Metropolitan Petar & Ors v Mitreski & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J Wednesday, 31 October 2001 3369/97 HIS GRACE METROPOLITAN PETAR, THE DIOCESAN BISHOP OF THE MACEDONIAN ORTHODOX DIOCESE OF AUSTRALIA AND NEW ZEALAND & 2 ORS v LAMBE MITRESKI & 6 ORS Judgment 1 HIS HONOUR: This is a motion by the defendants in these proceedings to strike out the statement of claim on the basis that the suit is defectively constituted by reason that neither is the Attorney General a plaintiff ex relatione or ex officio nor do the plaintiffs have the authority of the Attorney General or the leave of the Court under s 6 of the Charitable Trusts Act 1993 ("the CTA") to bring the proceedings. The law governing the proper parties to proceedings relating to charities is recondite and complex. To understand it, it is necessary to go into some history. The Law 2 Among the more useful accounts of this subject are those in Jordan, Chapters in Equity in New South Wales (6th Ed, 1947) 47; Jacobs' Law of Trusts in Australia (6th Ed, 1997) [1067]; and Tudor on Charities (8th Ed, 1995) ("Tudor") 338 - 369. 3 It is said that the rules relating to the parties to a suit concerning charitable trusts are the same as the rules in all suits relating to trusts with two exceptions, namely, that only specified persons may bring the proceedings and that the Attorney General is generally a necessary party to the proceedings: 5(2) Halsbury's Laws of England (4th Ed, 2001 Reissue) tit Charities par 516; Picarda, The Law and Practice Relating to Charities (2nd Ed, 1995) 652. This statement, which was correct at general law and remains so despite statutory modification, has the virtue of pointing up that there are two separate subject matters within the special rules relating to the parties to charity suits. In the numerous discussions (often unclear) of these rules these two subject matters are often elided and this has led to considerable confusion. The two subject matters are, first, who may bring proceedings to enforce a charitable trust and, secondly, whether or not the Attorney General is a necessary party to the proceedings. Who May Be Plaintiff? 4 The general law is stated by Professor Scott to be that proceedings to enforce a charitable trust could be brought by the Attorney General (whose general role in charity proceedings is discussed below), by one trustee against others, or by persons with a special interest in the subject matter of the trust: see IVA Scott on Trusts (4th Ed, 1989) s 391. The Attorney General could bring proceedings on the relation of persons who wished to complain about the non enforcement of the trust. When that occurred the Attorney General could, at his election, either commit the conduct of the proceedings to the relators against an indemnity for costs (with a residual right to resume control of the proceedings) or conduct the proceedings himself: Tudor 349 - 350. That persons with a special interest were able to bring such a suit in the English Chancery Courts in their own names, and not only as relators to the Attorney General, is demonstrated by the decision in Braund v Earl of Devon (1868) LR 3 Ch App 800. That was a case where a testator had made a gift to trustees to support a school for the gratuitous education of boys, with preference to be given to the lineal descendants of his grandfather. Three of the descendants sued the executors, joining the Attorney General as defendant, for provision for their education. The executors demurred to the bill. The Court of Appeal in Chancery (Page Wood and Selwyn LJJ) upheld the demurrer, but only on the ground that the plaintiffs did not have the consent of the Charity Commissioners under the Charitable Trusts Act 1853 s 17 (as to which see [6] below) to bring the proceedings, not on the ground that they did not have standing or that the Attorney General must be the plaintiff. It was also the situation in New South Wales: Lang v Purves (1862) 15 Moo PC 389; 15 ER 541; 1 SCR (NSW) App 4. Thus, it is stated in Story on Equity Jurisprudence (3rd English Ed, 1920) ("Story") s 1191 that "if there be any abuse or misuse of the funds by the trustees, the Court will interpose, at the instance of the Attorney-General, or the parties in interest, to correct such abuse or misuse of the funds" (my italics). 5 It was always the case, however, that the trustee might sue to enforce rights at law or recover property of the trust without the Attorney General being party to the suit. This was made clear in the New South Wales context by the decision of Rath J in Uniting Church in Australia Property Trust (NSW) v Monsen [1978] 1 NSWLR 575, where his Honour, after an illuminating survey of the authorities, said at 591: "It seems to me that the Attorney-General is not a necessary party in proceedings in which an existing charity, whether incorporated or not, is seeking to recover property to which it claims to be entitled, or to protect property in which it claims an actual or contingent interest. The plaintiffs in this case are asking the Court to make an order declaring their interest in certain names, an order restraining the defendants from dealing with those names contrary to the interest so declared. In my opinion, such proceedings are plainly distinguishable from proceedings against trustees for the administration of a charitable trust, and it is not necessary that the Attorney-General should be a party, either as plaintiff or defendant. The Court has before it the parties who have an interest in litigating the issues involved. The Attorney-General would also have an interest, because as parens patriae he also is concerned that property the subject of a charitable trust is used for its proper purposes, but this is not a case in which his presence is required." 6 The necessity for the authorisation of the plaintiff and the participation of the Attorney General on the plaintiff's side of the record has been varied by statute over 150 years, both in England and the Australian States. The process started in England with the Charities Procedure Act 1812 52 Geo III c 101 (Sir Samuel Romilly's Act). That Act provided for a more summary procedure than then available. In case of "a Breach of any Trust, or supposed Breach of any Trust created for Charitable Purposes, or whenever the Direction or Order of a Court of Equity shall be deemed necessary for the Administration of any Trust for Charitable Purposes" any two persons might present a petition for summary determination, rather than proceeding by bill or information. But the petition had to be certified by the Attorney General before proceeding. This Act was in force in New South Wales. It was not regarded as suitable for proceedings in which there was a contest between adverse interests: Parker's Practice in Equity (New South Wales) (2nd Ed, 1949) 425. In England, as a belated result of a Royal Commission of 1837, there was enacted the Charitable Trusts Act 1853 16 & 17 Vic c 137: see 14 Holdsworth's History of English Law 130. That Act created and gave various functions to the Charity Commissioners. It provided by s 17 that the prior consent of the Commissioners had to be obtained to the bringing of any suit "concerning or relating to any charity, or the estate, funds, property, or income thereof". The reason for the provision was to control a practice which had grown up of vexatious charity suits being brought for the sake of costs out of the charitable funds (which certainly suggests plaintiffs other than the Attorney General). It was the lack of consent under s 17 that led to the success of the demurrer in Braund v Earl of Devon supra. The section said nothing concerning the identity of the proper plaintiffs to such suits, although obviously it assumed that they might be persons other than the Attorney General. The Act by s 43 defined the persons who might bring proceedings under the jurisdiction "conferred or created by" the Act in much the same way as does s 33 of the Charities Act 1993 (UK) (as to which see [7] below). Section 43 did not, however, apply to charity proceedings generally. And it should be added that the 1853 Act applied only to charities for certain purposes specified in its preamble. The parties to suits relating to charities outside the Act continued to be regulated by the general law. 7 The next step in England was the replacement of the Charitable Trusts Act 1853 by the Charities Act 1960, itself replaced by the Charities Act 1993. Section 28 of the 1960 Act (replaced in identical terms by s 33 of the 1993 Act) was as follows: "(1) Charity proceedings may be taken with reference to a charity either by the charity, or by any of the charity trustees, or by any person interested in the charity, or by any two or more inhabitants of the area of the charity if it is a local charity, but not by any other person. (2) Subject to the following provisions of this section, no charity proceedings relating to a charity ( other than an exempt charity) shall be entertained or proceeded with in any court unless the taking of the proceedings is authorised by order of the Commissioners.

(5) Where the foregoing provisions of this section require the taking of charity proceedings to be authorised by an order of the Commissioners, the proceedings may nevertheless be entertained or proceeded with if, after the order had been applied for and refused, leave to take the proceedings was obtained from one of the judges of the High Court attached to the Chancery Division. (6) Nothing in the foregoing subsections shall apply to the taking of proceedings by the Attorney General, with or without a relator, or to the taking of proceedings by the Commissioners in accordance with section 32 above.

(8) In this section 'charity proceedings' means proceedings in any court in England or Wales brought under the court's jurisdiction with respect to charities, or brought under the court's jurisdiction with respect to trusts in relation to the administration of a trust for charitable purposes."

8 The section, as well as requiring the consent of the Charity Commissioners, specifies the plaintiffs who may bring charity proceedings. And it applies to a very wide class of proceedings (although there are "exempt charities" to which the Act does not apply). There is not a large body of authority as to what was a sufficient interest to qualify a person as a plaintiff within the meaning of the section, despite its existence in some form since 1853. But a recent decision suggests that the necessary interest is "an interest materially greater than or different from that possessed by ordinary members of the public": In re Hampton Fuel Allotment Charity [1989] Ch 484 at 495 per Nicholls LJ. 9 In New South Wales there have never been any Charity Commissioners. Sir Samuel Romilly's Act remained in force until the Imperial Acts Application Act 1969 came into operation. That Act replicated the provisions of Sir Samuel Romilly's Act in s 17. The Supreme Court Rules 1970 revolutionised Supreme Court procedure and abolished proceedings by petition. But s 17 remained in force until repealed by the Charitable Trusts Act 1993. The CTA in s 5 defines "charitable trust proceedings", in terms harking back to Sir Samuel Romilly's Act, as follows: "(1) In this Part, 'charitable trust proceedings' means proceedings in the Court brought, whether by any trustee of a charitable trust or by any other person, under the Court's statutory or general jurisdiction with respect to any breach or supposed breach of a charitable trust, or with respect to the administration of a charitable trust. (2) However, in this Part 'charitable trust proceedings' does not include: (a) proceedings for the bringing of any appeal; or (b) proceedings relating merely to the construction of a trust instrument."

And by s 6 it provides as follows: "(1) Charitable trust proceedings are not to be commenced in the Court unless: (a) the Attorney General has authorised the bringing of the proceedings; or (b) leave to bring the proceedings is obtained from the Court. (2) The Court is not to give such leave unless satisfied that the Attorney General has been given an opportunity to consider whether to authorise the proceedings or that the referral of the matter to the Attorney General is not appropriate because of the urgency of the matter or other good cause. (2A) Any such authority or leave may also be given after charitable trust proceedings have been brought so as to enable the continuation of those proceedings. (3) A person who does not otherwise have standing may bring charitable trust proceedings if authorised by the Attorney General to bring those proceedings. (4) Nothing in this section applies to the bringing by the Attorney General, with or without a relator, of charitable trust proceedings or any other proceedings relating to a charitable trust." These provisions have been alluded to, but not expounded by the High Court in Bathurst City Council v PWC Properties Pty Limited (1998) 195 CLR 566. However, it may confidently be said that they do not effect a codification of the law as to the necessary parties to charitable trust proceedings (despite an inconsistency between the use of the word "codify" in the Second Reading Speech (Legislative Assembly, 21 April 1993, 1385) as opposed to "clarify" in the Explanatory Note accompanying the Bill; "codify" in the Speech was plainly an erroneous use of the word). The CTA's exception in s 6 of the bringing of proceedings by the Attorney General as plaintiff, with or without a relator, and its lack of reference to the possible necessity of the Attorney General as a defendant (if not a plaintiff) make that clear. Unlike the English legislation, s 6 does not specify or enumerate classes of plaintiffs; but from subs (3) it appears that the section proceeds on the basis that there were before its enactment plaintiffs who had standing to bring charitable trust proceedings other than the Attorney General.

10 The second proposition is that the Attorney General is generally a necessary party either as plaintiff or defendant in a suit for the enforcement of a charitable trust. This is because, as stated by Story in s 1190: "The general doctrine in England is, that the king, as parens patriae , has a right to guard and enforce all charities of a public nature, by virtue of his general superintending power over the public interests, where no other person is intrusted with that right." The proposition is stated thus in Tudor at 351: "By reason of his duty as the Sovereign's representative, protecting all persons interested in the charity funds, the Attorney-General is as a general rule a necessary party to charity proceedings. He represents the beneficial interest; it follows that, in all proceedings in which the beneficial interest has to be before the court, he must be a party. He represents all the objects of the charity, who are thus in effect plaintiffs through him. It was accordingly held that, if all the subscribers to a charitable fund were plaintiffs, the action would still be defective for want of parties, unless the Attorney-General were also a party."

11 It remains a nice question in any proceedings whether the Attorney General's joinder is necessary or whether all necessary interests are represented by other parties. The classic statement as to the circumstances in which the Attorney General is and is not a necessary party to charity proceedings is that of Sir John Romilly MR in Ware v Cumberledge (1855) 20 Beav 503 at 510 - 512; 52 ER 697 at 700 - 701: "It is difficult to lay down any general rule, which shall be adapted to every case; there must be a great deal of discretion in these matters. The Attorney-General represents all absent charities, and it is sufficient to have him here to represent all absent charities. But absent charities may obviously be of two different characters: they may either be under gifts to specified individual charities, or to charity generally. In case the gift is for charity generally, no one can represent it but the Attorney-General, and he must be here to represent such general charities. When there are specified individual charities, then the Attorney-General's presence is not universally necessary; but it is required by the court upon various occasions, as, for instance, where any rules are required for the regulation of the internal conduct of the charity itself, such as the establishment of a scheme and the like: there the Attorney-General is necessary for the purpose of aiding and assisting the court in directing and sanctioning the general system and principle that ought to govern charities of those descriptions. But there are other cases where there is no question as to the conduct of management of the charities, but only whether the charity is entitled to a particular legacy or not. In those cases the Attorney-General is rather in the nature of a trustee for those charities, and the court prefers having before it the charities beneficially interested, for the purpose of putting their interests before the court in the light which they consider most favourable to them. In those cases I think it preferable that the charity itself should appear rather than that the Attorney- General should represent it. This appears to me to be one of the latter class 9of cases, and therefore it would be better that the charity should appear. Having stated that as my general view of the case, it is very obvious, as counsel will see, that there may be mixed cases in which it is impossible to lay down a rule beforehand, and in which the Court must act on the matter before it in such manner as, according to the best exercise of its discretion and judgment, it may think best calculated to promote justice." The Present Case 12 These are proceedings among adherents of the Macedonian Orthodox Church. The first plaintiff is the Metropolitan of that Church for Australia and New Zealand. The second plaintiff was appointed by the first plaintiff as the priest of the Church of St Petka, Rockdale. The sixth defendant is an association incorporated under the Associations Incorporation Act 1984 and is the legal owner of the land on which the church and the church hall stand, other land in the district used for church purposes and other property. The first five defendants are officers or former officers of the association. The eighth defendant (the seventh defendant having been dismissed from the suit) is the priest of the church appointed by the sixth defendant. 13 The suit is similar to one relating to the Serbian Orthodox Church recently decided by the Chief Judge in Equity: Radmanovich v Nedeljkovic [2001] NSWSC 492. The following descriptions of that suit, contained in his Honour's judgment, appear applicable to the present case on such material as I have seen to date: "[3] The basal question for determination is whether the trusts affecting the relevant land are for the Serbian Orthodox Church as a whole or whether they are solely for the Church Community of Warriewood-Mona Vale or otherwise.

[11] Although irrelevant to the dispute, the present case possesses all the indicia of the usual causes of problems in the Eastern Churches in Australia. A small group of migrants commence a Church/Community centre without great thought to constitutional issues. Often a local solicitor assists in the drawing up of a constitution from a precedent from a democratically run club or congregational church. No-one at this stage gives thought to the hierarchical nature of such churches. As time goes by and the Church gathers strength, constitutional questions assume greater importance and the tension between the hierarchical principles and the democratic structure of the local constitution escalates to breaking point. The disputants, as in the present case, are men and women of Christian faith and goodwill caught up in the inevitable struggle planted at the community's foundation." The parties are reversed in this suit, in that in Radmanovich the plaintiff was the trustee of church property, representing the local community, and it was the defendants who represented the hierarchical church. Here the representatives of the hierarchical church are the plaintiffs and the trustee/representatives of the local community are the defendants. The solution as to parties adopted in Radmanovich was to add the Attorney General by amendment as a defendant. The reasons given by his Honour for this course were as follows: "[14] The proceedings were commenced by summons filed 12 February 1999 without naming the Attorney-General as a party. It is conceded that this was irregular. This is for two reasons, first, the proceedings are in respect of an alleged charitable trust. Secondly, if the trust should fail, the Attorney-General represents the person who would take on bona vacantia if that became a relevant consideration." 14 The amended statement of claim is, to say the least, an unruly document. It has more than 200 paragraphs and more than 30 prayers. However, the application to strike it out is, as I have said, for want of parties. I do not intend to encourage other applications in relation to the statement of claim; despite its unruly nature, I think the purposes of these proceedings will be best served by their being brought to early trial. They are at present specially fixed for hearing before me commencing on 25 February 2002. It will be best if that fixture can be maintained. The defendants have stated, I think correctly, that the amended statement of claim broadly contains four claims: "(a) by the Church that the property of St Petka Parish is held on trust for the religious and charitable purposes of the Church;

(c) that the sixth defendant has been wrongly passing itself off as part of the Church;

(d) by the second plaintiff that he is entitled to be reinstated as parish priest of St Petka and to be paid money."

It should be added to (a) that the allegation is that the property referred to is at present being used in breach of trust because it is being used for purposes other than the proper purposes of the hierarchical Macedonian Orthodox Church. Such a suit is justiciable: see The Solicitor-General v Wylde (1945) 46 SR (NSW) 83 per Jordan CJ at 97; Wylde v Attorney-General for New South Wales (at the relation of Ashelford) (1948) 78 CLR 224 esp per Latham CJ at 257. 15 Mr T G R Parker, of counsel for the plaintiffs, has submitted that this suit is not within the definition of charitable trust proceedings in the CTA; that the authority of the Attorney General or the leave of the Court is not necessary under s 6; and that the suit is not one in which the Attorney General is required to be plaintiff. I do not agree with the proposition that this suit is not within the definition of charitable trust proceedings. It seems to me that it is squarely within that definition, as brought with respect to a breach or supposed breach of a charitable trust, so that it is necessary for the plaintiffs to have, at least in relation to claim (a), the authority of the Attorney General or the leave of the Court. Alternatively, the suit might be brought under the exception in subs (4) by the Attorney General at the relation of the present plaintiffs. The Attorney General was earlier approached by the plaintiffs to give his fiat so that the suit might become a relator suit brought by the Attorney General on their relation. Answer was made on behalf of the Attorney General that, in his opinion, the suit did not require the Attorney General to be a party by reason of the decision in Monsen's case supra. The Attorney General equally very properly indicated that he would be prepared to give his fiat if the Court deemed it necessary. In my view, with great respect, the Attorney General's contention that the case is within the principles stated in Monsen's case is not correct. In my view, it would be correct to decide Monsen in the same way today with the CTA in force as Rath J decided it in 1978. But this case is different. The trustee is not the plaintiff. This is not, or certainly not wholly, a suit to recover or protect property of the trust, although claim (c) may fall within that category. But claim (a) does not. It is, as I have already opined, a claim to enforce the trust upon the grounds that the ways in which the defendants (including the trustee) are dealing with trust property is foreign to the purposes of the trust and should be restrained. The motion must therefore succeed and the statement of claim must be struck out if the situation be not remedied. I shall hear further submissions from the parties and should welcome submissions from the Attorney General, in light of what follows, as to the course which the proceedings should now take. 16 It seems to me that there are two courses open. The first is for the Attorney General to give his fiat to the plaintiffs. That would certainly give the suit proper constitution. However, in my view the preferable course is one akin to that followed by the Chief Judge in Radmanovich. The plaintiffs could be given the authority of the Attorney General or, alternatively, I should be prepared to give them the leave of the Court to maintain the proceedings, since the Attorney General on their application for a fiat had an opportunity to give them instead authority to bring the proceedings, but did not do so (thus fulfilling s 6(2)). I am inclined to remedy the defect of constitution of the suit by giving that leave but, in my view, the suit would remain one to which the Attorney General should be a party, because I am not convinced that the whole of the general interest in the trust is represented by the present parties to the suit. Even more importantly, although a defence has not yet been filed, the defendants have announced before me that they intend to put a submission that the property is not in fact held under a charitable trust. For those reasons the Attorney General should be party to the suit. I think it desirable that he be an independent party to the suit and appear at the trial, at least to put submissions to assist the Court, as he did in Radmanovich, in relation to the existence and correct characterisation of the trust, and any other matters that he deems appropriate. I should attempt to give directions in due course to limit the degree of his participation in order to limit the costs incurred. The animosity of the parties can be relied on to ventilate any factual dispute. 17 Having expressed these views, I propose to stand the matter over to hear further submissions on the course I should follow. As I have said, I should welcome submissions from the Attorney General as to that course. The matter should then return to Young CJ in Eq for his Honour to put in place the appropriate arrangements for security for costs which his Honour has foreshadowed in his judgment on that subject matter: Metropolitan Petar v Mitreski [2001] NSWSC 414. That ought occur promptly if there is to be any hope of retaining the fixture for 25 February 2002. The costs of the motion may be addressed on that occasion. ***************************

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