Metropolitan Petar v Mitreski [2008] NSWSC 243 | Case summary

3369/97 - METROPOLITAN PETAR v MITRESKI JUDGMENT 1 HIS HONOUR: This judgment deals with notices of motion filed on 14 February 2008 which seek a variation of an injunction granted by the Court of Appeal on 6 October 2006 subsequently varied so that it would be further varied by permitting the 6th defendant, Macedonian Orthodox Community Church St Petka Inc to use certain funds to defray the reasonable legal costs of preparing and participating in interlocutory hearings and the final hearing of these proceedings. 2 Unfortunately, in order to deal with this matter which has been hotly contested, I have to go back and consider some of the past history of these proceedings over the last 12 years. 3 Although it is a gross simplification, the basal dispute between the parties is whether the 6th defendant holds the property vested in it absolutely or as a trustee for the purposes of the Macedonian Orthodox Church or otherwise on trust. 4 According to the statement of claim, in about October 1977 a constitution was adopted by the parishioners of the Parish of St Petka, a parish of the Macedonian Orthodox Church, with an unincorporated association set up to encourage practice and to promote the Macedonian Orthodox religion. On or about 28 October 1977, ownership of the church property was transferred to the trustees of this association. Between 1978 and 1982, the trustees acquired various other pieces of property in Rockdale. In or about April 1992, the 6th defendant was incorporated under the Associations Incorporation Act 1984. 5 Under schedule 2, clause 2 of the Associations Incorporation Act 1984, on an incorporation of an association under that Act, the assets of a former association vest in the incorporated association without the need for any further assignment or assurance. 6 Section 18 of the Associations Incorporation Act restricts an incorporated association from exercising any power that is prohibited by the rules of the association, and from exercising or doing any act otherwise than in pursuance of the objects of the association. However, such restrictions may only be asserted (apart from prosecutions) in proceedings between members of the association or by the association with officers of the association. 7 The proceedings were heard in part by Hamilton J in 2003. In the course of those proceedings, if not before, the property involved in the dispute was split into two, Schedule A property being, for most intents and purposes, property on which religious services were conducted, and non-Schedule A property being other property such as investment units. 8 Hamilton J, in his judgment of 4 April 2003 cited as Metropolitan Petar v Mitreski [2003] NSWSC 262 answered a separate question that the Schedule A property, was prior to its transfer to the 6th defendant, held upon trust to permit the trust property to be used by the Macedonian Orthodox Church St Petka Rockdale as a site for a church of the Macedonian Orthodox religion and for other buildings and activities concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox religion. His Honour found that the trust was a valid charitable trust and answered in the negative the question: "Whether the effect of the vesting of the property in the 6th defendant was that the 6th defendant thereafter held the property free of either trust". 9 As yet there has been no determination of the basis upon which the association holds the non-Schedule A property. 10 On 27 April 2006, Hamilton J handed down a judgment cited as Metropolitan Petar v Mitreski [2006] NSWSC 336. That was a judgment on a notice of motion dated 14 March 2005 whereby the plaintiffs sought an interlocutory injunction restraining the 6th defendant from applying or using any monies held by the 6th defendant, as well as restraining the 6th defendant from encumbering or charging any of its property for the purpose of payment of legal costs and disbursements otherwise than in accordance with certain orders of the court. His Honour granted an injunction restraining the use of the Schedule A property. In making that decision, his Honour summarised the law as to trustees using the trust property for legal costs including the following: A. A trustee is entitled to be indemnified out of a trust estate against all proper costs, charges and expenses incident to the execution of a trust. B. The fact that, in defending a suit for the benefit of a trust estate, a trustee also defends his own character and actions as trustee does not disentitle him to indemnity for his costs. 11 The decision of Hamilton J went on appeal and in a judgment cited as Metropolitan Petar v The Macedonian Orthodox Community Church St Petka Incorporated [2006] NSWCA 277, a judgment delivered on 6 October 2006, the court consisting of Beazley, Giles and Hodgson JJA, varied what Hamilton J had done and made the following order: "5. Upon the appellants by their counsel giving to the Court the usual undertaking as to damages the sixth defendant be restrained until the further order of the Court from paying any legal fees of the first to sixth and eighth defendants or any of them: (i) incurred in conducting proceedings no 3369 of 1997 after 4 April 2003; and (ii) incurred in conducting the proceedings referred to in paras 29(L) … and 29(P) … of the statement of claim (Version 7); (iii) incurred in conducting proceedings no CA40928/06 and CA40313/06 out of any of its property or the proceeds of sale or any moneys raised by giving security over any of that property other than: (a) costs the payment of which is authorised under judicial advice given or order made by the Court in the Judicial Advice Proceedings; (b) reasonable legal costs of opposing the relief claimed by the appellants in their Notice of Motion for injunctive relief in the proceedings filed on 14 March 2005; (c) reasonable legal costs of proceedings no CA40313 of 2006 … (d) [deleted] (e) payment of reasonable legal costs incurred in the period between 3 May 2006 and 7 June 2006 out of property other than the property set out in Schedule A to this order … or any proceeds of the sale of or any moneys raised by giving security over any of the non-Schedule A property." 12 The 6th defendant applied for special leave to appeal from that judgment. The principal ground for seeking special leave was that: "The reasoning of the Court of Appeal supports the principle that where a plaintiff, who is seeking an interlocutory injunction to enjoin a defendant from dealing with property, has established that there is a serious question to be tried that the property is held on trust or that the property being held on a trust that contains certain terms, then the defendant will be prevented from having recourse to the property to defend the proceedings. This principle has been rejected by intermediate appellate courts in England and Hong Kong and single judges in Canada and Australia." 13 On the hearing of the special leave application which came before Gummow and Heydon JJ on 8 December 2006, Heydon J asked what were these English, Hong Kong and Canadian cases and asked whether they were actually cited to the Court of Appeal as they did not appear on the list of authorities. The Court was told that the applicants were referring to United Mizrahi Bank Ltd v Doherty [1998] 1 WLR 435; Xylas v Khanna, English Court of Appeal, 4 November 1992, unreported and other unreported decisions referred to in the Mizrahi case at pp 438-439. It was argued before the High Court that the proper principle was that where the plaintiff claims a trust such as this case: "there needs to be taken into account the following considerations, in particular in a case of this kind, being a charity, that there is a public interest transcending the private interests of the parties and the ordinary public interest that there be something in the nature of equality of arms, that there is a public interest that requires a controversy to be quelled by adjudication on its merits. Second … that determination of an interlocutory injunction in a way which prevents the determination on the merits by depriving the defendant of resort to its own property … is a wrong exercise of the discretion." 14 The High Court refused special leave to appeal. 15 The next round of litigation took place before Palmer J in which his Honour was asked to give judicial advice to the 6th defendant. His Honour did so, and in the course of giving that advice, indicated that he was of the view that it was appropriate that the proceedings be brought to a conclusion by funds being made available to the 6th defendant properly to defend the proceedings. He indicated that he thought the material suggested that if they were not given access to the association's property, they would not have those funds: see Re Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247 [53]. The judicial advice proceedings continued for a while and were finalised in Re Application of Macedonian Orthodox Community Church St Petka Inc (No 4) [2007] NSWSC 254. 16 The Court of Appeal allowed the appeal against Palmer J's decision principally on the basis that the 6th defendant was not a neutral party, but was abusing the right to ask for judicial advice to protect its own interests: see [2007] NSWCA 150 (costs being dealt with in [2007] NSWCA 287). 17 The High Court of Australia granted special leave against the Court of Appeal's decision on 7 March 2008, and that appeal is yet to be heard. 18 From time to time variations were made to the Court of Appeal's order: see orders of Hamilton J on 22 February and 3 April 2007. 19 On 14 December 2007, Associate Justice Macready dealt with an application to amend the statement of claim. His Honour granted amendment and varied the injunction granted by the Court of Appeal to include as an exception the costs of that motion and the amendment. 20 On 19 February 2008, by consent, I further varied the Court of Appeal's order by adding as para (h): "Reasonable legal costs of the 1st to 6th and 8th defendants relating to the preparation, filing and serving of a defence to the statement of claim (version 9)." 21 The present motion was argued before me on 19, 20 and 22 February 2008. The reason for three hearing days was that it was very difficult to get all the members of each team together on each day, so that although it was hardly satisfactory, there was about an hour's argument on each day. On the hearing at various stages, Mr T G R Parker SC and Mr R E Steele appeared for the plaintiffs, Mr G O Blake SC appeared for the 1st to 6th and 8th defendants, and Mr M McFadden of counsel or Ms C Samuels appeared for the Attorney General. 22 Mr Parker's principal submission was that the court should not entertain this application at all. He put that it is a fundamental principle that an application to vary an interlocutory order of a substantive nature made after a contested hearing is only to be entertained after the discovery of new material which could not reasonably have been put before the court on the hearing of the original application. Furthermore, such material has to be established by evidence. Mr Parker put that the present situation was not one of the exceptions to the general rule because when the initial application was made it must have been anticipated that there would be further costs leading up to the hearing. 23 Mr Parker relied on the decision of McLelland J in Brimaud v Honeysett Instant Print Pty Ltd, 19 September 1988, unreported. 24 In that case McLelland J, after referring to rules of res judicata, issue estoppel and abuse of process, said: "Interlocutory orders, of their very nature, create no res judicata or estoppel, and the Court retains jurisdiction to set aside, vary or discharge an interlocutory order up to the time of the final disposition of the proceedings. However the general rationale of the principles last referred to applies even in the case of interlocutory orders. It would be conducive to great injustice enormous waste of judicial time and resources if there were no limit on the power of a party to have any interlocutory application or order relitigated at will. The over-riding principle governing the approach of the Court to interlocutory applications is that the Court should do whatever the interests of justice require in the particular circumstances of the case. In giving effect to that general principle, and in recognition of the public and private interests earlier referred to, rules of practice have been developed in accordance with which the discretionary power of the Court to set aside, vary or discharge interlocutory orders will ordinarily be exercised. … … the ordinary rule of practice is that an application to set aside, vary or discharge the order must be founded on a material change of circumstances since the original application was heard, or the discovery of new material which could not reasonably have been put before the Court on the hearing of the original application."

His Honour then gave examples. 25 McLelland CJ in Eq reaffirmed that view in Collier v Howard, 23 April 1996, unreported. The same principle was laid down by Sperling J in Wentworth v Rogers, 28 April 1996, unreported, quoted in detail in the note "Interlocutory Motions may be brought once only" in (1996) 70 ALJ 613. 26 The High Court decision on which those remarks were based is Adam P Brown Male Fashions Pty Ltd v Philip Morris Incorporated (1981) 148 CLR 170, where at 178, four justices of the High Court said of an interlocutory order: "A court must remain in control of its interlocutory orders. A further order will be appropriate whenever, inter alia, new facts come into existence or are discovered which render its enforcement unjust … . Of course, the changed circumstances must be established by evidence … ". 27 None of the cases, as is made clear by the words "inter alia" in the Adam P Brown case, intend to limit the discretion of the court to review its interlocutory orders when it considers there is justice in so doing. They make it clear that ordinarily that is only to occur where new material has been discovered not available at the time of the original hearing or circumstances have materially changed. 28 It should also be noted that most of the cases are directed to the situation where the fresh application is made within weeks of the original determination and the main focus of the remarks in Brimaud's case and like cases were directed against such soon repeated applications. 29 In the instant case, it seems to me that there could well be a case for saying that there have been altered circumstances because of the remarks of Palmer J in the judicial advice proceedings, but particularly because the Attorney General's representative has now said that he agrees with what Palmer J said, and that is, that the present dispute is involving the property of a charity which is being sterilised by this dispute, and if the only way in which the charity's position can be clarified is by using some of its money, then so be it. 30 In my view, it is just to reconsider the exceptions to and the scope generally of the Court of Appeal's injunction. 31 I thus pass to the merits. 32 On the merits, Mr Parker puts that there is no proper evidence that there is no prospect of the 6th defendant raising funds to meet the costs of preparation of these proceedings. The evidence of Mr Kotevich and the solicitor, Mr McConnell, on the issue, is no more than bare assertions. Furthermore, the focus is always on the 6th defendant. There is never any sufficient material to show why the 1st to 5th and 8th defendants' position must be ignored. Indeed, what the 6th defendant appears to seek to do is to have the costs of the other defendants for whom its solicitor also acts, paid for out of the assets of the 6th defendant. So far as discretion is concerned, the court should bear in mind, Mr Parker puts, that the 6th defendant has displayed preparedness to spend what monies it has raised upon ancillary litigation rather than getting ready for the main hearing. 33 The 6th defendant puts, particularly in its written submissions, that the main enquiry is whether the plaintiffs have made out a prima facie case. It has, but it is a weak one. Then one looks to the balance of convenience. Here, there is no prospect of the 6th defendant securing legal representation otherwise than out of the assets and as recognised by Palmer J, it is unfair to require it to take a neutral position or to retire from the litigation, thus the litigation should be funded out of the assets. 34 Mr Parker's riposte to that was that the Court of Appeal has already rejected that way of looking at things when it granted the injunction. 35 My mind has swung many times as I have been considering what decision I should make on this motion. Particularly is this so because the Attorney General, as the protector of charities, has taken the view that it is in the public interest that the proceedings should be concluded as soon as possible and that the only way that can be done with the court being given the assistance it will need is for the 6th defendant to be funded out of the assets. Even though this may mean that there will be hardly anything left, in a very real sense the assets will have been used to protect the charity. There is certainly a lot to be said for this approach. 36 However, I do not consider I can take this approach in view of what has been said by the Court of Appeal in 2006. 37 The Court of Appeal made it quite clear that, with minor exceptions, in all the circumstances of this case, the 6th defendant was not to be permitted to utilise the properties vested in it for the purpose of defending these proceedings. 38 The court considered that where a prima facie case has been shown it may be appropriate, and it is in this case, not to permit the 6th defendant to use the property which is the subject of the claim to defend the proceedings. 39 The circumstances of the 6th defendant have changed barely at all since the Court of Appeal's decision. It was in as much difficulty in raising funds dehors the Schedule A and non-Schedule A assets in 2006 as it is at the moment. The only difference is that the costs have increased partly because of the interlocutory appeals. 40 I consider that Mr Parker's submission is correct, that whilst small variations might be made to the injunction, as has already been the case, no major variation ought to be made, nor ought a series of variations be made, which will operate to nullify the order made by the Court of Appeal. 41 I consider that were I to make any of the orders sought in the notices of motion, I would be transgressing the principle set out in the previous paragraphs. 42 I should add more or less as an aside that no one seems to have considered that in any event the 6th defendant might be bound by what is sometimes called the broad view of the ultra vires principle not to use the assets otherwise than for the charitable purpose even if there were no trust. Cases such as Attorney General v Newbury Corporation (1834) 3 My & K 647; 40 ER 246; Pickering v Stephenson (1872) LR 14 Eq 322 (as explained by Lindsay J in Re a company (No 1126 of 1992) [1994] 2 BCLC 146 at 150 and following) and Breay v Royal British Nurses' Association [1897] 2 Ch 272, suggest that at least without the consent of the members in general meeting, the Schedule A and non-Schedule A assets of the 6th defendant could not be used for its litigation in any event. However, three qualifications should be made to that statement: (a) the point has not been argued; (b) the constitution of the 6th defendant may get over this problem; and (c) the effect of s 18 of the Associations Incorporation Act referred to earlier may affect the matter. I merely make the aside because I would not wish it to be thought that if the injunction fails or is suitably modified that it must inevitably follow that there can be resort to these assets to fund the litigation. 43 Accordingly, in my view, the motions of 14 February 2008 must be dismissed with costs against the 6th defendant.

Metropolitan Petar v Mitreski

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