Alsop Wilkinson (a firm) v Neary

Form of order

1. The first difference between the parties is whether, as ADF contends, the order made by the Court should be limited to permitting the Receivers to make an interim distribution to the CBA or should, as the Receivers contend, provide for an interim distribution to be made to creditors of ADF in accordance with the Distribution Schedule. It seems to me that the orders should be made in the wider form for which the Receivers contend, because, first, that was the matter in issue in the application before me, to which my judgment was addressed; second, that wider order recognises that the relevant distribution involves both the making of a payment to CBA and the setting aside of funds pending the determination of proofs of debt in respect of the Diocese of Bathurst, APT and two other entities associated with the Diocese; and, third, that schedule sets out further information as to the basis of the calculation that was the subject of evidence before me as to which the parties had the opportunity to make submissions. Conversely, an order in the narrower form would not reflect the fact that the Receivers sought approval not for a distribution to CBA alone, but for a distribution that comprised a payment in a specified amount to CBA and the preservation of specified amounts that could be applied to meet the claims of other creditors associated with the Diocese of Bathurst if their proofs of debt were allowed. That approach is consistent with the conclusion set out in paragraph 56 of my orders, where I noted that: "I am satisfied that the Receivers' approach to the identification of persons to whom an interim distribution should be made, or set aside pending adjudication of their claims, is appropriate. The matters raised by ADF do not seem to me to provide reason to decline leave for that interim distribution. …"

Undertaking by CBA

1. The parties were agreed that the Court should note and accept an undertaking that has been given by CBA to the Court that it will repay any distribution made to it, if an order is made by a Court which reduces, extinguishes or gives rise to a set-off against the judgment debt entered in the proceedings on 15 October 2013 against ADF. CBA has confirmed that it gives that undertaking to the Court and I will note and accept that undertaking.

Costs

1. The Receivers seek an order that APT pay their costs incurred on and from 16 October 2014, being the date on which APT informed the Receivers that it would be opposing the distribution application. The Receivers submit that there is no reason to depart from the usual order that costs follow the event in a "beneficiaries' dispute", as described in Alsop Wilkinson (a firm) v Neary (1996) 1 WLR 1220 at 1223 - 1224, where Lightman J described such a dispute as: "a dispute with one or more of the beneficiaries as to the propriety of any action which the trustees have taken or omitted to take or may or may not take in the future. This may take the form of proceedings by a beneficiary alleging breach of trust by the trustees and seeking removal of the trustees and/or damages for breach of trust." The Receivers submit that this application had that character as a result of APT's grounds of opposition to the distribution, and that APT's opposition to the orders was not for the benefit of the Fund. The Receivers also point to my finding that there would have been unfairness to them in requiring them to address issues as to their, or their solicitors, independence which had been raised as a collateral issue in the application, rather than in an application squarely brought under s 423 of the Corporations Act or in the Court's inherent jurisdiction. The Receivers also submit that their application for an order in respect of a proposed interim distribution was not a proper or appropriate forum for APT to raise any of the matters that it raised during the course of that application and that, having put the Receivers and the fund to the cost of dealing with those allegations in the cost of the interim distribution application, APT should be ordered to pay the Receivers' costs from the date on which it signalled its opposition to the application
2. On the other hand, APT seeks an order that its costs in respect of the application be costs of the receivership of ADF or, alternatively, there should be no order as to costs as between APT and the Receivers. APT submits that the orders appointing the Receivers required that they seek Court approval for the making of distributions to creditors of ADF and that they give notice of that application to all creditors who had lodged a proof; that APT is the next largest creditor (or at least, person claiming to be a creditor) after CBA; and that APT was served with the Interlocutory Process brought by the Receivers seeking the relevant approval. APT contends that the Receivers' application is akin to an application by a trustee or liquidator to a Court for judicial advice and that all parties who are joined in such an application ordinarily have their costs paid out of the assets held by the trustee or liquidator. APT submits that its involvement, as contradictor, was appropriate, if not necessary, because the Receivers' application concerned the disposal of a substantial sum of money, which represented almost 90% of the assets presently held by ADF and there was a "close working relationship" between the Receivers, their solicitors and CBA, and APT was an appropriate contradictor in respect of the question of whether it was appropriate that the relevant distribution should be made to CBA. APT also submits that its position was not without success, so far as it prompted the Receivers to file an Interlocutory Process seeking further directions to address the matters raised by APT in respect of its proof of debt and led the Court to require, as a condition of the distribution to CBA, the undertaking (which I noted above) that CBA be required to repay that distribution, if an order is subsequently made by a Court that reduces, extinguishes or gives rise to a set-off against the relevant debt.
3. Costs are in the Court's discretion, under s 98 of the Civil Procedure Act 2005 (NSW), and r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") provides that costs should follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. APT accepted, in submissions, that s 98 of the Civil Procedure Act conferred a discretionary power to determine costs of the Court and that discretion must be exercised judicially. However, the Court will have regard to the particular character of claims to a fund held on trust and analogous claims. In Re Buckton [1907] 2 Ch 406, which is often cited in respect of issues of this kind, the possible cases were divided into three categories. The first category is where the trustee, as applicant, seeks to have the court construe the trust instrument or to have some question decided in the course of the administration of the trust, where the costs of all parties are ordinarily regarded as having been necessarily incurred for the benefit of the trust and are ordered to be paid out of the trust fund. That category was expanded, in Alsop Wilkinson (a firm) v Neary above to include a dispute as to trusts, where the trustees hold the subject matter of the settlement, and that observation was approved by Campbell JA in BE Australia WD Pty Ltd (subject to a Deed of Company Arrangement) v Sutton [2011] NSWCA 414; (2011) 285 ALR 532 at [213]. The second category of case identified in Re Buckton is where an application is made by a beneficiary and the trustee is a defendant but it is apparent that the application was made because of a difficulty in construing the trust instrument or with the administration of the trust so that the trustees would have been justified in making the application and, in that case, the costs of all parties are regarded as having been necessarily incurred for the benefit of the trust. The third category is where a beneficiary makes a claim that is adverse to another beneficiary, and the application is in the nature of hostile litigation, where the ordinary rule that costs follow the event is applied. In that case, the trustee's costs may be paid out of the trust fund rather than by the unsuccessful party in some instances.
4. APT also draws attention to the decision in Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653, where the Court of Appeal observed that, where a trustee reasonably seeks advice from the Court as to how a trust should be administered, all parties properly joined should have their appropriate costs out of the fund. APT points out that Ward J (as her Honour then was) took the same approach in Re Perpetual Investment Management Ltd [2011] NSWSC 615 at [8] in respect of a party which appeared at and participated in proceedings for judicial advice and that White J also took that approach in Re All Class Insurance Brokers Pty Ltd (in liq) [2014] NSWSC 475 at [53], where his Honour noted that costs were properly allowed out of the fund where he had been assisted by submissions made on behalf of creditors who had appeared on an application brought by a liquidator.
5. In BE Australia WD Pty Ltd (subject to a Deed of Company Arrangement) v Sutton above, Campbell JA (with whom McColl JA agreed) observed at [213] that: "The form of the proceedings, as inter partes litigation, is not decisive of how the costs of that litigation should be dealt with. Courts exercising equity jurisdiction encounter a variety of situations where a fund is being administered subject to the control of the court, and a question arises about the proper manner in which that fund should be administered. Such a situation can arise concerning administration of deceased estates, concerning administration of trusts, concerning company liquidations, concerning administration of the estates of incapable people, and concerning DOCAs. In those situations, whether the costs of the court deciding the question that has arisen should be treated as costs of administration of the fund is significantly influenced by whether the proceedings are in substance adversarial ones. While where the costs should fall in litigation is always a matter of discretion, very commonly costs are paid from the fund for non-adversarial proceedings, and by the loser for adversarial proceedings …"
6. I accept that this application had something in common with an application for judicial advice, at least in the sense that the Receivers would not have been entitled to proceed with the distribution without the leave of the Court required by the orders by which they were appointed, and that leave would not have been granted unless they satisfied the Court that the course they proposed was an appropriate one. As APT points out, I treated the application as having something of that character in dealing with an application made by APT for leave to cross-examine one of the Receivers as to his affidavit sworn in support of the application. As Campbell JA observed in BE Australia WD Pty Ltd (subject to a Deed of Company Arrangement) v Sutton above, costs are often paid from the fund for non-adversarial proceedings. It seems to me that this application was, in principle, non-adversarial in character, so far as it was directed to whether the Court was satisfied that the Receivers should be permitted to take the course they proposed. That seems to me to be the case notwithstanding that APT put its opposition to that course in strong terms and raised questions as to the independence of the Receivers and their solicitors in doing so. In principle, it seems to me that the application is therefore one where costs would not necessarily follow the event.
7. The possible orders as to costs that were addressed by the parties in submissions were, first to allow APT's costs from the Fund in full (as APT contends); or, second to make no order as to costs either in favour of or against APT (as APT contends in the alternative); or, third, to order that APT pay the Receivers costs of the application. I do not consider that I should make an order allowing APT's costs from the Fund in full, where a substantial part of the hearing was directed to a contention that the Receivers should be required to inquire into the status of the consent judgment in favour of CBA, notwithstanding that, as I noted in my primary judgment, ADF had consented to it on the instructions of its then directors, and while represented by senior counsel and independent solicitors, and APT now identified no issue which provided any realistic basis on which that judgment could be set aside.
8. I do not consider that I should make an order that APT pay the Receivers' costs of the application in full, as the Receivers contend, where APT's submissions raised matters that seem to me to have been relevant to the Court's decision and which, as APT points out, were reflected in the form of orders made by the Court. As I noted in my principal judgment, APT had made substantive submissions as to the position in respect of its proof of debt, which were only not addressed in the application because of the Receivers having taken steps to file a separate application to address that matter, immediately prior to the hearing. Second, as APT points out, it was at least a proper party to the application, so far as the orders for the Receivers' appointment required that it be given notice of the application, it was given such notice, and its interests were plainly affected both by the fact that a payment was sought to be made to CBA and the fact that monies would be set aside for it, rather than immediately paid to it. Third, I accept that APT had a degree of success in the application, at least to the extent that its intervention prompted an undertaking by CBA to address the position if orders were subsequently made adverse to its entitlement to the monies to be paid to it, which had not been offered or sought by the Receivers at the time the application was brought. Fourth, it seems to me that there was a proper basis for APT to identify a concern as to the issue of independence, at least in respect of the firm of solicitors that acted both for CBA and the Receivers in reliance on a "chinese wall", although I ultimately held that it would be unfair to the Receivers to require them to address that issue in the application for leave to make a distribution from the fund, as distinct from any inquiry that may be pressed by APT under s 423 of the Corporations Act. In indicating that concern was properly raised, I, of course, express no view as to its ultimate merit, which was not a matter that was determined in the application before me.
9. Neither the Receivers nor APT contended that APT should have some part of its costs from the Fund or made submissions as to the applicable legal principles as to such an order or their application in the particular facts. The parties may have had reason for that approach, given the costs which might have been involved in an assessment of the costs attributable to particular issues, although the Court could have reached a broad view as to that question had the parties made submissions in that regard. I do not consider I can take that approach where neither party advanced it and I have not had the benefit of submissions addressing it. In that situation, it seems to me that the preferable course is to make no order as to APT's costs of the application, which I do not consider the other orders canvassed by the parties are appropriate for the reasons noted above.
10. I do not understand there to be any contest as to the proposition that the Receivers should properly have their costs of the application as costs in the receivership of ADF.
11. Accordingly, I make the following orders: 1 The Applicants are permitted to make an interim distribution to creditors of the Anglican Development Fund Diocese of Bathurst Board (Receivers and Managers Appointed) in accordance with the Distribution Schedule annexed to the orders and marked "A".
12. The Court notes and accepts the undertaking given by the Commonwealth Bank of Australia to the Court by letter dated 12 February 2015 that it will repay any distribution made to it, if an order is made by a Court which reduces, extinguishes or gives rise to a set-off against the judgment debt entered in these proceedings on 15 October 2013 against the Anglican Development Fund Diocese of Bathurst Board (receivers and managers appointed).
13. There be no order as to the costs of this application as between the Applicants and the Anglican Property Trust Diocese of Bathurst.
14. The Applicants' costs be costs in the receivership of the Anglican Development Fund Diocese of Bathurst Board (receivers and managers appointed).

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 March 2015