Macedonian Orthodox Community Church St Petka Incorporated v Metropolitan Petar

The costs orders made at first instance 3The outstanding issues concerning the costs of the proceedings at first instance were addressed by Brereton J in his judgment of 21 December 2012 ([2012] NSWSC 1610). Although there were considerable complexities in the proceedings, his Honour treated the costs issues as able to be dealt with by reference to three categories, these being costs incurred in connection with the proceedings before Hamilton J (see judgments of 4 April 2003 and 31 March 2005), before Young CJ in Eq (see judgment of 4 March 2009) and before himself (see judgments of 3 February, 5 March and 21 December 2012). 4His Honour first concluded that he should not disturb Young CJ in Eq's order that the Association and Council Members (together, the "Defendants") pay the costs of the Bishop and priest (together, the "Plaintiffs") incurred in the proceedings before him. 5Brereton J then concluded that the Plaintiffs had been substantially successful before Hamilton J and that the Defendants should pay the Plaintiffs' costs of and associated with the proceedings before that judge. 6Next, Brereton J noted that the Plaintiffs had been successful before him in (1) establishing that, with a minor exception, the property of the Association not dealt with by Hamilton J was held on the same charitable trust as applicable to the remainder of the property, (2) proving six of eight alleged breaches of trust, (3) resisting the Association's application under s 85 of the Trustee Act 1925 and (4) establishing the accessorial liability of four of the five Council Members. He noted however that there were a number of issues upon which the Defendants had been successful (see [2012] NSWSC 1610 at [30]). In these circumstances, Brereton J considered that the Association should pay two-thirds of the Plaintiffs' costs of the proceedings before him (at [35]). 7His Honour then noted the relative duration of the proceedings before Hamilton J (13 hearing days) and before him (21 hearing days) and concluded that the Association should pay 75 per cent of such of the Plaintiffs' costs (including reserved costs) of the proceedings as a whole that were not the subject of a specific costs order (ibid). 8His Honour's orders concerning the Council Members are referred to below.

Costs orders in relation to the Association 9On appeal, the Association argued that two factors of equal significance warranted the percentage of 75 per cent stated in the order referred to at [7] above being reduced to 25 per cent. 10The first factor comprises assertions by the Association in its written submissions that the solicitors who acted for both the Association and the Council Members would not "look to the Council Members for the payment of [the] firm's professional fees, even where they are attributable to the defence of those individuals" and that "the Council Members are indemnified by the Association". 11Even if they are accurate, neither of these assertions is in my view of present significance. If the solicitors do not intend to charge, or pursue payment of fees by, the Council Members, that will simply mean that the Council Members will not, to that extent, incur costs which they can recover under any costs order made in their favour (as to which see later in this Judgment). Further, the existence of an obligation on the Association to indemnify the Council Members would not be a reason to reduce any liability the Association might have to the Plaintiffs for costs. That is a matter between the Association and Council Members which should not, and does not, affect the Plaintiffs' rights. 12The second factor advanced by the Association for reducing the percentage of 75 per cent is the Association's success on appeal in obtaining an order under s 85 of the Trustee Act 1925 relieving it of liability for its breaches of trust constituted by its payment of emoluments to Fathers Dzeparovski and Despotoski. The Plaintiffs contend that this success should not lead to any reduction in the percentage of the costs ordered to be paid because the Plaintiffs' resistance to the application under s 85 led only to some additional legal argument and no, or no substantial, additional evidence. They assert also that the claim consumed only a small proportion of the time involved in the litigation. 13In my view the costs orders made by Brereton J should only be disturbed to the extent necessary to reflect the limited variations on appeal to the conclusions reached at first instance on the substantive issues in the proceedings. This is consistent with the approach of the parties in their submissions to this Court on costs. The only variation that affected the Association was its success on its s 85 application. The other variation, concerning accessorial liability, affected the Council Members only. The Association did not contend that the costs order made by Young CJ in Eq against it should be set aside. 14Brereton J noted that "only a relatively small portion of the case" was relevant to the Council Members' liability as accessories (at [40]). The principal issue on that aspect of the case was whether the Council Members acted honestly. Their honesty was likewise relevant to the Association's s 85 application because they were the instrument by which the Association acted. In my view some adjustment to Brereton J's costs orders needs to be made to reflect the Association's success on appeal on this application. Whilst the Association was seeking an indulgence, in the sense that it was seeking to be excused from the consequences of its breaches of trust, the application was strongly contested and should in my view be treated as ordinary adversarial litigation, as was the case in Brien v Australasian Memory Pty Ltd [2000] NSWSC 333; 34 ACSR 158 at [13] - [15]. 15In concluding that the four Council Members who were found liable as accessories should pay about 25 per cent of the costs of the proceedings before him (see [17] below), Brereton J appears to have formed the view that the accessorial liability issue accounted for about 25 per cent of the time taken before him. That estimate should in my view be taken as also applicable to the time taken in respect of the s 85 application, given that the factual dispute at the heart of both concerned the honesty of the Council Members. 16On that basis and assuming, as I think is appropriate, that the litigation of those issues should be treated as severable from the litigation of the remainder of the issues, the Association, having succeeded on appeal, would prima facie have been entitled to be paid 25 per cent of its costs of the proceedings before Brereton J. To reflect the fact that the Plaintiffs are not simply unable to recover their costs in respect of the s 85 application but are liable to pay those of the Association relating to it, the percentage of the costs recoverable by the Plaintiffs in respect of the proceedings before Brereton J should be reduced from two-thirds to 15 per cent (an approximate reduction of 50 per cent of the costs of the proceedings). Taking into account both the proceedings before Hamilton J and those before Brereton J, I would reduce the percentage stated in Brereton J's order concerning the Plaintiffs' entitlement to the costs of the proceedings as a whole (which are not the subject of specific costs orders) to 50 per cent.

Costs orders in relation to the Council Members 17In his judgment of 21 December 2012, Brereton J concluded that, in principle, the four Council Members whom he found liable as accessories should be jointly and severally liable with the Association for the costs of the proceedings before Hamilton J and for about a quarter of the costs to which the Plaintiffs were entitled of the proceedings before him. The latter presumably reflected those Council Members' failure before Brereton J on the accessorial liability issue. It is not contended on appeal that his Honour should have ordered that they pay a higher percentage to reflect their failure before him on other issues. 18Taking into account the two sets of proceedings, his Honour ordered that those Committee Members should be jointly and severally liable with the Association for one-third of the costs for which the Association was liable - that is 25 per cent of the Plaintiffs' costs of the proceedings (including reserved costs) not the subject of a specific costs order (at [41]). Young CJ in Eq's order that the Council Members pay the costs of the proceedings before him remained unaffected. 19On appeal, the Council Members submitted that they should be relieved of any liability to pay the Plaintiffs' costs, notwithstanding that they were unsuccessful in the proceedings before Hamilton J and Young CJ in Eq in supporting the position taken by the Association, and that the findings of those judges were not varied on appeal. They contended that their lack of success in this respect should be regarded as offset by the manner in which the Plaintiffs prosecuted their claim against the Council Members, particularly in the Plaintiffs' lack of adequate particularisation of their allegations of dishonesty of the Council Members and the changes from time to time in the manner in which the Plaintiffs put their case on accessorial liability. 20I do not accept this submission. These were matters that were available to be put, and indeed may well have been put, before Brereton J. They are not new features of the proceedings and reliance upon them should be regarded as foreclosed by Brereton J's decision. Whilst Brereton J was of course considering the Council Members' position on the assumption that four of them were liable as accessories, the matters now relied upon were, to the extent that they have foundation, relevant to the course taken by his Honour in relation to costs. I consider therefore that the Council Members' lack of success before Hamilton J and Young CJ in Eq must be reflected in the costs orders. 21The Council Members also relied on the assertions referred to above (at [10]) that the solicitors for the Association and the Council Members will not look to the Council Members for payment of costs and that the Council Members are indemnified by the Association against their liability to pay costs. For reasons I have given earlier, I do not consider that these assertions, even assuming that they are to be accepted as representing the facts, should affect the costs orders to be made. 22I consider that an appropriate costs outcome in respect of the proceedings before Brereton J to be one that would entitle the Council Members to recover 25 per cent of their costs of the proceedings before his Honour. Thus, as a result of their success on appeal on the accessorial liability issue, the Council Members would be entitled to their costs of the proportion of the hearing referable to that issue, rather than having to pay the Plaintiffs' costs of that issue. 23Taking into account this conclusion and that the Council Members should be held responsible for the costs of the proceedings before Hamilton J, I consider that the appropriate order in relation to the proceedings before Hamilton J and Brereton J is, so far as the Council Members are concerned, that they pay 10 per cent of the Plaintiffs' costs. The percentage stated in Brereton J's order should be reduced accordingly. 24Contrary to their submission, I do not consider that there is any reason to set aside the costs order made by Young CJ in Eq against the Council Members. Those costs related to a discrete aspect of the proceedings in relation to which the Council Members were unsuccessful. For the reasons I have given above, the other submissions made by the Council Members do not indicate that any variation should be made to his Honour's order.

The Attorney-General's position 25The Attorney-General does not oppose the setting aside of the order for costs made in his favour by Young CJ in Eq on 9 June 2009. 26The Attorney-General does not seek any order for costs in his favour, nor does any party seek an order against him.

Appeal costs 27On appeal, both the Plaintiffs and Defendants were unsuccessful on arguments concerning the terms of the relevant charitable trust. The Association was successful in obtaining relief under s 85 of the Trustee Act and the Council Members were successful in reversing the finding against them of accessorial liability. Otherwise, the Plaintiffs succeeded on the issues argued on appeal. 28In my view, the Association should be ordered to pay 75 per cent of the Plaintiffs' costs of the appeal, the reduced percentage reflecting the Plaintiffs' failure on the s 85 issue and on their argument concerning the terms of the trust. 29Whilst the Council Members were successful on the ultimate issue that concerned them, that of accessorial liability, they took the same position as the Association on the other issues. In these circumstances, the Plaintiffs should be ordered to pay 50 per cent of the Council Members' appeal costs.

Further issues for Brereton J 30The Plaintiffs and Defendants agreed that this Court should remit to Brereton J for determination the question of whether the Association is entitled to be indemnified out of the trust assets in respect of costs ordered to be paid by it. This is an appropriate issue for resolution at first instance. However, as it was not one that arose on the appeal, it is not appropriate for this Court to make an order for remittal. The issue can be determined at first instance without such an order. The same position applies in relation to the question of whether the Association is entitled to be indemnified for its own costs.

Stay of costs orders 31Both the Plaintiffs and Defendants accepted that costs orders against the Association should be stayed until its entitlement to indemnity from the trust assets is determined.

Orders 32For the above reasons, I propose the following orders: (1)Vary order (3) made by Brereton J on 21 December 2012 by substituting the percentage of 50 per cent for the percentage of 75 per cent and substituting the percentage of 10 per cent for the percentage of 25 per cent. (2)Set aside order made by Young CJ in Eq on 9 June 2009 insofar as it ordered that any of the Defendants pay costs to the Attorney-General of New South Wales. (3)Stay order (3) made by Brereton J on 21 December 2012, as varied, and also the costs orders made by Young CJ in Eq on 9 June 2009 against the Defendants until the earlier of the date upon which the Defendants' entitlement to indemnity from the trust assets is determined and a date appointed by a judge of the Equity Division for this stay to conclude. (4)Order the Association to pay 75 per cent of the Plaintiffs' costs of the appeal. (5)Order the Plaintiffs to pay 50 per cent of the Council Members' costs of the appeal. (6)In these orders, the term "Plaintiffs" refers to Bishop Petar and Father Mitrev and "Defendants" to the Macedonian Orthodox Community Church St Petka Incorporated and those members of its Council whom Brereton J found accessorially liable for breaches of trust. 33EMMETT JA: I agree with the orders proposed by Macfarlan JA for the reasons given by his Honour.

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: 18 November 2013