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[2023] FCA 271
Federal Court of Australia
2023-03-27
Persons Mr P, McElwaine J
Original judgment source is linked above.
The Application of 9 December 2021 23 On 9 December 2021, the solicitor for Hasst signed, dated and lodged an interlocutory application seeking non-publication and confidentiality orders pursuant to ss 37AF and 37AG of the Act concerning the provisions of a funding agreement entered into between it, Wright and Logan. That application was not accepted for filing until 10 February 2022. The orders sought to deny the Mr Jones Parties from learning the precise terms on which Hasst has agreed to provide litigation funding in the Family Court proceedings. 24 Justice Anderson at an interlocutory hearing on 9 March 2022, made certain confidentiality orders upon the application until conclusion of the administration of the bankrupt estate "or until otherwise ordered". He further ordered that the Trustees pay Hasst's costs of and incidental to the application. 25 At the case management hearing on 12 May 2022, I made orders vacating the confidentiality orders of Anderson J and that the material filed by Hasst subject to those orders be removed from the Court file. I did not vacate the costs order. Those orders were made after I raised with counsel for Hasst whether denying to one participant to the advice proceeding access to documents and submissions relied upon by another, could possibly be procedurally fair. Eventually counsel for Hasst accepted that the material claimed to be confidential was not materially relevant and accepted that the confidentiality orders should be vacated. Counsel for the Trustees and the Mr Jones Parties applied respectively for costs orders against Hasst. Eventually, I determined that the question of costs should be reserved until determination of the advice application. 26 The Trustees and the Mr Jones Parties now pursue their costs of the application, save for the discrete costs order made by Anderson J on 9 March 2022. Each seeks an order that Hasst pay the costs of and incidental to the hearing on 12 May 2022, and additionally the Trustees extend it to the appearance on 2 May 2022. 27 Hasst resists each application primarily on the ground that the question of costs is foreclosed by the costs order made by Anderson J on 9 March 2022. It is submitted that the costs order operates as a final order of the Court which was not appealed and the question of costs cannot now be revisited. I do not accept that submission. The Trustees and the Mr Jones Parties do not seek to re-agitate the costs order made by Anderson J. Properly understood, his Honour made a costs order consequential upon the substantive orders that were made on that day. Those orders were expressed to apply until otherwise ordered. On 12 May 2022, I made orders vacating the substantive orders that Anderson J had made. I did so after detailed submissions were made and considered. The costs order made on 9 March 2022 does not preclude the making of a separate costs order in relation to what occurred thereafter. 28 A further submission of Hasst is to the effect that it should not pay the costs of and incidental to the hearing on 12 May 2022, because the question of confidentiality was subsequently agitated at a case management hearing on 28 October 2022. That submission is misconceived: what I am concerned with is the exercise of a discrete costs discretion in relation to what occurred on 12 May 2022. 29 In my view the costs of and incidental to 12 May 2022 follow the event. Hasst conceded the irrelevance of the material that it sought to be protected by the confidentiality orders to the issues required to be resolved upon the judicial advice application. There are no relevant circumstances which displace the general costs rule that the Trustees and the Mr Jones Parties should have their costs. I am not, however, prepared to include the appearance on 2 May 2022 as a component of those costs. This was a case management procedural hearing and it is not appropriately the subject of a separate costs order.
The Confidentially Application 30 Wright and Logan by an application dated 27 October 2022 sought confidentiality and non-publication orders pursuant to ss 37AF and 37AG of the Act in respect of material comprised in and attached to an affidavit made by one of the Trustees on 7 July 2022, concerning the Funding Agreement with Hasst and made for the purpose of adducing evidence in a separate proceedings where the Trustees seek to disclaim that funding agreement. The affidavit attached a version of that agreement without redaction of clauses central to the funding limits. At the case management hearing on 28 October 2022, I dismissed the application and reserved the question of costs. During the hearing I expressed to counsel my difficulty in comprehending how the funding limit clauses were at all relevant to the judicial advice application. Senior counsel for the Trustees conceded that they are not relevant, but had been placed before me "because we want to keep your Honour appraised of all of the circumstances". Eventually, after I clearly stated that I would not be making any determination about the respective rights of the Trustees and Hasst arising under that agreement, all counsel agreed that the material in the affidavit would not be relevant to the advice application and that I should limit my consideration to a redacted version of the agreement that did not raise a claim of confidentiality. Thereafter senior counsel for the Trustees advised that he would not be reading the affidavit into evidence in this proceeding. 31 The Trustees do not seek an order for the costs of this application. The Mr Jones Parties submit that Wright and Logan should pay their costs of and incidental to it. Wright and Logan resist the application. They do so arguing that their sole interest and concern was "to protect their legitimate rights to confidentiality" in circumstances which were beyond their control. 32 Hasst submits that it should receive its costs from the Trustees and/or the Mr Jones Parties. This submission is put on the basis that the conduct of the Trustees and the Mr Jones Parties re-enlivened the issue of confidentiality, which had been addressed at the case management hearing on 12 May 2022. 33 The justification for the application by Wright and Logan was their concern that, for commercial reasons, the Mr Jones Parties should not be appraised of particular terms of their funding agreement with Hasst for the reasons of perceived advantage in the conduct of the Family Court proceedings. For example, if the Mr Jones Parties became aware of the funding limit, that knowledge may be used in deciding what steps would be taken in the Family Court proceedings. The difficulty, however, with that justification is that if the confidentiality and non-publication orders sought had been made, the Mr Jones Parties would not have had access to material and submissions relied upon by Hasst, Wright and Logan in this proceeding leading to distinct procedural unfairness. Balanced against that consideration is the fact that the Trustees were the parties responsible for placing material, which they ultimately conceded was irrelevant, before the Court which caused Wright and Logan to file the application. 34 Overall in my view, a principled exercise of the costs discretion favours an award of costs to Wright, Logan and the Mr Jones Parties to be paid by the Trustees. My primary reason is that the Trustees ought to have appreciated from the outset that the terms of the Hasst agreement, distinct from the fact of its existence, was irrelevant to determination of the judicial advice application. The material contained in the affidavit in the separate proceedings should not have been referenced in this matter.
Conclusion 35 For these reasons I order as follows:
SCHEDULE OF PARTIES VID 562 of 2021 Interested Persons Fourth Interested Person: ACN PTY LTD AS TRUSTEE FOR THE M TRUST Fifth Interested Person: MTA PTY LTD AS TRUSTEE FOR THE T TRUST Sixth Interested Person: MR JONES Seventh Interested Person: MR JONES' CREDITORS Eighth Interested Person AFC PTY LTD AS TRUSTEE FOR THE AFC DISCRETIONARY TRUST Ninth Interested Person HASST PTY LTD
Hughes
NM Superannuation Pty Ltd
MCELWAINE J 1 I provided judicial advice and made consequential orders in this matter on 7 December 2022: Bianco (Trustee), in the matter of the bankrupt estate of Jones (Deceased) [2022] FCA 1470 (PJ). I directed that further submissions on consequential issues and costs be provided. I ordered that pseudonyms be used so as not to identify the parties in order to maintain the confidentiality of some of the parties who are disputants in proceedings in the Federal Circuit and Family Court of Australia (Division 1). I adopt the same pseudonyms in this judgment. These reasons are informed by and should be read with my primary reasons. I do not repeat relevant findings therein. Terms and abbreviations used in these reasons have the same meaning as in the primary reasons. 2 I have now received costs submissions from the Trustees, Ms Wright and Logan Property Investments Pty Ltd as the first and second interested persons (Wright and Logan), ABC Pty Ltd, ACN Pty Ltd as Trustee for the M Trust and MTA Pty Ltd as Trustee for the T Trust as the third, fourth and fifth interested persons (Mr Jones Parties) and Hasst Pty Ltd as the ninth interested person (Hasst). 3 The competing positions may be shortly stated, though the analysis is more complex. The Trustees submit that costs should be ordered as follows: 1. Subject to paragraphs 2 and 3: (a) the Trustees' costs of and incidental to this proceeding be costs in the administration of the bankrupt estate of Mr Jones Snr; (b) the interested parties shall bear their own costs of and incidental to their participation in this proceeding. 2. Hasst Pty Ltd pay the Trustees' costs of and incidental to its application filed on 10 December 2021, including but not limited to the costs of the Trustees' appearances on 2 and 12 May 2022, to be taxed in default of agreement. 3. The costs Hasst is required to pay pursuant to paragraph 2 do not include those costs being the subject of the order by the Honourable Justice Anderson made on 9 March 2022. 4 Wright and Logan do not make submissions as to costs, save for the costs of a discrete interlocutory application made by them on 27 October 2022 for confidentiality orders which was dismissed at a case management hearing on 28 October 2022 (Confidentiality Application). They submit that there be no order in relation to the costs of the Confidentiality Application. 5 The Mr Jones Parties submit that their costs, together with the Trustees' costs of the originating application, be paid out of the assets of the bankrupt estate on an indemnity basis. Alternatively, subject to what follows, they submit that the Trustees and the Mr Jones Parties should bear their own costs of the originating application. They further submit that their costs of an interlocutory application made by the Trustees on 20 April 2022 and determined on 12 May 2022 be paid by Hasst and that Wright and Logan be ordered to pay their costs of the Confidentiality Application which sought orders pursuant to ss 37AF and 37AG of the Federal Court of Australia Act 1976 (Cth) (Act). 6 Hasst submits that the Trustees should pay its costs of the originating application on a party and party basis and that the costs applications of the Trustees and the Mr Jones Parties made against it should each be dismissed. 7 No submissions have been made by ACF Pty Ltd, Mr Jones or Mr Jones' creditors.
Costs of the Originating Application 8 The Trustees and interested persons accept that the costs discretion is broad and is guided by settled principles but ultimately turns on the particular facts and circumstances of this case. The principles that provide guidance in an application by a trustee or liquidator for judicial advice were summarised by Colvin J in Preston, in the matter of Sandalwood Properties Ltd (No 2) [2018] FCA 816 (Preston) at [15]-[24] as follows: In Farrow Finance Co Ltd (in liq) v ANZ Executors & Trustee Co Ltd (1997) 23 ACSR 521, an application by a liquidator for directions was upheld, but the substantive submissions advanced by the liquidator were not (described as being right for the wrong reasons): at 526. In that case, Hansen J stated the general principles to be applied as to costs upon an application by a liquidator for directions in the following terms at 526-527: Where the application is necessitated only by the stand taken by one particular creditor, or a certain group of creditors acting only in their own interest, and the question involved is not a complex one, then costs should generally follow the event. In other words, if the position which the liquidator always intended to adopt is vindicated, and the submission of the opposing creditors is rejected, then those creditors should be liable for the liquidator's costs of the application. … On the other hand, where the issue involved is a complex one, or one involving a relatively novel proposition in law, then the starting point is that the costs of all necessary parties are to be paid by the liquidator and counted as costs in the liquidation. These principles have been applied by other single judges, including in the context of applications for directions by receivers: Re New Cap Reinsurance Corp Holdings Ltd [2001] NSWSC 1001; Ansett Australia Ltd v Ansett Australia Ground Staff Superannuation Plan Pty Ltd [2002] VSC 114; and Gothard, in the matter of AFG Pty Ltd (Receivers and Managers Appointed) (in liq) v Davey (No 2) [2011] FCA 59. However, in BE Australia WD Pty Ltd v Sutton [2011] NSWCA 414 at [212]-[214] Campbell JA (McColl JA agreeing) stated: In my view, there is no occasion to make a costs order by reference to any principle other than that costs follow the event. In form, the litigation in the court below was an application by Ms Sutton appealing against the rejection of her proof of debt, or alternatively seeking an order under s 447A. Even though she ultimately did not press the appeal against rejection of her proof of debt, the question of whether she was a creditor was an integral part of considering whether it was appropriate to make an order under s 447A. The form of the proceedings, as inter partes litigation, is not decisive of how the costs of that litigation should be dealt with. Courts exercising equity jurisdiction encounter a variety of situations where a fund is being administered subject to the control of the court, and a question arises about the proper manner in which that fund should be administered. Such a situation can arise concerning administration of deceased estates, concerning administration of trusts, concerning company liquidations, concerning administration of the estates of incapable people, and concerning DOCAs. In those situations, whether the costs of the court deciding the question that has arisen should be treated as costs of administration of the fund is significantly influenced by whether the proceedings are in substance adversarial ones. While where the costs should fall in litigation is always a matter of discretion, very commonly costs are paid from the fund for non-adversarial proceedings, and by the loser for adversarial proceedings [citations omitted] The principles that Hansen J stated in Farrow Finance v ANZ … and that Warren J adopted in Re Ansett Australia are, with respect, very shallowly rooted in principle and authority. While it is true that in Re GPI Leisure Corp Ltd (in liq) (1994) 53 FCR 365 … Whitlam J made an order, on a liquidator's application for directions at which interested parties also appeared, for the costs of all parties to be paid out of the assets of the company, his Honour gave no reason for taking that course, and indeed it is not even clear from the judgment whether there was any contest about the appropriate order for costs. Hansen J's judgment in UTSA Pty Ltd (in liq) v Ultra Tune Australia Pty Ltd (unreported, SC(Vic), 19 July 1996) stated no general principle, and made an order for costs by reference to detailed consideration of the facts relating to the conduct of the particular litigation he was deciding. I do not find in those cases a reason to depart from the guidance arising from Re Buckton and to other cases I have mentioned concerning the way the costs of the present application should fall. Both the hearing in the court below and the appeal and cross-appeal were in substance adversarial litigation. The costs should follow the event. In other cases, courts have approached the issue of costs on an application for directions by applying the ordinary rule as to costs where a trustee, beneficiary or personal representative brings an action relating to the construction of the trust instrument or some other issue arising in the administration of the trust or the propriety of any action taken or to be taken. In such cases it is usual for orders to be made for the costs to be paid out of the trust, fund or estate on an indemnity basis: see, for example, the authorities collected by Finkelstein J in Australian Securities and Investment Commission, in the matter of GDK Financial Solutions Pty Ltd (in liq) v GDK Financial Solutions Pty Ltd (in liq) (No 4) [2008] FCA 858; (2008) 169 FCR 497 at [8] [10]. Where the application for directions concerns a subject matter that must be resolved as part of the administration of a receivership such that the costs may be viewed as costs of the receivership, then that is a matter that may warrant the costs of a party being fully indemnified out of the assets in the hands of the receivers. This is especially so where a party's participation has been, in effect, as a proper contradictor and the proceedings do not have the character of true adversarial litigation: as to these matters see Gothard v Davey (No 2) at [55] [57]. Also relevant may be the approach taken by receivers on the application and the extent to which they took a considered approach to the issues raised on the application for directions: Bredenkamp v Gas Sensing Technology Corporation, in the matter of Welldog Pty Ltd (In Liq) (Receivers and Managers Appointed) (No 2) [2017] FCA 1125. Therefore, if a party's participation is adversarial in the sense that it goes beyond that which is necessary in order to present the facts and address the issues so as to enable the court to provide advice for the purposes of the administration being conducted (in this case the receivership) then the approach to costs that applies to adversarial litigation should be applied. This is all the more so where the intervener participates to agitate a claim or position that has arisen from steps taken by the intervener. On the other hand, if a party participates as a proper contradictor solely for the purpose of assisting the court in addressing the issues necessary to provide proper and appropriate judicial advice to the party seeking directions, then the approach to costs on applications concerning the administration of a trust, estate or fund should be applied. In such cases it is usual for all parties properly participating to be entitled to their costs on an indemnity basis paid out of the trust, estate or fund on the basis that they are costs of due administration. Further, having regard to the views expressed by the Court of Appeal in BE Australia WD Pty Ltd v Sutton, the proper approach does not depend upon whether the issue raised is a complex one. Costs on an application for directions that raise complex matters that are dealt with in an adversarial way should be dealt with according to the principle that generally the discretion as to costs is to be exercised in favour of the successful party. Also, in an appropriate case, where directions by way of judicial advice are sought and the matter is not complex, a party who appears to oppose the directions in a manner that is not adversarial may nevertheless be exposed to the risk of a costs order. This is because, in such a case, the proper administration of the receivership is not advanced by a party who intervenes where the issue is relatively simple, and the issue can be dealt with by the court without the assistance of a proper contradictor. I take this to be the thrust of the concern behind the general principles stated by Hansen J in Farrow Finance which I have quoted above. For completeness, I note that none of these principles bear upon the extent to which the party seeking advice may recover the costs of seeking directions (including any costs awarded against that party) from the trust, estate or fund being administered. That is an issue which does not arise here. 9 I agree with his Honour and I adopt his analysis as relevant to the exercise of my discretion in this matter. 10 The Trustees submit that they succeeded, in substance, in obtaining the relief which they sought in the originating application. Attention is drawn to certain factors which I characterised in my primary reasons at PJ [6] as having the distinct flavour of adversarial litigation: the Mr Jones Parties participated with a view to advancing or protecting their interests in the Family Court proceedings, Hasst was concerned with protecting its asserted right to a priority interest in any proceeds recovered by Wright and Logan (and indirectly the Trustees) in consequence of success in the Family Court proceedings and, similarly, Wright was concerned to protect her economic interests in that proceeding. Thus, despite having a proper basis to seek an order that their costs be paid by one or more of the interested persons, the Trustees submit that "in order to avoid the inevitable arguments and expense involved in identifying those creditors' respective contributions to the Trustees' costs" that, with one exception, the Trustees only seek their costs from the bankrupt estate of Mr Jones Senior and to protect it from adverse costs claims. 11 The Mr Jones Parties submit that they properly performed the role of contradictor to the application for judicial advice and that by application of "the usual position", they should have their costs paid out of the bankrupt estate. For that submission reliance is placed on Stojic v Stojic (2018) 98 NSWLR 512; [2018] NSWSC 1268 (Stojic), Re MF Global Australia Ltd (in liq) (No 2) [2012] NSWSC 1426 (MF Global) and Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653 (Hughes). Emphasis is placed on the fact that the Trustees did not succeed in their claim for relief pursuant to s 67 of the Trustee Act 1958 (Vic) (Trustee Act) and whilst conceding that not all of their arguments were accepted, nonetheless the points relied on were assessed in the exercise of my discretion whether to grant relief and if so on what terms. A general submission is also made to the effect that the Trustees benefited from participation by the Mr Jones Parties which ensured that all relevant facts were disclosed to the Court. 12 In response, the Trustees submit that full disclosure was made by them in any event, save for an obvious error in one affidavit which was subsequently corrected, and that there is no basis to deprive them of their costs where it should be concluded that the proceeding was commenced and prosecuted appropriately. 13 Hasst submits that the Trustees should pay their costs of the originating application as between party and party and does not condition that order by limiting it to costs payable out of the assets of the bankrupt estate. It submits, correctly, that ordinarily an application by a trustee for judicial advice is made ex parte. In this case, the Trustees sought and obtained case management orders to the effect that notice was required to be given to all creditors of the bankrupt estate. Hasst had a proper interest in protecting its claimed right to priority over any sum recovered in consequence of the successful prosecution of the Family Court proceedings. This interest, limited as it was, was reflected in its primary submission that the Trustees should not be advised that they are "justified in implementing" the terms of the Funding Agreement for participation by the Trustees in the Family Court proceedings. To that extent, their submissions succeeded in that the advice given in consequence of my primary reasons was limited to advice that the Trustees were justified in entering into the Funding Agreement. Further, Hasst submits that as a result of participation in this proceeding, it secured in its favour agreement (a concession) from the Trustees that no order made on the originating application would prejudice the rights of Hasst, including any ability that it may have to commence proceedings against the Trustees in respect of any action that might be taken to perform the terms of the Funding Agreement. It is further submitted that Hasst participated in response to an invitation from the Trustees to do so, it raised matters relevant to the exercise of the discretion to grant relief that were not directly raised by the Trustees and that overall its participation was reasonable and of assistance to the Court. Finally, Hasst relies on the fact that the Trustees did not succeed in their application for exoneration pursuant to s 67 of the Trustee Act. 14 In response, the Trustees submit that they should not be ordered to pay the costs of Hasst and rely on several considerations as follows. They did not invite or compel participation by Hasst. Haast made an informed decision to participate and did not do so on a limited basis as demonstrated by reference to the extensive evidence and written submissions that it relied upon. The Confidentiality Application was without merit and dismissed. Although the ultimate result was less than the full extent of the relief claimed, nonetheless the relief ultimately granted vindicated the applicants' position. In answer to the submission that there was potential to prejudice the rights of Hasst, the Trustees point to correspondence prior to the hearing to the effect that the application did not seek to determine any substantive rights, which position was confirmed in opening submissions by their senior counsel. It is wrong to submit that the Trustees made a concession of the type asserted by Hasst and that I should conclude that Hasst "forced the expenditure of resources to do little more than confirm this furious agreement". 15 Subject to one matter dealt with below concerning the Confidentiality Application, in my view the Trustees at all times acted reasonably and appropriately in commencing this proceeding and in the manner in which it was prosecuted and argued. As set out in my primary reasons, I am satisfied that full disclosure was made by the Trustees. The issue upon which judicial advice was sought was complex. It was not an application which, in the ordinary course, would have been made ex parte and even if it had been, it is inevitable that the Court would have required notice to be given to the affected creditors and interested third parties, if only for the purpose of having the benefit of a contradictor. There is no basis to conclude that the Trustees acted unreasonably or otherwise engaged in some form of disentitling conduct so as to displace the usual rule that a trustee or liquidator who seeks judicial advice in relation to a matter arising under an administration is entitled to have his or her costs met as costs of the administration on an indemnity basis: Preston at [18]. 16 I do not consider that the Mr Jones Parties should also receive their costs whether on an indemnity or party and party basis from the bankrupt estate. As is clear from my primary reasons, the Mr Jones Parties have very significant economic interests at stake that they seek to protect in their vigorous defence of the Family Court proceedings commenced by Ms Wright and supported by the Trustees. Although Mr Jones does not make a costs submission in this proceeding, his related corporate entities do. In my view, his interests are aligned with them. If the Trustees had failed in their application for advice to the effect that they were justified in entering into the Funding Agreement that is likely to have been to the advantage of the Mr Jones Parties and Mr Jones, despite the applicants' position that performance of the Funding Agreement did not depend on the receipt of favourable advice. The effect of the judicial advice provided in consequence of my primary reasons is to exonerate the Trustees from claims of breach of duty in their decision to enter into it. The consequence is that the Trustees may continue to participate in the Family Court proceedings, free from claims that they have acted inappropriately in respect of the Funding Agreement. Claims of that sort were asserted, somewhat vaguely by the Mr Jones Parties in this proceeding but were not accepted by me as a reason to refuse advice. However, had the Trustees not received the advice, such claims were open to be made and pursued by the Mr Jones Parties and Mr Jones to at least make it more difficult for the Trustees to fully participate in the Family Court proceeding. 17 The Mr Jones Parties rely on authorities to the general effect that in the ordinary course a contradictor in an application by a trustee for judicial advice concerning the administration of a trust will receive costs to be paid out of the trust fund: Stojic at [46]-[52] Ward CJ, MF Global at [27], Black J and Hughes at 671, Sheller JA (with whom Kirby P agreed). However, as explained in Macedonian Orthodox Community Church St Petka Incorporated v His Eminence Petar The Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66; [2008] HCA 42 at [71]-[72], Gummow ACJ, Kirby, Hayne and Heydon JJ, ordinarily the resolution of questions in proceedings of that character serve the important function of protecting the interests of the trust. As I have explained, participation of the Mr Jones Parties in this proceeding was distinctly different. I made that finding in my primary reasons at PJ [98]. Self-interest was raised in Stojic as a reason to conclude that a participant was an adversary and not merely a contradictor, disentitled to costs out of a deceased estate. That submission did not ultimately succeed before Ward JA who ordered that the participant's costs be paid out of the estate but set-off against any amounts that he is found liable to repay to the estate: [53]-[55]. The case is not authority for some broader principle that persons who participate as adversaries will be entitled to receive costs from a trust fund. And I note that her Honour's attention was not drawn to line of cases referenced by Colvin J in Preston as extracted above. 18 In MF Global, Black J accepted at [34]-[35] that where the proceeding is adversarial, costs usually follow the event: "very commonly costs are paid from the fund for non-adversarial proceedings, and by the loser for adversarial proceedings." In Hughes, Sheller JA (with whom Kirby P agreed) at 671 said: It is I think well-established that, where the terms of a trust document in the context of events which have happened reasonably lead to a trustee to seek administrative advice from the Court as to its meaning and how it should be administered, all parties properly joined should have their appropriate costs out of the Fund. 19 The Trustees in this proceeding did not seek advice as to how the bankrupt estate should be administered. Rather they sought advice confirming their justification for entry into the Funding Agreement in order to actively participate in the Family Court proceedings. Were it not for the Funding Agreement, the Trustees would not have been able to participate in the Family Court proceedings. The Mr Jones Parties actively resisted the judicial advice sought by the Trustees. Mr Jones and ABC Pty Ltd are adversaries in the Family Court proceedings. If Ms Wright ultimately prevails, there is likely to be a very significant return of divisible assets to the bankrupt estate. The interests of the Trustees and Ms Wright are aligned in the Family Court proceedings. The Mr Jones Parties made submissions to the effect that I should refuse to provide the advice sought by the Trustees as it will affect their ability to subsequently contend that the Trustees breached the trust obligations or were conflicted in entering into the Funding Agreement. It was forcefully submitted that the applicant's participation in the Family Court proceedings was wasteful, costly and unnecessary. The Trustees were criticised for their decision to expend funds of the bankrupt estate on litigation in the Family Court when a distribution ought to have been made to the unsecured creditors at an early point in time. The Funding Agreement was criticised for providing a commercially disproportionate return to the litigation funder. In my primary reasons each of those submissions are rejected, amongst others. Most of the submissions relied upon by the Mr Jones Parties were redolent of a desire to protect their economic interests and those of Mr Jones. 20 The extent of participation by the Mr Jones Parties, as revealed in the matters relied on which I addressed in my primary reasons, leads me to conclude that they did so as substantive adverse parties who failed in the event and which may have justified an order that they pay the applicants' costs: Preston at [20]. However, the Trustees do not seek that order. 21 The Mr Jones Parties did not confine their participation to mere contradictors. Their active participation was driven by self-interest and that of Mr Jones: PJ [98]. In these circumstances they should not receive their costs out of the bankrupt estate and must bear their own costs. 22 As to the application of Hasst, I do not consider that this is an appropriate case for there to be an award of costs in its favour to be paid by the Trustees. Even if one understands the application as not being for a personal cost order against the Trustees, but one which seeks a payment of costs from the assets of the bankrupt estate, for reasons similar to those that I have expressed in relation to the Mr Jones Parties, I am satisfied that Hasst voluntarily participated in the proceeding in order to protect its interests. It did not act as a disinterested contradictor concerned with protecting the assets of the trust estate. Its participation, although confined to the priority question said to arise from its separate litigation funding agreement with Wright and Logan, occurred despite clear statements made on behalf of the Trustees by their senior counsel on 9 March 2022 at a case management hearing that nothing in the application seeks "to upset the existing - the legal relationships as between [Hasst] and [the bankrupt estate] or as between [Hasst] and any other claimant on [the bankrupt estate]". Further, on 25 May 2022, the solicitor for the Trustees clearly stated in writing to the solicitor for Hasst that the Trustees would not pay any part of any sum recovered by them in consequence of the Family Court proceedings without first providing one week's notice in writing to its solicitors. Overall, I am satisfied that participation by Hasst was adversarial. In these circumstances, and noting that the Trustees do not seek an order for costs against Haast, the appropriate order is that it should bear its own costs of the proceeding.
[2002] VSC 114
(1993) 29 NSWLR 653
(2008) 237 CLR 66
(2018) 98 NSWLR 512
(1994) 53 FCR 365
(2008) 169 FCR 497
[2008] HCA 42