The Uniting Church in Australia Property Trust (Vic) v Attorney-General (Vic) (No 2)
[2022] VSC 764
•12 December 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
TRUSTS, EQUITY AND PROBATE LIST
S ECI 2020 03812
IN THE MATTER of the GORE CHARITABLE TRUST
and
IN THE MATTER of r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic)
BETWEEN:
| THE UNITING CHURCH IN AUSTRALIA PROPERTY TRUST (VICTORIA) | Plaintiff |
| v | |
| THE ATTORNEY-GENERAL FOR THE STATE OF VICTORIA | Defendant |
| and | |
| JENNIFER SHEPPARD | Joined Party |
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JUDGE: | Incerti J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 17 October 2022, further submissions filed on 21 October 2022, 9 & 21 November 2022 |
DATE OF RULING: | 12 December 2022 |
CASE MAY BE CITED AS: | The Uniting Church in Australia Property Trust (Vic) v Attorney-General (Vic) (No 2) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 764 |
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COSTS – Costs of application for judicial advice – Whether trustee’s costs reasonably incurred – Whether trustee’s application proper for administration of the trust – Whether interested beneficiary entitled to costs from the trust.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J McComish | Stewart Peters |
| For the Defendant | Dr P Bender | Victorian Government Solicitor’s Office |
| For the Joined Party | Mr I Upjohn KC with Mr R Young | Waters Lawyers |
HER HONOUR:
I refer to my judgment, The Uniting Church in Australia Property Trust (Vic) v Attorney-General (Vic),[1] for the background circumstances and my reasons.
[1][2022] VSC 610.
The plaintiff is the trustee of the Gore Charitable Trust. The defendant is the Attorney-General of Victoria. The joined party, Dr Jennifer Sheppard, was added to the proceeding as an objector by order of the Court dated 11 December 2020.
This ruling deals with the costs of this proceeding. The plaintiff seeks an order that it be indemnified from the Gore Charitable Trust in respect of its costs. The defendant does not seek any costs order in respect of her own costs. The joined party seeks her costs from the plaintiff on a standard basis.
In controversy is the following:
(a) whether the plaintiff is entitled to its costs from the Gore Charitable Trust; and
(b) whether the plaintiff should pay the joined party’s costs on a standard basis.
The parties all filed written submissions in relation to costs and were given the opportunity to make oral submissions.[2] I requested that the plaintiff and the joined party provide an estimate of their costs for this proceeding. The plaintiff provided a breakdown of costs and indemnity sought which totalled $177,121.32. The joined party simply provided a lump-sum figure of the estimate of costs of $150,000. The value of the Gore Charitable Trust as at 12 October 2022 was $903,990.88 and $93,338.80 is income (which was distributed on 3 November 2022).[3]
[2]Plaintiff’s submissions on costs dated 17 October 2022; Defendant’s submissions on costs dated 9 November 2022; Joined Party’s further submissions on costs dated 21 November 2022; Plaintiff’s reply to defendant’s submissions on costs dated 21 November 2022.
[3]Plaintiff’s reply to defendant’s submissions on costs dated 21 November 2022, [6].
Is the plaintiff entitled to its costs from the Gore Charitable Trust?
Rule 63.26 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) states that:
Unless the Court otherwise orders, a party who sues or is sued as trustee or mortgagee shall be entitled to the costs of the proceeding out of the fund held by the trustee or out of the mortgaged property in so far as the costs are not paid by any other person.
In Re Sir Colin and Lady McKenzie Trust (No 2)[4] McMillan J summarised the principles relevant to the current matter as follows:
Trustees are ordinarily entitled as of right to indemnity out of the trust for expenses properly incurred, including litigation expenses. This is the position at common law and is reflected in statute.
The concept of ‘proper’ expenditure excludes costs which are of an unreasonable amount, have been unreasonably incurred, or have been incurred as a result of conduct that demonstrates want of prudence or diligence. Expenses and liabilities that are improperly incurred, such as acting beyond power, in bad faith or in the exercise of power ‘with an absence of care and diligence that a person of ordinary prudence should exercise’ are not caught by the right of indemnity and should be borne by the trustee personally.
Where an application was reasonably required for the due administration of a trust or estate, the costs of all other parties are normally payable from the fund, taxed on a standard basis. The costs of such a proceeding nonetheless remain within the Court’s general costs discretion and the application of the general rule that costs follow the event.[5]
[4][2020] VSC 335.
[5]Re Sir Colin and Lady McKenzie Trust (No 2) [2020] VSC 335, [45]-[47].
The plaintiff submits that it followed the appropriate procedure to obtain judicial advice and is therefore entitled to its costs as a complete indemnity.[6] The plaintiff relies on Innes v Attorney-General (Vic)[7] for the proposition that there is no distinction between a proceeding simply for advice and a proceeding that involves relief under s 67 of the Trustee Act 1958 (Vic). The plaintiff submits that the s 67 relief was an integral part of the proceeding and, in effect, no additional costs arose by reason of the s 67 application. It submits that as such, Re Sir Colin and Lady McKenzie Trust (No 2)[8] is distinguishable. In that case, the trustee sought to be excused from repayments of amounts expended in breach of trust and only raised s 67 by way of separate application, which involved additional costs.[9] The plaintiff submits that the bifurcated nature of those proceedings was the reason McMillan J ordered a proportionate allocation of the costs of the s 67 application in distinction to the proceeding for judicial advice, for which complete indemnity was ordered.[10]
[6]Innes v Attorney-General (Vic) [2021] VSC 628, [110] (Daly AsJ); Re Sir Colin and Lady McKenzie Trust (No 2) [2020] VSC 335, [45], [55] (McMillan J); Re The Macedonian Orthodox Community ‘Saint Dimitrji Solunski’ Springvale Inc [2020] VSC 274, [85] (Derham AsJ).
[7][2021] VSC 628.
[8][2020] VSC 335.
[9]Ibid, [2].
[10]Ibid, [54].
The thrust of the defendant’s submissions was concern in relation to the quantum of costs incurred and sought by the plaintiff. The defendant drew the Court’s attention to s 24 of the Civil Procedure Act 2010 (Vic), which obliges practitioners to ensure legal costs are reasonable and proportionate to the complexity of the issues and the amount in dispute. The defendant identified correctly that the key question is whether the costs have been properly incurred. The defendant noted that a court has to be cautious before concluding that costs have been improperly incurred as to deprive a trustee of their right of indemnity.[11] The defendant made no positive allegation that the plaintiff improperly incurred costs, but made a number of observations about the quantum of costs, the value of the trust assets and the nature of the proceedings.[12]
[11]Hopkins v Edwards [2020] VSC 456, 234.
[12]Defendant’s submissions on costs dated 9 November 2022, [6].
The joined party submits that the plaintiff should not have its costs indemnified from the Gore Charitable Trust as that would diminish the funds and the plaintiff is a ‘large professional trustee with significant funds in current and non-current investments.’[13] The joined party echoed the defendant’s concerns about the total quantum of costs incurred by the plaintiff.
[13]T18.13-19.
By way of response, the plaintiff submits that there is nothing unreasonable about the costs incurred in the plaintiff’s conduct of this case: the proceeding involved complex multi-party litigation spanning three years since 2020 which was necessitated by wider dispute that had been before the courts since 2019. The underlying allegations raised by the joined party were voluminous, complex and spanned the whole 10 year period since the property trust became trustee of the Gore Charitable Trust in 2012. Finally, an unusual amount of legal analysis and submissions has been required. The plaintiff has been called on to review, seek instructions upon, and respond to submissions put by the defendant on at least six occasions and the joined party on at least five.[14]
[14]Plaintiff reply to defendants submissions dated 21 November 2022, [4].
In specific response to points identified by the defendant, the plaintiff opined that it was inapt to make a dollar for dollar comparison between the costs of the proceeding and the recompense due to the trust. It observed that the baseline of conducting any Supreme Court litigation is high, whatever the value of the amount in dispute. The plaintiff points to the regrettable need for the Court’s advice arising because of the two lawsuits brought against it by or on behalf of the joined party. The plaintiff submits that it is inapt to make a comparison with the joined party’s costs, when the costs burden of the plaintiff is inherently likely to be greater and when there is no transparency about the task to which the joined party’s costs were referable.
The plaintiff notes that while the trial of the matter lasted two days, it involved substantial preparation and follow-up, including complex financial calculations spanning many years. It maintains that this matter involved contested evidence in circumstances where there was heated contest on the part of the joined party about the entirety of the financial evidence before the Court. The plaintiff notes that a number of other matters were only withdrawn or not pressed by the joined party at the last minute but that each required substantial time and consideration on the part of the plaintiff’s lawyers.
The plaintiff submits that the defendant’s reference to specific costs items and observations that they appeared prima facie to be high misconceives the time and effort that has been required throughout this matter by the plaintiff’s solicitors to complete the work. The plaintiff submits that it is unrealistic to criticise the costs of the solicitor’s involvement in reviewing a complex and long-awaited judgment.
Finally, the plaintiff disputes the defendant’s observation that the plaintiff’s costs for preparing the originating motion and the affidavit in support of $25,000 appear high. The plaintiff observed that there was no duplication of substantive work in this proceeding and that the time needed to be spent in legal, historical, documentary and financial analysis in order to commence proceedings was substantial. The plaintiff maintains that its costs were reasonably and properly incurred and not extravagant or disproportionate.
The plaintiff and the joined party have been in dispute for a significant period of time in relation to the restoration of capital to the Gore Charitable Trust. The parties sensibly agreed to questions 1, 2 and 5 at the commencement of the proceeding however, questions 3 and 4 were genuine issues that required the Court’s advice and guidance. I consider there existed genuine issues as to the plaintiff’s obligation to restore the Gore Charitable Trust and calculation of that amount, and therefore that the plaintiff was justified in seeking the advice of the Court and issuing the Order 54 application. In the absence of the plaintiff’s Order 54 application, I have no doubt that the joined party would have issued further proceedings which would have been time-consuming and costly. I note that
From the outset the plaintiff accepted it was in breach of trust and that the capital should be restored. The plaintiff under the s 67 application did not seek to be excused in respect of payments of capital made in breach of trust. The s 67 relief was an integral part of the proceeding connected to the Order 54 application, and therefore this case is distinguishable from Re Sir Colin and Lady McKenzie Trust (No 2), in which the trustee sought to be excused from repayments of amounts expended in breach of trust.
The plaintiff did not get all the relief it sought under the s 67 application. However, I note my comments in regard to those matters that I was not prepared to grant relief to the plaintiff.[15] The s 67 application may well avoid further litigation even though the totality of the relief was not granted.
[15]The Uniting Church in Australia Property Trust (Vic) v Attorney-General (Vic) [2022] VSC 610, [144], [148], [152]-[155].
Significantly, I consider the defendant was the appropriate contradictor to assist the Court on both the Order 54 and s 67 applications. The defendant opposed the breadth of the s 67 relief and noted that the relief should not extend to other alleged breaches that did not form the basis of the Order 54 application.
I accept that the plaintiff is a well-resourced institution. However, this is not a basis upon which I should depart from the ordinary principles that costs follow the event and therefore the plaintiff is entitled to be indemnified from the Gore Charitable Trust.
The materials filed with the Court reveal allegations raised by the joined party that were voluminous, complex and spanned a 10-year period since the plaintiff became trustee of the Gore Charitable Trust in 2012. It follows from these matters that there would have been a significant amount of paperwork and solicitors correspondence required particularly in circumstances where the lines of communication had to a degree broken down and were required to be put in writing at all times. Finally, while the trial was of relatively short duration, there was an unusual amount of legal analysis and submissions required.
In conclusion, there is no reason the plaintiff should be deprived of its ordinary right to indemnity in respect of its costs; or for the Court to undertake further investigation.
Should the plaintiff should pay the joined party’s costs on a standard basis?
The plaintiff submits that given this was a proceeding seeking judicial advice, there was no need for the joined party to insist on her own involvement, since the defendant was the only necessary party and was available to assist the Court.[16] In Re Sir Colin and Lady McKenzie Trust (No 20),[17] the Attorney-General was the first defendant and the additional second defendant took an active role in opposing the advice sought by the charitable trust. The second defendant sought but was refused a costs order on a standard basis.
[16]Bathurst City Council v PWC Properties Pty Ltd (1998) 195 CLR 566, [39] (Gaudron, McHugh, Gummow, Hayne and Callinan JJ) approving Ku-Ring-Gai Municipal Council v Attorney-General (NSW) (1954) 55 SR (NSW) 65, 69-70.
[17][2020] VSC 335.
The plaintiff submits that relevant matters include: the defendant was the only necessary party; the joined party’s active litigation was contrary to the Uniting Church regulations; the joined party has already been subject to an (unmet) indemnity costs order; and the Court is particularly sensitive to the proportionality of costs in charitable trust proceedings.[18]
[18]Plaintiff’s submissions on costs dated 17 October 2022, [14].
The joined party submits that the Order 54 application was ‘very narrow’ and ‘shortly dealt with’,[19] while the ‘bulk of the Court’s time was taken up on the s 67 point and the Court declined to give the very broad relief sought…’.[20] The joined party further submits that the plaintiff’s motivation to seek the Court’s advice was not ‘prophylactic in nature,’[21] but as a result of the joined party’s agitation and that the plaintiff issued this proceeding to pre-emptively stop or avoid the contemplated litigation by the joint party having obtained the defendant’s fiat in September 2020. As such, the joined party rejects the plaintiff’s submission that she is a ‘unnecessary party or an officious intermeddler.’[22]
[19]T16.15.
[20]T16.16-18.
[21]T16.29.
[22]T17.11-13.
As stated above, I consider that the defendant was the only appropriate contradictor in these proceedings and the joined party’s involvement was unnecessary.
Accordingly I consider that the joined party ought to bear its own costs.
Conclusion
In summary, I consider the plaintiff should be indemnified out of the assets of the Gore Charitable Trust in the sum of $177,121.32.
I make no order as to costs in relation to the defendant or the joined party.
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