate from the prospect of settlement, and oblige the court to hear lengthy and frequent arguments in relation to costs as an additional burden on its resources and the costs of the parties: see MacKinnon v Petersen (Unreported, NSWSC, 19 April 1989) (Cole J); Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [67] - [68] (McHugh J). Litigation is time-consuming, expensive and burdensome enough already.
In addition, while parties should be encouraged to consider carefully what matters they put in issue, justice may not be served if by too ready a resort to deciding questions of costs according to success on particular issues, parties are dissuaded by the risks of costs from canvassing all issues which might be material to the decision in the case: Doric Products Pty Ltd v Lockwood Security Products Pty Ltd [2002] FCA 282; NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 [24].
In Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell
[2007] WASCA 158 (S), the position was put as follows:'[T]he power to adjust an order for costs by reference to particular issues upon which the generally successful party has failed, is properly exercised only where there are discrete and severable issues upon which the generally successful party has failed, and which have added to the cost of the proceedings in a significant and readily discernible way [7].'
See also Medical Board of Western Australia v A Medical Practitioner
[2011] WASCA 151 (S) [4].18 The starting point is that the appellant was the generally successful
party in the appeal having succeeded on ground 1 and would, therefore,
ordinarily be entitled to his costs.19 Grounds 1 and 2 were expressed in the alternative and the appeal was
argued on that basis. The second ground of appeal did not provide an
| MURPHY JA | [2011] WASCA 146 (S) |
independent basis for success in the appeal had the first ground failed (substantive reasons [84]). Further, the court having upheld the first ground, the second ground did not strictly fall to be considered.
20 Ground 2 was to the effect that if cl 11 of the trust deed did not
preclude the appointment of the first respondent as trustee (as contended in ground 1), the deed as a whole nevertheless manifested an intention that the appointor, if also a beneficiary, ought not control the office of trustee. That being so, both grounds of appeal were broadly directed to the same question, namely, whether the appointment of the first respondent was invalid or otherwise inappropriate on the proper construction of the trust deed. In the circumstances, in my view, it cannot be said that the two grounds raised discrete and severable issues so as to enliven the court's discretion under O 66 r 1(3).
21 Moreover, the first and second respondents have not established that
the inclusion of the second alternative ground increased costs in a significant and readily discernible way. The submissions concerning the second ground were relevant to the disposition of the appeal, insofar as they addressed issues concerning the proper construction of the trust deed and the principles in relation to s 77 Trustees Act, pursuant to which section the court ultimately made an order. In the circumstances I do not consider that the inclusion of ground 2 can be said to have significantly increased the costs of the appeal.
For the above reasons, this is not a proper case in which to depart from the general rule that costs should follow the event.
The notice of contention
23 The first and second respondents' notice of contention contended that
the primary decision should be upheld because the appellant was precluded from seeking a declaration that the first respondent was invalidly appointed by reason of estoppel or res judicata. The court unanimously held that the notice of contention had no merit. In the circumstances, costs would ordinarily follow the event in the notice of contention. The first and second respondents do not submit otherwise. The appellant should be entitled to his costs of the notice of contention.
The appellant's amendments
24 The appellant sought leave to amend his grounds of appeal and file
amended submissions three weeks prior to the hearing. The first and second respondents submit that the appellant ought not recover, as part of
| MURPHY JA | [2011] WASCA 146 (S) |
his costs of the appeal, costs associated with the preparation of the amended grounds and submissions. It is said that the amendments were so extensive that the grounds of appeal and submissions were, in substance, substituted by new grounds and submissions following the appointment of new counsel.
25 The general rule is that where leave to amend is granted, the
amending party is liable to pay the costs of the application to amend and any consequential costs 'thrown away'. However, the court will still have regard to the nature and extent of the amendments, together with the reasonableness of the other party's conduct. In Stanley v Layne Christensen Company [2006] WASCA 56, Wheeler JA explained [52], [55]:
The general rule is, and should remain, that where a party is seeking the indulgence of the Court, that party will be required to pay the costs of the application, including costs thrown away, and will not normally receive the costs of the application. However, it is also a normal rule that the Court will have regard to the extent to which it might be said that costs were unnecessarily incurred by a party, and will have regard to the reasonableness of the party's conduct in determining how costs should be awarded. In particular, where a contested application, even for an indulgence, is unnecessary because a party acting reasonably would have consented to appropriate orders, the party who has caused the costs to be unnecessarily incurred will not obtain its costs of such a proceeding merely because the application is for some indulgence. That is implicitly recognised in Briggs at 14, where Owen and Parker JJ appear to accept that an unreasonable withholding of consent might form an appropriate basis for a ruling on costs which departed from the 'normal rule' relating to indulgences. However, in that case their Honours considered that it could not be said that the other party was unreasonable to require that the proposed amendment be justified to the satisfaction of a judicial officer.
...
I should add that the respondents submit that, as a general principle, the 'normal rule' upon a successful application to amend pleadings should be that the Court orders costs in the cause, since whether or not the amendments prove to be necessary and appropriate will depend upon whether the amending party ultimately succeeds at trial. I would not go so far as to hold that that should be the usual or normal order. There are a number of factors to balance. One is that, since it would generally be possible for a party to avoid the need to seek any indulgence by accurately formulating its pleading or otherwise complying with the rules, the fact that the party is seeking an indulgence will be relevant. As I have already noted, the degree of conferral and the reasonableness of conduct of the party opposing such an indulgence will also be relevant. Where amendments are not substantial, or where they serve simply to further
| MURPHY JA | [2011] WASCA 146 (S) |
clarify an otherwise broadly satisfactory pleading, it may be appropriate simply to order costs in the cause. Such a course may also be appropriate where an amendment adds a substantial, different, but apparently arguable cause of action, on the basis that it is always possible for a trial Judge to make a special order in relation to the costs of such an issue, if it should ultimately be found that the party is unsuccessful in relation to that new cause. It is appropriate that the discretion in such cases should remain unfettered in the interests of efficient case management.
26 In the present case, the solicitors for the appellant sent a letter to the
other parties on 4 March 2011 which attached the proposed amendments, explained that the amendments were sought as a result of advice from (newly briefed) senior counsel that the amendments would simplify the issues and that the substance of the appeal remained unaltered, and invited the parties to consent to the amendments within one week. The first and second respondents did not reply to the letter. The third respondent sought more time to seek instructions.
27 In light of the proximity to the hearing, the appellant applied to the
court for leave to amend on 14 March 2011. The court directed that any affidavits and/or submissions in opposition to the application be filed by 21 March 2011. No affidavits or submissions were filed. The court granted the appellant's application on 24 March 2011. The respondents were given time within which to make any consequential amendments to their respective submissions. The first and second respondents did not make any amendments. The third respondent made some minor amendments.
28 It is important to note that the unopposed orders made, when
granting the application to amend, included an order that 'the costs of the application be costs in the appeal'. That order still stands. Like the amendments, that order was not opposed.
29 As the successful party in the cause, the appellant is, accordingly,
entitled to have his costs of the application to amend included in his
overall costs.30 In any event, the amendments did not alter the substance of the
appellant's case, reflected by the fact that the first and second respondents considered it unnecessary to make any consequential amendments to their submissions. On the contrary, the amendments clarified the appellant's arguments and contributed to the efficient disposition of the appeal. This is a case where it would have been reasonable for the respondents to consent to the amendments sought when invited to do so.
| MURPHY JA | [2011] WASCA 146 (S) |
| Order 66 r 4(1) - costs out of the trust property | |
| General principles |
31 Section 37(1) Supreme Court Act provides that the court or judge shall have full power to determine by whom or out of what estate, fund, or property, and to what extent costs are to be paid.
Order 66 r 4(1) provides:
4. Costs out of fund or property (1) Where property is the subject of any action or matter, or where any question arising therein will affect any right or claim to property, the Court may make an order that the costs of any party may be recovered out of the property with or without recourse against any other party: Provided that no such order shall be made unless the Court is satisfied that the party seeking the order had a genuine interest to protect, or that it was reasonable in the circumstances that he should appear.
33 The appellant seeks an order pursuant to O 66 r 4(1) that, to the
extent that the appellant's costs are not recovered from the first and second respondents, his costs be recovered from the trust. On the other hand, the first and second respondents submit that all of the appellant's costs should be paid out of the trust.
34 The third respondent submits that her costs should be paid either by
the unsuccessful party who is generally to bear costs or, alternatively, that
the trustee pay her costs with a right to be indemnified out of the trust.35 A helpful summary of the broad principles under the general law
concerning costs in matters involving trust disputes is found in the judgment of Finkelstein J in Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119. His Honour said [5] - [9]:
The best place to begin is with some basic rules. Re Buckton [1907] 2 Ch 406 contains a classic statement of the principles upon which costs are awarded in cases involving trustees. There Kekewich J (who was a master of Chancery procedure) said that, broadly speaking, there are three kinds of disputes involving trustees. The first is an action brought by trustees relating to the construction of the trust instrument or some other question arising in the course of an administration. In Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220 at 1223; [1995] 1 All ER 431 at 434 (Alsop Wilkinson), Lightman J broadened this category by including within it '[every] dispute as to the trusts upon which [the trustees] hold the subject matter of the settlement'. For convenience he labelled these cases as 'trust disputes'.
| MURPHY JA | [2011] WASCA 146 (S) |
When a 'trust dispute' has come about because there is a dispute between two beneficiaries concerning the construction of the trust instrument or their respective rights in the trust estate, the duty of the trustee as the trustee for all beneficiaries is to treat the beneficiaries impartially and remain neutral: Australia and New Zealand Banking Group Ltd v National Mutual Life Nominees Ltd (1977) 137 CLR 252 at 264-5, 270; 15 ALR 287 at 296-8, 301-2; Alsop Wilkinson at WLR 1225; All ER 435-6; Re Patton (1971) 19 DLR (3d) 497; Jones v Heritage Pullman Bank & Trust Co 518 NE 2d 178 (1987) at 182-4 (Jones); Northern Trust Co v Heuer 560 NE 2d 961 (1990) at 964 (Northern Trust Co). Thus, unless the trust instrument itself provides otherwise, the trustees should bring the dispute into court for resolution but in the proceeding they are not entitled to favour one party over another by advocating a party's cause: Re Hughes' Will 5 NW 2d 791 (1942); Re James' Estate 86 NYS 2d 78 (1948) at 89; Re Duke 702 A 2d 1008 (1995); A W Scott and W F Fratcher, Scott on Trusts, 4th ed, Little, Brown, Boston, 1987, § 183; Restatement (Second) of Trusts, American Law Institute, Philadelphia, 1959, § 183. To do otherwise would be a breach of the trustees' duty to deal impartially with all beneficiaries and to protect their interests. Of course, if the case is not properly presented by the beneficiaries the trustees may, indeed probably should, provide the court with their views.
In a trust dispute the costs of all parties are treated as necessarily incurred for the benefit of the estate and are ordered to be paid out of the fund either on a solicitor and client or indemnity basis: E R Daniell, S E Williams and F Guthrie-Smith, Daniell's Chancery Practice 7th ed, Stevens, London, 1901, vol 1, pp 953, 955 - 7, 987; Re Buckton at 414; McDonald v Horn [1995] 1 All ER 961 at 970 - 1. One possible exception is the case of a 'timid trustee' who unnecessarily approaches the court for advice when the answer to the problem raised by the dispute is sufficiently clear. Even then the trustee usually gets his (or her) costs. Another exception is where the trustees breach their duty to act impartially, even if the breach is technical in nature, done in good faith, and causes no harm: Alsop Wilkinson at WLR 1225; All ER 435 - 6; Jones; Northern Trust Co. At best the trustees will be entitled to the costs incurred in submitting to the court's direction. That may include the costs of a defence, a discovery and an appearance: Alsop Wilkinson at WLR 1225; All ER 435 - 6. Interestingly, while it is proper and sometimes obligatory for trustees to bring a trust dispute to court, in the United States it is said that a trustee who is a party to a trust dispute has no standing to appeal from the judgment, except in limited circumstances: Scott, 1987, § 183.
The second kind of dispute is a trust dispute in which the application is made by someone other than the trustee (usually a beneficiary) but raises the same kind of issue as in the first class and would have justified an application by the trustees. Here the same rule in relation to costs applies because, as in the first class, the application is for the benefit of the estate.
The third class identified by Kekewich J (which Lightman J refers to as a 'beneficiaries dispute') is where a beneficiary brings a hostile claim against
| MURPHY JA | [2011] WASCA 146 (S) |
the trustees (for example as to the propriety of any action taken or omitted to be taken) or another beneficiary. As between the parties the costs in this kind of case are treated in the same way as in ordinary litigation, that is, they follow the event. However, if the trustees properly (albeit not necessarily successfully) defend the claim for the benefit of the estate they will be entitled to their costs out of the estate to the extent they are not recovered from the other party.
See also Murdocca v Murdocca (No 2) [2002] NSWSC 505 [71] - [78]
(Campbell J).
In Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572, Latham CJ said (578 - 579):
Certainly, as a rule, a trustee is allowed his costs out of the trust estate if his conduct has been honest, even though it may have been mistaken. In the ordinary case a trustee brings or contests legal proceedings on behalf of the trust and not on his own behalf. He is often a necessary party to proceedings where he ought to be present even though he may do no more than submit to the judgment of the Court. In such a case the trustee receives his costs. The position is admittedly different in a case of misconduct.
37 Further, consistently with a trustee's general right of indemnity out of
the trust for expenses reasonably incurred in the execution of the trust or powers (see In re Beddoe [1893] 1 Ch 547, 555 - 556, 560; s 71 Trustees Act), O 66 r 9(2) provides, relevantly, that unless otherwise ordered, a trustee shall 'be entitled to the costs of ... proceedings, in so far as they are not recovered from or paid by any other person, out of the [trust] fund'. Under O 66 r 9(2), the court may only order otherwise where the trustee has acted unreasonably, or for his or her own benefit rather than for the benefit of the trust.
38 Where a trustee has acted unreasonably in defending proceedings,
particularly in relation to the trustee's removal, the court is more likely to favour the view that the costs should not be borne by the estate: Gava v Grljusich (Unreported, WASC, Library No 960082, 22 February 1996) 4. See also Macedonian Orthodox Community Church St Peka Incorporated v His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66 [148] - [152].
39 In relation to appeals by a beneficiary, the general rule is that a
beneficiary who unsuccessfully appeals a decision concerning the proper construction of a trust instrument is liable to pay costs, unless there are circumstances which warrant a relaxation of the general rule: Gale v Gale
| MURPHY JA | [2011] WASCA 146 (S) |
[1914] HCA 53; (1914) 18 CLR 560, 574 (Rich J); Trustees, Executors and Agency Company Ltd v Ramsay [1920] HCA 2; (1920) 27 CLR 279, 285; Fowler v Nield (1961) 61 SR (NSW) 152, 161 (Walsh J). If the circumstances warrant a relaxation of the general rule, the court may order, for example, that the costs of the other parties be paid out of the trust with the appellant to bear its own costs (see Currie v Glen [1936] HCA 1; (1936) 54 CLR 445, 451, 461), or that the costs of all parties be paid out of the trust (see Gale v Gale (574) (Griffith CJ); Watson v Ralph [1982] HCA 35; (1982) 148 CLR 646, 654, 657). The general rule does not apply here of course as the appeal succeeded.
The beneficiaries' costs in these proceedings
40 The question of whether parties' costs should be paid out of the trust,
or in accordance with the ordinary rules, essentially involves a characterisation of the nature of the proceedings, and a consideration of the position each party adopted in the proceedings. In my view, properly characterised, these proceedings fall within the second class of dispute referred to above (see [35]), namely, a dispute between beneficiaries concerning the administration and proper construction of the trust, and, in my view, the beneficiaries were acting reasonably to protect their interests.
41 The originating summons filed by the appellant (plaintiff) below
sought a declaration that the appointment of the first respondent was invalid and consequential orders for, in effect, the appointment of a new trustee and vesting of the trust property. The disposition of the summons, and of this appeal, turned on the proper construction of the trust deed, in particular on the proper construction of cl 11. The resolution of that question is a matter concerning the administration of the trust and may be seen to affect the interests of both of the Scaffidi brothers and their mother in their capacity as beneficiaries. For the reasons expressed in [189] of the substantive reasons, which outline why it is expedient to order the appointment of a new trustee under s 77 Trustees Act, it is to be accepted that the resolution of this question of construction has ultimately served the best interests of the trust. I do not understand any of the parties to contend otherwise. That being so, in the exercise of discretion, I would order that the appellant's costs be paid out of the trust pursuant to O 66 r 4(1).
42 In relation to the third respondent's costs, I am satisfied that it was
appropriate for her to take part in the proceedings below and, to the extent that she did, in this appeal. The question of construction raised concerned
| MURPHY JA | [2011] WASCA 146 (S) |
| HALL J |
the proper administration of the trust and consequently had the potential to affect her interests as a beneficiary and creditor of the trust. As such, she was entitled to make submissions which sought to protect those interests. It is apparent from her counsel's submissions below, and her written submissions in this appeal, that her main concern was the financial position of the trust and the financial implications of the appellant's orders sought below, and initially in this appeal, to the effect that the trust property be vested in a number of insolvency practitioners. Upon the appellant filing an amended minute of proposed orders on the morning of the hearing which instead sought an order pursuant to s 77 Trustees Act for the appointment of a new trustee, the third respondent appropriately sought, and was granted, leave to withdraw. In the circumstances, the third respondent should also have her costs paid out of the trust.
43 Neither the appellant nor the third respondent sought an order under
O 66 r 9(2) that the first respondent should not be entitled to its costs out of the trust, even though it might be said that, as trustee, it effectively sided with the second respondent in the dispute.
Conclusion - orders
I would make the following orders:
1. The appellant's costs of the originating summons dated 19 April 2010 and of the appeal, be taxed as one bill of costs.
2. The third respondent's costs of the originating summons dated 19 April 2010 and of the appeal, be taxed as one bill of costs.
3. Pursuant to O 66 r 4(1) of the Rules of the Supreme Court 1971 (WA), the costs taxed pursuant to orders 1 and 2 shall be recovered out of the property of the Scaffidi Family Trust, without recourse against any other party.
HALL J: I agree with Murphy JA.
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