Lowe v Sze Tu as Administrator of the Estate of the late Fung Chun Chow; Lowe v Pascoe as Administrator of the Estate of the late Kut Sze Tu

Court of Appeal (NSW)|2023-05-29|Before: Bell CJ, Mitchelmore JA

Background to the appeal

In order to evaluate the arguments on the appeal, it is necessary to address aspects of the procedurally complex litigation in some detail. I received considerable assistance in this regard from the Joint Agreed Chronology that the parties handed up at the commencement of the hearing. I have also drawn from the reasons of the primary judge in Lowe v Pascoe (No 9) [2021] NSWSC 163 ("Lowe v Pascoe (No 9)"), and from other judgments to which I have referred below.

The Partnership and the Three Properties

Administration of the KST Estate and the KST Estate Fund

On 26 March 2001, the Administrator was appointed as receiver of the real property of KST, and as Administrator of the KST Estate for the limited purpose of taking an account and verifying distributions from the KST Estate in order to report to the Court. On 13 May 2002, the Administrator provided a report to the Court which recorded, inter alia, that before his appointment various family members had made withdrawals from KST's bank accounts.
Following settlement of certain litigation on 22 November 2002 by way of a Deed of Family Arrangement, the Administrator took on the general administration of the KST Estate pursuant to Letters of Administration issued to him that same day. In the course of seeking to get in the assets of the KST Estate, in order to distribute the estate according to the Deed of Family Arrangement, the Administrator sold KST's interests in a number of properties, including his interests in the Three Properties.
KST's interest in the Haig Street property was sold to Sunly and Gordon; his interest in the Maroubra Road property was sold to an unrelated third party; and his interest in the Campbelltown property was sold to Margaret and Helen: Lowe v Pascoe (No 9) at [10]. The cash received from the sale of KST's interests in the Three Properties was mixed in a single fund with monies received from sales of KST's interests in other properties and cash from KST's bank accounts (the KST Estate Fund). The value of the KST Estate Fund has fluctuated over time, due to interest accruing and payment of the Administrator's costs and expenses.

The Partnership Proceedings (2005/262284)

On 7 November 2005, the Lowes commenced the Partnership Proceedings. The defendants in the Partnership Proceedings included the other members of the Partnership: Margaret, Helen, Janet, the KST Estate (through the Administrator), and the Estate of FC Chow. Although Sunly, Gordon and Stella were not partners in the Partnership, the Lowes also joined them as defendants. As summarised in the Joint Agreed Chronology, the relief that the Lowes sought in the Partnership Proceedings included the following: "a. a declaration as to the partnership and partnership interests; b. an account as between partners; c. a general account against the Estate of the late FC Chow; d. declaratory relief that 100% of [the Three Properties] were held on constructive trust for the Partnership: i. the late KST interests, as well as ii. Margaret's interests, iii. Helen's interests, iv. Sunly's interest, and v. Gordon's interests."
A number of the individual defendants contended that there was no partnership, or alternatively that any partnership was a sham partnership. They also contended that the claims were time-barred by reason of the Limitation Act 1969 (NSW), directly or by analogy, or were precluded by the defences of the laches, conventional estoppel or indefeasible title.
On 17 April 2008, the Estate of FC Chow filed a submitting appearance in the Partnership Proceedings: Lowe v Pascoe (No 9) at [57]; [148]. The filing of the submitting appearance came after Stella (who at that time had replaced Sunly as the representative of the Estate of FC Chow) had received a letter from the Lowes' solicitors dated 14 April 2008 (the April 2008 Letter). The April 2008 Letter relevantly stated: "…it is apparent that it would not be appropriate for your client to actively defend the [Partnership] proceedings … Should [the Lowes] succeed [in the Partnership Proceedings], it is likely that substantial value will be added to your client's mother's estate to the benefit of the beneficiaries of that estate … There is no apparent downside for your client in supporting our clients' claims … There is an obvious commercial benefit to the beneficiaries of your client's mother's estate, including your client herself, in the event that our clients' claims in the proceedings succeed … The purpose of this letter is to invite your client to consider the commercial futility in defending the proceedings and, instead, to admit the allegations in the Amended Statement of Claim, or, alternatively, file a Notice of Submitting Appearance."
The Court heard the Partnership Proceedings over various dates between 30 October 2008 and 9 October 2009. On 25 June 2010, Smart AJ gave judgment, declaring the existence of the Partnership, from 1 August 1975, between the late KST, the Lowes, Margaret, Janet, Helen and the late FC Chow. His Honour further declared that the Lowes each held a 10% interest in the Partnership; Margaret, Helen and Janet each held a 10% interest; the KST Estate held a 20% interest; and the Estate of FC Chow held a 30% interest.
Between 13 August 2012 and 21 August 2012, the parties appeared before Gzell J on the hearing of three issues in the Partnership Proceedings, namely, dissolution of the Partnership, KST's fiduciary duties, and whether the interests of KST, and the other defendants, in the Three Properties were held on trust. On 5 December 2012, his Honour gave judgment on those issues in Lowe v Pascoe (No 4) [2012] NSWSC 1493. On 13 March 2013, his Honour made a series of declarations and orders, including that KST, in breach of his fiduciary duties, had misappropriated funds of the Partnership and used some of those funds to purchase the Three Properties. His Honour also made declarations giving effect to his finding that 90% of KST, Margaret, Helen, Sunly and Gordon's interest in the Three Properties, or their net proceeds, were subject to an institutional constructive trust in favour of the Partnership.
In relation to the costs of the Partnership Proceedings, Gzell J made the following orders: "9. With the exception of (a) costs the subject of order 10 below (b) costs which have previously been the subject of a costs order in favour of a party to these proceedings and (c) costs which were otherwise specifically the subject of an order reserving costs, the Second, Third, Fifth and Sixth Defendants pay the Plaintiffs' costs of the proceedings, including the proceedings before Smart AJ. 10. The Plaintiffs pay: a. the Defendants' costs of and incidental to the disputed application before Gzell J, determined on 3 August 2012; and b. the Fifth and Sixth Defendants' costs of and incidental to the hearing before Smart AJ concerning the Plaintiffs' jurisdictional objection which was the subject of his Honour's 24 March 2011 judgment. 11. The Court notes that the costs ordered to be paid by paragraphs 9 and 10 above are payable now (subject to assessment) and shall not be deferred until the completion of the taking of the inquiry provided for in paragraph 7."
By Order 7, to which Order 11 referred, Gzell J ordered that an inquiry be held "in order to identify what (if any) monies the Plaintiffs are entitled to (and from whom) by way of an account of profits (after taking into account any just allowances)".

Appeals in the Partnership Proceedings and the direction for the Inquiry

Sunly and Gordon, Margaret, and Helen lodged separate appeals from the orders of Gzell J, challenging both the factual and legal premises of the trust- based claims and reasserting defences they had argued at first instance.
On 23 December 2014, in Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462, the Court of Appeal (Gleeson JA, Meagher and Barrett JJA agreeing) allowed the appeals. The Court did not set aside the declarations that Gzell J made regarding the existence of a trust in favour of the Partnership with respect to 90% of the interest of KST in the net proceeds of the Three Properties, but it did set aside a number of other orders that his Honour had made. In lieu of his Honour's orders, the orders of the Court of Appeal relevantly included, as part of Order 3: "(ii) Declare that the partnership, being the partnership declared by Smart AJ on 25 June 2010 (the Partnership), was dissolved on 1 July 1989. (iii) Declare that 90% of any profits (if any) derived by the late [KST] from the Partnership Properties after just allowances (if any) since the date of their acquisition were and are held on constructive trust for the Partnership. (iv) Direct that an inquiry be held to identify what (if any) moneys the [Lowes] are entitled to from the late [KST] by way of an account of profits after taking into account any just allowances, in respect of the benefits (if any) obtained by the late [KST] through his ownership, possession and/or use of his respective interests in the Partnership Properties since their acquisition. (v) Order that [the KST Estate] pay to [the Lowes] 20% of the amount of the benefits the late [KST] obtained through his ownership, possession and/or use of the Partnership Properties since their acquisition as may be found to be due pursuant to the inquiry referred to in order (iv) above"
The declaration that the Court made in Order 3(iii) has been referred to in subsequent proceedings, including this appeal, as the Profits Trust.
Since August 2016 in the Partnership Proceedings, and since October 2017 in the FC Chow Proceedings, there have been various hearings conducted, and judgments given, pursuant to Order 3(iv) (collectively, the Inquiry), to which I will refer below.

The Court of Appeal's costs orders of 10 April 2015

On 10 April 2015, the Court of Appeal handed down Sze Tu v Lowe (No 2) [2015] NSWCA 91 ("Sze Tu v Lowe (No 2)"), which dealt with the costs of the appeal. Gleeson JA (Meagher and Barrett JJA agreeing) concluded that the Lowes should pay 85% of the respective appellants' costs of the appeals: at [54]. In so concluding, his Honour looked at the matter globally and considered that an order as to 85% of the respective appellants' costs of the appeals reflected "the respective success of the parties on appeal where the appellants were wholly successful in their own interests and only partly successful to a limited extent in the interests of the [KST] Estate": at [54].
The Lowes had sought an order that, save as provided for by Order 10 made by Gzell J on 13 March 2013, the KST Estate pay its costs of the appeal and of the proceedings at first instance, "out of the [KST] Estate (and only to the extent that the assets of the [KST] Estate are sufficient to pay those costs)": at [15]. The Lowes also sought the following order relevantly to those costs: "(4) the costs referred to in order 2 … are to be paid: (a) in priority to the trust declared by the Court in order 3(iii) made on 23 December 2014 [(the Profits Trust)]; (b) in advance of the inquiry directed to be held by the Court in order 3(iv) made on 23 December 2014; and (c) in priority to the fulfilment of order 3(v) made by the Court on 23 December 2014."
As to whether the Lowes should obtain a costs order against the KST Estate, Gleeson JA described the Lowes as having "enjoyed substantial success in their claim against the [KST] Estate" ([72]), but considered that their entitlement to costs was modified by a number of matters. Those matters included the multiplicity of parties, actions and issues, the various issues on which the Lowes had mixed success, the extent to which those issues were clearly dominant or separate, their overall significance to the outcome, and the time they occupied during the hearing so far as could be discerned: at [72]. Gleeson JA concluded that some allowance in favour of the KST Estate should be made in relation to the Lowes' failed claims against it for accounting relief as a partner, and in relation to issues that the Lowes raised unsuccessfully: at [73]-[74]. His Honour continued at [75]: "Further, Geoffrey and Mary should not have the whole of their costs of the proceedings in circumstances where there were multiple parties, actions and issues, and they have succeeded only against the Estate. This has two aspects. One is that the Estate should not be required to bear the costs at first instance which relate to matters against other defendants which were separate and distinct from matters concerning the Estate. The separate matters concerning the successful defendants included the resulting trust claim; the indefeasibility defences; Margaret's asserted contribution to the Maroubra Road property; and the re-opening application before Smart AJ. The other aspect is that there should be some allowance for the extent of the Estate's participation in the proceedings at first instance relative to the participation of the successful defendants who were the active defendants at first instance. It is common ground that the Estate was not an active party at first instance. Insofar as Geoffrey and Mary incurred costs in pursuing their claims against the Estate and claims against the successful defendants, the greater proportion of Geoffrey and Mary's costs would have related to the later claims."
The manner in which these aspects could best be accommodated, in his Honour's view, was by allowing the Lowes a proportion of their costs at first instance: at [76]. In so allowing, however, it was relevant to take into account that any costs order against the Estate would "burden parties who played a passive role in the proceedings and have an interest in the [KST] Estate": at [77]. This could, in turn, be accommodated "by imposing a condition, as sought by the Estate, as to the source from which any costs order may be satisfied": at [77] (emphasis added). In addition to the interests of those who played a passive role, Gleeson JA considered that the interests of the successful appellants would be served by a condition of that nature, relevantly observing at [78]: "Although the Court was not provided with any information as to the quantum of Geoffrey and Mary's costs, it may be inferred from the form of orders proposed by them that the orders they seek against the Estate, if made, may substantially, if not wholly, erode the assets of the Estate. In those circumstances the successful appellants would, in effect, be paying or contributing to Geoffrey and Mary's costs."
Accepting that the KST Estate took an adversarial position in the proceedings, his Honour concluded that an order for costs should be made subject to two limitations, which he set out in [80]-[81]: "The first limitation is that [the Lowes] should receive only a proportion being 35% of their costs at first instance having regard to the matters identified above. The second limitation relates to the source from which such costs should be paid. … the costs order … is payable only to the extent that the costs can be satisfied from KST's 20% share of the partnership assets currently held by the Estate."
His Honour accepted that given the Lowes' success against the KST Estate in relation to their principal claim for proprietary relief, it was appropriate that their costs "should be paid forthwith", noting that no submissions had been made to the contrary: at [82]. However, his Honour rejected the Lowes' contention "that any costs order against the [KST] Estate should have priority over the constructive trust declared by this Court in favour of the partnership in respect of 90% of the profits (if any) derived by the late KST from his interest in the three properties, subject to any just allowances": at [83]. The submissions suggested no basis for conferring such priority: at [83].
The Court of Appeal made orders in the following terms: "(1) The first and second respondents (Geoffrey and Mary) pay 85% of the respective appellant's costs of the appeals. (2) In lieu of orders 9 and 11 of the orders made by Gzell J on 13 March 2013 [see [22] above], substitute the following orders: "9(a) The first and second plaintiffs (Geoffrey and Mary) pay the second, third, fifth and sixth defendants' costs of the proceedings at first instance, including the proceedings before Smart AJ. (b) Subject to (c) below, the first defendant (the [KST] Estate) pay 35% of the plaintiffs' costs of the proceedings at first instance, including the proceedings before Smart AJ. (c) The costs order referred to in (b) above is payable only to the extent that the costs can be satisfied from the late [KST's] 20% share of the net proceeds of sale of the assets of the partnership currently held by the [KST] Estate (being the partnership declared by Smart AJ on 25 June 2010). 11 The Court notes that the costs ordered to be paid by paragraph 9(a), (b) and (c) above and paragraph 10 of the orders made by Gzell J on 13 March 2013 are payable now (subject to assessment) and shall not be deferred until the completion of the taking of the inquiry provided for in paragraph 3(iv) of the orders made by this Court on 23 December 2014."
I will refer to these orders below, collectively, as the Capped Costs Orders.

Progress of the Inquiry

On 2 August 2016, the Administrator filed a notice of motion and supporting affidavit in the Partnership Proceedings in order to progress the Inquiry. The Lowes filed a competing notice of motion on 10 October 2016. On 1 February 2017, the Court ordered that the Inquiry be conducted by a Judge of the Supreme Court. The terms of reference for the Inquiry, which were annexed to the Court's orders, included, in paragraph 1: "1. The Inquiry shall: (a) take an account of the profits (if any) after just allowances in respect of the benefits (if any) obtained by the late [KST] through his ownership, possession and/or use of his respective interests in [the Three Properties]; and (b) determine what (if any) of the benefits the plaintiffs, [the Lowes] are entitled to out of the benefits (if any) identified in the taking of accounts referred to in subparagraph (a) above."
On 17 March 2017, the solicitors for Helen wrote to the solicitors for the Administrator, confirming that Helen also wished to claim her share of the corpus of the capital from the sale of the Three Properties and that it was her position that "all partners of the Partnership should be entitled to their distribution of the corpus, pari passu, once that formula is determined by the Inquiry as the partnership has been dissolved by the New South Wales Court of Appeal Judgment on 24 December 2014". Prompted by that letter, which was copied to the solicitors for the Lowes, the Lowes' solicitor wrote a letter to the Administrator's solicitors dated 21 March 2017, stating that Helen had no entitlement to the payment described in the letter from Helen's solicitors at the conclusion of the Inquiry and that such a claim was statute barred. The Lowes' solicitors further stated that Helen had no entitlement to payment arising from the profits derived from the Three Properties as that claim was likewise statute barred.
During argument on the appeal, Senior Counsel for the Lowes accepted that although the letter from the Lowes' solicitors referred only to Helen, it was making a broader claim that no other partner was entitled to a distribution. In Lowe v Pascoe (No 9), Emmett AJA noted Sunly's contention that receipt of this correspondence from the Lowes' solicitors in March 2017 was the first point at which he understood that there was any controversy with respect to the entitlement of the Estate of FC Chow to share in the property of the Partnership consistently with the orders of the Court of Appeal: at [151].

The Lowes' application for payment of their costs

On 13 April 2017, the Lowes filed a notice of motion seeking, inter alia, the following order with respect to payment of their costs pursuant to the Capped Costs Orders: "3. The first defendant pay to the plaintiffs: (a) $676,716.25 as assessed by Alyson Ashe of Alyson Ashe & Associate or such other amount as the Court may determine, as constituting 35% of the plaintiffs' costs of the proceedings at first instance; or (b) such other amount as the Court may determine, as constituting an amount equivalent to 20% of the net proceeds of sale of the Partnership Properties, whichever is the lesser."
The Court made programming orders with respect to that claim on 1 May 2017, which included the filing of Points of Claim, Points of Defence and Points of Reply. In their Points of Claim, filed on 15 May 2017, the Lowes pleaded that KST's 20% share of the net proceeds of sale of the assets of the Partnership, calculated to 31 May 2017, was $1,042,712.15, comprising: $606,275.37, being KST's share of the net proceeds of the sale of the Three Properties; and $442,436.78 in interest on his share (at [33]).

Commencement of the FC Chow Proceedings (2017/325815) and application in the Partnership Proceedings

On 27 October 2017, Gordon, Sunly and Stella (in her capacity (at that time) as the administrator of the Estate of FC Chow) commenced proceedings, seeking distributions from the Net Proceeds Trust and Profits Trust to the FC Chow Estate in proportion to FC Chow's share as a Partner. On the same day, Stella filed a notice of motion in the Partnership Proceeding seeking orders to the effect that the KST Estate pay the Estate of FC Chow 30% of the Partnership entitlement, on the taking of accounts of the Partnership.
On 7 December 2017, after the Administrator raised in a directions hearing of the Partnership Proceedings, on 22 November 2017, that the Estate of FC Chow had no right to a partnership distribution, Stella filed a further notice of motion in the Partnership Proceedings which sought leave to withdraw the submitting appearance that had been filed in those proceedings, to the extent that was necessary to move on the motion filed on 27 October. Emmett AJA refused the leave sought to withdraw the submitting appearance, in a judgment delivered on 20 March 2018: Lowe v Pascoe (No 7) [2018] NSWSC 333. His Honour did make an order substituting Sunly as the representative for the Estate of FC Chow in the Partnership Proceedings.

Offers by the Administrator to the Lowes in relation to costs

On 5 May 2017, the Administrator had made an open offer to the Lowes to pay the amount of $344,224.30 in full and final satisfaction of the Capped Costs Orders. The Lowes did not accept that offer.
In February 2018, the Administrator provided a report that was to be led in evidence in the Inquiry. Among other issues addressed in the report, the Administrator calculated the net proceeds of sale of the Three Properties (section 6.5). As the Net Proceeds Trust extended over 90% of the net proceeds of sale of those Properties, the Administrator calculated the net proceeds held on trust for the Partnership in the amount of $2,433,113. The 20% interest of the Lowes in that amount was $486,623 (before adjustments for the Administrator's remuneration attributable to the net proceeds). As KST's interest was also 20%, the amount of his interest was the same (before adjustments for the consultant's costs).
By letter to the parties to the Partnership Proceedings, dated 6 June 2018, the Administrator wrote noting that he proposed to seek agreement from the Lowes on a figure as to their costs, being $550,000 inclusive of GST. That figure was advanced by the parties' respective experts as a fair and reasonable outcome. The Administrator wrote that if the Lowes accepted that figure, there was "then the further complication that the amount payable by the Administrator is capped at an amount equal to the late [KST's] share of the net proceeds of sale of the Partnership Properties". The Administrator foreshadowed attempting to reach agreement with the Lowes "in relation to the effects and consequences in the present case of the 'capping' adverted to in the preceding paragraph". On 23 August 2018, the Administrator wrote to the Lowes, referring to the 6 June 2018 letter and asking whether the Lowes agreed to the experts' figure of $550,000 inclusive of GST as being the reasonable amount of their costs.
In December 2018, there were discussions between the Lowes and the Administrator, the nature and outcome of which was the subject of disagreement on the appeal. All parties appear to accept that the Lowes and the Administrator had agreed that the maximum amount payable to the Lowes with respect to costs was $550,000. According to the Joint Chronology, the Lowes and the Administrator accept that they had agreed that the amount of $550,000 inclusive of GST was to be treated as the reasonable amount of the Lowes' costs. However, the Lowes characterised the discussions as resulting in an agreement to settle the Capped Costs Orders in the sum of $550,000, which the Administrator refused to pay, whereas the Administrator characterised the agreement as merely "the first step to be taken", with the next step being to "ascertain the cap that then applied to the source of funds from which 35% of the reasonable costs could be satisfied". This involved ascertaining "the portion of the KST Estate Fund that comprised the Profits Trust."
On 20 December 2018, the Administrator wrote to the Lowes, referring to their request that the Administrator pay $550,000 in satisfaction of the Capped Costs Orders and noting that the Administrator was "not in a position to determine whether the amount payable would ultimately be $550,000 as the costs are only payable to the extent that they can be satisfied from the late [KST's] 20% share of the net proceeds of sale" of the Three Properties. The letter further stated that in an effort to resolve the issue, having regard to the Capped Costs Orders and the report the Administrator had submitted to the Inquiry (referred to above at [44]), the Administrator was "prepared to resolve this matter by paying to the plaintiffs the amount of $450,000 in full and final satisfaction of the Costs Order". The Administrator referred in this context to: 1. the Lowes' acceptance that the KST Estate was only liable to meet the lesser of: 1. 35% of their costs at first instance, as assessed or agreed; or 2. 20% of the net proceeds of sale of the assets of the Partnership currently held by the KST Estate; and 1. the Administrator's calculation, in his February 2018 report, of $486,623 as constituting 20% of the net proceeds of sale of the assets.
The Lowes did not accept this offer.
Various other offers were made by the Administrator at and following mediation to try to settle the whole of the Lowes' claims against the KST Estate, including their costs claim, none of which were accepted.

Hearing of the FC Chow Proceedings and the Inquiry

On 11 March 2019, the Estate of FC Chow filed an amended statement of claim in the FC Chow Proceedings. The Administrator filed an amended defence on 26 March 2019, while the Lowes filed an amended defence on 11 April 2019. Amended replies were made to the amended defences, dated 4 April 2019 and 29 April 2019 respectively.
On 10 August 2020, Emmett AJA commenced hearing the Inquiry and the FC Chow Proceedings. On 4 March 2021, his Honour gave judgment in Lowe v Pascoe (No 9), determining that the Estate of FC Chow was entitled to a Partnership distribution, subject to the Estate of FC Chow notionally accounting for benefits received by the beneficiaries of that Estate: at [207]-[210].

The claim for contribution

On 15 April 2021, the parties raised with the primary judge that the reasons in Lowe v Pascoe (No 9) may be subject to some ambiguity and may indicate some misapprehension as to the relevant facts. Emmett AJA directed each party to serve a written outline of any questions as to ambiguity in the reasons for judgment in Lowe v Pascoe (No 9), or any misapprehension as to the questions being resolved.
The parties exchanged outlines and a series of responses thereto. In submissions dated 29 April 2021, the Lowes raised the issue of contribution. The issue was advanced in the context of a submission that the analytical work of equity should not proceed from the premise that each partner has an 'equal' proprietary interest in the fund. The Lowes contrasted their position with that of Margaret, Helen and Janet, none of whom ultimately sought payment orders and did not have a specific interest in the fund. It followed, the Lowes submitted, that "even if Margaret, Helen or Janet obtained orders now, having done the necessary equity and shown there was still value in the interests they claimed, that interest would be later in time to the Lowes' interest": at [52]. Their submissions continued at [53]-[54]: "Margaret's, Helen's and Janet's position as former fellow partners reinforces this analysis because it reminds us that a partner's obligations are not quite those of a beneficiary of a trust. If, despite all questions of laches, they now returned funds and claimed on the trusts, or were to receive something as an adjunct to another's claim, each would do so as a partner reliant upon the findings of the inquiry. The inquiry only occurred, however, due to the Lowes' efforts from 2016 onwards in establishing it. Margaret's, Helen's and Janet's status as former partners, claiming a share consonant with their partnership interest, would fairly then be subject to an order to contribute to the costs of the inquiry. The contribution would be in an amount proportionate to their interest in the partnership. That is the normal rule in partnership suits and there is no reason why it would not now apply to partners claiming through the efforts of fellow partners (Cavasinni v Cavasinni [2007] NSWSC 619 [58]; see also s 24(1) rule (2)(b) Partnership Act 1892 (NSW)). Such costs would normally diminish the value of their respective interests because those costs would be recoverable from the fund (Cavasinni at [59]). FCC's claim on the fund is subject to a similar analysis. It sought a payment order on 27 October 2017, by way of summons, and later sought an inquiry in similar terms to that favouring the Lowes. We have seen that is (scil it) has no value in its claim, now that it is worked out; even if it did, it would only now result in a payment order in respect of specific assets. Having been created later in time, the Lowes would have priority in any shortfall situation in respect of fund payments."
In the conclusion to those submissions, the Lowes set out the orders that they submitted the Court should make in the Partnership Proceedings and the FC Chow Proceedings. The orders they proposed did not include an order for contribution. Rather, in the Partnership Proceedings, the Lowes sought a distribution from the Net Proceeds Trust and the Profits Trust in a specified amount, liberty to apply in respect of the amount payable to the Lowes pursuant to the costs order made by the Court of Appeal and orders for costs of the Inquiry and interest; while in the FC Chow Proceedings they sought an order that the KST Estate pay the Estate of FC Chow 30% of the benefits KST obtained through his ownership, possession and/or use of the Three Properties, certification or declaration that the Estate of FC Chow was not entitled to any payment, and an order that the Estate of FC Chow pay their costs. The responsive submissions of the FC Chow respondents focused on the orders that the Lowes sought as against them.

The hearing on 13 July 2021

On 13 July 2021, his Honour held a further hearing concerning the issues that the parties had raised. The Administrator prepared an agenda for the purposes of the hearing in consultation with the other parties, which summarised the questions that the parties wished to ventilate at the hearing. The agenda, which the primary judge set out in the judgment he published following the hearing, Lowe v Pascoe (No 10) [2021] NSWSC 1232 ("Lowe v Pascoe (No 10)") at [11], included: 1. for the Administrator: whether Helen, Margaret and Janet, as members of the Partnership, should receive a distribution from the funds held by the Administrator; and whether the partners who have received unauthorised distributions from the KST Estate should account to the KST Estate if they are to receive a distribution from the funds held by the Administrator; 2. for the FC Chow respondents: the notional accounting by the late FC Chow in respect of notional distributions to Sunly and Gordon, and the effect of the Deed of Family Arrangement; 3. for the Lowes: whether the Lowes are entitled to pre-judgment interest; and "[w]hether, if all partners are to receive a distribution, each partner must contribute to the Lowes' costs to date as a condition of the receipt of a distribution".
The parties agreed to defer the issues of costs and any indemnification of the Administrator: Lowe v Pascoe (No 10) at [10].
In the hearing on the agenda issues, on 13 July 2021, Senior Counsel for the Administrator described the Lowes' claim for contribution as "a new point", noting that as far as the Administrator could ascertain it had not been raised before (Transcript 13/07/21 at p 19.24). Mr Pesman SC, who was then briefed for the Lowes, made the following submissions (Transcript 13/07/21 at p 47): "PESMAN: …Turning then to how one is to deal with Helen(?), Margaret(?), and Janette(?), given the amounts already received by Helen and Margaret and nobody's done the maths, it's very likely that they've already received what they're entitled to. But if they have not, we also say that your Honour having decided that they're entitled to participate, which in his context we can't say your Honour is operating under a misapprehension; your Honour has made that finding. H HONOUR: If you tell me that it was just totally wrong, then I don't hear what you say. PESMAN: Well, our principle (sic) position, as your [H]onour knows from the submissions, is we've used the word 'priority' but that's not really accurate. The purpose of the inquiry is to work out the amount to which we're entitled; we should be paid that amount before there are distributions to partner who are not participating in this exercise. H HONOUR: My intention was clear; to the extent that the other partners are trying to participate would be on the same terms as Sunly and Gordon, only they're bringing to account what they've already received. PESMAN: But we say in addition they should also contribute to our costs in establishing -- H HONOUR: I understand the costs point, I understand that point, yes. PESMAN: In circumstances where they resist of the existence of a partnership, they should not benefit without first compensating us, and Mr Lowe'[s] evidence was that his costs had been in excess of $2 million to get to this point. …" (Emphasis added.)
Senior Counsel for the Lowes had earlier noted, in relation to the proposed distributions, that "everybody except Janet, Geoffrey and Mary received very substantial amounts of the misappropriated fund in the years between 1998 and 2001" (Transcript 13/07/21 p 43.21). Mr Pesman SC also referred specifically to the distributions to Helen and Margaret (Transcript 13/07/21 p 44.24): "In relation to distributions to those partners, and I'll come back to the detail a little later, it is to be recalled that Helen and Margaret, at all times of the principal proceedings up to and including the Court of Appeal, denied the existence of the partnership so Geoff and Mary have been put to very very substantial expense to demonstrate the existence of the partnership from which they received the misappropriated fund. It will be a very odd outcome if Mary and Geoff (scil Helen and Margaret) now get the full value of their interest in the partnership without accounting for that matter as well."
As to those persons, the primary judge did note in Lowe v Pascoe (No 10) that following the 13 July 2021 hearing, Helen, Margaret and Janet were invited to indicate whether they claimed to be entitled, as partners, to share in any distribution by the Administrator: at [30]. Janet was the only one to respond; and she indicated that she was not interested in a distribution if, as the primary judge described it, she had to contribute to the legal costs of any of the parties: at [31].

Subsequent decisions of the primary judge

On 30 September 2021, Emmett AJA gave judgment in Lowe v Pascoe (No 10). His Honour concluded that if, as he had held in the FC Chow Proceedings, the Estate of FC Chow was entitled to a distribution, the other members of the Partnership were also entitled to participate. However, they would be entitled to do so "only on the basis that they bring to account any benefits they have received from KST in the same fashion as is proposed for Sunly and Gordon": at [29]. His Honour did not hold that their entitlement to a distribution was also conditional upon contribution to the Lowes' costs.
His Honour referred to the invitation to Helen, Margaret and Janet, after the 13 July 2021 hearing, to indicate whether they claimed to be entitled to share in any distribution, and to Janet's response: at [30]-[31]. Janet also was the only one to respond. Janet asserted that, in contrast with the other partners, she had not received very substantial amounts of the misappropriated funds in the years from 1998 to 2001: at [32]. In the hearing on 13 July 2021, counsel for the Lowes asserted that they also had received substantially less and indicated that all partners, with the exception of Janet and the Lowes, had received "what is likely to be in excess of the entitlements that they would have in relation to any distribution": at [32].
Noting that Janet had accepted that she had received a distribution of $80,000 from the KST Estate, and there had been no claim for recovery of that sum from her, his Honour treated her written submissions as indicating that she would only press a claim for distribution if the amount of that distribution, after bringing to account the sum of $80,000, was a positive amount: at [33]. Again, his Honour did not refer to any condition of contribution to the Lowes' costs.
On 8 October 2021, his Honour held a directions hearing. The FC Chow respondents and the Administrator submitted in the course of that directions hearing that there were further issues that required determination. Mr Pesman SC advanced the submission that, so far as the Lowes were concerned, the primary judge had "already made all of the decisions that [were] necessary to be made", subject to costs (Transcript 08/10/2021 p 19.44).
The matter was listed for hearing on 21 October 2021 on questions including those "related to the alleged benefits received by [the Lowes]." In Lowe v Pascoe (No 11) [2021] NSWSC 1375 ("Lowe v Pascoe (No 11)"), the primary judge addressed the issue of the amounts for which the Lowes should account. It was common ground that Mary should account for $80,000 that she received from an interest-bearing deposit: at [2]. His Honour held that there was no basis for the Lowes to account for $25,000 that they used to purchase their home: at [13].
On 23 March 2022, Emmett AJA delivered judgment in Lowe v Pascoe (No 13) [2022] NSWSC 320 ("Lowe v Pascoe (No 13)"), by which his Honour decided that in order to calculate KST's share of the Net Proceeds Trust and the Profits Trust, the amounts of the partnership distributions that KST received should also be notionally brought to account by the KST Estate, in the same way as the benefits received by other partners: at [10]-[11]. As is set out in more detail below, the effect of this notional bringing to account was to reduce KST Estate's share of the Net Proceeds Trust to nil.
The "final question" to be resolved was the costs of the proceedings, which the parties agreed could be determined on the papers: at [15]. His Honour directed the Administrator to bring in short minutes of order giving effect to all conclusions reached in the proceedings (which he did on 30 March 2022), and made directions for the filing and service of submissions as to costs.

21 April 2022 Orders

On 21 April 2022, the primary judge made notations and orders that were consistent with the Administrator's draft short minutes of order.
In his Honour's subsequent decision on costs, to which I refer in more detail below, his Honour noted that the Lowes, who had changed solicitors, sought to delay entry of the short minutes of order that the Administrator had prepared as directed: Lowe v Pascoe (No 14) [2022] NSWSC 1591 ("Lowe v Pascoe (No 14)") at [11]. His Honour referred in this context to an affidavit of Geoffrey Lowe sworn on 11 April 2022 that had been filed without leave: at [12]. In the affidavit, Mr Lowe asserted that the parties had "not yet dealt [with] an issue in respect of the proposed distribution, namely that the manner in which the Administrator has proposed to distribute the funds improperly dilutes the interests of the partnership": at [13]. Both the FC Chow respondents and the Administrator filed written submissions objecting to any further delay: at [16].
In his Honour's judgment in Lowe v Pascoe (No 14), his Honour stated at [17]: "On 21 April 2022, the parties were informed that the Draft Orders, as proposed by the administrator, would be entered forthwith and those orders were then entered. The orders as entered are set out in the Appendix to these reasons. I gave the direction for the entry of those orders in circumstances where I considered that it was clear that the Lowes had had ample opportunity to raise for determination any issue outstanding in either of the proceedings. Public policy requires that there must at some point be an end to litigation. …"
Relevantly for present purposes, the orders provided as follows: "The Court notes that: 1. The notional value of the: (a) Net Proceeds Trust (as that term is defined in the Court's reasons for judgment delivered on 4 March 2021); and (b) distributions to be made from the Net Proceeds Trust, is determined in accordance with the Court's findings as set out in the Schedule to these orders. 2. The notional value of the: (a) Profits Trust (as that term is defined in the Court's reasons for judgment delivered on 4 March 2021); and (b) distributions to be made from the Profits Trust, is determined in accordance with the Court's findings as set out in the Schedule to these orders. The Court orders that: … 6. Subject to any further costs orders and no earlier than 28 days after the entry of these orders, the Administrator is to distribute the fund held by him to those Partners (as that term is defined in the Court's reasons for judgment delivered on 4 March 2021) who have accounted for the value of any funds that represent funds of the Partnership, in accordance with paragraphs 5.1 and 5.2 in Part 5 of the Schedule to these orders. 7. To the extent that there is a distribution to the Estate of the late [KST] from the Net Proceeds Trust, the Administrator is to pay the plaintiffs (the Lowes) from or out of such distribution the amount payable to the Lowes in respect of the costs order made in New South Wales Court of Appeal proceedings numbers 2013/107940, 2013/107447 and 2013/107472 up to a maximum of $550,000."
The Schedule to those orders is arranged into five parts, as described in the Schedule itself: "Part 1 - deals with the Net Proceeds Trust Part 2 - deals with the Profits Trust Part 3 - deals with the calculation of the notional distribution to the late FC Chow Part 4 - deals with the calculation of the notional distribution of the late KST Part 5 - deals with the order and quantum of distributions that should in due course be made from the net Fund to the extent that it is possible to do so (that is, to the extent that sufficient funds are available to enable the distribution)."
Part 1 lists that the value of the Net Proceeds Trust constitutes 66.1% of the total value of the Net Proceeds Trust plus the Profits Trust. Part 2 lists that the value of the Profits Trust constitutes the remainder (33.9%) of the total value of the Net Proceeds Trust plus the Profits Trust.
Part 4, which is titled "Amount to be notionally accounted for by KST", provides that "Notionally, the total value of the Net Proceeds Trust and the Profits Trust, is $5,253,712 + $2,692,891 = $7,946,603". However, the monies that were available to the Partnership as at 30 March 2022 was $2,059,462. The amount for which KST was thus notionally to account was $7,946,603 - $2,059,462 = $5,887,141. It followed that KST's 20% share of the Net Proceeds Trust was zero (as Emmett AJA had recorded in the notations to these orders).
Part 5 is titled, 'The flow of distributions to be paid out of such funds as are available as at 30 March 2022' and provides: "There are insufficient funds available to pay each Partner an amount equivalent to the notional distribution they would have received if the whole of the funds the subject of the notional Profits Trust and Net Proceeds Trust were available. Accordingly, such funds as are available are to be distributed in the following order up until the point that the available funds are exhausted. 5.1 Order of payments out (if available) from the Net Proceeds Trust (comprising 66.1% of funds available for distribution) [(1)] The first available $1,284,084 out of the fund is to be distributed as to 1/3rd each to Geoff Lowe, Mary Lowe and Janet McNamara to equalise with FC Chow estate who has received 81.5% of her entitlement. [(2)] If any funds are available thereafter, those funds, up to an amount of $584,059, is to be distributed as to 1/6th Janet McNamara, Mary Lowe and Geoff Lowe, and ½ to FC Chow estate. [(3)] If there are any funds remaining, the residual is to be retained by KST Estate. 5.2 Order of payments out (if available) from the Profits Trust (comprising 33.9% of funds available for distribution) [(1)] The first available $80,000 out of the fund is to be distributed to Geoff Lowe, to equalise with Mary Lowe and Janet McNamara. [(2)] If any funds are available thereafter, those funds, up to an amount of $404,611, is to be distributed as to 1/3rd each to Geoff Lowe, Mary Lowe and Janet McNamara. At that point the % return to all claiming partners would equal 79.8%. [(3)] If any funds are available thereafter, those funds, up to an amount of $326,513, is to be distributed as to 1/6th to Janet McNamara, Mary Lowe and Geoff Lowe, and ½ to FC Chow Estate. [(4)] If there are any funds remaining, the residual is to be retained by KST Estate."

The decision on costs

In written submissions on costs dated 27 April 2022, the Lowes contended that all partners were "liable to the Lowes in respect of the legal costs of all proceedings, regardless of whether they are entitled to a distribution". In advancing that submission, the Lowes relied on the following: "(i) as a basic tenet of partnership law, costs incurred by a partner on behalf of the partnership are payable by all parties [citing s 24(1)(2) of the Partnership Act 1892 (NSW)]; and (ii) the Lowes acted in the interests of the partnership and were ultimately successful in establishing that: (A) [KST] misappropriated funds of the partnership to purchase the [Three Properties]; and (B) the partnership has an interest in the [Three Properties], (iii) the Lowes have, during the inquiry, agitated issues with the report of the Administrator dated 8 February 2018 (2018 Report), which ultimately increased the value of funds available to the partnership (discussed in further detail at paragraphs 17 to 20 below)." (Footnotes omitted.)
In those submissions, the Lowes submitted that "in light of their substantial contribution to the interest of the partnership as a result of their original proceedings and the subsequent inquiry, and in light of general partnership obligations, the Court should declare that all partners are required to contribute to the legal costs that they have incurred over the last two decades". They then advanced specific submissions in relation to the outcome of the Inquiry, submitting that they had, by their contribution, increased the value of the Partnership's interest in the funds and that it was reasonable for them to be legally represented in the Inquiry. The Lowes then submitted that as the "original plaintiffs, their contribution to the partnership has been substantial, to the benefit of all the partners, and they should therefore have their costs paid, as their costs ha[ve] assisted in the proper administration of the fund". These costs, the Lowes submitted, should be paid in advance of any distribution to any other partners.
The orders the Lowes sought at that time included the following (I have set out below the final form in which they were proposed, with the Lowes making some amendments to the orders as they originally proposed them, in further submissions dated 10 October 2022): "(a) The Court declares that all parties of the partnership declared by Smart AJ on 25 June 2010 are liable, pursuant to their respective partnership interest, to: (i) the plaintiffs in proceedings 2005/262284 (Partnership Proceedings); (ii) second and third defendants in proceedings 2017/325815 (FC Chow Proceedings); (together, the Partnership Proceedings and the FC Chow Proceedings since about August 2016 are known as the Inquiry Proceedings) being Geoffrey Lowe and Mary Lowe (the Lowes) in respect of any legal costs incurred by the Lowes (as agreed or assessed) in respect of the Partnership Proceedings since 2005, the FC Chow Proceedings since 2017 and the Inquiry Proceedings since 2016, and interest on those costs. (b) In the alternative to order 1 above, the Court declares that all parties seeking distribution from the Net Proceeds Trust …or Profits Trust… are liable to the Lowes in respect of any legal costs incurred by the Lowes (as agreed or assessed) in respect of the Partnership Proceedings since 2005, the FC Chow Proceedings since 2017 and the Inquiry Proceedings since 2016, and interest on those costs, as a condition of receiving any distribution pursuant to their respective partnership interest (adjusted proportionately to the number of partners participating in any distribution). … (d) The Lowes' costs of the Partnership Proceedings and the FC Chow Proceedings are to be paid out of the fund held by the Administrator in priority to distributions to any other parties (but for the Administrator's costs), save for those costs related to the hearing conducted on 21 October 2021, where the fifth and sixth defendants in the Partnership Proceedings should pay the Lowes costs of and incidental to that hearing. (e) The FC Chow Plaintiffs should pay the Lowes' costs of the FC Chow Proceedings. …"
The Administrator submitted that each party should bear its own costs in respect of the Inquiry and the FC Chow Proceedings. He submitted that such an order had the benefit of ensuring that the funds were not further depleted by adverse costs orders. Further, it recognised "that although each party has had some wins and some losses on contested points in respect of this matter, the true position is that no party has gained through the pursuit of this protracted litigation".
The FC Chow respondents opposed the Lowes' submissions on contribution. In relation to the Partnership Proceedings that were ultimately decided in the Court of Appeal, the FC Chow respondents submitted that the Court's costs orders were based on the submissions made to it and that the Lowes could not now reopen those orders. Further, and in any event, the submission that the Lowes had acted in the interests of the Partnership found no support in the manner in which they litigated the case, noting that they repeatedly advanced that the Partnership Proceedings and the Inquiry were initiated solely on their behalf and not the Partnership, and for their benefit to the exclusion of all other partners.
The FC Chow respondents drew support for this contention from the manner in which the Lowes sought to defend the FC Chow Proceedings, raising defences of estoppel, laches and the Limitation Act. Following the primary judge's rejection of those arguments, with the Court of Appeal's orders in the Partnership Proceedings characterised as creating an entitlement for all partners, not just the Lowes, the Lowes continued to pursue orders that would result in them receiving the totality of the Partnership Fund. The FC Chow respondents submitted at [22]: "The Lowes … engag[ement] in this conduct, in the Partnership Proceedings, the Inquiry and the FC Chow Proceedings was consistently one of self-motivated gain at the expense of the other partners and beneficiaries and cannot be characterised as asserting an interest in the 'proper administration of the Partnership fund' nor of 'acting reasonably'."
In their further submissions before the primary judge, the Lowes developed their entitlement to contribution in a manner that most closely approaches the argument they put in this appeal: "It is uncontroversial that the Partnership Proceedings were commenced by Geoffrey and Mary for the benefit of all partners: the Court has ultimately made this determination and the FC Chow parties relied on this fact in order to agitate their entry into the Inquiry. The other partners, being Janet, Margaret and Helen, have had varying levels of participation in the proceedings and the Inquiry, but have filed some evidence and made some limited submissions. They have been largely inactive self-litigant parties. This does not negate their obligation to contribute, regardless of whether or not they have obtained any benefit from the proceedings: the costs paid by the Lowes in seeking to recoup the misappropriated assets of the partnership is part of the 'ordinary and proper conduct' of the business of the firm such that the partnership must indemnify them pursuant to the relevant Act."
Also in those further submissions, the Lowes submitted that they had agitated these matters before the Court in the Inquiry, referring to the agenda for, and the transcript of, the 13 July 2021 hearing that I have extracted above. It was not clear to the Lowes whether the Court proposed to resolve the issue "either as a further matter to be adjudicated or as part of the submissions on costs" (emphasis added), or, alternatively, "whether the matter is foreclosed such that it can only be agitated by the Lowes on appeal". The Lowes also submitted that as a matter of equity, any partner who receives a distribution from either the Net Proceeds Trust or the Profits Trust should contribute proportionately to the Lowes' entire costs of the proceedings, "similar to the Court's finding that a partner wishing to receive distribution must bring to account any benefit received from KST". They also claimed an entitlement to interest on the entirety of their costs. Finally, the Lowes submitted that their costs of the Inquiry should be paid in priority to any other distribution, submitting that any costs ordered in favour of the Lowes "will be partnership debts".
On 22 November 2022, the primary judge determined that each party should bear its own costs of the Inquiry and the FC Chow Proceedings: Lowe v Pascoe (No 14) at [59], [62].
Under the heading "Additional Contentions by the Lowes", Emmett AJA observed, at [48], that the Lowes "now contend that each member of the Partnership is liable to them in respect of the legal costs of each set of proceedings, regardless of whether the member is entitled to a distribution". His Honour summarised their argument as follows: "[48] …They assert that: - as a matter of principle, costs incurred by one partner on behalf of a partnership are payable by all partners [relying on s 24(1)(2) of the Partnership Act 1892 (NSW)]; - they acted in the interests of the Partnership and were ultimately successful in establishing that KST misappropriated funds of the Partnership to purchase the Partnership Properties and that the Partnership had an interest in the Partnership Properties; and - they agitated issues with the Administrator's report of 8 February 2018 that ultimately increased the value of the funds available to the Partnership. The Lowes contend that, in the light of their substantial contribution to the interests of the Partnership (as a result of the Lowe Proceedings and the subsequent Inquiry) and in the light of general partnership principles, the Court should declare that all Partners are required to contribute to the legal costs that they have incurred according to their respective interests in the Partnership. They assert that it was reasonable for them to be legally represented in the Inquiry and that their contribution to the interests of the Partnership has been substantial and for the benefit of all of the Partners. [49] In the alternative, the Lowes contend that any member of the Partnership seeking distribution from the Net Proceeds Trust or the Profits Trust should be required, as a condition of receiving any distribution, to agree to contribute, according to the respective Partnership interest of that member, to any legal costs incurred by the Lowes in respect of the Lowe Proceedings, the FC Chow Proceedings and/or the Inquiry. They also assert that their costs of the Lowe Proceedings and the FC Chow Proceedings should be paid out of the funds held by the Administrator in priority to the distribution to any other person other than in respect of the Administrator's costs, save for the costs relating to the hearing that resulted in Lowe v Pascoe (No 11). They say that the FC Chow Plaintiffs should pay those costs to them. They also say that the FC Chow Plaintiffs should pay their costs of the FC Chow Proceedings." (Footnotes omitted.)
In concluding that there was no merit in the Lowes' claim to be entitled to be indemnified by other members of the Partnership, his Honour noted that throughout the Inquiry and the FC Chow Proceedings, the Lowes had maintained that the Partnership Proceedings had not been brought on behalf of all members of the Partnership. In circumstances where "[n]o such claim was ever made in the [Partnership Proceedings], and no member of the Partnership, other than the estate of FC Chow, has been afforded any opportunity to deal with such a claim", his Honour rejected it: at [52]. His Honour continued at [53]: "The FC Chow Plaintiffs assert that, in contending that no other member of the Partnership was entitled to receive anything from the funds held by the Administrator, the Lowes were motivated by self-gain at the expense of the other members. Accordingly, their conduct could not fairly be characterised as asserting an interest in the proper administration of the Partnership assets. Indeed, as the FC Chow Plaintiffs assert, it was that conduct on the part of the Lowes that forced the FC Chow Plaintiffs to commence the FC Chow Proceedings. If the Lowes were acting in the interests of the Partnership, as they now assert, there would have been no need to commence the FC Chow Proceedings at all. There is no basis to find that the Lowes are entitled to be indemnified by any other member of the Partnership."
His Honour noted that the Lowes also sought to agitate a question regarding an order of the Court of Appeal. His Honour stated that on 8 December 2018, the Administrator and the Lowes agreed to settle an order for costs made by the Court of Appeal for $550,000. (As I have noted above, the Administrator submits that this is factually incorrect.) Referring to the terms of the order of the Court of Appeal that the costs be paid from KST's share in the distribution of the funds held by the Administrator, his Honour summarised the Lowes as contending that the costs were payable to them forthwith and, had the sum been paid immediately, it was agreed they would have been entitled to retain it, whereas, as matters had transpired, there was nothing payable: at [56]. In response to this submission, his Honour stated at [57]: "The problem with that contention, of course, is that the final determination of the Court does not change the position but declares the position as it has always been. On that basis, the effect of the Court of Appeal's order was that, always, if there were nothing to which KST was entitled, there would be nothing from which the costs could be met. Any variation of that order would require an application to the Court of Appeal. It is not within my power to vary the effect of the order of the Court of Appeal."
His Honour made no order as to costs of the FC Chow Proceedings or the Inquiry. In relation to the Inquiry, his Honour observed that it was "not a proceeding which naturally admits of success or failure on the part of any participant": at [59]. The Lowes do not cavil substantively with that determination but maintain that certain comments that the primary judge made in reaching it cannot stand to the extent they become inconsistent with the outcome of the present appeal.

Grounds of Appeal

The Lowes advanced the following grounds of appeal in their Second Further Amended Notices of Appeal: "1. The primary judge has erred in making a notation as to the notional value of the Net Proceeds Trust and the distributions to be made from the Net Proceeds Trust which did not account for the matters raised in Ground 5 and 8 below, and in entering Orders 6 and 7. 2. The primary judge has erred in making a notation as to the notional value of the Profits Trust and distributions to be made from the Profits Trust which did not account for the matters raised in Ground 5 and 8 below, and in entering Orders 6 and 7. [Grounds 3 and 4 were not pressed.] 5. The primary judge erred in failing to determine all relevant matters raised in the Inquiry in respect of the contributions by the Partnership to the appellants' costs. 6. The primary judge erred in failing to consider and determine all relevant matters raised in the Inquiry in respect of the determination of the notional value of the Net Proceeds Trust. 7. The primary judge erred in failing to consider and determine all relevant matters raised in the Inquiry in respect of the determination of the notional value of the Profits Trust. 8. The primary judge erred in entering Order 7 of the 21 April Orders in circumstances where this order is contradictory to the orders of the Court of Appeal of New South Wales made on 10 April 2015 (Sze Tu v Lowe (No 2) [2015] NSWCA 91) which substituted orders 9 and 11 of the orders made by the Supreme Court of New South Wales on 13 March 2013 (Lowe v Pascoe (No 6) (Supreme Court (NSW), Gzell J, 13 March 2013, unrep). [Ground 9 was not pressed]"
As I have noted above, the Lowes accepted that consideration of grounds 1, 2, 6 and 7 is only necessary if they succeed on grounds 5 and/or 8.

Costs Priority Issue (Ground 8)

By Ground 8, the Lowes contend that Order 7 of the primary judge's orders of 21 April 2022 is inconsistent with the Capped Costs Orders, as it requires the KST Estate to meet the Capped Costs Orders after the distribution and exhaustion of the Net Proceeds Trust. The Lowes submitted that the effect of the Capped Costs Orders was that the liability to pay 35% of their costs of the Partnership Proceedings was only to be satisfied from KST's 20% share of the partnership assets then "currently held" by the Estate; and the liability arose immediately, with those costs payable before the Inquiry. Any change to the position of the KST Estate as a consequence of the findings of the Inquiry was, in their submission, irrelevant to the content of their earlier vested right to payment of the Capped Costs Orders forthwith.
Referring to the settlement that, in their contention, they had agreed with the Administrator, namely, that they be paid costs in the amount of $550,000, the Lowes submitted in writing that pursuant to the Capped Costs Orders, specifically 9(b) and 9(c), they should have been paid that amount immediately, out of the net proceeds of sale of the assets of the Partnership then held. In oral submissions, Senior Counsel for the Lowes accepted that having regard to the balance of the Net Proceeds Trust, if the Lowes were entitled to 20%, the most the Lowes could be paid was $486,623.
The Lowes submitted that instead of paying them forthwith as the Capped Costs Order contemplated, the Administrators waited, only for the primary judge subsequently to determine that there was a shortfall in the Net Proceeds Trust, that the KST Estate was to be treated as having notionally received a sum equivalent to that shortfall, and that it would thus receive no distribution. They submitted that in requiring the KST Estate to meet the Capped Costs Orders after distribution and exhaustion of the Net Proceeds Trust "in light of and on the basis of the findings made in the Inquiry", Order 7 denuded the Capped Costs Orders of effect and rewarded the other partners for the Administrator's non-compliance.
In so far as the primary judge held, in the costs judgment, that its final determination declared the position as it had always been (see Lowe v Pascoe (No 14) at [57]), the Lowes accepted that a judicial determination has retrospective effect in the sense of deeming the position to have always been as declared. However, they submitted that the content of their right to quantification and payment of their costs in Order 11 of the Capped Costs Orders was by reference to the assets "currently held by the Estate" (Order 9(c)), and was not amenable to change as a result of the Inquiry.
It followed, the Lowes contended, that payment of their costs should have been made (and should be made) before the first of the distributions described in Parts 5.1 and 5.2 of the 21 April 2022 orders (that is, before step 5.1(1) and 5.2(1) extracted at [74] above). The Lowes did not press their claim for priority over the Administrator's costs of administering the KST Estate, a position which is confirmed by the terms of the orders proposed in the Second Further Amended Notices of Appeal.
In resisting this ground of appeal, both the Administrator and the FC Chow respondents emphasised the terms of Order 9(b) of the Capped Costs Orders. They submitted that by that order, the Court of Appeal conditioned payment of the percentage of the Lowes' costs stipulated in Order 9(b), "to the extent that the costs can be satisfied from the late [KST's] 20% share of the net proceeds of sale". At the time of the Capped Costs Orders, the monies constituting the Net Proceeds Trust and the Profits Trust were in a single, mixed fund, and the Net Proceeds Trust had not been quantified. Accordingly, the Administrator had not yet ascertained the portion of the KST Estate that could be used to satisfy the Capped Costs Orders. It was not until 21 April 2022 that that amount was ascertained. The language in Order 9(b), of "only to the extent", encompassed the possibility that the Court may ultimately determine that KST's 20% share of the Net Proceeds Trust was insufficient to pay 35% of the Lowes' costs.
In so far as the primary judge found that KST had no entitlement to any payment from the Net Proceeds Trust, the Administrator and the FC Chow respondents relied on what the primary judge said as to declaring the position as it had always been. Any other outcome, in their submission, would entail, as the primary judge found, an impermissible variation of the costs orders of the Court of Appeal.
I have referred above to the reasons of Gleeson JA in Sze Tu v Lowe (No 2) (at [28]-[34]). The Capped Costs Orders were formulated to accommodate two central concerns with the Lowes' application for costs: (i) what proportion of their costs the Lowes should recover; and (ii) from what source. In relation to the latter aspect, Gleeson JA was concerned to avoid a situation where, as a result of an order as to costs, the successful appellants would, in effect, be paying or contributing to the Lowes' costs.
The first concern his Honour identified was addressed in Order 9(b), which limited the Lowes' costs recovery from the KST Estate to 35% of their costs of the proceedings at first instance. The second concern was addressed in Order 9(c). Contrary to the argument put by the Administrator and the FC Chow respondents, Order 9(c) entailed no more than identifying what amount represented 20% of the net proceeds of the partnership assets "currently held". That the inquiry was intended to be so limited is supported by the terms of Order 11, in which the Court of Appeal ordered that the costs were payable "now (subject to assessment) and shall not be deferred until the completion of the taking of the inquiry provided for in paragraph 3(iv) of the orders made by this Court on 23 December 2014".
The qualification in Order 9(c), "only to the extent that", accommodated the possibility that the Lowes might not be able to recover all of the costs permitted by Order 9(b). However, read with the other paragraphs of Order 9 and Order 11, and with the benefit of Gleeson JA's reasons, the qualification did not constitute judicial recognition that KST's 20% share may be insufficient to permit full recovery; rather, it constituted judicial acknowledgment that "the partnership assets currently held" may not permit full recovery of the amount of costs that was the subject of Order 9(b).
I accept the Lowes' submission that on the terms of the Capped Costs Orders, they were intended to insulate the Lowes' entitlement to costs (capped both as to extent and source) from any subsequent diminution or alteration through the Inquiry. The alternative construction for which the Administrator and the FC Chow respondents contended does not pay sufficient regard to the terms of the Capped Costs Orders, construed by reference to the time they were made and without the benefit of hindsight. The Lowes' costs were intended to be determined by reference to KST's 20% share of the assets "currently held" as at the date of the Capped Costs Orders.
Turning then to Order 7 of the April 2022 orders, viewed in isolation the terms of that order reflect the broad intention of Order 9(c) of the Capped Costs Orders, namely, to limit the exposure of the Partnership funds to costs recovery by the Lowes to KST's share of those funds. However, when Order 7 is read with Order 6, which, in turn, incorporates the "waterfall" of payments in paragraphs 5.1 and 5.2 of the Schedule to the Orders, Order 7 operates so as to leave no funds available to satisfy the Capped Costs Orders. That is an outcome that is inconsistent with what the Capped Costs Orders contemplated would occur, focusing in particular on the reference in Order 9(c) to "KST's 20% share of the net proceeds of sale of the assets of the partnership currently held by the [KST] Estate", and that those costs be paid "now" and "not be deferred" pending the Inquiry.
I do not accept the Lowes' submission that the Administrator "failed" to pay $550,000 to the Lowes in accordance with an agreement reached in December 2018. The discussions to which I have referred at [46] above did not result in an agreement to settle the Capped Costs Orders in the sum of $550,000. Rather, and as the Administrator submitted, his proposal of 6 June 2018 related to whether $550,000 inclusive of GST was a "fair and reasonable" figure of the proportion of the Lowes' costs at first instance as specified by the Capped Costs Orders (namely, 35%). As far as the Administrator was concerned, there was a "further complication" which would arise if that figure was accepted, being the "capping" of the figure "at an amount equal to [KST's] 20% share of the net proceeds of sale of the Partnership Properties". For the reasons I have given, the Administrator misunderstood the Capped Costs Orders, but he did not fail to make a payment in accordance with a finalised agreement.
The Lowes' argument in this respect was, in part, directed at seeking priority of the payment of its costs pursuant to the Capped Costs Orders over the costs of the Administrator. As I stated at [94], in the course of oral submissions, Senior Counsel for the Lowes did not maintain the claim for such priority. Accordingly, no more needs to be said about it.
I note further that in oral submissions, Senior Counsel for the Lowes frankly accepted that the Lowes did not pursue their costs pursuant to the Capped Costs Order with any expedition. I have referred above to the manner in which the Lowes articulated their entitlement in the Notice of Motion that they filed in April 2017, and in their articulation of KST's 20% share of the net proceeds of sale of the Three Properties in the Points of Claim filed in the Inquiry, on 15 May 2017 (see [39]-[40]). The Administrator took issue with the Lowes not pursuing their costs before the outcome of the Inquiry, and not advancing below the arguments they now advance in a timely fashion or at all. Again, that argument was primarily directed in response to the Lowes' claim, which they did not ultimately press, that they should be paid their costs in priority to the Administrator's right of indemnity. With that being the case it is unnecessary to address it further.
I would uphold Ground 8 of the Second Further Amended Notices of Appeal. In so far as Grounds 1 and 2 refer to Order 7, those grounds also refer to Order 6, which raises the issue that is the subject of Ground 5. Accordingly, I will address Ground 5 before addressing the other grounds and orders.

Costs Contribution Issue (Ground 5)

By Ground 5, the Lowes allege that the primary judge failed to address their claim for contribution from the other partners or otherwise constructively denied it. The way they put this argument initially was that all partners were required to contribute irrespective of the limit of the available funds or whether the partners sought a distribution from the Net Proceeds Trust or the Profits Trust. As was ultimately put on the appeal, the Lowes limited their claim for contribution against Janet, Margaret and Helen to the extent that the funds available for distribution to them by the Administrator were sufficient to satisfy that liability. The Lowes did not limit their contribution claim against the FC Chow respondents in the same way. On the hearing of the appeal, Senior Counsel submitted that the FC Chow respondents should contribute to such of their costs as were properly described as falling within the scope of s 24(1)(2)(a) of the Partnership Act 1892 (NSW) proportionately with FC Chow's 30% share in the Partnership.
The Lowes submitted that the costs they incurred in the Partnership Proceedings, the Inquiry and the FC Chow Proceedings were incurred in their capacity as partners on behalf of the Partnership. In oral submissions, Senior Counsel for the Lowes divided the history of the proceedings into two stages, the first of which related to the Partnership Proceedings and covered the period from their commencement in 2005 up until the Court of Appeal's decision in Sze Tu v Lowe (No 2), and the second being from the point of the Inquiry (correspondence as to which gave rise to the FC Chow Proceedings). The Lowes submitted that as a matter of law (Partnership Act, s 24(1)(2)(a)) and equity, each partner must contribute proportionately to their costs across the two stages, including any adverse costs orders.
The Lowes submitted that there was no distinction between acting to further their own interests and acting in the common interests of the Partnership during the two stages, such that it could not be said that the costs were not incurred in the proper conduct of the business of the partnership. As to the first stage, Senior Counsel submitted that there could not be any argument that up until the Court of Appeal's decision in the Partnership Proceedings, "all of that would be covered by the scope of the contribution order". Senior Counsel for the Lowes accepted that the question of whether the second stage was done for the benefit of the Partnership was more contestable than it was for the first stage.
The Lowes contended that their entitlement to contribution in equity or under the Partnership Act was not determinable through the Court's procedural powers as to costs. It followed, in their submission, that the statutory and/or equitable entitlement was neither determinable nor determined by the Court of Appeal's exercise of the costs discretion in 2015, or by Emmett AJA's exercise of the costs discretion in 2022. They submitted that in circumstances where the issue was included in the agenda for the 13 July 2021 hearing and was the subject of submissions before the primary judge, his Honour should have addressed the Lowes' entitlement to contribution before making the 21 April 2022 orders and failed to do so.

The claim for contribution

In Cummings v Lewis (1993) 41 FCR 559; [1993] FCA 190, Cooper J provided a succinct summary of the general doctrine of contribution (at 590-593). His Honour there referred to the decision of the Privy Council in Scholefield Goodman & Sons Ltd v Zyngier [1986] AC 562 at 575, in which the principle was described as founded on the principle that equality is equity. Cooper J observed that the circumstance that gives rise to an equity to compel contribution where there is a common liability or a common risk "is that satisfaction of the liability or the loss occasioned by the risk has been borne by one of a number": at 593. His Honour continued: "Once the equity has arisen it is then that 'the duty of contribution extends to all persons who are within the scope of the equitable obligation'. … The principle of equity which operates to create the equity is: he who enjoys the benefit ought also to bear the burden."
Specifically in relation to a partnership, Cooper J stated that the obligation to contribute to losses is either expressly or impliedly contained in a contract of partnership, imposed by statute or arises from the circumstances of the particular partnership as a matter of legal or equitable obligation: at 593. His Honour continued: "The payment by one partner of a loss to which all partners are exposed operates as a benefit to those partners who do not pay and a detriment to the partner who has paid. It is this circumstance which explains and founds the right to contribution both at common law and in equity between partners."
In claiming their costs as incurred on behalf of the partnership, the Lowes also relied on the principle in subs (2)(a) of s 24(1) of the Partnership Act, which relevantly provides: (1) The interests of partners in the partnership property and their rights and duties in relation to the partnership shall be determined, subject to any agreement expressed or implied between the partners, by the following rules- … (2) The firm must indemnify every partner in respect of payment made and personal liabilities incurred by the partner. (a) In the ordinary and proper conduct of the business of the firm, or (b) In or about anything necessarily done for the preservation of the business or property of the firm.
The Lowes submitted that the costs of the proceedings were in the ordinary and proper conduct of the business of the Partnership, in so far as they were necessary to achieve the result of the declaration of the Partnership and enlarging of the Net Proceeds Trust and Profits Trust in favour of the partners: Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342 at 351; [1969] HCA 55. The only exception to the basic tenet to which principle (2)(a) in s 24(1) of the Partnership Act gives effect, they submitted, was if the partner incurring the costs has acted fraudulently, with culpable negligence or wilful default, or if equitable defences are established: Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17 at [17] (Gaudron ACJ and Hayne J), [143] (Callinan J).
I have set out above in detail the chronology of the Lowes' claim for contribution. The chronology reveals that the Lowes first raised the issue of contribution, in any form, in April 2021, some 16 years after the Partnership Proceedings were first commenced. They did not raise the issue of contribution in any pleading in the Partnership Proceedings, in which the other partners (or their deceased estates) were defendants and against whom the Lowes sought relief which included an account as between partners. Nor did the Lowes foreshadow making such a claim when they wrote to the solicitors for Stella as the then representative of the Estate of FC Chow in April 2008, encouraging her either to admit the allegations in the Amended Statement of Claim or alternatively to file a submitting appearance (see [19] above).
The Points of Claim that were filed and served on behalf of the Lowes in the Inquiry sought recovery of their costs pursuant to the Capped Costs Orders in the Partnership Proceedings; but the Points of Claim did not otherwise seek contribution. If the Lowes intended to make a substantive claim for contribution, as opposed to one that was determinable through the Court's procedural powers as to costs, they did not plead it as such.
When contribution was first raised, it was of limited scope. As I have set out at [53] to [54] above, contribution was deployed primarily in support of the Lowes having priority of distribution over those partners who did not participate in the Inquiry or the FC Chow Proceedings, namely Margaret, Helen and Janet. Consistently with the limited basis on which it was advanced, the Lowes did not propose any orders in April 2021 that required any of those partners to make any contribution for any aspect of the proceedings. The manner in which the primary judge referred to contribution in Lowe v Pascoe (No 10), in the context of potential distributions to Margaret, Helen or Janet, reflected the limited attention it was given in the Lowes' written submissions and in the course of the hearing on 13 July 2021 (see [57] to [58] above).
Senior Counsel for the Lowes accepted that the claim for contribution as developed in the appeal did not reflect the manner in which it was put in the proceedings below. The claim for contribution was only put in a way that even approached the argument on appeal at the tail end of the proceedings, in the Lowes' submissions on costs (after they had changed legal representatives). Before that time, at the directions hearing on 8 October 2021, Senior Counsel for the Lowes confirmed that as far as the Lowes were concerned the primary judge had made all the necessary decisions, subject to costs.
In the submissions that were subsequently advanced, costs was the only issue that remained. In the Lowes' written submissions in reply on costs, to which I have referred above, they put contribution as an issue to be resolved "either as a further matter to be adjudicated or as part of the submissions on costs" (emphasis added) (see [82]). Not only was there no suggestion that the primary judge could not address the issue as part of his Honour's consideration of costs, his Honour was expressly invited to consider it on that basis. As the Administrator submitted on the appeal, having regard to the stage at which the claim was raised, and in the context of written submissions on costs, one can readily appreciate his Honour might not have understood that a whole new substantive claim was being propounded.
Having regard to the circumstances in which the issue of contribution was raised, there can be no criticism of the manner in which the primary judge addressed it in Lowe v Pascoe (No 14). In Lowe v Pascoe (No 13), his Honour noted that "[t]he final question that requires consideration is [the] party/party costs of both proceedings", which the parties had agreed should be determined on the papers: at [15]. The costs of the proceedings up to the point of the appeal in 2014 had been dealt with by the Court of Appeal in 2015, in a manner that sought to accommodate the multitude of arguments that the Lowes had run at first instance, including against the individual partners which did not survive the appeal and the Lowes' limited success on the appeal against the KST Estate. In terms of the Inquiry and FC Chow Proceedings, his Honour did not address costs until the conclusion of the proceedings, consistently with the parties only addressing matters that "required resolution before finalising proposed orders giving effect to [Lowe v Pascoe (No 9)]" and having agreed that it would be necessary to "conduct a further hearing to address" costs: at [6].
On this appeal, the Lowes submitted that their statutory and equitable entitlement to contribution was neither determinable nor determined by the Court of Appeal nor Emmett AJA's exercise of the discretion as to costs. The implication of that argument is that the "question of costs" which the primary judge reserved did not include the contribution issue and as such there was a failure to address the issue before making the 21 April 2022 orders. I do not accept that submission. As the FC Chow respondents submitted, the claim for contribution to the Lowes' costs, to the extent it was raised as a substantive claim, was inextricably tied to questions of which party was liable for which other parties' costs.
In relation to the Lowes' claim for contribution for what they described as stage one, there is a superficial attractiveness to the submission that it was only because of their efforts (and in the face of opposition) that the Partnership was declared and the Three Properties were recognised as having been purchased with Partnership funds. However, the Lowes did not divide the proceedings into stage one and stage two before the primary judge. As his Honour noted, the Lowes did not make any claim for contribution in the Partnership Proceedings until well after stage one, and the determination of the Court of Appeal in 2014.
The contribution claim that the Lowes make for stage one is that all partners are liable for "any legal costs" they incurred in respect of the Partnership Proceedings since 2005 (reflected in their proposed orders). That claim runs headlong into the Court of Appeal's recognition, in its costs judgment in 2015, that the Lowes raised a multitude of issues in the Partnership Proceedings, including claims against individual partners which, for the greater part, were ultimately unsuccessful. As I have noted above, the Capped Costs Orders limited the source from which the costs order could be satisfied, not only to prevent the successful parties (including Helen and Margaret) from, in effect, paying or contributing to the Lowes' costs, but also to prevent the costs order burdening those parties who played a passive role in the proceedings and had an interest in the KST Estate (including other partners, Janet and (the Estate of) FC Chow).
The equity on which the Lowes rely for their claim for contribution does not coincide with the claim that they make for the entirety of their costs. Further, I accept the submission of the Administrator and the FC Chow respondents that the effect of what the Lowes contended for on the appeal in relation to stage one is contrary to the Capped Costs Orders that the Court of Appeal made and its reasons for making those orders. If the Lowes wished to claim contribution from the other partners for their costs of stage one of the Partnership Proceedings, they would need to have approached the Court of Appeal for a variation of the Capped Costs Orders.
In any event, it is artificial in my view to consider stage one independently of stage two. The Lowes submitted that through the Inquiry, they successfully established that the Administrator had incorrectly assessed the property the subject of the Net Proceeds Trust and the Profits Trust in his report to the Court; and their participation in the proceedings caused the value of both trusts to increase. They submitted that the costs they incurred in conducting proceedings to increase the value of the trusts formed part of the ordinary and proper conduct of the business of the Partnership. If the Estate of FC Chow was to receive a distribution from funds held on trust for the Partnership, it must contribute its proportionate share of the costs, being 30% (as that is the FC Chow Estate's partnership interest).
What is clear from the chronology that I have set out above is that there is abundant support for his Honour's conclusion at [52] of Lowe v Pascoe (No 14), that throughout what the Lowes describe as stage two, they consistently maintained that the Partnership Proceedings (which necessarily encompasses stage one) had not been brought on behalf of all members of the Partnership. The Lowes actively sought to avoid any other partner receiving any monies from funds held on trust for the Partnership. That was so notwithstanding that in stage one, in relation to the Estate of FC Chow, the Lowes had represented that success in the Partnership Proceedings would benefit the beneficiaries of that Estate, only for them subsequently to make clear that so far as they were concerned no other partner was entitled to a distribution. The Lowes sought an order in the FC Chow Proceedings that the Estate of FC Chow was "not entitled to any payment". They also made submissions on 29 April 2021 that the Inquiry should not make any finding or determination of any equitable interest held by Margaret, Helen and Janet in the funds held on trust for the Partnership, as they were "not claimants".
Having regard to the course of the Partnership Proceedings, the Inquiry and the FC Chow Proceedings, I accept the primary judge's conclusion that the Lowes' claim for contribution was made late in the piece, without notice to Helen, Margaret and Janet and with limited notice to the FC Chow respondents, well after "stage one". The Lowes did not incur all of their costs in all of the proceedings in a manner that gave rise to the relevant equity grounding a right of contribution from the other partners to the Partnership. Nor did the Lowes' costs meet the description of payments made, or liabilities incurred, "in the ordinary and proper conduct of the business of the firm" within the meaning of s 24(1)(2)(a) of the Partnership Act. To the extent that it arose, the primary judge rejected the claim for contribution and was correct to do so. Ground 5 should be dismissed.

Other grounds of appeal

Given my decision is to uphold Ground 8 and dismiss Ground 5, I have considered Grounds 1, 2, 6 and 7 in so far as they apply to Ground 8. Having regard to my conclusion on Ground 8, I consider that Ground 1, which relates to the Net Proceeds Trust, should be upheld in so far as: 1. Order 7 of the Orders of 21 April 2022 is inconsistent with the Capped Costs Orders; and 2. Order 6 of those orders proceeds on the premise that the distribution that the Administrator is to undertake, in Parts 5.1 and 5.2, should not first account for the Lowes' costs pursuant to the Capped Costs Order.
Additionally, Note 6 of Part 1 of the Schedule does not accurately reflect the terms of the Capped Costs Order as I have construed them, but it is unnecessary to make any formal order to that effect (nor in relation to Notes 1 and 2 which precede the formal orders dated 21 April 2022).
Although Ground 6 also involves the Net Proceeds Trust, the Lowes did not make additional submissions in respect of it and it does not relevantly add to Ground 8 and Ground 1.
Grounds 2 and 7 relate to the Profits Trust and are not affected by my conclusions on Ground 8. Those grounds should be dismissed.

Conclusion

In light of the protracted nature of the proceedings, and the retirement of the primary judge, it is desirable to avoid remittal of the proceedings if that is possible. Having regard to the orders sought in the Second Further Amended Notices of Appeal, and my reasons, I consider that the following orders should be made to dispose of the appeal: 1. Appeal allowed in part. 2. Vary Order 6 of the orders made on 21 April 2022 in proceedings numbers 2005/262284 and 2017/325815 (21 April 2022 Orders) to insert, at the beginning of the Order, the words "Subject to Orders 7A to 7C inclusive and". 3. Set aside Order 7 of the 21 April 2022 Orders, and in lieu thereof make the following orders: 1. 7A. The Court declares that the sum of $486,623 is payable from the Net Proceeds Trust to the first and second plaintiffs in proceedings number 2005/262284 in respect of the costs order made in New South Wales Court of Appeal proceedings numbers 2013/107940, 2013/108447 and 2013/107472 (Costs Order) in priority to all other distributions. 2. 7B. The Court declares that interest be payable on the amount of the Costs Order from 4 December 2018. 3. 7C. For the avoidance of doubt, any payment of the Costs Order pursuant to Order 7A above is not intended to have priority over any entitlement of the Administrator pursuant to any right of indemnity for costs reasonably and properly incurred that may otherwise be available to the Administrator. 1. The FC Chow respondents are to pay 50% of the Lowes' costs of this appeal.
That leaves the costs of the appeal. The Lowes submitted that they should follow the event. The Administrator submitted that the Lowes should pay the Administrator's costs of the appeal and the FC Chow Parties submitted that the appeal should be dismissed with costs as it was unmeritorious, there was no error identified and the appeal was a further attempt by the Lowes to claim for themselves the totality of the funds held on trust for the Partnership.
Given the Lowes have had mixed success on the appeal, I consider that the appropriate order is for the FC Chow respondents to pay 50% of the Lowes' costs of this appeal. I make no order requiring the Administrator to pay the Lowes' costs, nor do I make the order that the Administrator sought that required the Lowes to pay his costs. If any party seeks a different order as to costs, they may have recourse to rule 36.16 of the Uniform Civil Procedure Rules 2005 (NSW).
GRIFFITHS AJA: I agree with Mitchelmore JA.

Amendments 27 November 2023 - Order 4 added to cover page and [131] 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: 27 November 2023

we v Pascoe (No 11) [2021] NSWSC 1375 Lowe v Pascoe (No 13) [2022] NSWSC 320 Lowe v Pascoe (No 14) [2022] NSWSC 1591 Scholefield Goodman & Sons Ltd v Zyngier [1986] AC 562 Sze Tu v Lowe (2014) 89 NSWLR 317; [2014] NSWCA 462 Sze Tu v Lowe (No 2) [2015] NSWCA 91 Category: Principal judgment Parties: In proceedings no. 2022/144952:

HEADNOTE [This headnote is not to be read as part of the judgment] The late Kut Sze Tu (KST) misappropriated funds from a partnership of which he was a partner, together with his second wife, the late Fung Chun Chow (FC Chow), daughters from his first marriage, Mary, Helen, Margaret and Janet, and Mary's husband, Geoffrey (the Partnership). KST applied the misappropriated funds to the purchase of three properties (the Three Properties). Following his death, the cash received from the sale of KST's interests in the Three Properties was mixed in a single fund with monies received from sales of KST's interests in other properties and cash from KST's bank accounts. In proceedings commenced in 2005 (the Partnership Proceedings), Mary Lowe, and her husband, Geoffrey Lowe, claimed that the Partnership existed and that by reason of the misappropriated Partnership funds, certain amounts were held on trust for them by the estate of KST (KST Estate) and by other partners who had interests in the Three Properties. Scott Pascoe, who is the administrator of the KST Estate, was a party to the Partnership Proceedings. A number of the individual defendants, including Margaret and Helen and two of the children of KST and FC Chow, Sunly and Gordon, denied the Lowes' claims. The estate of FC Chow filed a submitting appearance, following an invitation to do so by the Lowes. Ultimately, following decisions made at first instance and on appeals brought by Margaret, Helen, Gordon and Sunly, the Partnership Proceedings resulted in declarations that the Partnership was formed in 1975 and dissolved in 1989, and that the Lowes each held a 10% interest in the Partnership, as did Margaret, Helen and Janet, while the KST Estate held a 20% interest and the Estate of FC Chow held a 30% interest. It was also declared that 90% of the net proceeds of the sale of KST's interest in the Three Properties was held on constructive trust for the Partnership (the Net Proceeds Trust); and 90% of the profits that KST derived from the Three Properties after just allowances was held on constructive trust for the Partnership (the Profits Trust). An order was made for an inquiry into what monies the Lowes were entitled to from the KST Estate by way of an account of profits (the Inquiry). The Court of Appeal dealt with the costs of the previous appeal in Sze Tu v Lowe (No 2) [2015] NSWCA 91, which was handed down on 10 April 2015. The Court relevantly made orders as to costs (the Capped Costs Orders) which included that the KST Estate pay 35% of the Lowes' costs of the first instance proceedings (Order 9(b)), with those costs being payable "only to the extent that they can be satisfied from the late [KST's] 20% share of the net proceeds of sale of the assets of the partnership currently held by the [KST] Estate" (Order 9(c)). The Court also noted that those costs were payable "now (subject to assessment) and shall not be deferred until the completion of the taking of the inquiry provided for in paragraph 3(iv) of the orders made by this Court on 23 December 2014" (Order 11). In 2017, following correspondence from the Lowes claiming that no other partner was entitled to a distribution from the KST Estate, Gordon and Sunly commenced proceedings seeking distributions from the Net Proceeds Trust and Profits Trust to the Estate of FC Chow, in proportion to FC Chow's share in the Partnership (the FC Chow Proceedings). The Administrator also sought to progress the Inquiry, and to seek agreement in relation to the Lowes' costs pursuant to the Capped Costs Orders. On 10 August 2020, Emmett AJA commenced hearing the Inquiry and the FC Chow Proceedings. On 4 March 2021, his Honour gave judgment in Lowe v Pascoe (No 9) [2021] NSWSC 163, determining that the Estate of FC Chow was entitled to a Partnership distribution, subject to it notionally accounting for benefits received by the beneficiaries of that Estate. Ultimately, notional accounting for benefits already received was required from the other beneficiaries and partners as a precondition to a distribution. This included KST, the effect of which was to reduce his distribution entitlement to zero. On 21 April 2022 his Honour made orders in the Partnership Proceedings and the FC Chow Proceedings which included, relevantly for the present appeal: "7. To the extent that there is a distribution to the Estate of the late [KST] from the Net Proceeds Trust, the Administrator is to pay the plaintiffs (the Lowes) from or out of such distribution the amount payable to the Lowes in respect of the costs order made in New South Wales Court of Appeal proceedings numbers 2013/107940, 2013/107447 and 2013/107472 up to a maximum of $550,000." The Orders included a Schedule which recorded a note to the effect that KST's 20% share of the Net Proceeds Trust was zero and, in Part 5, detailed the order of payments to be made out of the Net Proceeds Trust and the Profits Trust. On 22 November 2022, the primary judge determined that each party should bear its own costs of the Inquiry and the FC Chow Proceedings: Lowe v Pascoe (No 14) [2022] NSWSC 1591. His Honour referred to the Lowes having made a claim to be entitled to be indemnified by other members of the Partnership and held there was no merit in the claim. As to the Lowes' submissions on the Capped Costs Orders, the primary judge considered that the 21 April 2022 orders declared the position as it had always been. In this appeal, the Lowes raised two key issues with the orders of 21 April 2022: (1) The Costs Priority Issue: By Ground 8, the Lowes took issue with Order 7 of the orders of 21 April 2022, on the basis that it was inconsistent with the Capped Costs Orders. The Lowes contended that by Order 7, the costs which were the subject of the Court of Appeal's order are to be paid following the distribution of the Net Proceeds and Profits Trusts, whereas the Capped Costs Orders required those costs to be paid forthwith, before the Inquiry and before the first of the distributions described in Parts 5.1 and 5.2 of the 21 April 2022 orders. (2) The Costs Contribution Issue: By Ground 5, the Lowes submitted that the primary judge erred in failing to determine, or constructively denying, their contention that other members of the Partnership were liable to contribute to their costs of the Partnership Proceedings since 2005, the FC Chow Proceedings since 2017, and the Inquiry since 2016. The Court (Mitchelmore JA, Bell CJ and Griffiths AJA agreeing), allowing the appeal in part, held: As to the Costs Priority Issue: (1) When Order 7 of the 21 April 2022 orders is read with Order 6, which, in turn, incorporates the "waterfall" of payments in paragraphs 5.1 and 5.2 of the Schedule to the Orders, Order 7 operates so as to leave no funds available to satisfy the Capped Costs Orders. That outcome is inconsistent with the Capped Costs Orders which were intended to insulate the Lowes' entitlement to costs from any subsequent diminution or alteration through the Inquiry. That construction is supported by the reference in Order 9(c) to "KST's 20% share of the net proceeds of sale of the assets of the partnership currently held by the [KST] Estate", and the language in Order 11 that those costs be paid "now" and "not be deferred" pending the Inquiry: at [9], [100]-[101]. (2) The qualification in Order 9(c), "only to the extent that", does not constitute judicial recognition that KST's 20% share may be insufficient to permit full recovery; rather, it constitutes judicial acknowledgment that "the partnership assets currently held" may not permit full recovery of the amount of costs that was the subject of Order 9(b). That construction is supported by the language of Order 9 and Order 11, and Gleeson JA's reasons which demonstrate that Order 9(c) was directed to addressing the concern as to the source from which the Lowes should recover their costs; and entailed identifying what amount represented 20% of the net proceeds of the partnership assets "currently held": at [97]-[99]. As to the Costs Contribution Issue: (4) The Lowes first raised the issue of contribution 16 years after the Partnership Proceedings were commenced, in a manner that was of limited scope. They only put the claim in a way that approached the argument as put on appeal at the tail end of the Inquiry and FC Chow Proceedings, in their submissions on costs. The issue of contribution at that point was inextricably tied to questions of which party was liable for which other parties' costs. There was no suggestion that the primary judge could not address the issue as part of his Honour's consideration of costs; his Honour was expressly invited to consider it on that basis: at [114]-[120]. (5) The primary judge was correct to reject the claim for contribution: at [127]. (i) The contribution claim made in relation to the period from the commencement of the Partnership Proceedings to 10 April 2015 (referred to as stage one) was contrary to the Capped Costs Orders that the Court of Appeal made and its reasons for making those orders. It ran headlong into the Court of Appeal's recognition in its judgment on costs that the Lowes had raised a multitude of issues in the Partnership Proceedings, including claims against individual partners which, for the greater part, were ultimately unsuccessful; and the Court's intention to prevent successful parties contributing to the Lowes' costs and passive parties bearing the burden of the costs order. The claim was also not made until well after stage one, without notice to Helen, Margaret and Janet and with limited notice to the FC Chow respondents: at [121]-[123], [126]. (ii) In any event, it was artificial to consider stage one independently of stage two (being the Inquiry and the FC Chow Proceedings), throughout which the Lowes consistently maintained that the Partnership Proceedings (which necessarily encompassed stage one) were not brought on behalf of all partners. The Lowes did not incur all of their costs in all of the proceedings in a manner that gave rise to the relevant equity grounding a right of contribution from the other partners, nor were they incurred in the ordinary and proper conduct of the business of the firm within the meaning of s 24(1)(2)(a) of the Partnership Act 1892 (NSW): at [124]-[126]. Cummings v Lewis (1993) 41 FCR 559; [1993] FCA 190; Scholefield Goodman & Sons Ltd v Zyngier [1986] AC 562, considered; Albion Insurance Co Ltd v Government Insurance Office (NSW) (1969) 121 CLR 342; [1969] HCA 55; Burke v LFOT Pty Ltd (2002) 209 CLR 282; [2002] HCA 17, cited.

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