Metropolitan Petar v Mitreski

Judgment 1This judgment deals with two issues which remain outstanding from the judgment delivered on 3 February 2012 [Metropolitan Petar v Mitreski [2012] NSWSC 16] ("the principal judgment"), and the consequential orders made on 5 March 2012 [Metropolitan Petar v Mitreski [2012] NSWSC 167] ("the orders judgment"), namely the alleged accessorial liability of the first, second, third, fourth and fifth defendants, ("the Committee Members"), and the question of costs.

Accessorial Liability 2The principal judgment addressed the principles relevant to accessorial liability in this context (at [158]-[165]), concluding that a person other than the trustee could be held liable for breach of trust on the footing of knowingly inducing or procuring a breach of trust (at [164]), that liability on this footing involved an element of knowledge (at [164]), and that this in turn required "consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour" (at [165]). I then concluded that the Committee Members had transgressed those standards (at [166]): They knew, or at the least ought to have known, that what they were doing repudiated their recently sworn undertaking to uphold church law, and yet would achieve no religious purpose in the eye of the Church for want of the Bishop's approval. While I accept that considerable doubt attended whether the Association would be held to be a trustee, about which minds could reasonably differ, until Hamilton J's judgment, and that the Committee Members did not understand the niceties of church law, I cannot accept that it accorded with ordinary standards of honest behaviour for them to repudiate their recent oath of office. Mr Eftimov's evidence establishes that all the Committee members were present when the oaths were taken. 3On that basis, I proceeded to hold each of the Committee Members liable as an accessory to account to the trust for the emoluments paid to Father Dzeparovski and Father Despotoski while that Committee Member remained in office, except payments made prior to November 1997 in respect of which the claim was statute barred (at [168]). 4Thus it will be observed that I relied on Mr Eftimov's evidence to establish that all the Committee Members had sworn an oath of office upon election to the Committee, and concluded that repudiation of that oath was of itself dishonest in the relevant sense (for reasons earlier explained at [150]). However, by the time of the orders judgment, it had occurred to me that my reliance on Mr Eftimov's evidence for the purpose for which I had used it might have been misplaced, as that evidence related to an earlier election than that of 14 April 1997 (when the first to fifth defendants were elected to the Committee), which triggered the events that led to the dispute the subject of these proceedings. Accordingly, I did not make any order to give effect to the conclusion expressed in the principal judgment in respect of accessorial liability, but observed (at [26]) in the orders judgment that it would be necessary to make directions for written submissions, inter alia, "on further consideration of the accessorial liability of the Committee Members". 5Such directions were made, in respect of which I added: So far as written submissions on accessorial liability is concerned, it is not intended that they should revisit the legal principles discussed in the principal judgment. So far as the defendants are concerned, it is open to them to submit that at least in respect of three of the Committee Members, the evidence might not establish that they had given oaths of office and so far as the plaintiffs are concerned, it is open to them to submit that the inculpatory findings should be supported on other grounds. 6Each of the parties has subsequently made written submissions on the question, which are unsurprisingly far more comprehensive than the original submissions on this issue. 7Before addressing them, it is appropriate to recall the manner in which the issue in respect of accessorial liability was defined during the trial when, on the thirteenth day, senior counsel for the defendants stated, prior to the cross examination of the third defendant Mr Minovski (at T597.25): I wish to know squarely what, if at all, the dishonest conduct [alleged against the Committee Members] is to be. 8There ensued the following exchange: HIS HONOUR: I understand there to be no allegation in this case that these gentlemen [the first to fifth defendants] pocketed moneys for their own benefit. The complaint is that they paid it to Father Despotoski and the other priest whose name begins with D, and not to the diocese. That is as I understand as a matter of fact what it boils down to. LEEMING: Then perhaps it is just a debate about words like dishonesty which have connotations. HIS HONOUR: I think the debate is that with knowledge of church law it equates to dishonesty. LEEMING: If that is what is being put and that is the extent of what is being put I understand that and I can deal with that. I understand that from the written submissions. PARKER: Certainly with regard to Mr Minovski, all that is put in relation to him is that he did what he did and that that had the effect of procuring a breach of trust and he did so with knowledge, or recklessly as to whether there was a breach. If one wants to pin the label of dishonesty on that, well, if the label fits so be it. There is no allegation that he personally profited and, so far as he is concerned, I think there is really nothing more to say. Others, I must say, have the additional factor that they did swear an oath to do something and if one regards acting contrary to a sworn oath as another badge of dishonesty, that will be something we will be relying on as well. But he did not swear an oath because he wasn't one of the people who swore the oaths in October of 96. 9While I accept that the plaintiffs may seek to establish accessorial liability on a different basis from that which I adopted in the principal judgment (as, having reached that conclusion, I did not consider other bases on which it might be supported), any such basis must be within the scope defined by the above discussion. To go outside its scope at this stage would be unfair to the relevant defendants. 10The evidence establishes that the first defendant Mr Mitreski, the second defendant Mr Damcevski and the fourth defendant Mr Eftimov took oaths on 7 October 1996, which they signed in writing, in the following form (translated from the Macedonian original): I do swear by the Almighty Our Lord, before the Authorised Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand and the Macedonian people that: I will be devoted and veridical to our Mother Macedonian Orthodox Church and I will honour the Holy Canons of the Orthodox Church, the Constitution of the Macedonian Orthodox Church, the Statute of the Macedonian Orthodox Diocese of Australia and New Zealand, the By-Law of the Macedonian Orthodox Church Community "St Petka" Rockdale as well as all other legal policies and regulations of the Church. 11Consistent with my previous findings in this respect (see principal judgment at [148]), I accept the evidence of Father Mitrev, which in this respect was unchallenged and was corroborated by that of Mr Eftimov, that the oath was also administered and taken orally, and reject Mr Mitreski's evidence to the contrary. 12It is common ground that there is no evidence that Mr Minovksi - who was not one of those elected on 7 October 1996 - took an oath, on that or any other occasion. Nor was the fifth defendant Mr Marcevski one of those elected on 7 October 1996, and he did not take an oath on that occasion. 13The defendants submit, however, that to the extent they took such oaths, they were not in respect of the office and the period of office on which they embarked on 14 April 1997, and thus were not binding on their conscience in respect of that office and period of office. Although the plaintiffs submitted that this argument was outside the scope of the directions of 5 March 2012, I do not agree; I accept that the relevant conclusion in the principal judgment was one that proceeded on the basis that the defendants' consciences were bound by an oath operative following 14 March 1997. 14The plaintiffs further submitted that it was immaterial whether the oaths were given in respect of the office and period of office that commenced on 14 April 1997, and that the oaths given earlier were not spent by or from 14 April 2007. It is true that the oaths in their terms are not expressed as to operate only for a limited period or only in respect of the office to which they were elected at the time. The notion of a person elected or appointed to an office taking an oath in respect of that office (and repeatedly doing so in the case of re-election or re-appointment) is not by any means uncommon, and although its terms are not so limited I accept that the oath is properly to be regarded as binding on the conscience of the person who takes it only in respect of the office and period of office in respect of which it is given. As none of the Committee Members gave an oath in respect of their periods of office commencing on 14 April 1997, it follows that dishonesty is not established merely by repudiation of that oath following 14 April 1997, and insofar as the conclusion in the principal judgment relied on the contrary view it cannot be supported. 15However, although that was undoubtedly part of the basis for the conclusion in the principal judgment, it was not the whole basis. Nor is the significance of the earlier oaths limited to whether they "bind the conscience" of the relevant defendant such that departure is thereby dishonest. They have wider relevance, as they establish, on the part of each Committee Member who had in the past taken such an oath, knowledge that officers of the Association were conventionally bound and expected not only to act in accordance with the Association's constitution, but also - to paraphrase the oath - to be loyal to the Macedonian Orthodox Church and its Holy Canons and Constitution, the Statute of the Macedonian Orthodox Diocese of Australia and New Zealand, the By-Law of the Macedonian Orthodox Church Community "St Petka" Rockdale, and all other legal policies and regulations of the Church - in other words, to comply with Church law. As was held in the principal judgment, a fundamental aspect of this is that it is the Bishop who administers the sacraments, albeit through the medium of the parish priest as his agent, and that a priest not appointed by the Bishop is from a religious perspective a nullity. Those Committee Members who had taken an oath - at any time and in respect of any office in the Association - must have known that regardless of the provisions of the Association's constitution, the Association was not a "free-standing" community association but one which was also an integral part of the Macedonian Orthodox Church, and the substratum of which included an assumption that it would be governed by Church law as well as by its secular Constitution. As observed in the principal judgment (at [150]), there is significance in Mr Mitreski's false denial that any such oath was administered orally, and in Mr Eftimov's insistence that it was not sworn in the church - the former reflecting conscious or unconscious appreciation of the difficulty of reconciling the oath with his subsequent conduct, and the latter being an attempt to minimise the significance of the oath for the same reason. The second defendant Mr Damcevski did not give evidence and I infer that he could have said nothing exculpatory on this issue. 16Mr Marcevski had been a Committee Member of the unincorporated association at various times between 1977 and 1992. Article 25 of the By-Laws required that following election, members of the committee take an oath before the parish priest. That this requirement was followed in practice emerges from an oath subscribed by officers of the Association on 4 February 1994, which recited (emphasis added): On the bases of article 23 of the Constitution of the Macedonian Orthodox Church and the previously established practice in the workings of the MOCC "Saint Petka" in Rockdale, New South Wales, Australia, the Executive Committee of the same Church Community, on the 4th of February 1994, before their parish priest Reverend Lupco Dvojakovski, articulated and with their own hand signed the following: OATH I, (FIRST AND LAST NAME OF THE MEMBER), SWEAR BY THE All-powerful God, that to my Mother, the Macedonian Orthodox Church, I would be faithful and surrendered in all, that conscientiously, responsibility and as a role model, will conduct myself by the Holy Canons, the Constitution of MIOC and the Bylaw of the Church Community "Saint Petka" in Rockdale, Sydney, NSW, as also by the other Church rules and regulations. I will fulfil my duty consciously, morally, responsibly and with honesty will guard the formal secrets of the Church and the interests of the same, I will defend and advocate. As I do this, in the same way may God help me in this life and the next. Signed with the own hand of those taking the Church oath: 17Although Mr Marcevski professed not to recall it (his initial "I don't remember" [taking an oath] evolved into "I haven't taken any oath"), I infer that Mr Marcevski did take an oath in substantially the same terms as that set out above on at least one if not more occasions when he was appointed or elected to the committee of the unincorporated association, and his denial of recollection of it has a similar effect to my above observations in connection with Mr Mitreski and Mr Eftimov. His prior involvement in governance of the Association's unincorporated predecessor imports knowledge on his part, equivalent to that of Mr Mitreski, Mr Damvecski and Mr Eftimov, that the Association was governed by Church law as well as by its Constitution. 18Mr Minovski's position is somewhat different. As I have mentioned, Mr Minovksi had not sworn any such oath and was not shown to have notice of its contents. Moreover, unlike Mr Marcevski, it did not appear that he had ever previously held a governance role in the Association or its unincorporated predecessor. While his longstanding involvement in the Association and its predecessor as a member might support an inference that he must have known that the Association was not "free-standing" but integrated into the Church, in the absence of something analogous to the oaths taken by the other Committee Members, or prior involvement in its governance (as distinct from mere membership), I am unable to be convinced that he knew that the Association was governed by Church law as well as by its Constitution. This conclusion is fortified by his apparently very rudimentary understanding of the existence of Church law, let alone of its provisions. While he admittedly knew that the church had its own rules including the Holy Canons, Constitution and Diocesan Statute, it was not established that his knowledge was more than marginal, and in particular it was not established in his case - as it was in the case of the others, by the oaths - that he had knowledge that the substratum of the Association included obligations to Church law overlaid on the Association's constitution. While his answer to the question whether he knew that the members of the Association were not entitled as a matter of church law to remove or replace the priest (referred to at [144] of the principal judgment) might seem somewhat evasive, examination of his cross-examination as a whole shows that many of his answers suffered from the same difficulty of being less than directly responsive, which might well be attributable to linguistic difficulties rather than to evasion. 19To establish accessorial liability - in any field - it is not necessary that the alleged accessory know that the principal is contravening a relevant law; it is sufficient that the alleged accessory knows the essential elements of the principal's conduct, that constitute the relevant contravention. In other words, while the accessory must have knowledge of all the elements of the principal's conduct that together constitute the contravention, the accessory need not know that in law those elements amount to a contravention [Giorgianni v The Queen [1985] HCA 29; (1985) 156 CLR 473; Yorke v Lucas [1985] HCA 65; (1985) 158 CLR 661, 668-70; Adler v ASIC [2003] NSWCA 131; (2003) 46 ACSR 504, [330] - [342]]. Consistent with that approach, in the present context, it is not necessary that to be liable as an accessory, the defendants must have known that in engaging and remunerating Father Dzeparovski and Father Despotoski the Association was committing a breach of trust; it is sufficient that they know those elements of the transaction that make it transgress ordinary standards of honest behaviour. 20For that reason, the elaborate and at first sight persuasive submissions advanced by the defendants - to the effect that, from the acceptance in the primary judgment (at [148]) that the Committee Members honestly believed that the Association was beneficially entitled to its property and did not hold it on trust, and that the parish property was Association property and not trust property, it follows that the first to fifth defendants had no apprehension that any of the Association's property was not property with which the Association could freely deal, and could not be taken to have known or to be reckless as to whether there was attached to that property an obligation to obey each and every edict of the Bishop - are not correct. While they may have believed that the property of the Association was not trust property, they (other than Mr Minovski) knew that the substratum of the Association, and its governance, had associated obligations to uphold church law. In particular they understood that the Bishop's approval was essential for the effective appointment of a priest. An additional reason for this is that the supposed distinction between what happens inside the church (in respect of which all the Committee Members accepted that the priest was the relevant authority) as distinct from the affairs of the community association becomes entirely artificial when it comes to the employment of the very parish priest who is to administer the sacraments in the church. 21Accordingly, while I have accepted that the Committee Members honestly and not unreasonably believed that the Association was beneficially entitled to its property and did not hold it on trust, they (other than Mr Minovski) also knew that it was implicit in their accepting a role in the governance of the Association that they would observe church law, and in particular that the priest could be appointed and removed only by the Bishop, and that a priest who had not been duly appointed by the Bishop could not validly administer the sacraments and from the church's perspective achieved nothing. In those circumstances, for them - having excluded the Bishop's priest - to remunerate priests not appointed by the Bishop, to no good religious end, transgressed the ordinary standards of honest behaviour. 22Reduced to the core elements, the Committee Members (other than Mr Minovski) assumed office in the Association knowing that the Association was an integral part of the Macedonian Orthodox Church, and that its substratum included the law and doctrine of the church. They knew that according to the law and doctrine of the church, a parish priest could not be removed or replaced except by the Bishop, and that a priest not appointed by the Bishop achieved nothing. They knew that the Bishop did not approve or authorise the removal of Father Mitrev or the appointment of Father Dzeparovski or Father Despotoski. In that context, belief that their own Constitution authorised them to act as they did is insufficient to dispel the conclusion that, in procuring the Association to appoint and remunerate a priest not approved by the Bishop, to perform acts that were in the eye of the Church a religious nullity, they were transgressing ordinary standards of honest behaviour.