Groote Eylandt Aboriginal Trust Incorporated v Attorney-General of the Northern Territory

TRUSTS - Trustees - Judicial Advice - Incorporated Trustee - Right of Indemnity - General principles at common law - Entitlement of trustee to advice that it could fund reasonable costs of defending proceeding from trust property - Insufficient evidence to assess costs in advance of the proceeding.

Groote Eylandt Aboriginal Trust Incorporated v Attorney General of the Northern Territory [2024] NTSC 83; Hancock v Rinehart [2015] NSWSC 646; Hopkins v Edwards [2020] VSC 456; Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (Macedonian Orthodox Church) [2008] HCA 42; (2008) 237 CLR 66; Marks v Evans [2023] VSC 158; Mulherin v Quinn Village [2007] QSC 231; Plan B Trustees Ltd v Parker [2013] WASC 216; Proud v Arkell [2019] NTSC 35; Re Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247; Re Estate Late Chow Cho-Poon [2013] NSWSC 844; Southern Equity Pty Ltd v Timevale Pty Ltd [2012] NSWSC 15, referred to.

Supreme Court Rules 1987 (NT) r 54, 63.23, 63.30.

Groote Eylandt Aboriginal Trust Incorporated v Attorney-General of the Northern Territory (No 2) [2024] NTSC 87

GROOTE EYLANDT ABORIGINAL TRUST INCORPORATED (NT 00142C)

• [1] In Groote Eylandt Aboriginal Trust Incorporated v Attorney General of the Northern Territory[1] I declined to provide the advice sought by GEAT with respect to the question posed in paragraph (b) and the correlated parts of the question posed in paragraph (d) of GEAT's application under Rule 54 of the Supreme Court Rules. These reasons relate to the remaining questions posed in that application, namely those in paragraphs (a), (c) and the correlated parts of the question in paragraph (d).[2]
• [2] I will deal with question (c) first, followed by question (a) and consider question (d) last. For the purposes of determining these questions I adopt, without repeating, the following parts of my reasons in GEAT (No 1): the factual background,[3] the review of GEMCO's SOC and the ALC's defence[4] and the outline of the relevant principles bearing on an application of this kind.[5]

• [3] This was the second of the two questions belatedly added by amendment to GEAT's application.[6] It seeks advice as to whether GEAT would be justified in bringing an application for an account and inquiry in the Proceeding commenced by GEMCO. Relatedly, in the question posed by paragraph (d) it asks: "... whether [its] reasonable costs and expenses, including any adverse costs order/s and/or any shortfall in recovery on a favourable costs order, incurred in connection with [such an application] should be paid on an indemnity basis from funds held in [its] bank account."

• [4] The proposal to make such an application in the Proceeding is based on a legal advice that GEAT's counsel provided to it about four weeks after it filed the present application.[7] That advice was, in turn, provided to the Court in support of the application. [Redacted - subject to legal professional privilege].
• [5] [Redacted - subject to legal professional privilege].
• [6] [Redacted - subject to legal professional privilege].

• [7] GEAT essentially relied upon the terms of its legal advice as set out above. In response, the Attorney-General contended that the Court should decline to give an affirmative answer to this question because there were numerous deficiencies in GEAT's legal advice such that the Court could not rely upon it with any confidence. [Redacted - subject to legal professional privilege].
• [8] In its submissions in reply, GEAT referred to certain parts of Mr Fadelli's non-confidential affidavit dated 24 September 2024 and claimed that both GEMCO and BHP "have made admissions of underpayment of the GEAT entitlements from time to time; and have declined to date, to provide GEAT with documents that would permit GEAT to undertake an independent audit of the quantum of those underpayments." [Redacted - subject to legal professional privilege]. In addition, it sought to rely upon two further matters: first, that an account had been ordered in Proud v Arkell[8] against the former administrator of a deceased estate and, secondly that "There is a risk of GEAT facing a plea of Anshun estoppel in subsequent proceedings" should it not address the issue raised by paragraph 6 of GEMCO's SOC. That paragraph pleads, among other things, that GEMCO "... has, at all relevant times, paid, and continues to pay, the GEAT Royalty ...".

• [9] As the history of the corresponding provisions to Rule 54 operating in NSW and England demonstrates,[9] the Court's jurisdiction to give judicial advice of the kind sought by GEAT in this application is exceptional. That is so because it contrasts with a Court's usual function of deciding disputes between competing parties and instead allows for the provision of "private and personal" advice to a particular class of persons, namely trustees or those holding a commensurate office.[10] Furthermore, the main consequence of its exercise is to provide, in advance, a unique form of protection, namely to "... protect a trustee from later complaint that he or she should have acted otherwise, [and] ... also protect the trustee from personal liability for costs incurred."[11]
• [10] The advantages of obtaining judicial advice instead of relying on a lawyer's opinion were identified by Lindsay J in Re Estate Late Chow Cho-Poon[12] in the following terms: "Although, in many cases, a trustee can obtain effective protection as well as guidance by acting upon the opinion or advice of a lawyer, the intervention of a lawyer is no guarantee of protection if a court subsequently perceives that: (a) the lawyer's opinion or advice was wrong; and (b) it was unreasonable for the trustee to have acted on it..." (citations omitted).
• [11] The jurisdiction to give such advice stems from a concern that "... the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and expenses properly incurred in performance of the trustee's duties." Accordingly, its purpose is to "... resolve doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. No less importantly, however, resolving those doubts means that the interests of the trust will be protected; the interests of the trust will not be subordinated to the trustee's fear of personal liability for costs."[13] It is, therefore, directed as much to the protection of the interests of the trust concerned as to those of the trustee and has a particular resonance when the trust is a charitable purpose trust.[14] The only qualification necessary to obtain this unique kind of advice is that "the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument."[15]
• [12] All of these features of the jurisdiction place obvious responsibilities on any trustee seeking judicial advice. It is not a remedy that should be sought capriciously. Hence in Plan B Trustees Ltd v Parker[16] Edelman J expressed the view that where the question is whether a form of legal action is justified, it will generally be necessary for a trustee to have obtained a legal opinion on, and to have formed its own opinion about, the action before seeking advice from the Court.[17] Furthermore, his Honour said earlier:[18] "... if the material put before the Court is insufficient for the Court to make a confident answer to the relevant issues then discretion will generally be exercised to refuse to make any directions." However, as the plurality remarked in Macedonian Orthodox Church, in making this assessment it may be necessary to take account of the fact that, at the early stage of a legal action, when judicial advice is usually sought: "... the issues involved in disputes about rights may not be fully sharpened and it may not be possible for the factual position to be as efficiently exposed as in a trial ...".[19]
• [13] In Re Cho-Poon[20] Lindsay J identified five benefits of providing "a memorandum of opinion by an independently-minded lawyer" to the Court dealing with a judicial advice proceeding. His Honour described such an opinion as one where the lawyer concerned had "examined the factual context critically, analysed competing contentions in a comprehensive legal context, and worked out a solution that commends itself to his or her professional judgement, a judgement upon which the court can responsibly be invited to rely."[21] He observed that the benefits of an opinion of that kind included "speed and efficiency",[22] giving "comfort" to the Court that the "questions identified for the opinion, advice and direction of the court are ripe for consideration",[23] providing an analysis of the issues that can be treated as more than "a mere submission",[24] subject to any legal professional privilege constraints, allowing persons interested to decide whether they should participate in the proceeding[25] and aiding the "efficient administration of the "summary" jurisdiction" concerned.[26]
• [14] Further on this aspect, in Macedonian Orthodox Church the plurality quoted with approval the observations of the trial judge (Palmer J) to the effect that the legal opinion provided to the Court "... must address the facts necessary to support the legal conclusions reached and must demonstrate that the propositions of law relied upon for those conclusions are properly arguable."[27] His Honour continued that if it is concluded that the proposed legal action were so arguable, there is then a separate question as to whether that course of action has "sufficient prospects" of success to justify proceeding. He said that answering that question required consideration of matters such as:
  • the nature of the case and the issues raised;
  • the amounts involved, including likely costs;
  • whether the likely costs to be incurred by the trustee are proportionate to the issues and [the] significance of the case;
  • the consequences of the litigation to the parties concerned; and
  • in the case of a charitable trust, any relevant public interest factors.[28]
• [15] Finally, it is not the Court's role to determine the merits of the proposed legal action nor to elide the two questions mentioned above.[29] Although in a rare case, of which GEAT (No 1) is an example, the particular form of legal action concerned - in that instance an interlocutory step already commenced in an existing proceeding - may be unarguable to the extent that eliding those two questions may be difficult to avoid.

• [16] For the reasons that follow, when these principles are applied to the legal advice provided to the Court by GEAT with respect to this question, I consider they reveal several significant deficiencies which affect its reliability. Many of these deficiencies are identified in the Attorney-General's submissions above. [Redacted - subject to legal professional privilege].[30]
• [17] [Redacted - subject to legal professional privilege].
• [18] [Redacted - subject to legal professional privilege]."[31] [32] [33]
• [19] [Redacted - subject to legal professional privilege].

• [20] Because of these deficiencies in the legal opinion that GEAT has provided to the Court I am unable to say with any confidence that the proposed legal action anticipated by question (c) is properly arguable. In this state of uncertainty, I therefore decline to give the advice sought. It necessarily follows that I also decline to provide the advice sought by the question set out in paragraph (d), in so far as it relates to the advice sought by paragraph (c).

• [21] This was the sole question upon which GEAT originally sought advice under Rule 54. It is expressed as follows:

... whether the plaintiff, in its capacity as trustee of the Groote Eylandt Aboriginal Trust ... (constituted by trust deed dated 2 August 2008 and amended by deed of Amendment dated 2021), would be justified in defending proceeding No 2024-02104-SC (the Proceeding) in the Supreme Court of the Northern Territory commenced against GEAT by Groote Eylandt Mining Company Proprietary Limited (GEMCO).

• [22] GEAT provided a number of legal opinions to the Court in support of its application for judicial advice on this question. It is appropriate to record at the outset that the Attorney-General did not raise any deficiencies in those legal opinions and contended that they demonstrated that the matters GEAT wished to raise by way of defence in GEMCO's Proceeding were properly arguable. The opinions addressed the two issues described in GEAT (No 1)[34] as follows:
  • the construction of clause 2 of the original GEAT Agreement and, in particular, the words "mining titles" appearing within it; and
  • the effect, if any, that the provisions of the ALRA and its subsequent amendments has on the GEAT Agreements.
• [23] [Redacted - subject to legal professional privilege].
• [24] Recognising the privilege and confidentiality that attaches to these legal advices I will confine my treatment of their relevant contents to the following broad summary. Having read each of them carefully I agree with the Attorney-General's contention that they variously demonstrate that GEAT has a properly arguable position in respect of each of the issues outlined above.

• [25] Having reached this conclusion I turn next to the other matters identified earlier[35] which affect the separate question of whether GEAT's proposed defence of the Proceeding has "sufficient" prospects of success. First with respect to those matters, GEAT provided the following estimates of the legal costs it is likely to incur in pursuing each of the three legal actions the subject of the four questions upon which it has sought judicial advice:
  • the judicial advice and strikeout applications - between $[Redacted as commercial in confidence] and $[Redacted as commercial in confidence].
  • the counterclaim and application for an account and inquiry - $[Redacted as commercial in confidence].
  • the defence of the substantive action - between $[Redacted as commercial in confidence]and $[Redacted as commercial in confidence].
• [26] Secondly, as to the present financial capacity of the Trust, in one of Mr Fadelli's affidavits he deposed that, as at 31 May 2024, the Trust held approximately $[Redacted as commercial in confidence] in its trading and preservation fund bank accounts. Thirdly, as to the significance to the Trust of the issues involved in the Proceeding, elsewhere in his affidavits Mr Fadelli [Redacted as commercial in confidence]. Finally, GEAT contended that its proposed legal actions were in the public interest "given both the public purposes of the [Trust] and the significant threat to [its] income ... posed by failure to defend the Proceeding".
• [27] With the exception of GEAT's estimated legal costs and the related indemnity question raised by amended question (d), the Attorney-General essentially agreed that these matters demonstrated the sufficient prospects necessary to justify GEAT defending the Proceeding.

• [28] The appropriateness of GEAT's estimated legal costs is, in my view, best dealt with in connection with question (d) below. Nonetheless it is pertinent to remark that if, for present purposes only, those estimates were to be accepted as accurate, a total costs liability, including an adverse costs order, in the order of [Redacted as commercial in confidence] is in proportion to the annual revenue of $[Redacted as commercial in confidence] which Mr Fadelli estimates is at stake in GEAT's defence of the Proceeding. Having regard to that matter and the others illuminated above, I consider that the propositions underpinning GEAT's proposed defence in the Proceeding are properly arguable and have such sufficient prospects of success as to justify GEAT pursuing that course. Accordingly I provide the advice sought by question (a).

• [29] In its original application under Rule 54, question (b) - later amended to question (d) - was in the following form:

Whether the plaintiff's reasonable costs and expenses, including any adverse costs order/s and/or any shortfall in recovery on a favourable costs order, incurred in connection with the proceeding, should be paid on an indemnity basis from funds held in the Trustee's bank account ...

• [30] As already foreshadowed, the Attorney-General raised several concerns with respect to the open-ended nature of the indemnity sought by this question. First the Attorney contended that, having regard to the conclusions reached with respect to GEAT's strikeout application and its proposed claim for an account and inquiry, the Court would be concerned as to whether "prudent choices" had been made by it to date in the conduct of this proceeding. Secondly, the Attorney contended that, having regard to the nature and extent of the issues involved in defending the Proceeding, a total legal cost estimate of between $[Redacted as commercial in confidence] and $[Redacted as commercial in confidence] may be regarded as "extravagant" citing the judgment of the Full Court of the Federal Court in Adsett v Belrouis[36]. In these circumstances, the Attorney contended, the Court could not be confident that it would be in the interests of the Trust for GEAT to be indemnified for "any and all costs of defending the litigation, regardless of how that defence may be conducted". Finally the Attorney contended that a refusal to provide the indemnity sought by question (d) would not prevent GEAT from meeting the costs of defending the Proceeding and relying on its right of indemnity in respect thereof at common law, and/or under the provisions of its Trust Deed, and/or under Rules 63.23 and 63.30 of the Supreme Court Rules.
• [31] In its reply submissions GEAT denied that it had failed to make prudent choices in the conduct of this proceeding to date and contended that even if the Court had any concerns with respect to its defence of the Proceeding, those concerns could be easily addressed by inserting in question (d) the words "provided the costs incurred were consistent with those that a person of ordinary prudence would have incurred in defending similar litigation". As well, GEAT sought to justify its estimate of legal costs by pointing to the ALC's corresponding estimate of $800,000 legal costs to defend the Proceeding, as disclosed in its most recent Annual Report. It added that this estimate did not include the ALC's costs of defending GEAT's claim in the Proceeding nor the cost of marshalling the necessary documentary evidence and engaging experts to give evidence "as to the nature and calculation of the GEAT entitlement and the objective intention of the parties to the GEAT Agreements."

• [32] It is convenient to begin by defining the right of indemnity that a trustee has at common law against the assets of a trust for amounts that it has expended from its own funds to discharge trust liabilities. In Hopkins v Edwards,[37] after reviewing the relevant authorities,[38] Lyons J summarised the content of that right in the following terms:

(1) the trustee is entitled to indemnity for costs, expenses and liabilities which are not shown to have been improperly incurred;

(2) this right of indemnity belongs to the trustee subject to circumstances being present which suffice to deny the right;

(3) the question of whether a cost, expense or liability was not improperly incurred depends on the duty upon, or power in, the trustee which resulted in incurring the cost;

(4) in the case of the costs of litigation or liabilities incurred in litigation, the relevant duty is likely to be whether in incurring the cost or liability the trustee failed to exercise the care and diligence that a person of ordinary prudence would exercise;

(5) even in proceedings involving a trustee which are adversarial in nature or where the trustee's personal interests are at stake, the Court must consider whether the costs incurred by the trustee were not improperly incurred in the sense set out in (3) and (4) above; and

(6) a Court must be cautious before concluding such costs, expenses or liabilities were improperly incurred as to deprive a trustee of his or her right of indemnity.[39]

• [33] In addition to this right of indemnity, I consider the Attorney-General is correct in pointing out that, when it incurs a liability in the form of legal costs, GEAT can also rely on Rules 63.23 and 63.30 of the Supreme Court Rules[40] and/or the pertinent clause of its Trust Deed.[41]
• [34] The additional benefit that judicial advice given under Rule 54 provides over and above the measures discussed above was described by Nicholson J in Yule v Irwin (No 2)[42] in the following terms: "... if an executor engages in conduct that is consistent with or follows the direction given by the Court, the executor will be protected from any claim by a beneficiary for breach of trust arising from action or inaction in accordance with that direction".[43] However, as Lyons J observed in Hopkins v Edwards "... the making of an order that a trustee is justified in relevantly defending a proceeding is not a "carte blanche" for the trustee to incur legal costs he or she sees fit. There is a continuing duty on the trustee to exercise the care and diligence that a person of ordinary prudence would exercise."[44]

• [35] In GEAT (No 1) I declined to provide judicial advice with respect to GEAT's strikeout application because I concluded that it had no real prospects of success and would be fruitless.[45] Earlier in these reasons I also declined to provide judicial advice with respect to GEAT's proposed application for an account and inquiry because I was not confident on the materials provided that it was properly arguable.[46] I did, however, provide judicial advice with respect to the original question - question (a) - that prompted this judicial advice proceeding in the first place.[47] In this respect, it is to be noted that my reasons in respect of that matter occupy a small fraction of the two judgments I have delivered thus far in this proceeding. Nonetheless I do not consider my role in this proceeding extends to characterising the prudence, or otherwise, of GEAT's decision to pursue the first two applications as the Attorney-General has contended I should. Nor do I consider it extends to conducting a critique of its conduct of the proceeding to date.
• [36] The estimates that GEAT has provided of its likely legal costs raises a different issue. Pursuant to those estimates GEAT predicted that its cost of this proceeding and the two applications mentioned above would be between $[Redacted as commercial in confidence] and $[Redacted as commercial in confidence] and that its cost of defending the Proceeding would be between $[Redacted as commercial in confidence] and $[Redacted as commercial in confidence]. The Attorney-General noted that the total of these figures is between $[Redacted as commercial in confidence] and $[Redacted as commercial in confidence] and claimed that they amounted to an "extravagant" sum. In defence of its estimates, GEAT compared them to the $[Redacted as commercial in confidence] that the ALC estimated it would incur in costs in defending the Proceeding, as disclosed in its recent Annual Report.
• [37] Despite the Attorney-General's criticisms of these estimates, I do not consider my role in this proceeding extends to assessing whether or not they are reasonable. In any event, on the very limited information available to me, I am not properly equipped to make that assessment. Instead I consider that both of these matters should be left to the trial judge in the Proceeding. That is to say the appropriateness of GEAT's conduct of its defence of the Proceeding and the quantum of any consequential costs orders that are made. This essentially means dealing with those issues retrospectively based on the events as they emerge henceforth including during the course of the trial, rather than in advance, based on present day estimates and predictions, as is contemplated by question (d). Furthermore when account is taken of the fact that an affirmative answer to that question does not offer a "carte balance" to GEAT in conducting its defence of the Proceeding, there is, in my view, little practical difference in adopting this approach. It achieves essentially the same outcome as inserting the words proposed by GEAT in question (d).[48] Finally, as the Attorney has pointed out, this approach does not prevent GEAT from meeting the costs of defending the Proceeding and relying on its ample indemnity rights as reviewed above.

• [38] In all these circumstances I am not willing to exercise the discretion to answer question (d) in the affirmative.

[1] [2024] NTSC 83 (GEAT No 1).

[3] See GEAT (No 1) at [4] to [7].

[4] See GEAT (No 1) at [8] to [13].

[5] See GEAT (No 1) at [28] to [35].

[6] See GEAT (No 1) at [1] and [15].

[7] GEAT filed its Originating Motion and ex parte application under Rule 54 on 20 August 2024 and the written advice in question was dated 16 September 2024.

[8] [2019] NTSC 35 (Proud v Arkell).

[9] See Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (Macedonian Orthodox Church) [2008] HCA 42; (2008) 237 CLR 66 at [37] to [44] and [69].

[10] See Macedonian Orthodox Church at [64] and [195].

[12] [2013] NSWSC 844 at [110] (Re Cho-Poon).

[13] Macedonian Orthodox Church at [71] and [196] and Proud v Arkell at [110].

[14] Macedonian Orthodox Church at [72] to [73] and [196].

[16] [2013] WASC 216 (Plan B).

[19] See Macedonian Orthodox Church at [106].

[20] See Re Cho-Poon at [113] to [117].

[27] See Macedonian Orthodox Church at [162] quoting Palmer J in Re Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247 at [80].

[28] See Macedonian Orthodox Church at [162] to [163] and at [165] and see also the list of matters set out in Plan B at [37] quoted in GEAT (No 1) at [30].

[29] See Macedonian Orthodox Church at [74].

[31] See Mulherin v Quinn Village (Mulherin) [2007] QSC 231 at [17] to [19], Southern Equity Pty Ltd v Timevale Pty Ltd (Southern Equity) [2012] NSWSC 15 at [109] to [110] and Hancock v Rinehart [2015] NSWSC 646 at [338] to [339].

[32] See Mulherin at [18] to [19] and the discussion in Southern Equity at [109].

[33] See Proud v Arkell at [125].

[35] See at [14] and GEAT (No 1) at [30].

[36] [1992] FCA 368; (1992) 37 FCR 201 at 211 to 212.

[37] [2020] VSC 456 (Hopkins v Edwards).

[39] See also Marks v Evans [2023] VSC 158 at [14].

[40] They relevantly provide that: "a party who to as trustee ..., unless the Court otherwise orders, is entitled to the costs of the proceeding out of the fund held by the trustee, ..., to the extent that the costs are not paid by any other person."; and "where a party who sues or is sued as trustee is entitled to be paid costs out of a fund which he holds in that capacity, the costs shall, unless the Court otherwise orders, be taxed on the indemnity basis." respectively.

[41] Clause 17(a) provides that: "To the extent permitted by law, the Trustee in its absolute discretion, may indemnify the Members and Officers against any and all Legal Costs incurred by the Trustee or a Member or an Officer: (i) as a result of Legal Proceedings; or (ii) in connection with, in consequence of, in respect of or arising out of any actual or alleged act or omission of the Trustee or a Member or an Officer not acting in bad faith." The clause goes on to identify a number of provisos which are relevantly consistent with the common law position outlined above.

[42] [2016] SASC 178 at [58] concerning the executor of an estate but applying equally to a trustee.

[43] See also Macedonian Orthodox Church at [65].

[44] See Hopkins v Edwards at [200].