White Rook Pty Ltd v White Horizon Pty Ltd
[2025] QSC 262
•17 October 2025
SUPREME COURT OF QUEENSLAND
CITATION:
White Rook Pty Ltd v White Horizon Pty Ltd [2025] QSC 262
PARTIES:
WHITE ROOK PTY LTD ACN 120 785 060 AS TRUSTEE OF THE KRYSTYNA ALLAN TRUST
(applicant)
v
WHITE HORIZON PTY LTD ACN 120 784 938 AS TRUSTEE OF THE ULTIMATE HORIZON TRUST(first respondent)
THE KRYSTYNA ALLAN TRUST AND ULTIMATE HORIZON PARTNERSHIP
(second respondent)FILE NO/S:
BS 3973/11
DIVISION:
Trial Division
PROCEEDING:
Application
ORIGINATING COURT:
Supreme Court of Queensland at Brisbane
DELIVERED ON:
17 October 2025
DELIVERED AT:
Brisbane
HEARING DATE:
26 September 2025
JUDGE:
Treston J
ORDER:
Pursuant to r 269 of the UCPR, Mr Combis’ remuneration for acting as receiver of the property of the Partnership is fixed in the sum of $0.00 in relation to District Court Proceeding 383/17.
CATCHWORDS: BANKRUPTCY – ADMINISTRATION OF PROPERTY – REALISATION OF PROPERTY – PROTECTION OF TRUSTEE FROM PERSONAL LIABILITY – COSTS OF PROCEEDINGS – where the first respondent applies for a declaration to disentitle a receiver from claiming remuneration and disbursements in relation to unsuccessful proceedings brought by the receiver – where the receiver commenced proceedings in the District Court in 2017 – where during the trial of the claim in 2025 the receiver’s claim was dismissed after it was conceded that the receiver did not have standing to commence the proceedings – where the receiver bears the onus of demonstrating that the costs of the unsuccessful proceedings were properly incurred – where the receiver did not apply for judicial advice prior to the commencement of the proceedings – where the receiver offers no evidence as to the factors which were taken into consideration before the commencement of the proceedings without bringing a Beddoe application – whether the expense associated with the unsuccessful proceedings was properly incurred such that there is a right under the general law to indemnity for that expense – whether the receiver ought to be denied remuneration and disbursements in respect of the unsuccessful proceedings
BANKRUPTCY – TRUSTEES – REMUNERATION – GENERAL PRINCIPLES – where the first respondent applies for an order that the receiver’s remuneration for acting as receiver other than in relation to the unsuccessful proceedings be fixed in an amount to be determined by the court – where the receiver did not place evidence before the court to discharge his onus – where the first respondent submits that consequently the court should make an order fixing the receiver’s remuneration at nil for the whole of the receivership – whether such an order ought to be made
BANKRUPTCY – TRUSTEES – VACATION OF OFFICE – REMOVAL – GENERALLY – where the first respondent applies for an order that the receiver be removed – where there are practical difficulties in deciding the application and the hearing of the application ought to be adjourned
Uniform Civil Procedure Rules 1999 (Qld), rr 269, 389
Adsett v Berlouis (1992) 37 FCR 201
Bank of Queensland Ltd & Anor v Ross Auto Auctions Pty Ltd (in liq) (Receivers & Managers appointed) & Anor [2016] QSC 19
Dixon v Dixon (No 2) [2022] NSWSC 944
Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Dobrijevic (No 3) [2017] NSWCA 109
In re Beddoe [1893] 1 Ch 547
Krystyna Allan Trust & Ors v White Horizon Pty Ltd; Krystyna Allan Trust and Ultimate Horizon Trust Partnership (Receivers and Managers Appointed) v Kelly [2025] QDC 60
LM Investment Management Ltd (in liquidation) & Ors v Whyte [2023] QSC 132
Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66
Miller v Cameron (1936) 54 CLR 572
Olsen v James [2020] NSWSC 1015
Park & Muller (liquidators of LM Investment Management Ltd) v Whyte (No 3) [2018] 2 Qd R 475
Tyler v Custom Credit Co Ltd & Ors [2000] QCA 178COUNSEL: L Henry for the applicant/receiver
D P de Jersey KC for the first respondentSOLICITORS:
HWL Ebsworth Lawyers for the applicant/receiver
Mills Oakley for the first respondent
Substantively, this is an application by the first respondent for a declaration to disentitle a receiver from claiming remuneration and disbursements in relation to an unsuccessful proceeding brought by the receiver in the District Court, to generally disallow all the receiver’s costs, and further for an order that the receiver be removed.
For the reasons which follow, only part of the relief sought ought to be granted, and that is to disentitle the receiver from remuneration and disbursements in relation to an unsuccessful proceeding which was brought by the receiver in the District Court. Otherwise, there needs to be directions about the remainder of the proceeding.
Background to the proceedings
The background to this proceeding was summarised comprehensively by Porter KC DCJ in a proceeding before him,[1] and I gratefully adopt a broad summary from his Honour’s decision.
[1]Krystyna Allan Trust & Ors v White Horizon Pty Ltd; Krystyna Allan Trust and Ultimate Horizon Trust Partnership (Receivers and Managers Appointed) v Kelly [2025] QDC 60 at [9] – [18].
The Krystyna Allan Trust and the Ultimate Horizon Trust partnership was a partnership between the trustees from time to time of these two trusts. The partnership operated from about 2003.
From 17 July 2006, the trustee of the Krystyna Allan Trust was White Rook Pty Ltd and the trustee of the Ultimate Horizon Trust was White Horizon Pty Ltd. Behind the partnership were two persons; Krystyna Allan, who controlled White Rook, and Daryll Kelly, who controlled White Horizon. The partnership business was land development.
In late 2006, there was a falling out between Ms Allan and Mr Kelly which led to the appointment of receivers to the partnership property. The receivers were appointed by an order of Mullins J (as her Honour then was) on 3 June 2011. The order appointed Peter Dinoris and Nick Combis as receivers and managers of the partnership. I will return to the terms of the appointment order below.
In September 2014, the receivers brought proceedings in the Magistrates Court against Mr Kelly, to recover a debt shown in the partnership accounts as owed by Mr Kelly to the partnership, in the sum of $118,134.08 (the Kelly proceedings).
In February 2017, the receivers commenced a proceeding in the District Court against White Horizon to recover a debt shown in the partnership accounts as due from White Horizon to the partnership of $363,375, after allowing for a debt showing in the accounts as due from the partnership to White Horizon of $486,266 (the White Horizon proceedings). White Horizon defended the proceedings primarily on the basis that the cause of action in debt was statute barred. White Horizon also counterclaimed for a debt due from the partnership to White Horizon.
The Kelly proceedings were transferred to the District Court and heard together with the White Horizon proceedings before Porter KC DCJ in April 2025. His Honour made orders in the Kelly proceedings by which judgment was entered for the plaintiff with interest and costs.
On 16 April 2025, both parties submitted to his Honour that in the White Horizon proceedings, both the claim and the counterclaim could not be sustained and that both proceedings ought to be dismissed. His Honour reserved his decision, but ultimately concluded that those submissions were correct and that both proceedings should be dismissed and that both parties should bear their own costs. Judgment giving reasons for that conclusion was handed down in May 2025.[2] In short, the receiver’s claim was dismissed after counsel instructed by the receiver conceded that the receiver did not have standing to commence the proceeding. I return to this in more detail at [19] – [21] below.
[2]See Krystyna Allan Trust & Ors v White Horizon Pty Ltd; Krystyna Allan Trust and Ultimate Horizon Trust Partnership (Receivers and Managers Appointed) v Kelly [2025] QDC 60.
Order appointing receiver
The June 2011 order appointing the receivers provided, conventionally, that the receivers were obliged to distribute any partnership assets as follows at paragraph 7:
“(a)First, to the payment of any fees and expenses of the Receivers and Managers, their partners and/or their employees as are reasonably incurred in carrying out the terms of this order and their duties as Receivers and Managers;
(b)Second, to the payment of any debts and liabilities of the Partnership to persons who are not partners of the Partnership;
(c)Third, to the payment of any debts and liabilities of the partners of the Partnership;
(d)Fourth, distribute between the partners of the Partnership in equal half shares.”
Paragraph 8 of the order provided:
“That should there be insufficient funds available to the Receivers and Managers to pay in full, the debts and liabilities of the Partnership in accordance with this Order, the Receivers and Managers may determine the proportion of which each Partner must contribute further monies as may be necessary to enable them to satisfy such debts and liabilities, taking into account, the amount that each Partner has already contributed to the Partnership expenses.”
Paragraph 10 of the order provided:
“That the Receivers and Managers prepare and lodge final accounts of the Partnership.”
Paragraph 11 of the order provided:
“That the Receivers and Managers must submit accounts to the partners or their nominated entities at the end of each calendar month from the date of appointment by the Court.”
The assets of the partnership consisted of several properties located at Krystyna Court, Karalee, and one property on Thornton Street at Raceview. The partnership owed debts:
(a)to the Deputy Commissioner of Taxation, $37,507;
(b)to the partnership’s former accountant, $27,335; and
(c)to a variety of secured creditors, $2,027,361.98.
By March 2012, the receivers had sold all assets of the Partnership, realising a total sum of $2,758,018.02. Although the total sum received was $3,098,678.27 which allowed for receipts additional to those following the sale of the real properties.
On 26 September 2012, this court varied the orders made by Mullins J and ordered that:
“1. Order 10 of the order of this Honourable Court dated 3 June 2011 be varied, so far as may be necessary, such that the preparation and lodgement, by Peter Dinoris and Nick Combis as Receivers and Managers (Receivers and Managers) of the Krystyna Allan Trust and Ultimate Horizon Trust partnership (Partnership), of accounts of the Partnership on and from 1 July 2006 shall constitute compliance with that order.
2. For the purposes of complying with order 10 of the order of this Honourable Court dated 3 June 2011, the Receivers and Managers be permitted to rely on the accounts of the Partnership as at 30 June 2006, as originally prepared and signed, as representing the true and correct financial position of the Partnership as at 30 June 2006, being exhibit ‘PD-3’ of the affidavit of Peter Dinoris filed on 10 August 2012.
3. The Receivers and Managers’ costs of this application be paid from the assets of the Partnership.”
The debts set out in paragraph [15] above were all paid by 2016.
White Horizon proceedings in the District Court
On 2 February 2017, the receiver commenced the White Horizon proceedings by District Court proceeding number 383/17. That proceeding sought recovery of an amount of $363,375, as a debt allegedly due to the partnership by one of the partners, White Horizon.
The relevant part of the reasons of Porter KC DCJ pertaining to the receiver’s lack of standing, leading to the dismissal of the proceeding, is as follows:
“[43]By the third day of the trial, both parties made written concessions that the claim and the counterclaim must be dismissed because no cause of action in debt arose between the parties to the White Horizons proceeding. Both parties submitted that claims by partners inter se arise, rather, in equity on the taking of an account on dissolution.
[44]That proposition is confirmed by the High Court decision of Commissioner of State Taxation of the State of South Australia v Cyril Henschke Pty Ltd (2010) 242 CLR 508. In that case, four partners had for many years carried on a well-known wine making business under the name CA Henschke & Co. One partner retired. Pursuant to the deed of retirement, the retiring partner received a substantial payment and the remaining three partners continued in partnership on the terms of the existing partnership.
[45]The Commissioner levied stamp duty on the deed of retirement as a conveyance, contending, in effect, that the effect of the deed was to vest personal property of the retiring partner in the continuing partners. The case turned upon whether the effect of the deed was merely to extinguish the interest of the retiring partner (as the Full Court had found) or to convey the interest of that partner to the continuing partners (as the trial Judge had found). The High Court agreed with the trial Judge. In so doing, the joint Judgment articulated the nature of the interest of partners in partnership property as follows:
22The significance of the interplay between the law of contract and the doctrines and remedies of equity was further explained by Lord Millett in Hurst v Bryk. His Lordship observed that disputes between partners and the dissolution and winding up of partnerships have always fallen within the jurisdiction of the Court of Chancery, and continued:
‘This is because, while partnership is a consensual arrangement based on agreement, it is more than a simple contract (to use the expression of Dixon J in McDonald v Dennys Lascelles Ltd); it is a continuing personal as well as commercial relationship. Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners. The amount owing to a partner by his fellow partners is recoverable only the taking of an account in equity after the partnership has been dissolved. Only the Court of Chancery was equipped with the machinery necessary to enable such an account to be taken, and the basis upon which the account was taken reflected equitable principles. These could be modified by agreement, but they did not find their source in contract.’
23This foundation for the engagement of equitable doctrines and concomitant remedies has given rise to judicial consideration of the nature of the interest conferred by equity upon each partner with respect to partnership assets as they exist from time to time and in advance of a ‘general’ dissolution under the control of a court of equity. Neuberger LJ recently described as ‘conceptually somewhat opaque’ the concept of a partner’s share in the partnership assets as understood in the earlier English authorities. However, the matter has received attention in a series of decisions in this Court.
[underlining added]
[46]The underlined passage supports the concession made by both counsel.
[47]The position is also articulated in a leading English text as follows (footnotes omitted):
Lord Lindley observed:
‘What is meant by the share of a partner in his proportion of the partnership assets after they have been all realised and converted into money, and all the debts and liabilities have been paid and discharged. This it is, and this only, which on the death of a partner passes to his representatives, or to a legatee of his share; which under the old law was considered as bona notabilia; which his bankruptcy passes to his trustee …’.
Although it would be more accurate to speak of a partner’s entitlement to a proportion of the net proceeds of sale of the assets, the correctness of the statement of principle embodied in the above passage cannot seriously be questioned, reflecting as it does the proper application of sections 39 and 44 of the Partnership Act 1890. This approach underlay the decision in Commissioner of State Taxation v Cyril Henschke Pty Ltd and was clearly endorsed by Norris J in Bieber v Teathers Ltd and the Irish court in Re Bloxham.
It also coincides with the conclusion of the Court of Appeal of Victoria in Commissioner of State Revenue v Danvest Pty Ltd, where various Australian authorities, including Commissioner of State Taxation v Cyril Henschke Pty Ltd, were reviewed, even though Lord Lindley’s definition was not, as such, cited by the court. The definition was, however, directly in play in Commission of State Revenue v Rojoda Pty Ltd. The decision in Deacon v Yaseen, must, in the above context, be regarded as something of an anomaly.
Accordingly, a partner’s entitlement will reflect not only his capital and current account balances and the size of his capital profit (or asset surplus) share, but also any amounts which he may owe to the firm, e.g. in respect of overdrawings. It is submitted that any attempt to demonstrate that a particular element of a partner’s share, e.g. his entitlement to capital, has an existence independent of the remainder must, in the absence of an express agreement, fail.
[underlining added]
[48]There was no evidence of any specific agreement to the contrary.
[49]Both counsel also agreed that the express power conferred on the receivers to sue in order 8 of Justice Mullins’ orders dated 3 June 2011 (see paragraph [14](d) above) did not alter that position. That is plainly correct as a matter of principle and on the proper construction of the order.
[50]As to the former, in Re Pinata Pty Ltd (in Liq) [2012] NSWSC 162, it was submitted that a receiver appointed by deed to the assets of a partnership for the purpose of dissolution and winding up of the partnership did not have power to sue partners for money due to the partnership. Hammerschlag J agreed:
48First, it was put on behalf of Hamilton that the deed did not confer upon him the power or authority to sue one or more of the partners on behalf of another or others of them, as the plaintiffs contend he should have done. This submission was put on the basis that cl 3.1.3 of the deed does not comprehend a power in the receivers to commence proceedings by one partner against another or others. Clause 3.1.3 provides that the receivers shall have the powers granted to a liquidator under s 477 of the Corporations Law. Section 477(2)(a) of that enactment provides that a liquidator may bring or defend any legal proceedings in the name and on behalf of the company. It was put that this was not a power to commence proceedings for one partner against others.
49This is undoubtedly correct.
50For over 150 years it has been settled that neither during the partnership nor after its termination has any partner a cause of action at law to recover monies due to that partner from his fellow partners. The amount owing to one partner by his or her fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved; see Richardson v Bank of England 41 ER 65. This principle has been affirmed by the High Court as recently 2010; see Commissioner of State Taxation v Cyril Henschke Pty Ltd (above) at 445 [22]; see also Hurst v Bryk [2002] 1 AC 185.
51Under cl 3.1 of the deed the partners appointed the receivers their agent to wind up the affairs of the partnership. The powers they gave the receivers were given in aid of winding up the affairs of the partnership by gathering in its assets, paying its liabilities and dividing the surplus according to the partners’ respective interests in the partnership. Clearly, this does not comprehend power in the receivers to bring proceedings to determine the extent of those interests, including by proceedings to determine monies due to one partner by his or her fellow partners, and on its plain meaning cl 3.1 does not confer such a power. To construe the provision otherwise would place the receivers in an impossible position of conflict and would assume an intention on the part of the partners to have an instrument which envisaged a course directly in conflict with long established principle.
52In any event, the partners could not validly authorise their agents to bring proceedings which they themselves could not bring; see Peter Watts and FMB Reynolds, Bowstead and Reynolds on Agency (19 th ed, 2011).
53The only proper course of resolution of the loan, interest, agistment and piping claims was for Pinata to bring proceedings for an accounting, a course which it ultimately took in 2001 and which, for reasons already discussed, failed.
[underlining added]
[51]As to the latter, Justice Mullins’ orders would in my view be taken to have been made on the assumption of consistency with the above principles. So much is more than an assumption, however. The terms of the order 5(f) deal specifically with claims inter se and provide a correct method for their resolution, consistent with the above principles.
[52]Finally, it remains only to note that the Partnership Act 1891 (Qld) does not appear to modify the general law in this respect. Indeed, ss 46 and 47 appear to be consistent with the above principles.
[53]Accordingly, neither party to the White Horizons proceedings has a cause of action in debt against the other and any sums due inter se must await the determination of balances due on the taking an account.”
(footnote omitted)
What can be seen from the above analysis is that there was High Court authority for the proposition that the receiver had no standing to bring the District Court proceeding but, I infer, that authority was apparently not considered at any time prior to the commencement of it, nor at any time during the eight years while it was on foot. Before me, no party suggested that the receiver’s concession that he did not, at any time, have standing to commence the proceeding was other than correct.
As to costs, Porter KC DCJ said:
“[54]The first issue is what costs order to make in the White Horizons proceedings. In my view, I should make no order as to costs and leave the parties to bear their own costs. A different outcome might have followed if the counterclaim could be characterised as entirely defensive. But it was not. The defendant’s position was that the plaintiff’s claim was statute barred, but its claim was not. It pressed for judgment on its counterclaim and dismissal of the claim. While it is difficult to see how that could have succeeded in the face of a set-off defence, that was the defendant’s position.
[55]Accordingly, I make no order as to costs of the White Horizons proceedings.
[56]A second issue is whether I should make an order which denied indemnity of the receiver from the Partnership assets. Ultimately, both parties submitted I should not do so because that question was properly one for the Court which appointed the receiver. I am not persuaded that this Court does not have jurisdiction to make an order denying indemnity to the receiver in the circumstances presently before the Court. In my view, such power could come within the scope of s. 69 District Court of Queensland Act 1967 in a case of this kind. Further, it might be argued that in this case, the receiver was suing as trustee and therefore the express power in Rule 704 Uniform Civil Procedure Rules 1999 might be engaged. However, it is unnecessary to decide the point. Both parties submit that the matter should be left to the Supreme Court. And there is much to be said for declining to make orders affecting an officer of the Court appointed by another Court, even if power to do so exists. I will therefore not deal with the question of the receiver’s indemnity.”
(footnote omitted)
Commencement of the District Court proceedings without judicial advice
It is not in dispute that the receiver did not apply for judicial advice prior to the commencement of the White Horizon proceedings.
The principles pertaining to whether a receiver is obliged to apply to the court for judicial advice regarding the commencement of proceedings was considered by Kelly J in LM Investment Management Ltd (in liquidation) & Ors v Whyte,[3] to which I will return, but the broad principles as they pertain to trustees are of longstanding. Lindley LJ said in In re Beddoe:[4]
“[A] trustee who, without the sanction of the Court, commences an action or defends an action unsuccessfully, does so at his own risk as regards the costs, even if he acts on counsel’s opinion; and when the trustee seeks to obtain such costs out of his trust estate, he ought not to be allowed to charge them against his cestui que trust unless under very exceptional circumstances. If, indeed, the Judge comes to the conclusion that he would have authorized the action or defence had he been applied to, he might, in the exercise of his discretion, allow the costs incurred by the trustee out of the estate; but I cannot imagine any other circumstances under which the costs of an unauthorized and unsuccessful action brought or defended by a trustee could be properly thrown on the estate … I entirely agree that a trustee is entitled as of right to full indemnity out of his trust estate against all his costs, charges, and expenses properly incurred … The words ‘properly incurred’ … are equivalent to ‘not properly incurred’ … But, considering the case and comparatively small expense with which trustees can obtain the opinion of a Judge … on the question whether an action should be brought … at the expense of the trust estate, I am of the opinion that if a trustee brings or defends an action unsuccessfully and without leave, it is for him to shew that the costs so incurred were properly incurred.”[5]
[3][2023] QSC 132.
[4][1893] 1 Ch 547.
[5]Ibid at 557 – 558.
The trustee, or in this case, receiver, therefore bears the onus of demonstrating that the costs were properly incurred.
Referring to the statement from Lindley LJ, Jackson J in Park & Muller (liquidators of LM Investment Management Ltd) v Whyte (No 3),[6] said at [58]:
“In my view, it is important to recognise that Lindley LJ’s statement in Beddoe is not a distinct species of the trustee’s right to indemnity for expenses properly incurred. Rather, it articulates what considerations will or may be expected to establish that the legal costs incurred by a trustee in prosecuting or defending a particular proceeding are expenses properly incurred. The underlying informing principle is that a trustee is expected not to engage lightly in litigation that will or may incur costs that will diminish the trust property. The trustee is only to do so if the circumstances justify it. Lindley LJ’s statement of the relevant considerations informs what may be a liability or expense properly incurred in those circumstances.”
(emphasis added)
[6][2018] 2 Qd R 475.
In Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand[7] (Macedonian case), the High Court (Gummow ACJ, Kirby, Hayne and Heydon JJ with whom Kiefel J, as her Honour then was, agreed) said at [71]:
“In short, provision is made for a trustee to obtain judicial advice about the prosecution or defence of litigation in recognition of both the fact that the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and expenses properly incurred in performance of the trustee’s duties. Obtaining judicial advice resolves doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. No less importantly, however, resolving those doubts means that the interests of the trust will be protected; the interest of the trust will not be subordinated to the trustee’s fear of personal liability for costs.”
(emphasis added)
[7](2008) 237 CLR 66.
The Macedonian case has been consistently followed in Queensland[8] and elsewhere.[9]
[8]See Re Moore (deceased) [2025] QSC 213 at [23]; LM Investment Management Ltd (in liquidation) v Whyte [2023] QSC 132 at [44]; Campbell v T. L. Clacher No. 2 Pty Ltd & Ors [2020] QSC 35 at [72]; Ban v the Public Trustee [2015] QCA 18 at [54] – [65]; Coore v Coore [2013] QSC 196 at [9] – [11].
[9]See QB4 Capital Pty Ltd v Guardian Securities Ltd [2023] FACFC 72 at [71]; Burke v Public Trustee for the State of South Australia [2022] SASCA 64; The Application of Richard Neal in his capacity as administrator of the Estate Late Paula Claire Hewitt [2021] NSWSC 1489 at [18]; Plan B Trustees Ltd v Attorney-General (WA) [2012] WASC 392.
Even if the decision not to apply for a Beddoe order is based on legal advice, that is no excuse from the consequences which arise from the failure to do so. As Lindley LJ noted, the fact that the trustee acted on counsel’s opinion is a relevant factor, “but counsel’s opinion is no indemnity to him even on a question of costs.”[10] In the same judgment, Bowen LJ stated:
“While I agree that trustees ought not to be visited with personal loss on account of mere errors in judgment which fall short of negligence or unreasonableness, it is on the other hand essential to recollect that mere bona fides is not the test, and that it is no answer in the mouth of a trustee who has embarked in idle litigation to say that he honestly believed what his solicitor told him, if his solicitor has been wrong-headed and perverse. Costs, charges, and expenses which have been unreasonably incurred, do not assume in the eye of the law the character of reasonableness simply because the solicitor is the person who was in fault. No more disastrous or delusive doctrine could be invented in a Court of Equity than the dangerous idea that a trustee himself might recover over from his own cestuis que trust costs which his own solicitor had unreasonably and perversely incurred merely because he had acted as his solicitor told him.
If there be one consideration again more than another which ought to be present in the mind of a trustee, especially the trustee of a small and easily dissipated fund, it is that all litigation should be avoided, unless there is such a chance of success as to render it desirable in the interests of the estate that the necessary risk should be incurred.”[11]
[10]In re Beddoe [1893] 1 Ch 547 at 558.
[11]Ibid at 562.
This passage was expressly approved by the Full Court of the Federal Court in Adsett v Berlouis.[12]
[12](1992) 37 FCR 201 at 210 – 211.
In LM Investment Management Ltd (in liquidation) & Ors v Whyte,[13] the receiver argued that the Beddoe principles had no application in respect of litigation conducted by him in the name of the trustee of a managed investment fund that the receiver was appointed to wind up, in circumstances where the receiver had commenced a proceeding without seeking judicial advice.[14] The receiver contended that the order which appointed him specifically authorised him to conduct litigation and, in those circumstances, there was no need for him to apply for such advice. However, Kelly J observed at [39]:
“… [the receiver] was an officer of the court and was entitled to resort to the court for necessary guidance. This court has a clear general jurisdiction to give its opinion, advice or direction to a receiver it has appointed.”
(footnote omitted)
[13](2023) QSC 132.
[14]Ibid at [28] and [38].
In this case, the receiver accepted that the court enjoys a broad, plenary power to make orders denying the receiver a right of indemnity from the assets of the partnership, but contends that the court should decline to do so. The starting point, the receiver contends, is that the receiver is entitled to an indemnity from the assets of the receivership for costs of litigation, including adverse costs orders, provided they were properly incurred. The receiver submits that the discretion to deny indemnity should be exercised with great caution and only in exceptional circumstances, describing it as an “unusual and extreme step”.[15] The receiver contends that the court should not take this step because:
(a)first, while the receiver ultimately conceded that the White Horizon proceedings were misconceived, it does not follow that it was obviously so;[16]
(b)second, there is no allegation that the receiver acted other than bona fide in the interests of the partnership;
(c)third, the receiver had some advice from counsel, which advice did not identify the principles which led to the receiver conceding the claim; and
(d)fourth, whilst it was open to the receiver to make a Beddoe application for directions, that is merely one factor to be taken into consideration.
[15]Bank of Queensland Ltd & Anor v Ross Auto Auctions Pty Ltd (in liq) (Receivers & Managers appointed) & Anor [2016] QSC 19 at [4] citing SingTel Optus Pty Ltd & Ors v Weston [2012] NSWSC 1002 at [14].
[16]Adsett v Berlouis (1992) FCR 201 at 211 – 212.
The receiver’s submissions cannot be accepted for the following reasons, which I deal with in reverse order to the way in which they were made.
The failure to make the Beddoe application might indeed be merely one factor for consideration, but it is a powerful factor.
Here, the receiver offers no evidence as to the factors, if any, which were taken into consideration before the commencement of the White Horizon proceedings, without bringing a Beddoe application. The receiver does not depose to any advice received from his solicitors. Counsel for the receiver asks me to infer that he must have had some such advice, having regard to the fact that a solicitor’s firm’s name appears on the statement of claim which was filed in the District Court proceedings. The only inference I can draw from that piece of evidence is that solicitors were instructed to file the proceedings, and must have considered the claim was not unarguable, but I would not be prepared to infer that the receiver obtained advice before commencing the proceedings. If the receiver had done so, it would have been an easy enough matter for him to depose to it, but he did not.
Affidavit material from the solicitor for the receiver shows that on 19 October 2015 the receiver’s solicitors issued a demand to White Horizon for payment of the sum of $363,375, based on the accounts of the partnership. Based on that letter, I am prepared to infer some sort of advice must have been given about recoverability of the asserted debt, but I cannot conclude what the advice was in the absence of it being deposed to.
The receiver does not depose that advice was sought from counsel prior to the commencement of the proceedings. The advice referred to in [32](c) above was obtained almost two years after the proceedings were commenced. The White Horizon statement of claim was not settled by counsel. Again, had the receiver obtained such advice, he could have deposed to it, but he did not.
Most importantly, it seems to me, there is no evidence of what the receiver took into account at all before commencing proceedings, such as the prospects of success, the costs of the litigation and the likelihood of actual recovery.
The failure to make the Beddoe application, unaccompanied by any explanation whatsoever as to why that course was adopted, exposes the trustee to the risks as regards costs in the way described by Lindley LJ as set out at [24] above.
Nevertheless, the receiver submits that as a matter of commercial reality, it cannot be the case that every liquidator or trustee must always obtain a Beddoe direction or risk litigating out of his own pocket. As much can be accepted, but generalities at that level are rarely helpful. There might be a variety of reasons why applications might not be pursued such as, the amount sought to be recovered might be small or the legal position towards recovery clear. No doubt there are other examples. But equally there will be cases where the application ought to be brought in the interests of the trust property. As Jackson J observed in Park & Muller (liquidators of LM Investment Management Ltd) v Whyte (No 3),[17] while there is no “bright line test” to determine the circumstances in which a Beddoe application ought to be made, the “underlying informing principle” is that the trustee is expected not to engage in litigation lightly.[18]
[17][2018] 2 Qd R 475.
[18]Ibid at [58] and [65].
In my view, the current case is one where such an application ought to have been brought. That is not to use the benefit of hindsight – it is the proper application of principle, that in the known circumstances, a claim of $363,375 to be brought some six years after the receivers had been appointed and five years after the assets of the partnership had been realised, ought not have been engaged in lightly.
Next, as I have already touched upon, the advice which was received from counsel on 23 December 2018 was expressly an advice on evidence, not on prospects or standing, and that advice was obtained almost two years after the proceedings were commenced. It neither recommended the commencement of the proceedings nor justified the conduct of it.
Third, it can be accepted that there is no allegation that the receiver acted other bona fide but, in the context of this proceeding, that is of limited relevance. The first respondent does not suggest a lack of bona fides and none is demonstrated.
That leaves me only to consider the submission made by the receiver that merely because the proceeding was conceded on the basis that the receiver had no standing, it does not follow that the proceeding was obviously misconceived. Indeed, the receiver raises against the first respondent that although the first respondent amended its defence on numerous occasions throughout the conduct of the White Horizon proceedings, it never raised the question of the receiver’s standing. That can be accepted as factually correct. It is raised however as a form of explanation for failing to bring the Beddoe application, being that the standing issue was so unusual and complicated that neither the receiver nor the first respondent ever identified it until well into the trial before Porter KC DCJ.
The difficulty with that submission, it seems to me, is that one of the purposes of the application for judicial advice is to identify to the court the prospects of success of the proceeding, the estimate of costs in respect of it and the likely outcome. As part of that process, any procedural, evidential or legal hurdles to the success and cost of the proceedings is ordinarily identified. Properly conducted, an application for judicial advice would ordinarily expose a substantive weakness, such as a lack of standing to bring the proceedings. In the circumstances, it seems to me that the failure to bring the Beddoe application, was a failing which directly led to the bringing of a proceeding which would otherwise likely have been exposed as one without standing, prior to its commencement. That is not a conclusion that the proceeding was obviously misconceived, but it is a conclusion that the occasion for turning one’s mind to the prospects of success was before the proceeding commenced, not seven years after commencement and at the conclusion of a three day trial.
What are the consequences therefore in relation to the receiver’s indemnity for remuneration and disbursements?
A trustee’s indemnity extends to expenses that are properly and reasonably incurred.[19] That approach was followed by Kelly J in LM Investment Management Ltd (in liquidation) & Ors v Whyte.[20] There, his Honour also considered the decision of Parker J in Dixon v Dixon (No 2),[21] where his Honour had observed:
“The decision in Beddoe was referred to with apparent approval by the High Court in Macedonian Orthodox Community Church. … In this context, there is every reason to treat the failure to obtain advice as a factor which potentially goes to unreasonableness. … In Olsen … I discussed the general equitable principles which apply to the onus in a trustee’s claim for indemnity. I concluded … that the legal onus lies on the trustee to show that the expense in question has been reasonably and honestly incurred, but usually this is an undemanding test, but the onus of demonstrating reasonableness is not demanding; in usual circumstances, it only requires that the incurring of the expense was not unreasonable. … Even if the trustee does not bear any onus, the court may take a failure to obtain judicial advice into account, and if that failure is unexplained it is open to the Court to conclude that the trustee’s behaviour was unreasonable.”[22]
[19]Olsen v James [2020] NSWSC 1015 at [103].
[20][2023] QSC 132 at [45].
[21][2022] NSWSC 944.
[22]Ibid at [75] – [78] followed by Kelly J in in LM Investment Management Ltd (in liquidation) & Ors v Whyte [2023] QSC 132 at [46].
I conclude, as Kelly J did, that the absence of an application for advice has been recognised as a matter “wholly relevant to the question of whether the trustee has ‘acted unreasonably’”.[23]
[23]Free Serbian Orthodox Church Diocese for Australia and New Zealand Property Trust v Dobrijevic (No 3) [2017] NSWCA 109 at [42] followed by Kelly J in LM Investment Management Ltd (in liquidation) & Ors v Whyte [2023] QSC 132 at [47].
Although each case turns on its own facts, the receiver contends that the position is as identified by the Full Court of the Federal Court in Adsett v Berlouis,[24] where the court said:
“The critical question, in our view, is whether or not the conduct which gave rise to the burden of costs – whether costs ordered to be paid or costs incurred by the trustee in prosecution of the litigation – was proper in the sense explained in Beddoe; that is, whether the expenditure was reasonably, as well as honestly, incurred. Where, for example, the litigation was obviously misconceived or, even if it was otherwise reasonable to be undertaken, extravagant in the resources applied to it, we would not regard the expense incurred as proper; notwithstanding that the trustee may have acted honestly throughout. It is neither possible nor desirable to attempt to identify all of the situations in which costs expenditure would not be regarded as proper. Nor is it profitable to attempt a detailed rule covering all circumstances. But we issue the caution that the language in some authorities, many of which relate to gratuitous trustees, may mislead. Sometimes that language appears to require a degree of personal misconduct or wilful recklessness, as opposed to mere negligence, mistake or breach of the trustee’s duty as set out above. We do not think that such a limitation can stand with cases such as Beddoe, which in our opinion correctly express the law. If the expense is one prudently and reasonably incurred in the discharge of the trustee’s proper duties, there is a right under the general law to be indemnified out of the trust estate. If the expense is not so incurred or is unreasonable or unnecessary, there is no right under the general law to indemnity because the expense is not ‘properly incurred’. The position is no different with a trustee in bankruptcy. Where the line is drawn, between an expense properly incurred and one not properly incurred, is to be determined on the facts of the particular case and in the exercise of judgment.”[25]
[24](1992) 37 FCR 201.
[25]Ibid at 211 – 212.
It follows, in my view, that there being no evidence of any of the relevant matters being taken into account before the commencement of the proceeding and in the absence of the Beddoe application, that the expense associated with the White Horizon proceedings was not properly incurred, and there is no right under the general law to indemnity for that expense.
Denial of all, or some, remuneration and disbursements?
I turn to the question of the quantum of the remuneration and disbursements incurred in the White Horizon proceedings and the receivership more broadly.
Paragraph 4 and 4A of the applicant’s amended application seeks the following orders:
“4.That pursuant to r 269 of the UCPR, Mr Combis’ remuneration for acting as receiver of the property of the Partnership is fixed in the sum of $0.00 in relation to District Court proceeding 383/17.
4A.That pursuant to r 269 of the UCPR, Mr Combis’ remuneration for acting as receiver of the property of the Partnership other than in relation to District Court proceeding 383/17 is fixed in an amount to be determined by the Court.”
(my underlining)
The receiver was therefore on notice that the first respondent was, firstly, applying for an order that the receiver recover no amount in respect of the White Horizon proceedings and, secondly, that his remuneration for acting as receiver in the balance of the proceeding was a matter to be determined on the hearing of this application.
Costs in the White Horizon proceedings
In relation to the costs in the White Horizon proceeding, the receiver did not identify any specific costs which he submitted ought to still be recoverable by him out of the receivership even if the court was satisfied that there was some failing on his part in failing to bring the Beddoe application before the commencement of the proceedings. Rather, counsel submitted that the court could take “an extremely broad brush” approach to the assessment of the receiver’s costs in respect of the White Horizon proceedings by reference to the following facts:
(a)the proceeding was commenced in February 2017;
(b)White Horizon filed its first defence on 3 April 2017;
(c)the receiver applied for summary judgment in the White Horizon proceedings on 28 September 2017, which proceeded over the course of a number of applications;
(d)on 26 October 2017, an order was made for White Horizon to file an amended defence and pay the receiver’s costs of the first adjourned summary judgment application;
(e)on the second return of the summary judgment application White Horizon’s amended defence was struck out and a second costs order was made;
(f)on the third return of the summary judgment application in December 2017 the application was adjourned sine die and costs were reserved;
(g)on 20 April 2018, the Kelly proceedings were transferred to the District Court and reconstituted as proceeding 2015/18;
(h)on 29 August 2018, the first and second costs orders were assessed and entered at $24,790.42;
(i)a statutory demand for payment issued to White Horizon which was not satisfied, and in March 2019, White Horizon was wound up in insolvency;
(j)in April 2019, Mr Kelly commenced a Supreme Court proceeding seeking orders for the termination of White Horizon winding up, and upon the hearing of that application the receiver appeared and consented to the order;
(k)in May 2020, disclosure was undertaken;
(l)in October 2020, the partnership filed an application to dispense with White Horizon’s signature on a request for trial date at which point directions were made for disclosure, particulars and an amended defence. At the same time an order was made that the White Horizon proceedings and the Kelly proceedings be heard together;
(m)in February 2021, following the receipt of particulars, White Horizon filed a further amended defence and counterclaim;
(n)between April and June 2022, the receiver issued notices of non-party disclosure to various financial institutions when disclosure was not made in the White Horizon proceedings and the Kelly proceedings;
(o)in July 2024, the District Court placed the matter on the commercial list and gave leave for the filing of a further defence;
(p)in December 2024, an order was made setting the matter down for a three day trial beginning in April 2025; and
(q)in March 2025, White Horizon was given leave to file a further amended defence and counterclaim which was its sixth such defence. Close to the trial, White Horizon filed a seventh amended defence.
The above chronology demonstrates, the receiver contends, that the receiver conducted himself reasonably and appropriately throughout the course of the White Horizon proceedings and accordingly the court would not deprive the receiver of the entirety of its costs throughout the conduct of the matter. Accordingly, it was submitted by the receiver’s counsel that if the receiver was to be denied a full indemnity in respect of his costs, the court would still allow the receiver 50 per cent of his total costs. It was described in argument that just because of the “original sin” in failing to bring the Beddoe application, that ought not mean that all that followed was necessarily unreasonable and improper. Rather, it was submitted on behalf of the receiver that one had to look at the conduct of the litigation and assess whether each of the decisions which the receiver made throughout the litigation was reasonable and proper and, it followed, that if it was thought his conduct was so appropriate, he ought to recover some costs in respect of the conduct of the litigation.
No authority was cited for the proposition that what the court ought to do is examine the conduct of the receiver at different stages of the litigation to determine whether his conduct at different points was reasonable or not. At best it was said that the principle to be advanced from Adsett v Berlouis[26] is that the question must always be whether the expenses, fees or remuneration incurred by the receiver were reasonable at the time they were so incurred. In my view, that misstates the principle in Adsett’s case which I have already set out at [49] above. If the expense is reasonably and honestly incurred, then there is a right under the general law to be indemnified out of the trust estate for it. But where the court has concluded, as here, that the cost was not properly incurred, because the proceeding ought never to have been brought, then the fact that the receiver acted properly throughout the course of the proceeding is not to the point. None of the expenses associated with the White Horizon proceedings were “properly incurred” because they were incurred without the benefit of the court’s advice on the hearing of a Beddoe application. As such, the submission that I ought to adopt an “extremely broad brush” approach to allowing the receiver 50 per cent of his fees, must be rejected.
[26](1992) 37 FCR 201.
In the alternative, it was contended on behalf of the receiver that rather than denying the receiver an entitlement in respect of his fees at all, there needed to be “a trial or some other mechanism of assessment” to examine each of the receiver’s decisions throughout the course of the White Horizon litigation between 2017 and 2025. What the “other mechanism of assessment” should be, other than a trial, was not identified, nor was any procedure identified for the suggestion that there ought to be a trial of each of the receiver’s decisions over the course of some eight years. Both sets of submissions can safely be rejected; they simply do not accord with proper principle.
In the exercise of my judgment, having concluded that the White Horizon litigation was not an expense which was “properly incurred”, it seems to me that there is no alternative other than to grant the relief sought in paragraph 4 of the amended application to deny the receiver remuneration or disbursements in respect of that aspect of his claim.
Costs other than in relation to the White Horizon proceedings
That leaves to be decided the question regarding the receiver’s other costs in the receivership, as was contemplated in paragraph 4A of the amended application.
The first respondent submits that because it had sought an order that the remuneration be fixed in an amount to be determined by the court, the onus was then on the receiver to identify his costs in the receivership so that that matter could be dealt with on the return of this application. As a matter of principle, that submission is correct.[27] The receiver, it seems, did not understand that to be the purport of paragraph 4A of the application, and counsel made a proper concession that that was the case.
[27]Dixon v Dixon (No 2) [2022] NSWSC 944 at [75] – [78].
Because of that misunderstanding, the receiver did not take the opportunity to place any evidence before the court in respect of his costs of the receivership. Having failed entirely to discharge his onus, counsel for the first respondent submits that I would simply make an order fixing the amount of his costs of the receivership at nil.
I am not prepared to do that.
The receiver is entitled to costs properly incurred in the conduct of the receivership. That he may have misunderstood what the effect of what was sought at paragraph 4A of the amended application is a matter which might go to costs, but such a misunderstanding ought not to deprive the receiver of his costs for the entirety of the receivership. This is so even though I also asked counsel for the first respondent if there was any prejudice to the first respondent if the receiver sought to adjourn the application for the purpose of putting material before the court, and counsel agreed there was not; yet still no application for an adjournment was sought on behalf of the receiver. Nevertheless, I do not consider that the receiver’s conduct is such that he ought to be deprived of all of his costs over the course of the many years of the administration without a proper examination of the relevant evidence.
In the circumstances, I propose to direct that the parties confer as to a set of directions which will facilitate the proper exchange of the necessary material to assess the costs other than in relation to the White Horizon proceedings, and that application will have to be brought back before me. Naturally, if the parties are able to reach an agreement in relation to that remuneration, the process could be further simplified.
Removal of Receiver
That leaves the issue of the application for removal of the receiver. The court has a wide discretion in relation to the removal of a receiver which is analogous to the removal of trustees generally. In Miller v Cameron,[28] Dixon J said the following in relation to the discretion to remove a trustee:
“In deciding to remove a trustee the Court forms a judgment based upon considerations, possibly large in number and varied in character, which combine to show that the welfare of the beneficiaries is opposed to his continued occupation of the office. Such a judgment must be largely discretionary. A trustee is not to be removed unless circumstances exist which afford ground upon which the jurisdiction may be exercised. But in a case where enough appears to authorize the Court to act, the delicate question whether it should act and proceed to remove the trustee is one upon which the decision of a primary Judge is entitled to especial weight.”[29]
(emphasis added)
[28](1936) 54 CLR 572.
[29]Ibid at 580 – 581.
While the discretion is broad, in my view there are a number of difficulties with determining this issue now.
First, no alternative receiver was offered, and I am not prepared to order removal where there is no replacement ready, willing, and able to be appointed.
Second, and more importantly, it was not made clear to me how a remuneration application could be brought by the current receiver if a new receiver is appointed. I propose to defer the hearing of the application for removal until the remuneration application is competed.
Third, and related to the second, there may be matters that arise in the remuneration application that are relevant to the removal application. The court determining the removal application ought to have proper regard to those matters. The hearing of that application is to be adjourned to a date to be fixed.
Leave to proceed
There remains one procedural issue to deal with, which was uncontentious, and that is whether the court ought to give White Horizon leave to proceed. That issue arises because in the winding up of the partnership, no step has been taken for some eight years. That is because the winding up could not proceed until the Kelly proceedings and the White Horizon proceedings were finalised.
As a consequence, in accordance with r 389 of the UCPR, no new step may be taken without an order of the court. The rule provides:
“389 Continuation of proceeding after delay
(1)If no step has been taken in a proceeding for 1 year from the time the last step was taken, a party who wants to proceed must, before taking any step in the proceeding, give a month’s notice to every other party of the party’s intention to proceed.
(2)If no step has been taken in a proceeding for 2 years from the time the last step was taken, a new step may not be taken without the order of the court, which may be made either with or without notice.
(3)For this rule, an application in which no order has been made is not taken to be a step.”
The receiver does not oppose leave to proceed. That is appropriate in all the circumstances when the explanation for the delay has been the conduct of the Kelly proceedings and the White Horizon proceedings. That is consistent with the proper application of principle.[30] Leave ought to be given.
[30]Tyler v Custom Credit Co Ltd & Ors [2000] QCA 178 at [2].
Conclusion
The parties can confer as to a form of orders to reflect these reasons, and submit those draft orders, or competing drafts, to me within three days of these reasons. Should a further short hearing be required, the matter will be listed promptly.
I will also hear the parties as to the costs of this application.
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