Di Benedetto v Kilton Grange Pty Ltd [2017] VSCA 119

COURTS AND JUDGES - Reasons - Email from associate conveying judge's reasons for decision - Whether form of reasons appropriate - Soulemezis v Dudley Holdings Pty Ltd (1987) 10 NSWLR 247; Esso Australia Pty Ltd v Robertson [2005] VSCA 138, referred to.

1 The principal issue before the Court concerns the liability of a trustee for the legal costs of an administration proceeding under O 54 of the Supreme Court (General Civil Procedure) Rules 2005 ('the Rules').[1] The trial judge held that the proceeding was adversarial in nature, between two sides of the same family, and that costs should follow the event with the trustee, in effect, unable to recover costs ordered against him from the trust. For the reasons that follow, the judge's discretion as to costs miscarried and, to that extent, the appeal should be allowed.

2 Luigi Di Benedetto died on 2 February 2010. His brother Salvatore is the applicant in this proceeding, both in his personal capacity and as the executor and trustee of Luigi's will and estate. It is convenient to refer to the brothers by their given names. Luigi was survived by his de facto spouse Susi Kobor (who is the second respondent), Salvatore and his wife Maria ('Maria Snr'), and their children Joseph, Ginetta and Maria ('Maria Jnr') Di Benedetto.

3 Luigi was the sole director and shareholder of Kilton Grange Pty Ltd ('Kilton Grange'), the first respondent. Kilton Grange was the trustee of the Green Gable Family Trust, a discretionary family trust whose beneficiaries included Luigi, Ms Kobor, Salvatore and Salvatore's children. The trust deed conferred on Luigi a power of appointment. The parties proceeded on the assumption that this power vested in Salvatore as Luigi's legal personal representative after his death.

4 The main assets of the trust were a property at Sunbury and two properties at Dromana.

5 When Luigi died, he left a 50 per cent interest in a property at Ascot Vale, vacant land at Portland, a small sum in a bank account and 100 shares (being the whole of the share capital) in Kilton Grange, valued at $100.00.

6 In his will, Luigi devised his interest in the Ascot Vale property to his nephew Joseph. He bequeathed his residuary estate to Ms Kobor, subject to the Sunbury property being subdivided and Kilton Grange transferring one block to each of Salvatore's children. However, the will did not descend to details of the proposed subdivision. In particular, it did not specify the number of lots into which the Sunbury property was to be subdivided nor the basis upon which lots were to be selected for transfer to Salvatore's children.

7 After Luigi's death, Salvatore as his legal personal representative exercised the power of appointment under the trust deed to remove Kilton Grange and to appoint Marjojen Pty Ltd ('Marjojen') as trustee of the Green Gable Family Trust. Salvatore also became a director of Kilton Grange.

8 Shortly thereafter, Ms Kobor issued two proceedings, one against Salvatore as executor of Luigi's will under pt IV of the Administration and Probate Act 1958 and the other against Salvatore, Kilton Grange and Marjojen, seeking declaratory relief and orders pursuant to s 48 of the Trustee Act 1958 and r 54.02 of the Rules. Mediation of those proceedings resulted in a deed of settlement, which was executed on 21 October 2010 by Ms Kobor, Salvatore (in his capacities as executor of the will, trustee of the estate and appointor under the Green Gable Family Trust), Kilton Grange, Marjojen, Maria Snr, Joseph, Ginetta and Maria Jnr.

9 The deed of settlement relevantly made the following provision:

(a) by cl 6, Salvatore was required to remove Marjojen as trustee and reappoint Kilton Grange in its place;

(b) by cl 7, Kilton Grange authorised payment of $6600 to Maria Snr and $2400 to Joseph;

(c) cl 8 provided that, apart from some specified amounts, Kilton Grange would not disburse any moneys to any of the parties or their agents until Ms Kobor had received the shares in Kilton Grange, as provided for by cl 15;

(d) by cls 10(a)-(b), Kilton Grange was required to subdivide the Sunbury property into 2 lots, being as near as practicable to 4/7 designated as Ms Kobor's lot and as near as practicable to 3/7 designated as the Di Benedetto children's lot;

(e) by cl 11, Kilton Grange was obligated to take steps to subdivide the Sunbury property as soon as practicable and continue such process until completion with all due expedition;

(f) by cl 13, the costs of the subdivision - 'that is to say all costs required to have the plan of subdivision registered' - were to be borne by the parties in proportion to their actual allotments;

(g) by cl 14, the Di Benedetto children's lot was to be distributed in specie to the Di Benedetto children as tenants in common in equal shares; and

(h) by cl 15, as soon as practicable after the distribution in specie to the Di Benedetto children, Salvatore was to transfer all shares in Kilton Grange to Ms Kobor;

(i) by cl 19, the parties were to bear their own costs of the settled proceedings, with no costs or disbursements of those proceedings to be paid out of the trust or the estate.

10 Further, cls 4 and 5 provided that '[s]ave as provided for herein' the parties agreed that none of them had any outstanding claims against Luigi's estate, and Salvatore agreed that the estate had no outstanding claims against any of the parties.

11 Steps were taken to subdivide the Sunbury property in the manner contemplated by the deed of settlement. Salvatore outlaid funds to pay some of the subdivision costs, as well as land tax and other outgoings for the Sunbury and Dromana properties. Some of those costs were funded by rent received from the Dromana properties.

12 Disputes arose regarding aspects of the deed of settlement. Among other things, difficulties were encountered in undertaking the proposed subdivision of the Sunbury property. In negotiating those disputes, the parties agreed in principle that the Sunbury property should be sold rather than subdivided. But other disputes remained unresolved, including as to payment of the expenses associated with the attempted subdivision.

13 On 14 March 2014, Salvatore (in his capacity as executor) and Kilton Grange (in its capacity as trustee) commenced a proceeding naming Ms Kobor as respondent. The originating motion sought advice in respect of nine questions, including whether the Sunbury property could be sold without subdivision, and if so whether the proceeds of sale could be distributed in accordance with a proposal set out in a supporting affidavit. Questions were also asked as to whether Kilton Grange, Salvatore, Maria Snr and Ms Kobor could be reimbursed and indemnified for expenses in relation to the subdivision attempt, whether Kilton Grange was authorised to make payments of $6600 to Maria Snr and $2400 to Joseph, and whether any amounts to be reimbursed should be paid from Ms Kobor's entitlement to the proceeds of sale or from sale of another trust asset. The applicants sought advice as to whether the shares in Kilton Grange should be transferred to Ms Kobor only after the proceeds of sale had been distributed as they proposed. Alternatively to that proposal, advice was sought as to the trust's entitlement to sell another asset in order to satisfy the liabilities owing to the applicants. Declarations were sought, including that neither Salvatore nor Kilton Grange were in breach of the deed of settlement. An order was sought that Ms Kobor pay the costs of the application and indemnify the applicants for their costs on an indemnity basis.

14 The supporting affidavit sworn by Salvatore described the will and the proceedings leading to the deed of settlement. Difficulties in obtaining subdivision of the Sunbury land were outlined. In short, the subdivision was approved subject to satisfaction of planning permit conditions which Kilton Grange was unable to meet in the absence of funds. It was said that Ms Kobor had refused to contribute to the necessary costs and neither Kilton Grange nor Salvatore and Maria Snr were in a position to pay the full amount required. Moreover, the trust's financial position had prevented it from meeting various liabilities. Salvatore and Maria Snr had paid amounts on behalf of Kilton Grange, the trust and the estate. Negotiations had been unsuccessful and Salvatore had received no response since April 2013 in relation to proposals for dealing with the costs and expenses incurred by Salvatore and Maria Snr in relation to the estate, and as to the liabilities of the trust and Kilton Grange.

15 The payments said to have been made by Salvatore and Maria Snr on behalf of Kilton Grange, the trust and the estate were set out in a table. That table was updated by an affidavit of the applicants' solicitor sworn on 10 April 2015. It described funeral costs said to be payable by the estate in the sum of $56 496.95, subdivision costs of $3300, land tax of $29 585.35 in respect of property held by the trust and the estate, and legal costs of Kilton Grange to 28 February 2015 totalling $225 848.80. Reference was also made to some loans which it is not necessary to describe.

16 By the proposal described in Salvatore's affidavit, the applicants proposed that the Sunbury property be sold without subdivision and the proceeds be distributed as to 4/7 to Ms Kobor and 3/7 to the Di Benedetto children. It was proposed that agent's fees and legal costs be deducted, along with costs in relation to the subdivision incurred by Salvatore, Maria Snr and Ms Kobor. It was further proposed that there be deducted from Ms Kobor's 4/7 share of the proceeds a series of amounts including $6600 to be paid to Maria Snr, $2400 to Joseph, and funeral costs, land tax in relation to the trust and the estate and legal costs of Kilton Grange since the settlement, all to be reimbursed to Salvatore and Maria Snr. Salvatore stated that he considered that the entitlement of Joseph, Ginetta and Maria Jnr under the will should not be diminished to repay amounts owing to himself and Maria Snr in circumstances where their contributions had maintained and preserved the assets and solvency of the trust since Luigi's death.

17 Discussions ensued, and several directions hearings were adjourned until, by further amended summons on originating motion dated 13 May 2015, the applicants sought various orders including orders permitting the sale of the Sunbury property and providing for the distribution of the sale proceeds. The summons also sought authorisation to make the specified payments to Maria Snr and Joseph, and orders as to the reimbursement of Kilton Grange, Salvatore and Maria Snr for subdivision costs and other costs, disbursements and expenses from the assets and sale proceeds of the estate and the trust. Reflecting the originating motion, the summons sought an order that the costs of the proceeding be borne by Ms Kobor and that she indemnify each of the applicants in such proportions as the Court deemed fit, such costs to be taxed on an indemnity basis.

18 The case was heard on 11 August 2015 and the judge delivered reasons on 7 September 2015.[2] She stated that no orders needed to be made in respect of the sale of the Sunbury property, given that the parties had already agreed upon a sale mechanism.[3] She upheld Ms Kobor's submission that the expenses associated with the subdivision should be paid or reimbursed from the proceeds of sale in accordance with the agreed proportionate interests of the parties.[4] In respect of the payments to Maria Snr and Joseph, the judge pointed out that Ms Kobor had conceded that they were entitled to reimbursement under the deed of settlement.[5] As to the remaining disbursements, including the funeral expenses as well as accounting costs and (undetermined) tax liabilities of the estate, the judge accepted Ms Kobor's submission that cls 4 and 5 of the settlement deed constituted mutual releases by the parties of any outstanding claims, such that Salvatore was not entitled to recover those sums.[6]

19 The trial judge directed the parties to file and serve proposed orders giving effect to her reasons and for further directions in relation to any other issues that remained live.

20 The parties could not reach agreement as to the appropriate orders. Ms Kobor relevantly sought orders requiring Salvatore to transfer the shares in Kilton Grange to her and to appoint her as a director of Kilton Grange, and personally to pay her, the trustee's and the executor's costs of and incidental to the proceeding. The applicants' proposed orders did not contain any order relating to the shareholding and directorship of Kilton Grange. They sought an adjournment of the question of costs, on the basis that the costs of the proceeding could not realistically be dealt with separately from the costs of Salvatore acting as executor and as director of Kilton Grange. It was submitted that the bulk of the costs related to the management of the various properties.

21 The judge made orders requiring the filing of submissions in relation to costs and adjourning the proceeding to 9 December 2015.

22 The applicants provided an 'updated' outline of submissions which elaborated on the principles governing the payment of legal costs from trust assets. They submitted that Salvatore was entitled to reimbursement from the estate for costs not unreasonably incurred in its administration, and that Kilton Grange was similarly entitled in respect of the assets of the trust. The proceeding had been properly brought because the administration of the estate and the trust could not be completed by agreement. In respect of the estate, distribution had already occurred and the executor was entitled to call upon the distributed assets to satisfy his indemnity; the relevant asset was the Portland property distributed to Ms Kobor as part of the residue. In respect of the trust, costs would ordinarily be payable from saleable assets; the Dromana properties were more readily saleable. However, consistent with the tenor of the deed of settlement, costs should lie where they fall, meaning that they would be liabilities carried with the transfer of shares in Kilton Grange to Ms Kobor.

23 In response, Ms Kobor submitted that the real dispute had always been about from which portion of the proceeds of sale of the Sunbury property the deductions should be made. The applicants had sought that they be taken from Ms Kobor's 4/7 entitlement, in accordance with Salvatore's proposal. The proceeding had been unnecessary in so far as it sought an order for sale of the Sunbury property. The only reason for raising the costs of subdivision had been to seek payment from Ms Kobor's share alone, as to which the applicants had failed. Nor had there been any dispute that the repayments of $6600 and $2400 to Maria Snr and Joseph were required. The Court had upheld Ms Kobor's argument that the settlement deed had released her from liability for funeral, taxation and accounting costs. The fact that the applicants had sought from the outset to have their legal costs paid personally by Ms Kobor strongly suggested that the main purpose of the proceeding was to seek payment of those costs. Finally, Ms Kobor sought orders that Salvatore pay not only her costs but also those of both applicants - namely, Salvatore in his capacity as executor and Kilton Grange. Ms Kobor submitted that otherwise Salvatore may seek to pursue recovery of any amounts outlaid from Kilton Grange (which the deed of settlement provided for Ms Kobor to control). In essence, the dispute had always been one between individuals representing different sides of the family, and Salvatore should bear the costs of the failed proceeding.

24 The applicants filed written submissions in reply. They pointed to the costs of administering the estate and the trust over five years, which Salvatore had largely funded. As director of Kilton Grange, he had been preserving and managing the trust assets which would ultimately be controlled by Ms Kobor. The expenses should 'follow' the assets. Ms Kobor had filed no evidence in the proceeding and had only raised the release regarding estate expenses by way of submission before trial. Salvatore's personal interests were said to be 'entwined' with estate or trust interests only 'to a limited degree'.

25 In draft orders dated 9 December 2015, Ms Kobor proposed that the Sunbury land be sold and that various expenses, including Kilton Grange's legal costs in relation to the subdivision and sale, but excluding its legal costs of the proceeding and of the settled proceedings (or any issues arising therefrom), be deducted from the proceeds before distribution. The orders proposed that the agreed amounts of $6600 and $2400 be deducted from Ms Kobor's share of the proceeds. Draft order 3 required Salvatore to transfer his shares in Kilton Grange to Ms Kobor, appoint her as a director and resign as a director, by 23 December 2015. By further draft orders, the applicants were to provide Ms Kobor with copies of bills of legal costs and disbursements relating to amounts that they sought to be paid out of the proceeds of sale of the Sunbury property or by Ms Kobor, and an itemisation describing the basis upon which the amounts were calculated and identifying the nature and purpose of the work. Ms Kobor finally sought adjournment of the application to a directions hearing on 4 March 2016 following provision of that material.

26 Following the exchange of submissions, the judge heard the parties on 9 December 2015. At the hearing, the parties indicated that they had not been able to reach agreement on the form of orders. The judge indicated that Ms Kobor had substantially succeeded in the proceeding, such that costs would usually follow the event. Counsel for the applicants sought to direct the judge to the history of the proceeding and its bearing on the question of costs. The judge stated that she was not going to review all of the correspondence between the parties and would, instead, confine herself to the documentation referred to in the parties' written submissions. However, the applicants should provide bills and itemisations to Ms Kobor pending a further directions hearing. The judge raised the question whether the shares in Kilton Grange had been transferred to Ms Kobor as contemplated in the orders previously exchanged, and indicated a view that Salvatore should be replaced as appointor under the trust deed. She sought submissions on this issue. However, no orders were made in that regard. The judge reserved the costs of the hearing and adjourned the matter for directions on 4 March 2016.

27 On 11 December 2015, Ms Kobor emailed revised draft orders to the judge's associate. The draft added a proposed order 4 that, if Ms Kobor exercised her power as director to appoint an appointor of the trust, then Salvatore was permanently restrained from ever exercising any power of appointment he may otherwise have had under the trust deed.

28 On 18 December 2015, counsel for the applicants informed the Court that alterations to the proposed orders had been put to Ms Kobor. On 25 January 2016, Ms Kobor's solicitors informed the judge's associate that agreement could not be reached and asked that the matter be set down for directions.

29 On 1 February 2016, the associate asked the parties to file proposed orders for the judge to consider on the papers. Ms Kobor relied on her earlier form of order. On 1 March 2016, the applicants provided their proposed form of order, together with submissions on Ms Kobor's proposed orders. Among other things, the applicants sought to make explicit that the legal costs paid on behalf of Kilton Grange by Salvatore and his wife were expenses to be borne by the proceeds of sale of the Sunbury property and sought an order that the legal costs of Kilton Grange in respect of the administration of the trust and the estate, along with its costs in respect of the proceeding and of the earlier, settled proceedings (or any issues arising therefrom), be paid from the assets of the estate and the trust as the Court should determine. It was submitted that it was not a simple 'costs follow the event' case. The determination of costs involved questions relating to the administration of the trust and the estate as well as the proceeding itself. The Court needed to be taken through the actual work done to determine what costs should be taken from the proceeds of sale and decide the question of costs generally.

30 The applicants resisted the proposed order that Salvatore resign as a director of Kilton Grange and sought to substitute instead an order that Ms Kobor be restrained from removing him as director pending payment of all moneys owing to Salvatore, Maria Snr and the beneficiaries under the deed of settlement. The applicants submitted that there had been no application for a change in directorship or any shift in control of Kilton Grange from Salvatore to Ms Kobor, and the Court lacked power or justification for such an order. However, the applicants accepted that an order should be made restraining Salvatore from exercising the power of appointment, irrespective of whether the power of appointment was further exercised.

31 The applicants also sought an order restraining Kilton Grange from encumbering or disposing of its assets pending the payment of all moneys owing to Salvatore, Maria Snr and the beneficiaries under the deed of settlement.

32 On 15 March 2016, the associate emailed the parties advising that the judge would make the orders sought by Ms Kobor unless the parties had anything to add. It is necessary to set out relevant parts of that email:

Her Honour has considered both the applicants' and the respondent's proposed form of orders as well as the applicants' observations about the proposed orders. Her Honour is of the view that the respondent's proposed orders more accurately reflect the orders her Honour made on 9 December 2015 following judgment.[7]

With respect to orders 3 and 4, her Honour refers the parties to paragraph [27] of the judgment where the Court found that although the settlement agreement provided that the applicant's interest in Kilton Grange be transferred to the respondent, this had not yet happened. In the circumstances, if the first applicant remained director of Kilton Grange, all issues in the dispute would not be finalised.

In light of this, the respondent's proposed orders 3 and 4 accurately reflect the Court's findings in respect of the agreement reached as between the parties. Notwithstanding this, the time for compliance with these orders has passed. Her Honour would be content to extend these dates to provide that the first applicant do the things necessary to transfer ownership of the second applicant to the respondent and resign as director by 25 March 2016.

With respect to the costs of the proceeding, I note that her Honour made orders on 16 October 2015 that required the applicants to provide an outline of submissions as to costs by 23 October 2015 and the respondent to provide the same by 6 November 2015. The hearing of these issues was set down for 9 December 2015 and, at that hearing, her Honour requested that each of the parties provide a minute of order to consider although the proceeding was adjourned to 4 March 2016 so her Honour could ensure that the proceeding has been finalised. The applicants did not provide a minute of order until 1 March 2016.

The respondent seeks orders that the first applicant pay the respondent's costs of and incidental to the proceeding and pay all of the costs of both applicants of and incidental to the proceeding and otherwise the proceeding be dismissed.

In the circumstances outlined above, particularly where the proceeding has been set down on three separate occasions to deal with the issue of the costs, her Honour sees no reason for not making the orders sought by the respondent. Her Honour is of the view that the applicants have been given more than sufficient time to make submissions as to costs and that this proceeding should be finalised forthwith.

33 Senior counsel for the applicants responded on the same date, stating, inter alia, that the judge was not in a position to make any orders as to costs. The bills had been provided as required, but agreement could not be reached and the matter had not yet been argued. Some of the costs related to the administration of the estate and the company, some to the proceeding and some to both. Those costs relating to the proceeding needed to be analysed to determine to what extent, if any, the conduct of the proceeding was 'inter partes' or a 'trustee' matter. As to the transfer of shares and the directorship, senior counsel noted that the deed of settlement had provided for the shares to be transferred after the contemplated subdivision. She observed that the Sunbury property had not yet been sold, and that further directions may be required. Kilton Grange should be restrained from disposing of assets lest its trustee's lien for the purpose of meeting its liabilities be rendered futile.

34 On 16 March 2016, the associate responded stating that the judge would consider any further written submission as to costs filed by 24 March 2016. The associate also again referred senior counsel for the applicants to 'the judgment' in respect of the issues as to transfer of the shares in Kilton Grange and the directorship, as well as the proposed restraint on disposal of the proceeds of the Sunbury land.

35 On 19 March 2016, the Sunbury property was sold at auction.

36 Ms Kobor relied on her initial submissions filed in advance of the 9 December hearing, while the applicants filed further submissions on 24 March 2016. They submitted that the judgment of 7 September 2015 had not dealt with the transfer of shares and the directorship, or a restraint on disposal of sale proceeds and other assets of Kilton Grange. As to costs, the applicants elaborated on their earlier submissions by setting out categories of costs that had been incurred in relation to the estate and the trust. It was submitted that the costs of dealing with estate assets and litigation should be borne by Ms Kobor as residuary beneficiary. These costs included costs incurred in dealing with administrative matters including taxation, borrowing and local government matters, as well as contentious matters relating to the funding of ongoing expenses, in which Salvatore was said to have been acting in a representative capacity. It was submitted that the determination of costs should be referred to the Costs Court or to an assessor. The costs of dealing with trust assets ought to have been borne by Kilton Grange and Salvatore should be indemnified by Kilton Grange for such costs as he had met. It was necessary to carry out a costs assessment in order to ascertain to what extent costs had been reasonably incurred on behalf of the estate and the trust. Without examining the course of correspondence, the Court could not decide whether, in acting in his representative capacity, Salvatore was acting reasonably.

37 On 2 May 2016, the associate emailed the parties stating that the judge would make the orders proposed by Ms Kobor. It is again necessary to set out parts of that email:

In my email dated 15 March 2016 to the practitioners, I advised that her Honour's view was that the respondent's orders more accurately reflected the orders made on 9 December 2015.[8] In respect of the costs of the proceeding, I referred to the fact that the proceeding had been set down on three occasions to deal with the issue of costs and that her Honour would make the orders sought by the respondent, subject to any further submissions by the parties.

Counsel for the applicants responded to my email with further written submissions. These further issues related again to the transfer of shares and the directorship in respect of the second applicant, the restraint upon disposal of the proceeds of the sale of the Sunbury property and the costs of the proceeding. In respect of the costs of the proceeding, counsel indicated a different view as to the timing of the hearing of the costs application and, on the substantive issues dealing with the costs, counsel considered that the issues had not been properly argued and that further work was required to be undertaken before a costs order could be made by her Honour.

With regard to the transfer of shares and the directorship in respect of the second applicant and the restraint upon disposal of the proceeds of sale of the Sunbury property, in my emails dated 15 and 16 March 2016, I referred counsel to the relevant paragraphs of the judgment dealing with these two points. Accordingly, her Honour's view is that the orders sought by the respondent in regard to these matters was the appropriate order to be made.

Counsel for the applicants forwarded further submissions on 24 March 2016. In those submissions, counsel repeated her earlier submissions on the first two points raised in her written submission dated 1 and 15 March 2016. In respect of the costs of the proceeding, counsel submitted that an examination of the work done was required so as to determine what are the proper costs of the proceeding, rather than be 'lumped under one approach'. It was submitted that the examination should consider whether the work was undertaken for administration purposes, litigation purposes 'and the like', dealing with contentious issues in the administration or dealing with matters of personal interests [sic] of the first applicant.

Her Honour has considered these further submissions. Her Honour's view is that there is no basis for the costs to be considered in the manner submitted by the applicants. The Court is dealing with the costs of the proceeding, not a minute examination that requires a categorisation of the costs incurred by the applicants. The applicants' orders for costs fail to recognise the fact that the disputes between the parties arising from the deceased's death were resolved by the deed of settlement dated 21 December 2010 [sic] and that the applicants' litigation arose from their disputes arising from the deed of settlement. Effectively this proceeding was adversarial involving two sides of the deceased's family. In the relief sought by the applicants, in both the initial and amended proceeding, the relief sought by them was, in some cases, never in contention and should not have been sought. Of the issues that were in contention, the respondent was the successful party. Her Honour's view is that the costs of the proceeding should follow the event and will make the costs orders as proposed by the respondent referred to above, with such costs to be assessed on the standard basis.

39 Order 1 provides for the priority of the application of the proceeds of sale from the Sunbury property. It relevantly provides:

1. On any sale of the [Sunbury property] the gross proceeds of sale, once received by the solicitor jointly appointed by the parties for the sale of the property ('Independent Solicitor'), be distributed by the Independent Solicitor in the following order and amounts:

(g) all proper, reasonable and necessary legal costs incurred by [Kilton Grange] in relation to the attempted subdivision of the Sunbury property and the sale of the Sunbury property, but specifically excluding:

(i) any legal costs of [Kilton Grange] in relation to the conduct of the legal proceedings being the subject matter of the 2010 Deed of Settlement (or any issues arising therefrom); and

(ii) any legal costs of [Kilton Grange] in relation to the conduct of the proceeding -

The surplus after deductions was to be paid as to 1/7 to each of Joseph, Ginetta and Maria Jnr and as to 4/7 to Ms Kobor (subject to deduction of $6600 to be paid to Maria Snr and $2400 to Joseph).

40 Order 5 provides that Salvatore must personally pay the respondent's costs of and incidental to the proceeding and the costs of both applicants (Salvatore in his capacity as executor and Kilton Grange) on a standard basis.

41 Orders 3 and 4 provide for Salvatore's removal from Kilton Grange. Under order 3, he was required within seven days to transfer all shares in Kilton Grange to Ms Kobor, to appoint her as a director and to resign his own directorship. By order 4, he was permanently restrained from exercising any power of appointment under the trust deed after such time as Ms Kobor should herself hold a power of appointment.

42 The sale of the Sunbury property settled on 17 June 2016. The proceeds are held in an interest-bearing account by an independent solicitor.

43 The proposed grounds of appeal allege errors of law in respect of the costs order against Salvatore (order 5) and in excluding certain of Kilton Grange's legal costs from the payment out of the proceeds of sale of the Sunbury property (aspects of order 1(g)[9]). It alleges errors in the making of the orders giving control of Kilton Grange to Ms Kobor (order 3) and the order restraining Salvatore from exercising any power of appointment under the trust deed (order 4). It finally alleges a failure to provide adequate reasons in respect of all of those orders, on the basis that the emails from the associate did not constitute reasons of the Court or, to the extent that they did, because they were legally inadequate.

44 The application purports to be made by two applicants, being Salvatore as the first applicant and Salvatore 'in his capacity as executor and trustee of the will and estate' of Luigi as the second. In that regard, the argument is advanced that Salvatore in his personal capacity was not a party to the proceeding below, and that the order for costs that was made against him was in the nature of an order against a non-party. For the reasons that follow, the submission should be rejected. But in any event, the fact that Salvatore has interests in different capacities does not justify treating him as if he were two different legal persons for the purposes of seeking leave to appeal. It is therefore convenient to refer to Salvatore as 'the applicant' for leave to appeal.

45 The applicant submits that the commencement of the proceeding was entirely proper. Kilton Grange was unable to comply with the deed's requirement to subdivide the Sunbury property because Ms Kobor refused to contribute to the associated costs. As such, Kilton Grange did not have the financial resources to pay itself, nor could Salvatore and Maria Snr lend those funds to Kilton Grange. Nor could Salvatore transfer the shares in Kilton Grange to Ms Kobor because under the deed of settlement that could only occur once the Sunbury property was subdivided. Kilton Grange could not sell the Sunbury property on the basis of the parties' in principle agreement because neither Ms Kobor nor her solicitors were responding to the applicants' solicitor's correspondence. It was especially desirable for the advice of the Court to be obtained, given that Salvatore was seeking reimbursement personally for amounts spent in the administration of the trust and the estate, and to dispose of trust assets contrary to the strict terms of the settlement deed.

46 In light of this background, there was nothing improper in the decision to commence the proceeding and the proceeding was not properly characterised as adversarial inter partes litigation. The applicants, as trustee and executor respectively, could not proceed to finalise the sale of the Sunbury property and resolve the reimbursement issues without the assistance of the Court.

47 In relation to order 1(g), the applicant submits that the effect of the order is to prevent indemnification of Kilton Grange out of the proceeds of sale of the Sunbury property. The test for whether the trustee's right to indemnification ought to be displaced - whether the trustee acted improperly in incurring the relevant liabilities[10] - was not considered by the judge, nor was it satisfied. Rather, the trial judge approached the issue on the basis that some of the relief sought by the applicants in the proceeding before her was not in contention and should never have been sought, while in respect of the rest of the relief sought Ms Kobor was successful, such that costs should follow the event. These conclusions fell short of a finding that the proceeding was improperly commenced. It was also proper to seek orders regarding estate liabilities, despite the releases in the settlement deed, because the settlement deed had failed.

48 The applicant contends that order 5 is a non-party costs order, as Salvatore was not a party to the proceeding below in his personal capacity. The judge was therefore required to apply the principles governing non-party costs orders.[11] She had not done so, nor had she, via her associate's emails, stated any findings of fact capable of supporting the making of such an order.

49 In any event, order 1(g) and order 5 went beyond orders that costs follow the event by ordering Salvatore to pay the costs of Kilton Grange as second applicant, depriving Salvatore of his right of indemnity in respect of the legal costs of the proceeding, and also by restricting Salvatore's right of indemnity against Kilton Grange in respect of legal costs associated with any matter arising from the settlement of the earlier proceedings.

50 In light of the above, the finding that Ms Kobor succeeded and that costs followed the event, even if sustained, should have meant no more than that Ms Kobor's costs of the proceeding should be paid by Kilton Grange out of the trust fund.

51 The respondents (Kilton Grange - now controlled by Ms Kobor - and Ms Kobor herself) contend that the proceeding was brought in order to enable Salvatore to recover amounts said to be due from the estate, and it was sought to secure and recover those amounts solely from Ms Kobor's share of the proceeds of sale of the Sunbury property. That purpose had not been achieved. There was no need to approach the Court because the parties had agreed in principle that the Sunbury property should be sold. The applicant only had to wait for that to happen in order to be reimbursed. Instead, he commenced a proceeding to try to ensure that Ms Kobor was ultimately responsible for those expenses.

52 Moreover, the claimed legal expenses were all attributed to Kilton Grange and the applicant had failed to show that they were not really expenses of the estate (to which the releases applied). There had ultimately been agreement as to the reimbursement of all trust expenses except the legal costs.

53 The respondents further contend that order 1(g) affects Kilton Grange's entitlements, not those of the applicant. The applicant therefore is without standing to seek leave to appeal against that order. In any event, order 1(g) does not deny recourse to the right of indemnity; it only provides that the right is not secured by the proceeds of sale. Any effect on the indemnity itself is confined to the legal costs of the proceeding, and derives from order 5.

54 As to order 5, the respondents submit that the order was not a nonparty costs order. Salvatore was a party to the proceeding and was represented. The fact that he was a party in his capacity as executor and trustee of the estate could not change that circumstance. Further, the respondents contend that in seeking an order that Kilton Grange's liabilities be paid out of Ms Kobor's share of the proceeds of sale of the Sunbury property, Salvatore was effectively acting for the benefit of the creditors of Kilton Grange rather than for the benefit of the trust. In that sense, Salvatore was a party in his own right to the proceeding before the trial judge, rather than merely in his capacity as executor and trustee of Luigi's estate.

The Kilton Grange order and the appointment order (proposed ground 2)

55 The applicant contends that there was no basis for the judge to make orders 3 and 4. Such orders had not been mentioned in the originating motion, which only sought advice, directions and declaratory relief under O 54 and s 63 of the Trustee Act 1958. Although the applicant had included orders on the subject in his proposed orders, he did not consent to the orders that were made. The Court did not have power simply to make such orders as it thought fair and reasonable or in order to finalise the dispute.

56 The applicant submits that, while the deed of settlement contemplated the transfer of shares to Ms Kobor, it provided that that would only occur once the Sunbury property had been subdivided and the in specie lot distribution had occurred. There was no other obligation to compel the transfer of shares, nor had Ms Kobor commenced any proceeding seeking such relief.

57 The respondents submit that it was the applicants in the proceeding below who proposed orders requiring Salvatore to appoint Ms Kobor as a director of Kilton Grange and to restrain Salvatore from exercising his power of appointment under the trust deed. Moreover, the summons on originating motion explicitly raised for determination the question whether (and when) Salvatore was obligated to transfer the shares in Kilton Grange to the second respondent. The control of Kilton Grange had always been an issue. The matter having been raised, the Court had power to make the orders by virtue of rr 1.14 and 59.01 of the Rules. In those circumstances, no complaint could be made about orders 3 and 4.

58 As to the sufficiency of the judge's reasons, the applicant contends that the associate's emails do not constitute reasons of the Court and that the failure to give reasons is an error of law vitiating the judge's orders. He submits that, even if the emails do constitute reasons of the Court, they do not adequately expose the trial judge's reasoning and this failure involves an error of law in any event.[12] In respect of orders 3 and 4, the judgment states that 'although provision is made in the settlement deed for [Ms Kobor]'s interest in Kilton Grange to be transferred to her, this had not yet occurred'.[13] The relevant paragraph was referred to in the judge's associate's emails of 15 and 16 March 2016.[14] However, it says nothing as to questions of power or justification for making the orders. No other basis was given for making orders 3 and 4.

59 The respondents submit that the associate's emails provided sufficient reasons for the orders in dispute, in circumstances where the orders were giving effect to findings made earlier for which reasons had been published, and there had been successive written submissions on these issues. The fact that the reasons were contained only in an email of the associate is said to be a mere technical deficiency to which no legal consequences attach.

60 Commencing with the orders made as to costs, it is convenient to approach the proposed appeal on the initial assumption that the associate's emails contained the reasons of the Court for the making of those orders and that those reasons were legally sufficient. On that assumption, the applicant seeks to challenge orders made by the trial judge as to costs, in the exercise of her discretion. The applicant therefore needs to establish error of the kind described in House v The King:[15]

The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.

61 An appellate court should be particularly restrained in disturbing the orders of a trial judge in judicial advice proceedings, having regard to these limited circumstances.[16]

62 It may be said at the outset that the applicant's contention that the judge erred by failure to apply the principles governing costs orders against non-parties is misconceived and must fail. The applicant was not a nonparty to the proceeding. The fact that he was named only in his capacity as executor and trustee of the estate did not insulate him from being affected in the proceeding in other capacities. He had expended the moneys the subject of much of the proceeding in his personal capacity, albeit that he sought their recovery in his capacity as executor and trustee of the estate and indirectly, through Kilton Grange. The question of his entitlement or liability to costs, as against other parties and the trust and estate, was alive from the moment that the proceeding commenced.

63 The general rule is that a trustee is justified in seeking advice and directions from the Court, and will be indemnified out of the trust fund for his or her costs incurred in doing so.[17] However, being an instance of the trustee's wider right of indemnity against the trust estate in respect of costs, expenses and liabilities, the right of indemnity is confined to those legal costs that are 'properly' incurred. This shorthand articulation of the test is open to the criticism that it merely expresses a conclusion and supplies no governing criterion,[18] but it is supported by authority of long standing[19] and was not questioned in the present matter.

64 The right of indemnity belongs to the trustee subject to circumstances being present which suffice to deny the right. As such, the position is more accurately stated as being that the trustee is entitled to indemnity for costs, expenses and liabilities which are not shown to have been improperly incurred.[20] Instances where that test has been met include where the trustee has acted beyond power, in bad faith or without the care and diligence of a person of ordinary prudence.[21] Similarly, a trustee is not indemnified where a liability is incurred as a result of conduct on the part of the trustee in breach of his or her duty to execute the trust with reasonable diligence and care.[22] On the other hand, a mere error of judgment may not suffice to show improper conduct.[23] The standard of care is that 'which might be expected of a trustee as objectively but not over-zealously enforced'.[24] What is 'proper' or 'improper' for this purpose is to be answered by reference to the duty with which the trustee was required to comply or the power the trustee was intending to exercise.[25]

65 Where a trustee commences a proceeding for his or her personal benefit, the rule that costs ordinarily follow the event applies, and if the action fails the onus lies on the trustee to show that the costs of the proceeding were not improperly incurred.[26] For example, the conduct of the proceeding, albeit that it concerns a personal benefit of the trustee, may have been an incident of the proper administration of the trust.[27]

66 The questions whether the proceeding was adversarial in nature or whether the trustee's personal interests were at stake are therefore not determinative of the matter of costs. In either case, the court must also consider whether the costs incurred by the trustee were properly incurred.

67 The present proceeding was in form an application for advice and directions, attracting the above principles. However, the judge characterised it as being in substance an adversarial proceeding, upon which Ms Kobor had substantially succeeded. The judge stated further, albeit through her associate, that some of the relief had never been in contention and should not have been sought. Plainly the proceeding was conducted in an adversarial manner. Apart from anything else, the parties sought costs orders against each other personally. But apart from the reference to relief that should not have been sought, the judge did not make any finding as to whether or not the proceeding was improperly brought or conducted by the applicant. Rather, her view was that costs should follow the event.

68 The finding that the proceeding was adversarial, involving two sides of the Di Benedetto family, did not suffice to warrant an order that costs should follow the event. That disposition was appropriate only if the applicant failed to demonstrate that the proceeding was properly commenced and conducted. The applicant had contended that the proceedings were necessary and the costs reasonably incurred. He had submitted that the question was not whether the applicant '"won or lost" the litigation but whether, in acting in his representative capacity, he was acting not unreasonably'. That submission was correct. The applicant submitted that the answer to this question depended on examining the relevant correspondence.

69 The associate's emails do not indicate in terms whether the judge applied the above test. Five reasons are given for the costs orders. First, the judge found 'no basis' for proceeding by way of analysis of the correspondence. Implicitly, then, the judge proceeded by way of characterising the proceeding without descending into the detail of the transactions. This course was properly open to the judge.

70 Secondly, the judge said that the applicant's claim for costs failed to recognise that the disputes between the parties arose from the deed of settlement rather than from the estate. This appears to have been a reference to the releases in respect of claims against the estate. It does not deny, however, that there were disputes as to the administration of the trust, and that the proceeding had involved claims against the estate (albeit unsuccessful ones).

71 Next, the judge stated that the litigation was effectively adversarial, between the two sides of the family. For the reasons already stated, this did not suffice of itself to justify a costs order against the applicant.

72 Fourthly, the judge said that some relief was not in contention and should not have been sought. This fell short of a finding that the whole proceeding should not have been commenced, or that it had been improperly conducted. In circumstances where the judge had declined to evaluate the proceeding by reference to the correspondence, in order to determine the extent to which it was properly conducted, her finding as to 'some' of the relief sought cannot be ascribed to the proceeding as a whole.

73 Finally, the judge stated that, of the issues that were in contention, Ms Kobor was the successful party. Again, this finding of itself established only the prima facie position that the applicant should pay her costs unless the proceeding had been properly commenced and conducted as an incident of the administration of the trust.

74 Making appropriate allowance for the fact that reasons for costs may be relatively brief, it does not appear that the judge made any finding as to whether the applicant brought or conducted the proceeding for a proper purpose in the administration of the trust. If not, this would suffice to vitiate the decision and reopen the costs discretion for determination by this court.

75 In the end, it is not necessary to decide the case on this basis because this is a case where the 'residual' ground in House v The King applies. In other words, while it may not clearly appear that the judge made a specific error of law in making her costs orders, there are sufficient facts before the Court to show that the discretion miscarried.

76 The applicant, as director of Kilton Grange, was faced with a situation in which the trust lacked the financial resources to maintain its real property assets and was constrained in disposing of those assets by the terms of the settlement deed. Kilton Grange was bound, as trustee, by that settlement deed, to undertake a subdivision of property which had proved practically impossible to achieve. In the meantime, the applicant had expended considerable sums on behalf of the trust, including in attempts to pursue a solution satisfactory to all parties. By the time the proceeding was commenced, it was nearly a year since Ms Kobor had responded to correspondence directed to that end. There was no solution in sight. It was perfectly proper for Kilton Grange to approach the court for advice and directions in that situation.

77 In that context, the applicant also sought advice and directions regarding estate matters. He had a legitimate interest in knowing from what source, if any, his expenditure on behalf of the estate should be recouped pursuant to his right of indemnity against the estate. It is true that the judge ultimately held that such rights had been released through the deed of settlement. However, the deed of settlement was, as the judge rightly observed, the immediate source of the parties' difficulties. It was not selfevident that the deed of settlement was effective to release the estate from liabilities in circumstances where it was incapable of being performed in important respects. In any event, by virtue of the conditional nature of the residuary bequest, the administration of the estate and the trust were inextricably linked. There was good sense in raising all issues relating to that administration for advice in the same proceeding.

78 Moreover, although the proposal put forward for the Court's advice involve Ms Kobor's share of the proceeds of the Sunbury property bearing the bulk of the payments in issue, this was not obviously unfair, so as to indicate a partisan or improper approach by the executor and trustee. There were significant amounts paid by Salvatore and his wife, for which they had arguable claims for reimbursement from the trust and the estate respectively. Subject to the uncertain requirement that an interest in the Sunbury property be given to the Di Benedetto children, the residue of the estate and the balance of the trust were held substantially for the benefit of Ms Kobor.

79 Unusually, the applicants sought indemnity costs against Ms Kobor as the respondent to the proceeding. That is indicative of adversarial litigation. But as already explained, it is not necessarily indicative of an improper purpose. In circumstances where Ms Kobor had not been responsive to recent correspondence directed to avoiding proceedings, it is understandable that the applicants sought to have her held responsible for the cost to the trust and estate arising when proceedings became necessary.

80 For these reasons, the commencement of the proceeding and its conduct were not improper and it was not appropriate that the applicant be ordered to pay the costs of the other parties personally, without recourse to the trust and Kilton Grange's right of indemnity. Order 5 must be set aside. It will be necessary to return later to the question what orders should be made in its place.

81 In so far as aspects of order 1(g) were impugned, Ms Kobor submitted that the applicant lacked standing because the orders confined Kilton Grange's right to indemnity against trust assets and it had not sought to appeal. However, the orders had the effect of preventing the applicant from being reimbursed by Kilton Grange out of the proceeds of sale of the Sunbury property for his proper expenditure on behalf of the trust. As such, he has standing to seek to have the orders varied so as to enable that reimbursement to take place.

82 But it does not follow from the successful challenge to order 5 that order 1(g) should be varied as the applicant seeks. The impugned parts of order 1(g) were directed at a specific issue, being the availability of the proceeds of sale of the Sunbury property to pay Kilton Grange's legal costs of any issues arising from the settled legal proceedings or its legal costs in relation to the conduct of the current proceeding. Order 1(g) leaves intact the trustee's right of reimbursement in respect of legal costs; it limits only the property to which recourse may be had for satisfying that right.

83 The terms of order 1(g) appear, in relevantly identical terms, in the draft orders provided by both the applicants and Ms Kobor to the trial judge. Senior counsel for the applicant submitted in this Court that there was not consent to the order standing alone, but that it was put forward as part of a 'package' of orders from which it was not severable. Relevantly, the applicants had also sought orders that the legal costs of Kilton Grange, including those the subject of order 1(g), be paid from such assets of the estate and trust as the Court determines.

84 In practical terms, as explained further below, an order to that effect should now be made by this Court, subject only to the qualification that there is no occasion to make orders for payment of Kilton Grange's legal costs of the settled proceedings or the legal costs of any issue arising therefrom (only these last costs being the subject of the impugned aspect of order 1(g)(i)). In the circumstances, the terms of order 1(g) substantially reflect the agreed resolution of the issues concerning the distribution of the proceeds of sale of the Sunbury property, and that order should not now be disturbed.

85 The next issue concerns orders 3 and 4, which provided for the transfer of control of Kilton Grange from the applicant to Ms Kobor. That matter was plainly live in the proceeding. The parties had exchanged draft orders and submissions on the subject. Ms Kobor sought the specific relief which the judge ultimately granted. In the circumstances, it was open to grant that relief notwithstanding that it went beyond the scope of the issues raised in the originating motion and the summons.[28]

86 The applicant submitted that, in so far as the judge ordered that he resign as a director of Kilton Grange and refrain from exercising any power as appointor, the Court lacked power to make those orders. The settlement deed made no provision for those matters and no cause of action had been identified. For example, there was no evidence that the applicant had threatened to misuse the power of appointment, and no suggested right on the part of Ms Kobor to have him resign as a director of Kilton Grange.

87 The order under appeal makes reference to r 1.14(2)(b). By that rule, the Court may exercise any power under the Rules on the application of a party. For the reasons above, the necessary application was made through the provision of draft orders and submissions. Counsel for Ms Kobor submitted that the Court had power to grant the relief under r 1.14(1)(a), which requires the Court in exercising any power under the Rules to 'endeavour to ensure that all questions in the proceeding are effectively, completely, promptly and economically determined'.

88 That submission should be accepted. The Court was exercising its powers under O 54. It was dealing with the administration of a trust and orders were required in order to give effect to the transfer of shares in the corporate trustee as had been agreed, albeit that the occasion for that to happen under the deed of settlement had not arrived, and would never arrive as a result of supervening events. Given the exchange of draft orders and submissions, the questions in the proceeding had widened to include the issue of the directorship of Kilton Grange and the exercise of the applicant's power of appointment.

89 It was the intention of the parties to the settlement deed that, once the in specie distribution of the 3/7 share of the Sunbury property had occurred, Ms Kobor would acquire the shares in Kilton Grange. There was no error in making an order to that effect before the disbursement of proceeds in place of the envisaged in specie distribution, as it could be taken that Kilton Grange would subsequently deal with the proceeds of sale in accordance with the orders. The other orders were directed to achieving the same end of perfecting the transfer of control of Kilton Grange from the applicant to Ms Kobor.

90 However, it follows from the setting aside of the costs order that a consequential change is required to the orders regarding control of Kilton Grange. That control ought not to reside with Ms Kobor until all questions of costs are resolved, because there is still a role for Kilton Grange to play in finalising the costs of the proceeding. That matter is explained further below.

91 In the circumstances, it is not necessary to consider the adequacy of the reasons as contained in the associate's emails. As far as costs are concerned, the order should be set aside even on the assumption that the emails, together with the judge's written reasons, are legally sufficient reasons for decision. Conversely, even if there were not adequate reasons, the orders regarding control of Kilton Grange were appropriate (subject to the consequential order still to be mentioned).

92 However, it is desirable to say something about the course that was taken in this case.

93 The provision of a court's reasons for judgment serves at least four purposes.[29] The reasons enable the parties to see the extent to which their respective arguments have been understood and addressed, and to perceive the basis for the court's decision. The giving of reasons enhances judicial accountability, both in the case itself and more widely. The publication of reasons enables practitioners, legislators and members of the public to ascertain the state of the law and the basis upon which like cases will probably be decided in the future. Finally, reasons enable an appellate court to determine whether the decision was affected by appealable error.

94 The scope of the obligation to give reasons does not arise in this appeal, for the reasons given earlier. It is relevant in this case that the trial judge had already published reasons for her substantive orders. Moreover, reasons for decisions as to costs may often be very brief, especially where little can be said against the usual order in the circumstances. There are also orders, including of a primarily administrative nature, for which reasons may not be required at all, including straightforward timetabling orders and unexceptional costs orders.[30] Here, as the judge recognised, the matter had been fully contested and, although reasons had already been published, supplementary reasons were required in order to explain how the judge had finally disposed of the case.

95 Rule 59.04 provides that, where the Court gives any judgment or makes any order, the reasons for which have been reduced to writing, it shall be sufficient to state the result without reasons, but the written reasons 'shall then and there be published' by delivery to the associate. This rule does not impose a requirement that reasons be provided contemporaneously with the giving of judgment or the making of an order, because it applies only where written reasons have been prepared at that time.[31] Where the interests of justice require it, a court may properly pronounce judgment and give reasons for it later.[32]

96 Equally, a court may indicate to the parties that judgment will be given 'on the papers', without the need for a further oral hearing. Such a course may advance the overarching purpose in the Civil Procedure Act 2010, namely to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute.[33] It is not necessary to explore further the circumstances in which judgment should be delivered in open court, as distinct from 'on the papers'. The issue is about the giving of reasons in either event and how, where reasons are required, they should be provided.

97 At least until the quite recent past, a strict view has been taken as to the manner in which the Court's reasons for decision are to be published. In Esso Australia Pty Ltd v Robertson,[34] this Court deprecated the publication of reasons by email. The trial judge had, through an email from his associate, provided the parties with formal reasons for judgment. The Court made the following observations about this course:

It would have been better if his Honour, finding himself in difficulties, had on 3 November announced that, for reasons to be published thereafter, he made the orders in question (and, if desired, that they should bear a specified date later than that day). More important, however, is the fact that the full reasons were apparently transmitted by e-mail to the parties. It must be clearly understood that the Supreme Court of Victoria, save in certain exceptional and well-known cases, sits in public for the hearing and determination of proceedings. That means that judgment is delivered in open court even if it be by the handing to the Associate of the court's written reasons and even though they may be available on the Internet very soon thereafter. Members of the public are entitled to be present in court to hear judgment being given and to obtain a copy of the reasons.[35] Other instances of the posting or emailing by judges of their written reasons have come to this Court's notice. Tribunals may be authorised to do that, but the practice should be entirely discountenanced for a court. The foregoing observations do not apply to the making of consent directions in busy managed lists. About any such practice we say nothing, though it might be possible for the judge to read out or hand down any such directions in open court.[36]

98 The above passage emphasises the importance of open justice.[37] As mentioned, the advent of the Civil Procedure Act may have lessened the rigours of the requirement that reasons be handed down in open court, or that it be announced in open court that reasons will be published in due course, rather than reasons being provided directly to the parties. It is now not uncommon, in some limited situations, for reasons of the Court to be provided to the parties by prior arrangement and for those reasons then to be able to be located only on the Court file (not being thought of sufficient importance to justify publication on the Internet), without the decision ever having been the subject of an announcement in open court. In practice it was always the case that, even if reasons were given orally in open court, the only effective source of those reasons thereafter was transcript held on the Court file. But whether the reasons are handed down or foreshadowed in open court, or simply provided to the parties and thereafter made available on the Court file (or the Internet), the reasons thereby published must be those of the Court.

99 In part, the orders in the present case addressed the substantive issues that had been the subject of the trial and in respect of which the judge delivered formal reasons following the trial. The orders also dealt with costs. The judge proceeded by having her reasons for making the orders reduced to writing and conveyed to the parties by the associate. As noted above, there is nothing necessarily wrong with a judge's reasons for decision being provided to the parties electronically through the judge's chambers or the court registry. In this case the parties received by email only the associate's account of the judge's reasons, albeit no doubt approved by the judge and, we assume, placed on the Court file and available for public inspection after the emails were sent. The associate's email addressed issues of some complexity, even though principally about costs, which had been contested in open court and subsequent submissions. Caution must be applied in proceeding in this way, because there will be cases where providing reasons in this manner may so substantially fail to achieve the purposes of publishing judicial reasons as to deprive what is provided of that character altogether. In light of our earlier conclusions, it is not necessary to decide whether, as the applicant contended, the present is such a case.

100 The applicant sought orders, first that order 1(g) be varied by deleting the words '(or any issues arising therefrom)' in sub-para (i) and the entirety of sub-para (ii). Those orders deprived Kilton Grange of its right to indemnity in certain respects. For the reasons given, those orders should not be varied.

101 The orders sought in respect of orders 3, 4 and 5 reflected the applicant's argument before the trial judge that further inquiry was required in order to identify the extent of the appropriate indemnities from the trust and the estate. The following order was sought:

Paragraphs 3, 4 and 5 of the Orders be set aside and in lieu thereof, the following orders be made:

(a) subject to further order, in so far as the executor incurred legal costs relating to the administration of the estate, the executor is justified in paying those legal costs out of the assets of the estate and is entitled to indemnity out of the assets of the estate in so far as those costs have been paid by or on behalf of the executor by any other person;

(b) subject to further order, in so far as the trustee incurred legal costs relating to the execution of the trust, the trustee is justified in paying those legal costs out of the assets of the trust and is entitled to indemnity out of the assets of the trust in so far as those costs have been paid by or on behalf of the trustee by any other person;

(c) [Ms Kobor] is entitled to indemnification out of the assets of the trust with respect to the legal costs incurred by her of and incidental to the proceeding below and the trustee is justified in paying those costs out of the assets of the trust;

(d) there be an inquiry as to the identification of those costs referred to in sub-paragraphs (a) and (b) hereof to be conducted by an [associate judge], who is invested with all necessary powers to make such orders as the [associate judge] may deem appropriate, by way of further order, in relation to the costs of the proceeding and the entitlement of the executor and the trustee (as the case may be) to be indemnified out of the assets of the estate and the trust respectively; and

(e) [Ms Kobor] transfer the shares in Kilton Grange Pty Ltd to [the applicant] and resign as a director of Kilton Grange Pty Ltd.

102 It may be seen that paras (a) and (b) of the proposed orders are not confined to the costs of the proceeding. However, it appears that this is the intention, when those paragraphs are read in conjunction with para (d). Moreover, in so far as para (a) seeks reimbursement of costs from the estate beyond those incurred in the proceeding, it is potentially inconsistent with the trial judge's decision regarding the operation of the release in the deed of settlement. For the avoidance of doubt, paras (a) and (b) should be limited, as para (c) is, to the legal costs of and incidental to the proceeding. That is not to say that the trustee and the executor are precluded from paying other legal costs. If there are such other costs, the provision for further order enables that matter to be considered once the facts are known.

103 The question of control of Kilton Grange presents a more difficult issue. The proposed orders reflect the apparent fact that the trial judge's orders for effecting a transfer of control of Kilton Grange have been performed. The applicant seeks to have those orders set aside and orders in their place having the effect of reversing that performance. Presumably this is based on a perception or fear that Ms Kobor might seek to thwart the applicant's recovery of amounts from the trust for the ultimate benefit of the applicant, although as happened below such apprehensions of the parties were not the subject of evidence.

104 Although the orders made by the judge were within power, they were predicated on there being no remaining reason why control of Kilton Grange should not pass to Ms Kobor. The success on appeal of the applicant on the question of costs means that the foundation for the orders has been undermined. Moreover, the fact that the orders have been performed means that, if the situation is left intact, control of Kilton Grange will have passed before all questions of its liability in respect of costs have been determined. It is undesirable that this be so. Accordingly, orders should be made by this Court to reverse that position. Instead of being orders 'in place of' the orders of the trial judge, which were made on a factual basis that no longer exists, new orders should be made by this Court acting upon the facts as they now stand. Since the proceeding will remain on foot pending the determination of remaining issues, it will be for the parties whether any further application is required to transfer control of Kilton Grange back to Ms Kobor once outstanding issues have been resolved.

105 Finally, the applicant sought orders that his costs of the appeal be paid by Ms Kobor, alternatively that those costs, as well as the costs of Ms Kobor as respondent, be paid out of the assets of the trust. Although the applicant pursued the appeal in order to vindicate his right to reimbursement from the trust and the estate, and in that sense advanced a personal claim which Ms Kobor resisted, genuine questions existed as to those issues and it is appropriate that the costs of both parties be paid by the trust from which indemnity will ultimately be sought. No order was sought against the estate. The costs of the hearing to be conducted by an associate judge, and any further issues that may arise, will remain for determination in the Trial Division.

106 In the result, the following orders should be made:

1. The application for leave to appeal is allowed.

3. Paragraphs 3, 4 and 5 of the orders of McMillan J made on 4 May 2016 be set aside and in their place it is ordered:

(a) subject to further order, in so far as the first applicant incurred legal costs of and incidental to the proceeding relating to the administration of the estate, the first applicant is justified in paying those legal costs out of the assets of the estate and is entitled to indemnity out of the assets of the estate in so far as those costs have been paid by or on behalf of the first applicant by any other person;

(b) subject to further order, in so far as the second applicant incurred legal costs of and incidental to the proceeding relating to the execution of the trust, the second applicant is justified in paying those legal costs out of the assets of the trust and is entitled to indemnity out of the assets of the trust in so far as those costs have been paid by or on behalf of the second applicant by any other person;

(c) the second respondent is entitled to indemnification out of the assets of the trust with respect to the legal costs incurred by her of and incidental to the proceeding and the second applicant is justified in paying those costs out of the assets of the trust; and

(d) there be an inquiry as to the identification of those costs referred to in sub-paragraphs (a) and (b) hereof to be conducted by an associate judge, who is invested with all necessary powers to make such orders as the associate judge may deem appropriate, by way of further order, in relation to the costs of the proceeding and the entitlement of each of the applicants to be indemnified out of the assets of the estate and the trust respectively.

4. Within 7 days of this order the second respondent transfer the shares in Kilton Grange Pty Ltd to the appellant and resign as a director of Kilton Grange Pty Ltd.

6. The costs of the appellant and the respondents of and incidental to the appeal be paid out of the assets of the trust.

[1] Since the proceeding was commenced, and by the time the impugned orders were made, the Rules had been replaced by the Supreme Court (General Civil Procedure) Rules 2015. Nothing turns on the change.

[2] Re Di Benedetto; Di Benedetto v Kobor [2015] VSC 472 ('Reasons').

[7] Despite the reference to orders having been made on 9 December 2015, it appears that the only order that was actually made on that day was to reserve the costs of the day and adjourn the directions hearing to 4 March 2016. Otherwise, the judge indicated how she would rule but the making of orders was to await the submissions of the parties as to the form those orders should take.

[9] Specifically, all of order 1(g)(ii) and the words '(or any issues arising therefrom)' in order 1(g)(i).

[10] The applicant relies on National Trustees Executors Agency Co of Australia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268 and Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287.

[11] See Knight v FP Special Assets Ltd (1992) 174 CLR 178; FPM Constructions Pty Ltd v Council of the City of the Blue Mountains [2005] NSWCA 340.

[12] See, eg, Assad v Eliana Construction & Developing Group Ltd [2015] VSCA 53 [33]-[34] (Redlich, Kyrou and McLeish JJA).

[14] See [32], [34] above.

[15] [1936] HCA 40; (1936) 55 CLR 499, 504-5 (Dixon, Evatt and McTiernan JJ).

[16] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66, 125 [190] (Gummow ACJ, Kirby, Hayne and Heydon JJ).

[17] Trustee Act 1958 s 36(2); Rules r 63.26; Australian Incentive Plan Pty Ltd v A-G [No 2] (2012) 44 VR 662, 694 [8] (Nettle JA; Tate JA agreeing), 694 [14]-[15] (Davies AJA).

[18] Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd [2002] NSWCA 26 [8] (Spigelman CJ), [42] (Mason P), [47] (Meagher JA).

[19] Re Beddoe [1893] 1 Ch 547, 558 (Lindley LJ); Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319, 335 (Dixon J); Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287, 303-8 [44]-[53] (Ormiston JA; Batt and Vincent JJA agreeing).

[20] Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287, 308 [53].

[22] Ibid; RWG Management Ltd v Commissioner for Corporate Affairs [1985] VicRp 42; [1985] VR 385, 396 (Brooking J).

[23] Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287, 308 [55], 309 [57].

[25] Ibid 306 [51]. See also M Scott Donald, 'The "Proper" Approach to a Trustee's Right of Indemnity' (2014) 8 Journal of Equity 283 (arguing that the right of indemnity depends upon the trustee observing the trustee's obligations of conduct).

[26] Re Beddoe [1893] 1 Ch 547, 558 (Lindley LJ); Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572, 578-9 (Latham CJ); National Trustees Executors and Agency Co of Australasia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268, 277, 279 (Williams J) ('Barnes').

[27] Barnes [1941] HCA 3; (1941) 64 CLR 268, 279.

The Court may, at any stage of a proceeding, on the application of any party, give such judgment or make such order as the case requires notwithstanding that the judgment or order had not been sought in the originating process or other document of the party in the proceeding.

[29] See Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, 279 (McHugh JA) ('Soulemezis'); Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430, 441 (Meagher JA); Fletcher Construction Australia Ltd v Lines Macfarlane & Marshall Pty Ltd [2001] VSCA 167; (2001) 4 VR 28, 35-6 [18] (Chernov JA; Charles and Vincent JJA agreeing) ('Fletcher Construction').

[30] Capital and Suburban Properties Ltd v Swycher [1976] Ch 319, 325-6 (Buckley LJ); Soulemezis (1987) 10 NSWLR 247, 270 (Mahoney JA), 279 (McHugh JA); Flannery v Halifax Estate Agencies Ltd [1999] EWCA Civ 811; [2000] 1 WLR 377, 381 (Henry LJ for Henry and Laws LJJ and Hidden J).

[31] Fletcher Construction [2001] VSCA 167; (2001) 4 VR 28, 41-2 [33]-[37].

[33] Section 7(1); see also ss 8-9.

[34] [2005] VSCA 138.

[35] Fletcher Constructions [2001] VSCA 167; (2001) 4 VR 28, 41-2 [35].

[36] Esso Australia Pty Ltd v Robertson [2005] VSCA 138 [9] (Warren CJ, Batt and Chernov JJA) (emphasis in original).

[37] See, eg, Wainohu v New South Wales (2011) 243 CLR 181, 215 [58] (French CJ and Kiefel J) (describing open justice as 'an essential incident of the judicial function'); Jason Bosland and Jonathan Gill, 'The Principle of Open Justice and the Judicial Duty To Give Public Reasons' [2014] MelbULawRw 20; (2014) 38 Melbourne University Law Review 482.