Douglas v James

Supreme Court of NSW|2015-07-30|Before: Slattery J, McDougall J

Judgment

This is the Court's third judgment in this litigation. McDougall J first heard these proceedings on 9 March 2015 and gave his principal judgment on 25 March 2015: Douglas v James [2015] NSWSC 299. His Honour then considered issues of costs on the papers and gave judgment on 22 July 2015: Douglas v James (No. 2) [2015] NSWSC 969.
But between McDougall J's principal judgment and his second judgment the plaintiffs filed a motion for an account consequent upon McDougall J's conclusions in the principal judgment. This third judgment deals with that motion. Much of the contest on the motion was settled. The parties are now arguing about issues of costs of the motion, although it has been necessary to consider much of the evidence on the motion to decide the costs issues.
These reasons refer to events, matters and things mostly using the same terminology as McDougall J used in the principal judgment and in the second judgment. His Honour used first names to refer to family members with the same surname.
The plaintiffs' original Notice of Motion was filed on 30 April 2015. The plaintiffs' amended motion was filed on 2 July 2015 at a preliminary directions hearing held before me. The 2 July 2015 amended notice of motion refined the matters in issue. But the issues settled by the time the amended motion came on for hearing before me on 30 July 2015.
The parties to the original proceedings were represented on the hearing of the amended motion. Mr L. Ellison SC appeared for the plaintiffs, the applicants on the amended motion, Zeta Kathleen Douglas and Marea Gilbert. Mr D. Allen of counsel appeared for the first and second defendants, also the first and second respondents to the amended motion, Mr David Anthony James and Ms Janina Kik. Mr R. Harper SC appeared for the third and fourth respondents to the amended motion, Mr Darron Mink and Pinnacle Financial and Investments Services Pty Ltd. Ms M. Cairns of counsel appeared for the fifth respondent, NMMT Limited. The third to fifth respondents to the motion were not parties to the original proceedings.

The Nature of the Principal Proceedings

The matters at issue in the principal proceedings can be no better described than the way they are set out in the introduction to those issues in McDougall J's principal judgment at [1] to [20]. For convenience [1] to [20] of his Honour's judgment are reproduced below: "[1] HIS HONOUR: These proceedings concern complex testamentary trusts created by the will of the late Stanley Edward Douglas. The specific question for decision is whether the first defendant (Mr James), as "Appointor" for the "Capital Protected Trust" (CPT) created by the will, had the power to remove and appoint trustees of the CPT. The parties [2] The first plaintiff is the widow of the late Mr Douglas. The second plaintiff is one of his four daughters. The third defendant is another daughter. The other two daughters are cross-defendants. For convenience, and without intending to be either patronising or disrespectful, I shall refer to the family members as "Stan", "Zeta", "Marea", "Trudy", "Lyn" and "Angela" respectively. Lyn and Angela took no active part in the proceedings. [3] Mr James is Trudy's husband, and hence the son-in-law of Stan and Zeta. [4] The second defendant (Ms Kik) was a friend of Stan and Zeta (although I suspect that the friendship between Ms Kik and Zeta may have cooled since Stan's death). Ms Kik was, she said, someone in whom Stan reposed trust and confidence. [5] Mr John Palmieri, a solicitor who had performed work for Stan from time to time, and who had drafted Stan's previous will, was also a cross-defendant. The will [6] Stan's will was made on 4 May 2011. The solicitor who drafted it was Mr Samuel Roberts. [7] The will was of great length (some 30 pages) and greater complexity. It appointed Mr Palmieri as executor. The substantive provisions of the will created the CPT and a number of "Beneficiary Controlled Testamentary Trusts" (BCTTs). Clause 2.6 provided that, in the events that have happened, Zeta, Marea and Ms Kik were to be the trustees of the CPT: 2.6 Subject to clause 20.7 ("Appointment and Removal of Trustees") in Part C, my wife Zeta Kathleen Douglas of [a residential address] ("Zeta Kathleen Douglas"), my daughter Marea Gilbert of [a residential address] ("Marea Gilbert") and my friend Janina Kik of [a residential address] ("Janina Kik") shall be the Trustees of the Capital Protected Trust created at clause 10 of this Will. [8] Although it is of no particular significance, cl 2.5 provided that, for each BCTT, the "Primary Beneficiary" (if nominated and determined in respect of that trust) or that person's nominee should be the trustee. [9] For each category of trust, there was provision for an "Appointor". Thus, for the CPT, cl 10.4 of the will provided: 10.4 My son-in-law David James shall be the Appointor of the Capital Protected Trust created by this clause and: (a) shall have the power to nominate any person or persons or company to act together or in his place as Appointor, and may place such conditions or restrictions on such nomination (and may make such nomination revocable or irrevocable) by any notice in writing to the Trustee, or by Will; (b) in the case of more than one Appointor, if the nomination is otherwise silent, they shall act jointly; (c) a successive Appointor, if the nomination is otherwise silent, shall also have the power to nominate a successor or alternate Appointor as if they were the initial Appointor, (d) the Appointor or any person nominated or appointed to become the Appointor either presently or at some subsequent time, may by notice in writing given to the Trustees of the Capital Protected Trust, resign or renounce such office and such resignation or renunciation shall take effect irrevocably upon such notice being given. [10] Apart from the functions described in cl 10.4, the only function that the will expressly gave to the Appointor of the CPT was that described in cl 10.7(a): 10.7(a) [The Trustees] may distribute, apply or allocate all or any part of any capital gain to or for the benefit of Zeta Kathleen Douglas, or with her consent and the consent of the Appointor in respect of the Capital Protected Trust to any other discretionary beneficiary identified in this clause; [11] For each BCTT, cl 20.6 covered the question of who should be the "Appointor": 20.6 The Appointor of the Beneficiary Controlled Testamentary Trust shall be determined as follows: (a) the Primary Beneficiary, shall be the initial Appointor or Appointors, and shall have the power to nominate any person or persons or company to act together or in place of the initial Appointor, and may place such conditions or restrictions on such nomination (and may make such nomination revocable or irrevocable) by any notice in writing to the Trustee, or by Will; (b) in the case of more than one Appointor, if the nomination is otherwise silent, they shall act jointly; (c) a successive Appointor, if the nomination is otherwise silent, shall also have the power to nominate a successor or alternate Appointor as if they were the initial Appointor, (d) the Appointor or any person nominated or appointed to become the Appointor either presently or at some subsequent time, may by notice in writing given to the Trustee of the Beneficiary Controlled Testamentary Trust, resign or renounce such office and such resignation or renunciation shall take effect irrevocably upon such notice being given. [12] There was no express, or stand-alone, power to appoint or remove trustees of the CPT. There was however an express power (cl 20.7) to appoint and remove trustees of each BCTT. The extent of that power requires further consideration. I set out that subclause, so far as it is relevant: 20.7 (a) subject to paragraph (d) of this subclause, the Primary Beneficiary, or a person (including a company) nominated by the Primary Beneficiary, shall be the initial Trustee or Trustees; (b) the Appointor (other than an Ineligible Person) may exercise the power to appoint such other person as he, she or they choose to be an additional or replacement Trustee and may subsequently remove the person as a, or the, Trustee; [13] It is not necessary to go to the definitions of all the defined terms (which are those italicised and given initial capital letters). [14] Clause 27.3 of the will contained a large number of definitions. Of present relevance, it defined for each of the BCTTs and the CPT, the "Appointor". It also defined the concept "Power of Appointment", although there was no express provision in the will giving anyone in terms (that is, using the precise phrase) such a power. [15] I set out those definitions: 27.3 (a) "Appointor" in respect of a Beneficiary Controlled Testamentary Trust, shall be determined in accordance with clause 20.6 ("Appointment and Resignation of Appointor"); (b) "Appointor" in respect of the Capital Protected Trust, shall be determined in accordance with clause 10.4; … (p) "Power of Appointment" means the power to appoint, remove or replace the trustee of a trust; [16] Those (and all other) definitions were expressed to be "[s]ubject to cl 27.2". Clause 27.2 said, in effect, that where there was a particular definition in any other part of the will, that definition should apply to the clause in which it appeared, not withstanding any inconsistency between that definition and one of the cl 27.3 definitions. The impugned transactions [17] On 6 June 2013, Mr James, purporting to exercise a power of appointment given to him by the will, gave notice that he had removed Marea as a trustee of the CPT and appointed himself in her place. He purported to confirm that exercise by a document described as "Deed of Appointment and Removal of Trustee" also dated 6 June 2013. Although the deed purported to remove Marea as a trustee, she was not a party to it. Nor were the other trustees at the time, Zeta and Ms Kik. [18] On 22 January 2014, Mr James again purported to exercise a power of appointment under the will. On this occasion, he purported to remove Zeta as a trustee of the CPT and to appoint Trudy in her place, on the basis that Trudy would act as one of the three trustees (Ms Kik and Mr James being the other two). There was no deed relevant to this purported exercise of power. The issues in dispute [19] Zeta and Marea contend that Mr James had no power to remove them as trustees of the CPT and to appoint others (i.e., himself and Trudy) in their places. Mr James contended that the will on its proper construction did give him that power. Alternatively, he contended that the will should be rectified to give him such a power. The claim for rectification was brought only under the general law. It did not rely on the limited power of rectification given by s 27 of the Succession Act 2006 (NSW). [20] In arguing the case for Mr James and the other defendants, Mr Dubler of Senior Counsel, who appeared with Ms Dolenec of Counsel for them, submitted that there were three questions to be decided: (1) whether, on the proper construction of the expression "Appointor of the Capital Protected Trust", it should necessarily be implied, reading the will as a whole, that the person who from time to time held the office of Appointor to the CPT should have the power to appoint and remove trustees of that trust? (2) Alternatively, whether, again on the proper construction of that expression in the context of the will as a whole, such a power should be read into the will in some way, by supplying additional words? (3) Whether rectification under the general law is available, and if it is, should be ordered?"
In the principal judgment his Honour decided the three questions that he had posed. On the first question McDougall J found that Mr James, the appointor named in clause 10.4 of the will, had no power to remove the originally named trustees of the CPT created by that will and to replace them with other trustees. Accordingly McDougall J concluded that neither Zeta nor Marea had been validly removed as trustee of the CPT and that neither Mr David James nor his wife Mrs Trudy James had been validly appointed as trustees of the CPT in their place. His Honour declared that the trustees of the CPT are and since the date of the death of the deceased have been Zeta, Marea and Ms Janina Kik. On the second question his Honour did not accept the submission that words should be read into the will to give the appointer the power to remove and appoint trustees that was found to be lacking in answer to the first question. The third question was decided adversely to Mr James: applying established authority, McDougall J found there is no equitable jurisdiction to rectify a will: Tatham v Huxtable (1950) 81 CLR 639 and Osborne v Smith (1961) 105 CLR 153. His Honour dismissed the Cross-Summons and reserved issues of costs.
There was later dispute about what McDougall J's judgment meant. As these reasons will show, that dispute had no proper basis. But as background to this later debate it is necessary to examine a little of his Honour's reasoning to the conclusion on the first question. McDougall J said at [141] to [144] of the principal judgment as follows: "141. As I have indicated, there are many reasons why a trustee may cease to hold, or cease to exercise the powers of, that office. Removal is but one. The power of replacement is apt to include the filling of an office that is vacated, or the powers of which are no longer exercised, by a particular individual. 142. Thus, I conclude that cl 20.7(b) should be construed so that the Appointor has power: (1) to appoint additional trustees; (2) to appoint replacements for trustees who have ceased to hold or exercise their office for any reason; and (3) to remove trustees appointed under the two foregoing powers. 143. That approach to the construction of cl 20.7(b) makes it clear why Stan did not simply say, in respect of the BCTTs, that the Appointor should have a "Power of Appointment". Further, it reveals an intention that the original trustees should not be subject to removal by the Appointor. They might be removed by other causes, including those (other than removal) that I have mentioned already. Where that happens, they may be replaced; and the replacement trustees would be subject to removal. But for so long as the original trustees are alive and able to exercise their office, they are entitled to remain in office, free from the threat of removal. That could be seen as a measure designed to protect Zeta during her lifetime, by ensuring that she remains a trustee, and thus retains an effective power of veto (because by cl 10.6(a) all decisions of trustees are to be made jointly). 144. Thus, it seems to me, there is a very significant difference between the cl 20.7(b) power of removal and the general power of removal that is inherent in the defined expression "Power of Appointment". The clause 20.7(b) power is different also to the general power of removal that, Mr Dubler submitted, was necessarily inherent in the concept of an "Appointor".
His Honour's reasons (at [143]) make plain that the will reveals an intention "that the original trustees should not be subject to removal by the appointor". Marea and Zeta were original trustees. There could be no doubt on any objective reading of paragraphs [141] to [144] that his Honour meant that Mr James could not as appointor remove neither Marea nor Zeta. The problem is, as will be seen, in early May the first respondent, Mr James later read part of this judgment in a different way and attempted to replace Marea as trustee.

The Procedural History following the Principal Judgment

Mr James appealed against the principal judgment on 21 April 2015 but did not attempt to seek a stay against its operation.
The applicants filed the original motion on 30 April 2015. Ms Kik alone filed a submitting appearance to the motion. But the applicants now seek an order for costs against her and that she not be able to indemnify herself for her costs out of the CPT. The motion sought relief that the respondents provide an account of all monies they had taken out of the trust to meet their costs of defending the proceedings.
After the first judgment the parties agreed upon certain consequential orders that were made on 30 April 2015. Those orders included the joining of NMMT as fifth defendant to the motion and the making of orders for NMMT to supply a statement of transactions for North account 665 after 1 January 2014.
On 30 April 2015 Marea and Zeta also eventually signed a joint authority to the team manager at North authorising North to release to Mr Mink and Pinnacle information for investments through North account 665 for the period 1 July 2014 up to 30 April 2015, including full capital gains tax information in respect of all investments on the account. On 5 May 2015 Ms Kik, the third trustee also signed the joint authority. So by 5 May all three trustees had signed. The authority so given should have been sufficient for Mr Mink, Pinnacle and North to act to supply information to the extent of the authority and even ultimately, if the co-operation extended, to operate the CPT accounts for the benefit of the three trustees. But issues later arose as to whether the information in account 665 was sufficient for the applicants' purposes.
But the very next day Mr James threw this developing consensus into disorder. He engaged in what was to become a controversial transaction. On 6 May he purported to ratify his earlier (June 2013) decision to remove Marea as an original trustee and to replace her with himself and to add Mrs Trudy James as an additional trustee. This was done despite the reasoning in [141] to [144] of McDougall J's judgment about Mr James's June 2013 removal and appointment of trustees. Mr James sought to justify this by misreading his Honour's judgment. This 6 May transaction then became a foundation for Mr James contending that the applicants had no standing to pursue either the motion or the amended motion.
The 6 May Deed deserves closer examination. It was entitled "Deed of Replacement and Appointment of Trustee" (the "Deed of Replacement" or the "6 May Deed"). Recital E to the Deed recites paragraphs [142(1) and (2)] of McDougall J's judgment. But Recital E fails to recite the limitation in paragraph [142(3)] and it does not mention paragraph [143] at all. The significance of Recital E is that it founds Mr James's unreasonable misreading of McDougall J's judgment. Paragraph [142(3)] of his Honour's judgment makes clear that the power to remove trustees does not apply to the original trustees appointed under the wills such as Marea and Zeta. Paragraph [143] makes that even more clear. The failure to mention paragraph [142(3)] and [143] in Recital E makes the recital an unfortunate distortion of McDougall J's reasons. This misreading of his Honour's judgment introduces the operative part of the 6 May Deed, which provided as follows: "IT IS AGREED AS FOLLOWS: 1. The Appointor previously replaced Marea Gilbert as a Trustee of the Capital Protected Trust by Deed on the 6 June 2013 and hereby ratifies that decision. 2. Should the replacement of Marea Gilbert in 1 above be invalid for whatever reason the Appointor replaces Marea Gilbert as a Trustee of the Capital Protected Trust. 3. The Appointor previously appointed David James as a new, replacement and or additional Trustee by deed dated 6 June 2013 and hereby ratifies that decision. 4. The Appointor hereby substitutes his position with Trudy James as at 6 June 2013. 5. Should the appointment and substitution in 3 and 4 above be invalid for whatever reason the Appointor hereby appoints the New Trustee, Trudy James as an additional co-Trustee of the Capital Protected Trust together with Janina Kik and Zeta Kathleen Douglas. 6. The New Trustee had accepted and accepts her appointment and agrees to be bound by the provisions of the Will relating to the Capital Protected Trust."
Although proper construction of the terms of the Deed of Replacement is difficult, as it simultaneously attempts a number of complex removals and substitutions, it seems probable that at least clauses [1] to [4] are invalid as being inconsistent with the terms of McDougall J's judgment. Clauses [5] and [6] may possibly be valid insofar as they appoint an additional trustee but even they invalidly infer that Marea had been removed as a trustee as they do not mention her as a continuing trustee.
Mr Jim Kekatos, the solicitor who acted on behalf of Mr James and Ms Kik continued to press upon the applicants the validity of the Deed of Replacement. He did so from the time of its execution until just before the hearing of these proceedings on 30 July 2015. For example on 18 June 2015 Mr Kekatos wrote to Mr Holmes, the solicitor for Marea and Zeta, stating, "We note that your client Marea Gilbert has been replaced as a trustee and therefore you are continuing to represent her and pressing production to her, if so on what basis".
The chaos created by the 6 May Deed for the trustees' dealings with third parties should not be underestimated. By 5 May the three trustees seem to have reached a viable consensus for giving instructions to Mr Mink, Pinnacle and NMMT, at least about account 665. They all seem prepared to operate to further McDougall J's principal judgment by giving joint instructions. And the law required them to operate unanimously: Luke v South Kensington Hotel Company (1879) 11 Ch D 121 at 125, per Jessel MR ("South Kensington Hotel"). They cannot act by a majority: Sky v Body (1970) 92 WN (NSW) 934, at 935G - 936A, per Street J ("Sky"). If there is continuing disagreement among trustees the Court may have to intervene to resolve the dispute: In the estate of William Just, Deceased (No. 1) (1973) 7 SASR 508 at 514, per Jacobs J (Just).
But the 6 May deed destroyed this consensus. It put in question the validity of Marea's and Zeta's appointments. It purported to appoint Mr James and Trudy James as trustees. It had the effect, an effect which could readily be anticipated, of destroying the confidence of the trustees thereafter to reach any unanimous agreement. Who was or was not a trustee, and how many was their number, were all now matters again in dispute. Ultimately, as will be seen below, Mr James proposed a compromise through Mr Kekatos that he would accept Marea and Zeta as trustees, provided they accepted Trudy James as an additional trustee with Ms Kik. But this offer of compromise itself risked producing a stalemate in the trustees' decision-making, as Trudy James and Ms Kik were aligned with Mr James's interests. Moreover, this offer of compromise was only necessary as a result of the chaos that the 6 May Deed had created.
The Court held a detailed directions hearing on 2 July 2015. This hearing was important in setting the scene for the issues that were to be litigated on 30 July. The Court endeavoured to have the parties address some consensual arrangements, so that notwithstanding the present differences between the three trustees, all parties could co-operate in giving the trustees access to the CPT's underlying financial data. The Court also asked the parties to put aside their differences and see they could agree not to initiate any transactions until the hearing took place on 30 July. On 2 July the amended notice of motion was filed and consent orders were made. These orders refer to the motion being originally filed on 28 April 2015. To that extent the order misdescribe what happened. The motion was indeed dated 28 April but it was not filed until 30 April. The 2 July orders were to the following effect: "1. Order that each of the applicants and each of the first and second respondents on the motion dated 28 April 2015 will not give instructions for any transaction in relation to the Capital Protected Trust ("the Trust") the subject of these proceedings to the third, fourth or fifth respondents to the motion before 4pm, on 30 July 2015. 2. Order the first respondent to the motion will not attempt to exercise his claimed power of appointment of the Trust at anytime between now and 4pm on 30 July 2015. 3. Direct that the parties consult with a view to quarantining argument about issues of costs between the applicants and the third to fifth respondents on the motion within a particular time period on 30 July 2015, so that the third to fifth respondents do not have to be present during the whole of the hearing on that day. 4. Direct that within 3 business days the applicants provide to the 1st and 2nd respondents a copy of the statement furnished by the 5th respondent pursuant to order 10 sought in the notice of motion filed 28 April 2015. 5. Direct that until 4pm 30 July 2015 the 3rd and 4th respondents upon individual or joint request by either applicant or first or second respondent provide to each applicant and first and second respondent any information requested as to the status of the assets liabilities income and expenditure of the CPT in the possession of the 3rd and fourth respondent (where such request does not require access to the north platform)."
On 2 July Mr Allen foreshadowed on behalf of the James/Kik parties that the first issue which would be contested on the hearing of the amended motion was the standing of the applicants to seek relief. He disputed the validity of their appointments because of the 6 May Deed and he forecast an argument that as the applicants were now no longer trustees, they were therefore no longer in a position to ask for the accounts. This submission was a furtherance of the position that Mr Kekatos was putting based on the 6 May Deed.
But the Court pointed out to Mr Allen in argument on 2 July that even if the submission he was advancing were valid, it still seemed to be uncontested that the applicants were trustees from the time of Mr Douglas's death and up to 6 May. And therefore they may well have had standing to ask for financial information from Mr James and Ms Kik in order to discharge their proper duties to the CTP for the period up to 6 May. The Court suggested that the James/Kik parties think further about this aspect of their argument.
Once again after the directions hearing on 2 July Mr Kekatos continued to assert without proper foundation that the 6 May Deed of Replacement was effective to replace Marea as a trustee. On 15 July 2015 Mr Kekatos contended, "Our client maintains that Marea Gilbert was validly replaced by Mr James on 6 May 2015 by way of the Deed of Replacement and Appointment of Trustees executed by Mr James". These contentions were calculated to undermine the applicants' standing to advance the motion.
In the same 15 July letter (which at times refers to Mr Kekatos as having one "client" - presumably Mr James, and at other times to "clients", presumably both Mr James and Ms Kik), after referring to the selective extract of paragraph [142] of McDougall J's judgment that appears in Recital E, Mr Kekatos shifted grounds slightly and asserted another equally groundless basis for Marea to be replaced as a trustee, as follows: "Our client maintains that Ms Gilbert ceased to exercise her office by, inter alia, wilfully obstructing the operation of the trust and refusing to carry out her functions as trustee, including refusing to meet with and jointly consider matters affecting the operation of the trust."
But then Mr Kekatos used his claimed doubts about the validity of Marea's appointment as a bargaining chip: something to be given away to achieve a temporary consensus requiring the applicant to accept Trudy James as an additional trustee up to the end of any appeal from McDougall J's judgment. "However, as you are aware, Mr James currently has an appeal before the Court of Appeal in respect of other aspects of his Honour's decision, in particular the limits imposed by his Honour on Mr James's power of appointment. If Mr James's appeal is successful, his earlier removal and replacement of Ms Gilbert will be upheld in any event, rendering the declaration sought by your client in these proceedings obsolete. Accordingly in respect of paragraph 2A and 5A of your clients' Amended Notice of Motion, our clients consent to an order: That from the date of these orders until further order of this Court, or the Court of Appeal, the trustees of the CPT are Marea Gilbert, Zeta Douglas, Janina Kik and Trudy James."
The contention from Mr Kekatos that Marea had refused to exercise her office by meeting her follow trustees, was apparently a reference to correspondence that had passed between Zeta and Marea and Ms Kik in April. But the correspondence came nowhere near justifying Mr Kekatos's assertion that Marea had, "ceased to exercise her office" by "wilfully obstructing the operation of the trust". There is no basis for the contention that Marea had refused to meet and "jointly consider matters affecting the operation of the trust".
What had actually happened in mid-April was quite different. Ms Kik wrote to Zeta and Marea in the following terms on 13 April 2015: "Dear Zeta, As trustees of Capital Protected Trust I think it would be appropriate and necessary for you, Marea and I to have a trustees' meeting to discuss various issues which appear to be of concern to you. Could you please suggest a number of times and dates which would be suitable for the 3 of us to meet in Pinnacle's offices? Perhaps you could also make a note of items you wish to discuss at that meeting. Many thanks. Janina Kik"
Two days later, on 15 April Zeta wrote back, saying to Ms Kik, "We will arrange a trustees' meeting following the conclusion of the Court case as noted in Marea's email to you prior to Easter. I will have Marea make arrangements at that time".
And on 15 April Marea also replied to Ms Kik in an email the relevant part of which reads as follows: "This email is to acknowledge receipt of your letter dated 13/4/15. I acknowledge that we will shortly need to have a Trustee meeting to enable the management of the Trust to get back on track. I have spoken to my mother, she and I are in agreement that as per my email of the 30/3/15 this first meeting should take place after the Judge has made his final determination on costs, scheduled on 24/04/15. I will, early next week, contact Darron Mink to ascertain firstly if we can use his office space to hold this meeting and secondly which dates can he advise are available for a meeting to be held after the cost determination. I will ask him for a few different dates to ensure we can find a time that suits everyone. Zeta and I await your response to our enquiry of the 8/4/15 where it was requested that you provide evidence of your statements regarding what you believe to be Stan's "own direction" with regard to the selection of a Trust Accountant."
Neither Zeta nor Marea's responses here show any great failure in co-operation. It was quite reasonable for them to agree to meet their fellow trustee Ms Kik, as they did, but to seek to defer that meeting until McDougall J had determined all the costs issues. This would avoid unnecessary trustee meetings. Although had they met earlier as Ms Kik suggested the possibility of wider agreements existed.
In McDougall J's second judgment on 22 July his Honour ordered that the defendants pay the plaintiff's costs of the proceedings up to and including 27 March 2015. His Honour also ordered the cross-claimant pay the first and second cross-defendants' costs of the Cross-Summons. His Honour denied the defendants and the cross-claimants, the James/Kik parties, the capacity to have recourse to the assets of the Trust to indemnify themselves in respect of the cost orders payable by them, or to recoup themselves from the trust for their own costs of conducting the proceedings.
On 24 July Mr Kekatos wrote again to Mr Holmes. He did not withdraw his contention that the 6 May Deed was effective to remove and replace Marea as a trustee. He continued to assert that Trudy James had been appointed as an additional trustee.
The issues on the amended motion were ultimately resolved on 30 July. The orders made that day were as follows: "1. That within 14 days the First Respondent David Anthony James provide to the Applicants an account of all monies received by and paid out of the Capital Protected Trust established by the will of Stanley Edward Douglas deceased ("the CPT") from 22 January 2014 to date. 2. That within 14 days the First Respondent David Anthony James provide to the Applicants an account of all monies withdrawn from the CPT and applied in payment of the defendants' costs of these proceedings and paid on account of costs not yet incurred. 3. A Declaration that the document dated 6 May 2015 titled "Deed of Replacement & Appointment of Trustee The Capital Protected Trust for Zeta Kathleen Douglas created in the will of Stanley Edward Douglas" is void and of no effect. 4. That within 14 days the Second Respondent Janina Kik provide to the Applicants an account of all monies received by and paid out of CPT. 5. That within 14 days the Second Respondent Janina Kik provide to the Applicants an account of all monies withdrawn from the CPT and applied in payment of the defendants' costs of these proceedings and paid on account of costs not yet incurred. 6. That within 14 days the Second Respondent Janina Kik sign all necessary documents to enable either Applicant who remains a Trustee of the CPT to receive periodic reports and information from Darron Mink, Pinnacle Financial and Investment Services Pty Ltd, NMMT Ltd and North Investment as to the status of the assets, liabilities, income and expenditure of the CPT. 7. Note in respect of orders 1, 2, 4 and 5 of the above orders that the accounts about which accounting is to be provided under those orders include the AMP Cash Management Account 939206-249670639, such accounting is to be by way of common money account showing in respect of all transactions, the date, the amount, the source of all deposits, the payee or transferee of all payments made and where a payment is made pursuant to a tax invoice a copy of such tax invoice is to be provided. 8. Join Darron Mink and Pinnacle Financial Investment Services as defendants to these proceedings for the purposes only of the applicant's notice of motion dated 1 July 2015 and for giving effect to orders pursuant to that motion. 9. That Darron Mink and Pinnacle Financial and Investment Services Pty Ltd provide each of the Applicants and the Second Respondent all documents, authorities, permissions and protocols to enable the Applicants and the Second Respondent individually or jointly to view all account details and transactions of the CPT and check the progress of transactions of the CPT online within 14 days from the date on which Darron Mink and Pinnacle Financial and Investment Services Pty Ltd are able to provide online access restricted only to those matters. 10. That until such time as they are able to comply with Order 10 Darron Mink and Pinnacle Financial and Investment Services Pty Ltd provide to each of the Applicants and the Second Respondent on the 1st day of each calendar month by post and/or email statements showing the current balance of the CPT and details of all transactions of the CPT for the preceding month. 11. That Darron Mink and Pinnacle Financial and Investment Services Pty Ltd the Applicants and the Second Respondent are authorised to carry out transactions on the account of the CPT upon receipt of written instructions which are jointly approved and signed by the Applicants and the Second Respondent. 12. That upon an individual or joint request by either Applicant or the Second Respondent, Darron Mink and Pinnacle Financial and Investment Services Pty Ltd provide to each of the Applicants and the Second Respondent any information requested as to the status of the assets, liabilities, income and expenditure of the CPT. 13. That within 14 days NMMT Limited provide to the Third and Fourth Respondents all documents, authorities, permissions and protocols to enable: (a) each of the Applicants and Second Respondent to view all details and transactions for the account known as the North account no Y00461665 in the name of Stanley Edward Douglas Testamentary Trust ("the Account") and check on the progress of transactions online; (b) the Third and Fourth Respondents to carry out transactions on the Account online on receipt of an instruction which is jointly approved and signed by the Applicants and the Second Respondent. 14. Note the undertaking of Mr James, the first defendant in the proceedings, given by his counsel that Mr James will undertake that he will not exercise any power of appointment provided for in clause 20.7 of the trust deed the subject of these proceedings, without the leave of the Court until the determination of Court of Appeal proceedings number 2015/118223. 15. Adjourn the matter to 9.30am on Friday, 14 August 2015 for mention. 16. These orders may be entered forthwith. "

The Current Costs Arguments

Zeta and Marea, the applicants/plaintiffs seek costs orders on the motion against several of the respondents. These reasons organise below the various costs arguments by reference to the respondents with whom Zeta and Marea have costs disputes.
Zeta and Marea advanced costs arguments by dividing the proceedings up into the four main issues in dispute: (1) who were the trustees after 6 May; (2) should the first and second respondents account for monies paid out of the trust; (3) the consent orders restoring the ability of the trustees to operate on the North account after means of access were closed down by NMMT; and (4) individual trustee's rights to information. Whilst the Court has found reference to these individual issues useful in these reasons, it is not necessary to deal with every issue with respect to every party.
Zeta and Marea have conveniently, and in my view accurately, apportioned their costs of the motion among these four issues. I have adopted the applicants' apportionment in the making of final costs orders on the motion. In undertaking this apportionment these reasons do not distinguish between the motion or the amended motion; they can be conveniently treated together as they often are in these reasons. Issues (1) and (2) together represent 40% of the applicants' total costs of the motion. Issue (3) represents 40% of the applicants' total costs of the motion. And issue (4) represents 20% of the applicants' total costs of the motion.
Issues (1) and (2) were largely a contest between the applicants and Mr James and Ms Kik. Issue (3) was largely a matter between the applicants and the fifth respondent NMMT. Issue (4) was largely a matter between the applicants and Mr Mink and Pinnacle.

The First and Second Respondents - The James/Kik parties

The applicants, Marea and Zeta, sought orders for costs against Mr James and Ms Kik in respect of the issues primarily joined between them, issues (1) and (2). And although the applicants submitted that NMMT was liable to the applicants for their costs of issue (3), the applicants contended that Mr James and Ms Kik were also responsible for these costs being incurred. Finally the applicants sought that Mr James and Ms Kik not have an indemnity from the CPT for their own costs or for any costs order made in favour of the applicants in respect of those issues. In response, Mr James and Ms Kik submitted that there should be no costs orders made between themselves and the applicants.
Mr James and Ms Kik, submitted to the orders made on 30 July including an order that Mr James not exercise his power of appointment without the leave of the Court until the determination of the Court of Appeal proceedings no 2015/118223, the appeal from McDougall J's judgment.
The Contentions. In oral submissions Mr D. Allen of counsel pointed out that the costs positions of Ms Kik and Mr James were different even though he and Mr Kekatos appeared for both of them. Mr Allen submitted that Ms Kik had nothing to do with the Deed of Replacement and had an even stronger argument than Mr James that she should not have a costs order made against her.
Mr Allen was correct to draw some distinction between his clients. I accept that Ms Kik had nothing to do with the creation of the Deed of Replacement. But Mr Kekatos was nevertheless acting for her throughout the period of these motions and some of his contentions in correspondence appear to have been made on her behalf.
Mr Allen also submitted that from the time of McDougall J's judgment Marea and Zeta did not request Ms Kik to do anything jointly with them which would enable the North platform accounts to be accessed co-operatively. Mr Allen submitted that Ms Kik at all times has acted reasonably and that the bringing of the notice of motion against her was unnecessary.
Mr Allen submitted that the only correspondence that comes close to asking Ms Kik herself to provide such accounts was an email on 24 March 2015 (even before McDougall J's judgment), in which Mr Holmes questions Mr Kekatos as to whether the defendants have withdrawn a total of $135,000 from the CPT to pay Mr James and Ms Kik's legal costs. Mr Allen submits that before the notice of motion was filed, apart from this letter, there had never been a direct request for Ms Kik to provide an account or a direct request for her to perform any action which would enable the other two trustees to have access to the platform.
As these reasons have already set out, Ms Kik did indeed join her consent on 5 May to that already provided by Zeta and Marea to authorise the obtaining of information from North account 665. There is no evidence that she resisted giving her consent when it was asked of her. In my view Ms Kik conducted herself reasonably in mid-April when she requested a meeting with Zeta and Marea to conduct the affairs of the trust. But as earlier indicated Marea and Zeta also behaved reasonably in seeking to defer that meeting until after McDougall J's costs judgment.
Mr Allen's point though is without further notice to Ms Kik, that Marea and Zeta filed the motion seeking an account in late April. Mr Allen submits that the motion against his client, Ms Kik, was unnecessary as she was co-operating before it was filed.
Mr Allen further points to the co-operation offered by Ms Kik and indeed Mr James on 15 July that they would provide an account of all monies received by and paid out of the CPT from 22 January 2014 to date. Both Mr James and Ms Kik made it clear on 15 July that existing orders for access to the North platform made on 30 April and on 2 July would continue until further order. But a fair comment about Ms Kik's co-operation with her fellow trustees is that it was a little slow.
In response, the applicants point to correspondence on 29 June in which Ms Kik does propound the Deed of Replacement. I accept that this is not entirely compatible with her submitting appearance. But this is not conduct such as should expose her to a costs order. The fact that she wrote correspondence such as this is more to be explained by her continuing role as a trustee than as a combatant on the motion, even though some of her views about the Deed of Replacement may have been misconceived and confusing. It is possible to make a costs order against a person who puts on a submitting appearance. But substantially more than this kind of conduct is required before such an order would be made: Sahab Holdings Pty Ltd v Registrar-General and Castle Constructions [2009] NSWSC 1143; 75 NSWLR 629 at [82].
The applicants - Ms Kik. In my view, in light of this history, the appropriate costs order between the applicants and Ms Kik, is the one which Mr Allen proposes: that each party bear her own costs. Ms Kik filed a submitting appearance and Mr Allen submits that she behaved reasonably once the motion was on foot.
But should Ms Kik be able to indemnify herself out of the CPT for her own costs in relation to the motion? In my view she should not. McDougall J has already deprived her of any right to reimbursement of costs in the proceedings. The current motion is incidental to the proceedings. And it is difficult to escape the conclusion that had she been more co-operative with her fellow trustees, including immediately offering to give a full account of the period that Marea and Zeta had been purportedly ousted as trustees, that the motion would have been far less expensive for everyone.
The applicants - Mr James. But the costs position as between Marea and Zeta on the one hand and Mr James on the other is quite different. Ultimately at the hearing on 30 July Mr Allen candidly did not attempt to defend the legal position taken in the 6 May Deed that Mr James could ratify his June 2013 decision to replace Marea. Mr Allen was correct in this. There seems to be no basis for such a contention. Whether Trudy James could be appointed as an additional trustee in May 2015 is perhaps a more open question and may alone be consistent with McDougall J's judgment. But the 6 May Deed was used for something wider. It was used prior to 30 July to try and undermine the continuing appointment of Marea and Zeta as trustees and their standing to bring the motion in a way which is incompatible with McDougall J's judgment.
In my view Mr James propounding of the 6 May Deed without reasonable cause and inconsistently with McDougall J's judgment was a very significant aggravating factor in causing the applicants to continue with the motion and to seek an account against him and Ms Kik and to keep advancing the motion against the other parties. Even if the 6 May Deed did not explain the filing of the motion, which actually preceded the 6 May Deed, the aggressive nature of the subsequent contest is explained to a degree by Mr James's baseless propounding of the 6 May Deed.
It is appropriate in my view therefore for Mr James to pay 80% of the applicants' costs of the motion (being 40% of the applicants' motion costs for issues (1) and (2) and 40% of the applicants' motion costs for issue (3)). Mr James's unreasonable conduct in relying on the Deed of Replacement in answer to the motion is a principal reason for this order. As to issue (1), Mr James never unequivocally accepted McDougall J's judgment and later sought actively to undermine its effect through the Deed of Replacement. As to issue (2), Mr James was always liable to account to the CPT for his period as a trustee. As to issue (3), as these reasons explain below in relation to NMMT, the intervention of Mr James had a significant influence on NMMT's conduct in acting defensively in the face of the discord between the trustees. NMMT behaved reasonably but Mr James should pay the applicants costs of issue (3), which representing some 40% of the applicants' motion costs.
Mr James's subsequent bankruptcy is not an obstacle to the making of this costs order against him. First, the bankruptcy has now been temporarily stayed pending the outcome of an appeal against the order for sequestration. And secondly, even if the stay were lifted, as this present costs order will have been made after Mr James's bankruptcy, it may be enforceable against him personally: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; 234 CLR 52.
It also follows from this reasoning that Mr James should not have recourse against the CPT either for his own costs of the motion or to meet the costs order made against him to pay 80% of the applicants' costs of the motion. His conduct of the motion is such that he should be denied indemnity from the CPT. This is so for several reasons.
A trustee is entitled to indemnity out of the trust estate in respect of costs reasonably and honestly incurred and is not accountable for mere errors of judgment: In re Jones; Christmas v Jones [1897] 2 Ch 190 and Mead v Watson [2005] NSWCA 133. A trustee may be deprived of indemnity out of the estate for costs if those costs were incurred not for the benefit of the trust estate but for the trustee's own benefit: Walters v Woodbridge (1878) 7 Ch D 504 and Re Spurling's Will Trusts [1966] 1 WLR 920.
Mr James's conduct in relation to all three issues was not reasonable and it would have been for the benefit of the estate had he immediately co-operated to do all things necessary to provide a full account in conformity with McDougall J's 26 March orders of his stewardship of the trust. His failure to recognise Marea and Zeta as trustees in conformity with his Honour's orders was on no view for the benefit of the trust.
That resolves questions of costs between the applicants and Mr James. But costs issues between the applicants and Mr Mink and Pinnacle are also difficult.

The Third and Fourth Respondents - Mr Mink and Pinnacle

Mr Mink and Pinnacle made no submissions about the form of the proposed order sought against them. But they sought that the applicants pay their costs on either the indemnity or the ordinary basis. In answer, the applicants sought that Mr Mink and Pinnacle pay 20% of their costs of the motion, being the applicants' costs associated with issue (4).
Mr Mink and Pinnacle put three main submissions: (1) that the applicants' motion was misconceived; (2) that Mr Mink and Pinnacle had behaved reasonably in relation to the motion; and (3) that the applicants, Marea and Zeta, have in contrast behaved unreasonably in relation to the motion. Mr Mink and Pinnacle submit that the cumulative effect of these three general considerations is that costs should be awarded in their favour on an indemnity basis. It is necessary to analyse their submissions in more detail.
(1) The Motion was Misconceived. Mr Mink and Pinnacle submit that the applicants' motion was misconceived for three main reasons. First, it was not the proper way to proceed. Secondly, it was unnecessary. Thirdly, it was contrary to the intent and purpose of the Civil Procedure Act 2005. These submissions can be considered together.
After he made declarations and orders on 25 March 2015 McDougall J reserved liberty to apply. Mr Mink and Pinnacle submit that this liberty did not extend to applying for substantive relief entirely different from the relief given in the final orders. They submit that Zeta and Marea's motion seeks substantive relief which is entirely different from that given in the final orders. Liberty to apply ordinarily merely reserves the right to apply for further or other orders to give effect to or carry out orders that have already been made: Katter v Melhem [2015] NSWCA 213 at [81] - [86]. Mr Mink and Pinnacle submit that liberty to apply cannot be used to join new parties after final judgment for the purpose of working out final orders and binding parties to declarations that have already been made, without an opportunity for these new parties to have been heard in the substantive proceedings.
Mr Mink and Pinnacle's second argument is that the motion was unnecessary. They submit that the proper approach was for the applicants to provide an appropriately worded written authorisation to Mr Mink and to Pinnacle to provide information and operate the accounts in question, rather than using the motion procedure that they did to join fresh parties.
Finally Mr Mink and Pinnacle submit that the motion was contrary to the intent and purpose of Civil Procedure Act, Part 6, Division 1 "Case Management and Interlocutory Matters", including s 56 "Overriding Purpose", s 57 "Objects of Case Management", s 58 "Court to follow Dictates of Justice", s 59 "Elimination of Delay" and s 60 "Proportionality of Costs". Mr Mink and Pinnacle's submission is that the applicants have burdened the Court and third parties with unnecessary, convoluted, time consuming and expensive litigation that is peripheral to the real issues in dispute.
There is much in Mr Mink and Pinnacle's submissions. The most efficient way for the applicants to have proceeded would have been to serve notice on Mr Mink and Pinnacle as to the result they wanted from McDougall J's orders and then to wait to see whether they complied. The applicants say that they did this in correspondence directly after 26 March. But the applicants' real remedy was against Ms Kik and Mr James. The applicants should have immediately sought from Ms Kik such joint authorisations as they thought they needed for giving instructions to NMMT, Mr Mink and Pinnacle and simply relisted the matter to force Ms Kik's co-operation, if it was not forthcoming. They did not do this. Instead they deferred a meeting with Ms Kik. To file a motion against Mr Mink and Pinnacle in these circumstances in my view was overkill.
(2) Mr Mink and Pinnacle Acted Reasonably. Mr Mink and Pinnacle contend that they acted reasonably in relation to the motion by making clear to the applicants from the beginning that they would co-operate to assist in a practical outcome and by signalling that they wished to be extracted from this dispute as soon as possible. They submit that they have furthered that intent by negotiating a mutually accepted form of order with the applicants.
In my view there is force in Mr Mink and Pinnacle's submissions that they have acted reasonably in relation to the motion. These reasons give further analysis of Mr Mink's and Pinnacle's conduct below in relation to NMMT.
(3) Applicants Behaved Unreasonably. Mr Mink and Pinnacle submit that the applicants themselves behaved unreasonably in advancing the motion. They submit that the approach of the applicants through their solicitor was both high handed and unjustified and that the tenor of the correspondence from Mr Adrian Holmes was "surprisingly bullying and aggressive". And Mr Mink and Pinnacle submit that the original notice of motion was never properly served on them but was sent to him by email whilst he was overseas, thereby requiring him to incur costs and expense in instructing lawyers to protect his position whilst he was away. Further, Mr Mink and Pinnacle submit that the original motion sought orders that are no longer pressed.
Moreover, Mr Mink and Pinnacle submit that after the 6 May Deed of Replacement came to light that Mr Holmes adopted an unjustifiably confrontational attitude in his correspondence. It is preferable not to set out all this correspondence in a costs judgment. But in my view when the correspondence is examined it gives support to Mr Harper SC's submission on behalf of Mr Mink and Pinnacle. It is aggressive correspondence but mainly because Mr Holmes seemed to conclude that Mr Mink was siding with Mr James. On that Mr Holmes was wrong. There was a much better explanation for Mr Mink not responding to Mr Holmes's demands as these reasons elsewhere explain: he was entitled to insist on unanimity from the trustees but Mr Holmes did not recognise that he had to achieve unanimity in instructions to the CPT's agents or go straight back to the Court.
Mr Mink and Pinnacle should have an order for costs against the applicants on account of this course of events. But I do not think that the applicants should pay Mr Mink and Pinnacle's costs of the motion on the indemnity basis, as they could have immediately put on a submitting appearance and the applicants' conduct was not so reprehensible as to merit an indemnity costs order, in accordance with the applicable principles: Leichhardt Municipal Council v Green [2004] NSWCA 341.
But Mr Holmes was doing his best on behalf of the applicants to give effect to McDougall J's orders, even if he was mistaken in the way that he went about it. In doing so he was acting for the applicants who were seeking as trustees to benefit the trust estate. In the result the applicants should have an indemnity out of the CPT's assets to meet this costs order and for their own costs of this part of the motion, issue (4). But that will be included in their general right to indemnity from the estate for their costs of the proceedings.

The Fifth Respondent - NMMT

On behalf of NMMT Ms M. Cairns of counsel submitted that NMMT: (1) is entitled to indemnity from the CPT for its costs of the motion as a bare trustee under Uniform Civil Procedure Rules 2005 ("UCPR"), r 42.25 from 29 April 2015 up to the date of the hearing; and (2) had conducted itself reasonably in not providing a statement of account to the applicants before the motion was filed, such that NMMT was not liable to pay any of the applicants costs of the motion. It was not in issue that NMMT as the custodian of the North platform acted as a bare trustee for the CPT.
Ms Cairns's second contention was resolved in NMMT's favour as Mr Ellison SC made clear that the applicants were not seeking a costs order against NMMT for that period. But the applicants put in issue NMMT's entitlement to an indemnity from the CPT, because it was submitted that the fifth respondent acted unreasonably and for its own benefit.
In order to understand the costs argument in relation to NMMT, it is necessary to understand a little of the role of NMMT in the administration of the CPT. NMMT is a subsidiary of AMP Ltd and is a bare trustee that operates an online financial services platform known as "North". The North service is described in the correspondence as a "wrap service" that consolidates and manages an investor's profile, portfolio and financial plans but is a service only available through a financial adviser. North is available to self-managed superannuation funds, to personal investors, joint applicants and trusts. North enables investors to invest in a range of managed funds, especially through a financial adviser. The role of the financial adviser is to assist clients with their initial investment, ongoing contributions or withdrawals, and the investment strategy that best suits their needs. The fourth respondent, Pinnacle is a financial adviser with access to the North service for the relevant accounts of the CPT.
After McDougall J delivered judgment on 25 March 2015 correspondence rapidly ensued between the solicitors for Zeta and Marea, the applicants, and NMMT. And NMMT's submission was that this correspondence showed that NMMT had conducted itself reasonably between 25 March 2015 and the date of hearing, 30 July 2015. The applicants submit that the correspondence showed that NMMT acted unreasonably and for its own benefit. Set out below is an analysis of the more important aspects of that correspondence. This analysis shows that NMMT did conduct itself reasonably during this period and especially between 30 April and 2 July and should not be deprived of its costs.
The Principal Judgment to 30 April. On 26 March 2015 Mr Holmes informed North that McDougall J had made the declarations and stated that "consequently, David James has no authority to act as trustee of the trust nor carry out any transactions on the above account". Mr Holmes sought North's undertaking that it would not permit further transactions to be carried on in the CPT's North account.
On 31 March 2015 Ms Anne Clarke at AMP responded on behalf of North indicating that "we have placed a flag on the relevant account and no further transactions will take place on this account until such time as we receive the appropriate paperwork to implement the Court Orders."
On 1 April 2015 Mr Holmes responded to Ms Clarke, informing her that her email satisfied his request. But Mr Holmes then added a request: to be informed of the current balance of the trust fund in North's account, together with a list of transactions for the period 1 January 2014 to the date of Mr Holmes's letter (1 April 2015). From 1 April Mr Holmes's correspondence properly construed was asking for a statement of account from both NMMT and Mr Mink/Pinnacle. Mr Holmes asserted on 1 April that "it is abundantly plain that each trustee, acting individually, has the right to this limited information. Otherwise, how would each trustee be able to perform his or her individual obligations in respect of the trust?".
But Mr Holmes's contention on this matter was not correct. As earlier indicated, where there is more than one trustee the trustees' decisions must be unanimous: South Kensington Hotel, Sky, and Just. Mr Mink, Pinnacle and NMMT were each entitled to hold out for an authority signed by all three trustees authorising the distribution of trust information from the North platform. To do otherwise would risk subsequent legal action by the non-authorising trustee/s, a risk that neither NMMT nor Pinnacle should reasonably be expected to take.
This dilemma was put colourfully by Mr Mink on 1 April when he said in an email to Marea, "Trust me when I say I am truly not trying to be difficult but I am in an absolute no win situation anymore as I am being slammed by both sides on everything and I don't want to do one thing that will get me into trouble. All I want to do is look after the investments but I am constantly being dragged into the trustee disputes."
This lack of unanimity among the trustees quickly became apparent to Ms Clarke. On 13 April 2015 Ms Clarke was forwarded email correspondence from Kekatos Lawyers sent on behalf of Ms Kik. In this correspondence Kekatos Lawyers referred to the correspondence that had come from Mr Holmes for the other trustees and requested "that you [Ms Clarke] provide me with sufficient notice of any action you propose to take in response to the letter from Mr Holmes."
Shortly afterwards, Mr James initiated correspondence that would have caused NMMT to infer there was further disunity within the CPT trustees and that would have created uncertainty for NMMT as to the integrity of the instructions it was receiving on behalf of the trustees. In a letter of 14 April 2015 Mr James seems to treat McDougall J's decision as "in question" and "subject to an appeal" and says that he, Mr James, is shortly going to ratify Zeta and Marea's "previous and current replacement a trustees". This indeed foreshadowed the effect of the yet-to-emerge 6 May Deed. Mr James's letter refers to the removal of Zeta and Marea, without a clear acknowledgement that McDougall J had declared they were still the trustees of the CPT and had never been removed as trustees. Mr James then finished the letter by requesting a meeting with Ms Clarke to discuss "the demands" made by Mr Holmes to represent the trustees.
Mr James was correct in so far as he was asserting that not all the CPT trustees had by then agreed with Mr Holmes's requests for information from NMMT. He pointed out that Ms Kik, the continuing trustee on any view, had not received any request for this information. The one gap in Marea and Zeta's conduct after 26 March was their failure rapidly to appreciate that the three trustees still had to act unanimously. Mr Holmes was corresponding on 14 April asking for AMP to reconsider its position but was still failing to provide AMP with a joint authority from all three trustees. But it must also be said that Mr James's correspondence was less than complete, in its failure even to acknowledge that the Court had declared that Zeta and Marea were continuing trustees of the CPT.
Ms Clarke responded to Mr Holmes the same day, referring to the correspondence that she had just received from Mr James. On 14 April 2015 she wrote to Mr Holmes, referring back to AMP's decision on 31 March 2015 to "restrict access to [this] North online account". Ms Clarke pointed out that because Mr James had indicated an appeal would be lodged, AMP would continue to restrict access to the account until the proceedings have been resolved on appeal. She made clear that this was a prudential decision by AMP and not the product of any instructions from Mr Mink. The letter made reasonably clear that the account access restriction applied to everyone, not just Zeta and Marea for whom Mr Holmes was acting. Ms Clarke said "Until such time as there is certainty in respect of the identity of the trustees, AMP is not able to provide the information you have requested." But she held out the possibility of the provision of information if all the interested parties agreed.
Once NMMT had taken the reasonable position that it would only act if all the trustees agreed, it is remarkable that in the absence of agreement no party decided immediately to bring the matter urgently back to the Court to obtain general orders for a workable access regime in substitution for such trustee agreement. Instead, minor facilitating orders were made on 30 April about account 665 and acrimonious correspondence continued for another six weeks until the directions hearing that was held on 2 July in anticipation of the hearing of the motion.
Zeta and Marea through Mr Holmes in April and in their later submissions on costs seemed to suspect that this correspondence on behalf of NMMT was designed to favour Mr James. But it in my view, it is clear that Ms Clarke's correspondence was only designed to prevent unauthorised access to the CPT's information and to prevent unauthorised operation of the CPT's North account. This was all conduct for the benefit of the trust not for the benefit of Mr James or NMMT.
This stand-off ultimately led to McDougall J making orders on 30 April that NMMT provide a statement of account, which NMMT did by 5 May.
14 April 2015 proved to be a busy day. That same evening, Mr James wrote back to Ms Clarke confirming its acceptance of the position that NMMT had taken with respect to the North platform and undertaking to provide a copy of the proposed appeal, "which will be filed in the next few days". At the same time Ms Clarke was exchanging correspondence with Mr Holmes, who was taking issue with whether Ms Clarke had mentioned an appeal in her telephone conversation with him on 31 March 2015. The dispute is not of present importance and does not need to be resolved to decide the costs issues now before the Court.
Ms Clarke's evidence of her approach to this correspondence, which I accept, is that when she was informed by Mr James about the possibility of an appeal she became concerned about providing a statement of account to Mr Holmes. Her concern was grounded in the fear that it might turn out after a successful appeal that she had delivered the statement of account for the CPT to persons who the Court of Appeal later might declare were not the proper trustees. Her view, therefore, was that NMMT should not take sides in a way that favoured one party over another. Ms Clarke confirmed the substance of this position to all parties, including Mrs Trudy James, the next day 15 April 2015.
On 15 April Mr Holmes wrote again to Ms Clarke pointing out that from his point of view, the main issue at that point was whether AMP "is, or is not, going to recognise" the Supreme Court's declarations on 25 March 2015. In my view, Ms Clarke's position at this point, she being the principal relevant decision-maker on behalf of NMMT, was reasonable. There was no question that she recognised the Supreme Court's decision. And she was concerned that it may be upset on appeal. Whilst that did not change the decision, she was anticipating, and with some justification given the tone of the contemporaneous correspondence, that if she proceeded to give information out at Mr Holmes's request and without a resolution signed by all three trustees, that that may be a breach of trust and expose NMMT to liability for its actions.
The practical course at that point really was for Mr Holmes to engineer either a court order to implement McDougall J's decision of 25 March or a direction to NMMT for the provision of the information that was signed by all three trustees. But the dispute continued less smoothly.
On 24 April 2015. Mr Holmes wrote again to Ms Clarke pointing out that she had not provided the statement of account which had been requested on 14 April and that he now had instructions to bring proceedings against AMP for the provision of the statement, unless it was given over that day. Ms Clarke sought an extension of time because she was at a funeral.
Ms Clarke rethought NMMT's position. She contemplated that given the stalemate that existed and that she still did not have any clear indication that an appeal been filed, she could recommend to NMMT that Mr Holmes be provided with a statement of account, regardless of the question of who the trustees of the trust were, but because Zeta was "entitled as a beneficiary" to request copies of those documents. So she asked Mr James whether he had any objection to this course.
Mr James did object. He replied, the same day, 27 April 2015, saying that even if a beneficiary requested information the trustees should all decide together what information would be provided and pointed out that only two of the three trustees had approached Ms Clarke and that a joint decision of the trustees was what was needed before NMMT could act on Zeta's request.
Mr Holmes filed the present motion on 30 April 2015. Ms Clarke explained in evidence her and NMMT's outlook on 27 April 2015. She says that once she got Mr James's email of that date, she did not immediately provide the requested statement to Mr Holmes, as she wanted to consider NMMT's position. Again, that seems to be a reasonable position. The notice to act that Mr Holmes gave Ms Clarke before filing the motion was unreasonably short in all the circumstances, especially given that not much had happened by way of communication between the parties between 15 April and 27 April.
In my view NMMT's conduct up to the filing of the motion on 30 April 2015 was reasonable. It took a legally correct position. Both under the general law and in light of clause 10.6 of the will, the trustees had to administer the trust jointly. But NMMT's conduct, in my view, shows a cautious concern to prevent possibly unauthorised use of the CPT's information.
But once filed, the motion sought wider relief than had been foreshadowed in Mr Holmes's correspondence outlined above. Prayers for relief 12 (a) and (b) of the motion sought that NMMT provide Marea and Zeta with all necessary "documents, authorities, permissions and protocols" to enable them together with Ms Kik to view account details and transactions and to carry out transactions on the accounts.
30 April to 30 July. The next question is whether NMMT conducted itself unreasonably after 30 April. Prayers for relief 12 (a) and (b) on the motion were made on 2 July. In answer to the question why NMMT did not immediately consent to prayers for relief 12 (a) and (b) once the motion had been filed Ms Cairns explained that NMMT could not consent to the orders because technically NMMT could not provide the access requested in these prayers for relief. And there was still the problem of Mr James's contentions outstanding that the applicants would be proven not to be trustees on appeal. And it was not possible for the applicants and Ms Kik to carry out transactions on the account online. The way the North platform works is that all the functions involving investments and transactions require Mr Mink's involvement. The original form of prayer 12 required in NMMT to deal directly with the clients, which is contrary to the North platform specifications. More refinement was required before anything like prayers for relief 12 (a) and (b) could be granted.
That refinement ultimately occurred. When the amended notice of motion was filed on 2 July and amended prayers for relief 12 (a) and (b) was substituted. The form of prayer in the amended motion (now prayer 12A) consistently with the operation of the North platform required NMMT to provide all the necessary authorities to Mr Mink and Pinnacle to allow the applicants and Ms Kik to view accounts and to allow Mr Mink and Pinnacle to act on joint instructions signed by all three of Marea, Zeta and Ms Kik.
The second issue is whether NMMT behaved unreasonably in negotiating the new form of prayer 12A. The motion was filed on 30 April and further court orders made the same day. The account was provided on 5 May pursuant to the orders that had been made on 30 April. On 6 May the three existing trustees all signed a deed authorising access to the account on the North platform.
On 7 May, Clayton Utz on behalf of NMMT wrote to Mr Holmes and Mr Kekatos pointing out the inappropriate form of prayers for relief 12 (a) and (b) and that it was not possible for NMMT to comply with the order unless it was redrafted.
On 8 May Mr Holmes replied proposing some changes to the form of order. Clayton Utz responded again on 29 May seeking to negotiate a "package" of orders which would also be acceptable to Mr Mink and Pinnacle. This draft included a form of order very close to clause 12A as ultimately made. Then on 1 June Mr Holmes replied accepting the proposals NMMT made on 29 May. There was further input from Berryman Partners, the solicitors for Mr Mink and for Pinnacle, about the final form of orders, which were agreed by 10 June, in the form that they were ultimately made on 2 July.
The applicants rightly point out that there was some confusion between NMMT and Mr Mink/Pinnacle about exactly how the North platform operated and whether it could provide read-only access. This confusion existed from about late May until order 12A was eventually negotiated; a result that was achieved in substance in correspondence between 29 May and 2 June. But this is no basis for denying NMMT its right of indemnity. Such confusion was the product of honest misunderstanding in communications in trying to solve the problem of creating a workable access regime to the North platform for the trustees, a problem that was not of NMMT's, Mr Mink's or Pinnacle's making.
The applicants submit that there was no good reason for NMMT to be engaging in correspondence with the other parties after 2 June. But the correspondence clearly shows NMMT taking part in fashioning, as it had to, a final form of agreement acceptable to all parties after that date. Short minutes of order were prepared on 12 June and NMMT gave its final consent on 15 June after Ms Clarke obtained instructions. On 29 June 2015 there was further correspondence in anticipation of the directions hearing on 2 July to the effect that some amendment was required to the form of orders at the request of Mr Mink and Pinnacle in relation to the provision of read-only access. Mr Holmes agreed to this amendment on 30 June. Thereafter that form of orders was handed up in Court on 2 July. The orders made on 2 July are set out earlier in these reasons.
There is nothing in any of this conduct between 30 April and 2 July or the hearing on 30 July that would provide grounds for NMMT to be deprived of its costs of the motion or the amended motion. From the Court's survey of the correspondence at all times through Ms Anne Clark, and then through Clayton Utz, NMMT conducted itself quite reasonably. Indeed, it is to be observed that notwithstanding the at times semi-hostile correspondence of some other parties NMMT maintained not only a correct legal position but an attitude of courtesy likely to promote longer term consensus. Merely saying that NMMT behaved reasonably does not capture the true position: it discharged its duties under pressure in my view to a high standard.
NMMT asked for an indemnity from the CPT for its costs of the motion from the date the motion was dated, 28 April, and then filed, 30 April 2015, up to the date of the hearing, 30 July 2015. Some costs will have been incurred even after that date as the matter has been before the Court once since 30 July. So the more flexible and appropriate form of order in respect of NMMT's costs is that NMMT have an indemnity for its costs of the motion and the amended motion out of the CPT.
Conclusions and Orders
The following is a result of the various parties' arguments about the costs of the motion, including the amended motion. There was some complexity to the form of the orders made on 2 July and 30 July. There is therefore the possibility that together with these orders the parties may need to re-approach the Court in relation to the implementation of these costs orders. So liberty to apply will be granted.
The Court will order as follows: 1. Order that the first respondent to the motion filed on 30 April 2015, and the amended motion filed on 2 July 2015 (hereinafter referred to in these orders as "the motion"), Mr James, pay 80% of the applicants' costs of the motion. 2. Order that the first respondent not be permitted to have recourse to the trust fund the subject of these proceedings ("the CPT") for the payment either of his own costs of the motion or for the payment of any order for costs on the motion against him. 3. Order that the applicants to the motion and the second respondent, Ms Kik, shall as between themselves each bear their own costs of the motion. 4. Order that the second respondent not be permitted to have recourse to the CPT for the payment of her own costs of the motion. 5. Order that the applicants pay the third and fourth respondents' costs of the motion on the ordinary basis. 6. Order that the applicants may have recourse to the CPT to reimburse themselves for the payment of the third and fourth defendants' costs. 7. Order that the applicants may have recourse to the CPT in order to meet their own costs of the motion. 8. Order that the fifth respondent have its costs of the motion and the amended motion on the indemnity basis out of the CPT. 9. Grant liberty to apply in relation to the implementation of these orders and the Court's orders of 2 July and 30 July.

Amendments 13 October 2015 - Paragraph [13], change "all three trustees had signed the authority so given" to "all three trustees had signed. The authority so given".

Paragraph [16], change "attempts number of complex number of" to "attempts a number of complex".

Paragraph [35], change "by in NMMT" to "by NMMT", change individual trustees to individual trustee's.

Paragraph [36], change these reason to these reasons. 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: 13 October 2015

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Judgment (11 paragraphs)

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Cases Cited (12)

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