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[2020] VSC 274
Supreme Court of Victoria
2020-05-19
Derham AsJ
Original judgment source is linked above.
TRUSTS AND TRUSTEES - Judicial advice -The plaintiff (an incorporated association) acts as trustee of church property - Whether as trustee the plaintiff should defend, and counterclaim in, legal proceeding brought by persons claiming to be members of the plaintiff and to be all the members of the committee of management of the plaintiff - Whether the plaintiffs in that proceeding should be permitted to participate in the application of judicial advice - Whether the plaintiff should be indemnified for its costs out the assets of the trust: Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66; Re Application of Macedonian Orthodox Community Church St Petka Inc [No 3] [2006] NSWSC 1247.
1 The plaintiff is an incorporated association ('Association') registered on 29 May 1991 pursuant to the Associations Incorporation Act 1981 (Vic) ('1981 Act') and taken to be registered pursuant to the Associations Incorporation Reform Act 2012 (Vic) . It claims to hold the property of the Macedonian Orthodox Church Community Saint Dimitrij Solunski Springvale pursuant to a charitable purpose trust.
2 The Association applies pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules') for judicial advice that it is justified in defending and counterclaiming in proceeding S ECI 2019 02718 in which Stevo Krstevski (and others) make claims against it (and others) concerning the control and management of the Association and its property ('Main Proceeding').[1] It is what is commonly called, in the probate jurisdiction of this Court, a 'Beddoe application', after the leading decision of Re Beddoe; Downes v Cottam.[2]
3 The Attorney‑General for the State of Victoria is named as the defendant, on behalf of the Crown in right of the State of Victoria, as the protector of charitable trusts. It is the function of the Crown to ensure the due administration of charities and the proper application of funds devoted to charitable purposes. That function is executed by the Attorney-General, who represents the objects of the charity.[3] It is the Attorney-General's duty to look after the interests of the public in the case of a charitable trust.[4]
4 By letter dated 12 November 2019, the Victorian Government Solicitor's Office ('VGSO') notified the Court that it acted for the Attorney‑General and that the Attorney‑General:
(a) did not oppose the application for relief set out in the originating motion, noting that this relief is sought by the Association and no other persons involved in the Main Proceeding;
(b) requested that if such relief as is sought by the Association or other relief is granted by the Court, the Association be required to inform the plaintiffs in the Main Proceeding of the granting of such relief; and
(c) did not intend to be represented at the hearing of the application or at any other hearing of the matter unless requested to do so for the assistance of the Court.[5]
5 When the application came on before the judge in charge of the Trusts, Equity and Probate List, application was made by counsel on behalf of the plaintiffs and defendants by counterclaim in the Main Proceeding ('the Objectors') to be heard in relation to the application. It was adjourned to a date to be fixed.[6]
6 By order made on 13 March 2020, McMillan J ordered, pursuant to r 77.05 of the Rules, that the proceeding, including the application for judicial advice pursuant to r 54.02 of the Rules, be referred to me for hearing and determination.
7 The Association relies on the affidavits of Father Mile Taleski sworn 16 September 2019 and Chris Alexander, solicitor of Novatsis & Alexander, sworn 19 September 2019.
8 Father Taleski deposes that he is the secretary of the Association. He was the priest of the Parish from 19 November 2006 until 23 February 2017. He was succeeded in that office by Father Gligor, who has since been suspended by the Bishop, and defrocked. In Father Taleski's absence the Parish was served by various priests of the Diocese, principally him, until 17 January 2019. He was Elder of the Parish and continued to be Elder from 23 February 2017 until 17 January 2019. On 3 February 2019 the Bishop appointed Father Mirko Pesovski as Priest and as Elder of the Parish.
9 The Association is the registered proprietor of 1 Edinburgh Road, Springvale on which is situated a church ('Church Property'). Until about January 2017 it was also registered as proprietor of the land at 3 Eve Court, Springvale on which was erected a house ('Church House'). The Association became registered proprietor of the Church Property in 1994 by transfer from trustees who previously held the title on trust for the parish of the Macedonian Orthodox Church of St Dimitrij Solunski Springvale ('Springvale Parish').[7] The trustees, the Bishop, and the Church Property were registered under the Religious Successory and Charitable Trusts Act 1958 (Vic).
10 On 22 November 2018 the Diocesan Bishop[8] appointed Father Taleski and four other members of the Parish as members the Temporary Committee of the Association ('Temporary Committee'). The first defendant in the Main Proceeding is the Association. The second to fifth defendants in the Main Proceeding are the individuals appointed as the Temporary Committee.[9]
11 In the Main Proceeding the Objectors allege, among other things, that they are the validly elected committee entitled to control the Association_._ They plead, and the defendants admit, that the Association -
...is a part of the Macedonian Orthodox Church with its seat in Skopje, Macedonia which has a constitution adopted in 2014 (Constitution) and is governed by a Synod (Synod). The [Association] is administered as a part of the Diocese of Australia and New Zealand (Diocese), pursuant to a Statute of the Macedonian Orthodox Church Diocese of Australia and New Zealand (Statute of MOCDANZ).[10]
12 After admitting this allegation the defendants go further and allege that:[11]
(a) on 22 April 1983, the Holy Bishops' Synod of the Macedonian Orthodox Church ('MOC') decided that the Parish[12] would be accepted into the MOC, the Parish would be part of the Australian Diocese of the MOC and would be governed by the By-laws approved by the Holy Bishops' Synod ('By-laws'), the Statute of the Diocese and the Constitution of the MOC;
(b) at all relevant times since 25 June 1991, the Church Administrative Council ('CAC') of the Parish is and has been the committee of management of the Association;
(c) by transfer of land dated 26 July 1994 and registered on 12 October 1994, the trustees of the Church Property transferred their interest to the Association as trustee of the Church Property.
13 In relation to the proposition that the Association (an association incorporated pursuant to Victorian law) is 'a part of the Macedonian Orthodox Church', the defendants in the Main Proceeding, including the Association, explain that 'from its incorporation, the Association was the entity through which the Parish was conducted',[13] and that at all relevant times since 25 June 1991, the Church Administrative Council of the Parish ('CAC') is and has been the committee of management of the Association.[14]
14 The Objectors claim in the Main Proceeding that between the time of its incorporation in 1991 and October 2011 the Association was bound by model rules promulgated under the 1981 Act with one amendment ('Former Rules') and that rules registered under the 1981 Act in October 2011 ('New Rules') were not validly adopted by the Association.
15 The defendants deny that the New Rules are invalid, contending that they were validly adopted at a general meeting held on 16 October 2011 and approved by the Holy Bishops' Synod on 24 November 2011. In addition, the defendants allege that from its incorporation the Association was subject to and governed by the By-laws approved by the Holy Bishops' Synod, the Statute of the Diocese (as amended from time to time) and the Constitution of the MOC.
16 The Objectors then claim that at an extraordinary meeting of the CAC in April 2016 a resolution to sell the Church House did not pass, but nevertheless it was sold in November 2016 by the Association represented by Father Taleski and the third and fourth defendants in the Main Proceeding. The defendants respond that there was an earlier meeting of the CAC in March 2016 at which a resolution for the sale of the Church House was passed, that resolution was confirmed by the Diocese in October 2016, and was not overridden by the April 2016 resolution. In addition, the Commonwealth Bank of Australia, as mortgagee, was threatening to enforce its security over the Church House. The Association acted in resolving to sell the Church House in accordance with article 66(g) of the By-laws, which provided that the Association, when disposing of trust property, should act upon the written direction of the CAC.
17 The Objectors claim and the defendants deny that there has been a failure to account for the proceeds of the sale of the Church House. It seems to be alleged that it is a failure to account to the 2017 Annual General Meeting, an interesting, but questionable, proposition. As the prayer for relief makes clear, however, it is intended to mean a failure to account to the CAC.
(a) Petar, Metropolitan of Prespa & Pelagonia and Administrator of Australia and New Zealand ('Metropolitan') is the Diocesan Bishop for the purposes of the Statute of MOCDANZ.
(b) on 22 November 2018 the Metropolitan issued a decision ('Decision') purportedly made pursuant to article 13, items 23 and 24 of the Statute of MOCDANZ and rule 36 of the New Rules which purported to:
(i) suspend or dismiss the 2017 CAC on the grounds of 'failure to comply with and to submit original copies of their given oaths in accordance with' the New Rules, the Statute of MOCDANZ and the Constitution and all other norms within the Macedonian Orthodox Church; and
(ii) appoint the Temporary Committee.
19 The Objectors allege that the Decision was not made in accordance with the Former Rules, which do not give the Metropolitan power to dismiss the CAC or to appoint a new temporary committee and, alternatively, if the New Rules were validly adopted, the Decision was not made according to the Statute of MOCDANZ and the New Rules, by reason of alleged defects in the procedure. The defendants allege that the Decision was effective.
20 The Objectors then claim that at the 2018 AGM of the Association resolutions were passed which had the effect that the plaintiffs are the validly elected members of the current CAC ('2018 CAC'). The defendants deny these allegations. Then the Objectors plead various actions of the Temporary Committee to take control of the Association, its bank account, the Church Property, the certificate of title to that property, and related steps, some of which are admitted and others denied.
21 The Objectors then plead that the Temporary Committee refuses to accept the election of the 2018 CAC, to which the defendants respond that it is a matter for the Bishop of the Diocese to call an election pursuant to Art 13 paragraph 23 of the Statute and the Bishop decided on 21 December 2018 to postpone an election of the Parish CAC until regular church liturgical life and conditions for convening a peaceful extraordinary election has been established.
22 The Objectors then raise an alternative claim that if the Temporary Committee was validly appointed and the New Rules were validly adopted, in breach of rule 36 of the New Rules no Extraordinary Electoral General Meeting of the Church was called within 30 days of the purported dismissal of the 2017 CAC (that is, by 30 December 2018) or at all. The defendants respond that the second to sixth defendants were validly appointed by the Bishop to the CAC and Rule 36 of the New Rules is subject to the Bishop's power to call an election pursuant to Art 13 paragraph 23 and, in the meantime, to appoint a temporary CAC pursuant to Art 13 paragraph 24 of the Statute, by reason of Art 66 of the Statute and Rules 3 and 58 of the New Rules.
23 The Objectors then make claims relating to inspection of the register of members, non-compliance by the CAC with the requirements of the Former Rules and the New Rules relating to the application for and approval of membership of the Association and that the Objectors have taken a census of the parishioners attending the Church for the purpose of creating a proper register of members, or updating the register of members.
24 The Objectors claim interim relief, including that the certificate of title to the Church Property be held securely by the defendants' solicitors, and final relief including:
(a) declarations that the Decision was of no effect, that the 2018 CAC has been validly elected and that the Former Rules are the rules of the Association; and
(b) orders for an account of the proceeds of the sale of the Church House, for the calling of an extraordinary general meeting of the Association, that the parishioners whose names appear on the Census are members entitled to vote at the EGM, and that the business for the EGM be to approve the New Rules, or such other rules as may be proposed.
25 The Association counterclaims, in substance, that by the Decision, the Temporary Committee was validly appointed, that on 24 April 2019 the Association requested the Objectors to deposit all money collected at Parish services into the Association's bank account and to deliver up all keys to the building on the Church Property to its solicitors. It is alleged that despite the fact that one or more of the Objectors have collected money at the Parish services and from the sale of icons and have the keys referred to, there has been no response to the request.
26 The Association then claims delivery up of possession of the Church Property, the keys to the Church Property and all moneys received from conducting services in the Parish and from the sale of icons. It also seeks an order that the Objectors account for all moneys received by them from conducting services in the Parish since 26 January 2019.
27 On 23 August 2019, the defendants undertook to the Court not to raise moneys by selling, mortgaging, encumbering or otherwise dealing with the Church Property without giving 10 days written notice to the Objectors' solicitors ('Undertaking').
28 It is common ground that the Association held and holds its property on trust for a charitable purpose ('Trust'). The Association and the other defendants in the Main Proceeding plead that the Association holds the Church property as trustee for the Springvale Parish and its members,[15] without expressly identifying the charitable purpose. The Objectors respond that the Association holds the Church property, and held the Church house, for the charitable religious trust purposes of the Springvale Parish and its members, being the congregation of that Church.[16] This exposes a subtle, and perhaps important, difference.
29 In his affidavit Father Taleski verifies various factual allegations made in the defence and counterclaim and states that:
(a) he is very concerned about the Association's property which is imperiled by the conduct of the Objectors in unilaterally seizing control of the Church Building and the Church funds;
(b) the Parish raises moneys from collections, sales, hall hire and other activities. The Commonwealth Bank Account of the Association is not being used to receive these funds. As at the date of his Affidavit, the account has a balance of $13,901.86 with no deposits recorded since 15 January 2019;
(c) as a result of the seizure of the Church funds by the Objectors, the Association does not know what its current cash position is and it cannot use those funds to pay its legal costs;
(d) he is a priest and not a man of substantial financial means. He will not be able to pay the costs of defending the main proceeding out of his own resources;
(e) he does not know of the financial resources of the third to fifth Defendants, but they are volunteers on the Temporary Committee (and predecessor Church Administrative Committees) and do not receive any remuneration for their services to the Church;
(f) the Sixth Defendant to the Main Proceeding has already resigned from the Temporary Committee, and it is clear from his daughter's email correspondence with the Court dated 8 August 2019 that he does not want to be involved in legal proceedings; and
(g) the Bishop has so far rejected his initial requests that the Diocese fund such costs and he is presently overseas in Macedonia. The Deputy Bishop who acts in his stead has told him that the Association should make a Beddoe application.
30 Father Taleski's affidavit discloses that the principal asset of the Trust is the Church Property. The most recent accounts of the Association are for the year ended 30 June 2018.[17] They reveal net assets of about $1.74 million mostly made up of the Church Property. As a result of the actions of the plaintiffs in the Main Proceeding in seizing control of the Church Funds, it is not known what the current cash position is. The Commonwealth Bank account has been frozen by the Bank and will not be accessible until the final hearing and determination of the Main Proceeding. There have been no deposits into the bank account since 15 January 2019. It is not known whether the plaintiffs have been spending monies raised from collections, the sale of candles and icons, hire of hall and other income on their legal costs in the Main Proceeding. No accounting for such monies has been forthcoming, despite demands going back to 24 April 2019, so that an accounting for such monies is part of the relief sought in the counterclaim.
31 The affidavit of Mr Chris Alexander discloses the legal costs of the plaintiff in the Main Proceeding. These have been incurred at a discounted rate, for counsel and solicitor, but have been growing rapidly. At the time of the affidavit in September 2019 the overall costs and disbursements, including Counsels' fees, amounted to about $66,110.00. Since then there has been considerable work undertaken so that I would expect that figure to have doubled. Mr Alexander deposes to the fact that he has been informed by a costs consultant, Mr De La Rue, and believes that a further $116,800 will be incurred 'by the church and the other Defendants in their defence of the main proceeding leading up to and including the trial that is estimated to occupy four hearing days'. The trial estimate is now longer and there is an interlocutory application by the Objectors for the Attorney-General to be joined as a party. The figure for the preparation for trial and trial is likely to double the estimate of the costs consultant so that the total costs in respect of which an indemnity is sought will be likely to amount to about $365,000.00.
32 The application is made under Rule 54.02 of the Rules which provides:
54.02 Relief without general administration
(1) A proceeding may be brought for any relief which could be granted in an administration proceeding and a claim need not be made for the administration or execution under the direction of the Court of the estate or trust in respect of which the relief is sought.
(2) Without limiting paragraph (1), a proceeding may be brought for-
(a) the determination of any question which could be determined in an administration proceeding, including any question-
(i) arising in the administration of an estate or in the execution of a trust;
(ii) as to the composition of any class of persons having a claim against an estate or a beneficial interest in an estate or in property subject to a trust; or
(b) an order directing an executor, administrator or trustee to-
(i) furnish and, if necessary, verify accounts;
(ii) pay funds of the estate or trust into court; or
(iii) do or abstain from doing any act;
(c) an order-
(i) approving any sale, purchase, compromise or other transaction by an executor, administrator or trustee; or
(ii) directing any act to be done in the administration of an estate or in the execution of a trust which the Court could order to be done if the estate or trust were being administered or executed under the direction of the Court.
54.03 Parties
In an administration proceeding or a proceeding referred to in Rule 54.02 -
(a) all the executors of the will of the deceased or administrators of the estate or trustees of the trust, as the case may be, shall be parties;
(b) where the proceeding is brought by executors, administrators or trustees, any of them who does not consent to being joined as a plaintiff shall be made a defendant;
(c) notwithstanding anything in Rule 9.03(1), and without limiting the powers of the Court under Order 9, all persons having a beneficial interest in or claim against the estate or having a beneficial interest under the trust, as the case may be, need not be parties, and the plaintiff may make such of those persons parties as the plaintiff thinks fit;
(d) [not relevant]
54.04 Notice of proceeding and judgment
(1) In an administration proceeding or a proceeding within Rule 54.02, notwithstanding Rule 54.03, the Court may order that any person not a party be given notice of the proceeding and of any judgment in the proceeding.
(2) On the application of a person given notice under paragraph (1), the Court may, in accordance with Rule 9.06(b), order that the person be added as a party.
33 The authorities establish the following propositions:
(a) rule 54.02 is the only statutory basis in Victoria for a personal representative of a deceased estate or trustee of a trust to seek the advice and directions of the court.[18] The Trustee Acts in other States and Territories generally make express provision for such applications to be made;[19]
(b) the procedure is a summary procedure, intended to enable questions arising in the administration of an estate or a trust to be resolved cheaply and simply[20] and operate as an exception to the court's ordinary function of deciding disputes between competing litigants;[21]
(c) the summary nature of the procedure is important to an understanding of the evidence the Court is entitled to rely upon in giving its advice. That evidence is ordinarily untested. The extent of the information available to the Court and its apparent reliability are factors going to the exercise of the discretion to give the advice.[22] That is,
...while the time and cost involved in giving judicial advice at an early stage of litigation, when the issues involved in disputes about rights may not be fully sharpened and it may not be possible for the factual position to be as efficiently exposed as in a trial, may be factors relevant to a decision not to grant judicial advice but to let the matter be examined in conventional litigation, they are not factors which either automatically bar judicial advice or are so weighty as generally to compel the court not to grant the advice.[23]
(d) the purpose of the procedure is to enable a trustee or executor to obtain the direction or opinion of the Court on a matter of administration or management, or as to the construction of the will or trust instrument, without the need to commence an administration suit with all its attendant delay and cost;[24]
(e) it affords a facility of giving 'private advice' because its function is to give personal protection to the trustee.[25] The obtaining of judicial advice resolves doubts about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. Resolving these doubts means that the interests of the trust will not be subordinated to the trustee's fear of personal liability for costs;[26] and
(f) there is but one jurisdictional bar to relief: the applicant must point to the existence of a question respecting the management or administration of the trust property or a question respecting the interpretation of the trust instrument.[27]
34 It is clear that, in an application of this kind, the court may give advice about whether it is appropriate for a trustee to defend a proceeding brought against the trustee in respect of the trust, and indeed the High Court decision in Macedonian Church St Petka was such a case.
35 I convened a hearing on 19 March 2020 to address the question whether the Objectors, who are the plaintiffs the Main Proceeding, should be given leave to participate in the Association's application for judicial advice. The Objectors had previously delivered submissions to the Court which addressed the basis on which they contended they should be heard and also addressed why supportive judicial advice, and a right of indemnity out of the assets of the Trust for the costs, should not be given.[28]
36 That question brought with it whether the Objectors should be served with the affidavits, exhibits[29] and submissions filed by the Association. It raised a circular issue, in that it was necessary to consider the substance of the Objectors submissions (and evidence), at least in general terms, in order to determine whether the Objectors should be given leave make the submissions. It also meant that if it was determined that the Objectors should be able to participate in the application then they should see the affidavits filed in support of it, with the exception of the confidential and privileged advice of Counsel for the Association, although the Objectors contested that proposition. That necessitated an early decision as to participation by the Objectors so that if they were permitted to do so they had the opportunity to advance further submissions based on a consideration of the affidavits advanced by the Association in support of their application for judicial advice.
37 I determined at the hearing to permit the Objectors to participate in the application for judicial advice, without being made a party to the application. I made orders that the Association serve on the Objectors the affidavits in support, and the exhibits to those affidavits - with the exception of the exhibit containing the confidential advice of Counsel in support of the application.[30] I also made orders for the filing of submissions by the Association and the Objectors, to be finalised by 17 April 2020 and expressly authorised the Objectors to file their material on RedCrest.
38 I gave short reasons for this decision at the time and said I would give full reasons in my consideration of whether the judicial advice should be given and whether the Association should have an indemnity for its costs of defending, and counterclaiming in, the Main Proceeding out of the assets of the Trust.
39 What immediately follows are the submissions advanced by the Objectors and the Association and my reasons for allowing the Objectors to participate in the application for judicial advice.
40 The first thing to note is that there was no dispute that the Association is the trustee of a charitable trust of some kind. The Objectors complained in the Main Proceeding, and voiced that complaint in their Reply and Defence to Counterclaim, that the defendants had pleaded that the Association was the trustee of a charitable trust without identifying its purpose. The pleading by the Association (and the other defendants in the Main Proceeding) is that:
...the Association holds the Church Property as trustee for the Macedonian Orthodox Church of St Dimitrij Solunski, Springvale, Victoria (Parish) and its members (Charitable Trust).[31]
41 The response of the Objectors is, after objecting that the plea may prejudice, embarrass or delay the fair trial of the proceeding, that:
...the Association holds the Church Property, and held the Church House, as trustee for the charitable religious purposes of the Macedonian Orthodox Church of St Dimitrij Solunski, Springvale and its members, that is the congregation of that church (Charitable Trust).[32]
42 Thus it was said by the Objectors that the purpose (and scope) of that trust was not agreed, or there was not necessarily a consensus on the purpose of the trust, and the governance of the trustee is hotly disputed. Nevertheless, for the purposes of being heard on this application, the Objectors contended that they, as members of the congregation of the Church, are beneficiaries of the charitable purpose trust. Moreover, the fulfilment of the charitable purpose alleged by the Objectors, which does not appear to be the subject of quarrel by the Association, requires the maintenance or retention of the Church Property. That objective is said to be the driver behind the commencement of the Main Proceeding and in that proceeding the Objectors sought and obtained the Association's Undertaking to the Court protective of the Church Property as part of their claim in that proceeding. The content of that undertaking requires that if an indemnity were given in this proceeding then, before anything could be done by the Association to exercise that right of indemnity for its costs by, for example, borrowing against the Church Property, the Association, as the trustee of the charitable trust, would have to give notice to the Objectors.
43 Interestingly, the Objectors found out about this application by a 'side wind', that is, the Attorney-General's solicitor mentioned in correspondence with the Objector's solicitor that this application had been made. The Objectors were critical of the absence of any notice by the Association to them in the light of the undertaking, the whole thrust of which is to give notice with respect to the depletion of the Church Property. But the undertaking, being the equivalent of an injunctive order, requiring notice to be given to the Objectors means, the Objectors contended, that they have a proper basis to be heard in this application because it has the potential to burden the Church Property with the Association's costs.
44 By their written submissions, the Objectors contended that they have a right to be heard in the Beddoe application because they are persons who, and represent interests that, are affected by its outcome, namely the parishioners of the Church of Saint Dimitrij Solunski. They went on in those submissions to address the substantive questions, to which I will return later.
45 The Objectors submitted that it is incorrect that the Attorney-General is the only proper contradictor, indeed she is a contradictor only in a nominal sense. This is because the solicitors for the Attorney-General (the VGSO) have written to the solicitors for the Objectors, stating, in effect, that they consider a significant part of the case pleaded by each side in the Main Proceeding concerns the question of who properly controls the Association and does not raise trust issues of the sort that warrant her involvement.[33] The real contradictors are the Objectors and their submissions provide assistance to the Court which it would not receive from the Attorney as a nominal contradictor.
46 The Objectors relied on the observations of Croft J in Charlesworth Nominees Pty Ltd v Charlesworth,[34] that:
...The present application is not of a type that might be characterised as an application for declaratory relief in respect of which a court may be concerned to have a contradictor but, nevertheless, in an important application such as the present application, it is difficult to see why it would not be desirable for the Court to have the advantage of alternative views and submissions put by an objector; quite apart from considerations of procedural fairness that may arise with respect to an objector who has a real interest in the outcome of an application of this type. In any event, the desirability of hearing objectors in applications of this type, on one or both of these bases or considerations, is supported by the authorities.[35]
47 In coming to that conclusion, Croft J relied on the observations of the High Court in Macedonian Church St Petka[36] when considering s 63(1) of the Trustee Act 1925 (NSW), provisions which relevantly fulfil essentially the same role as r 54.02, and:[37]
Even if notice of the application for private advice is given to other persons (by reason of rules of court, or a court direction under s 63(4), or by reason of s 63(8)), those persons are not strictly speaking 'parties' to 'proceedings' by reason of the closing words of s 63(11), although they are able to participate in the proceedings to some extent. Section 63 reflects a compromise between a procedure for affording private advice to trustees and the need for affected persons to be given a hearing in some cases.
48 His Honour also referred to the observations of Lindsay J in Re Estate of Chow Cho Poon,[38] where he referred to s 63 of the Trustee Act 1925 (NSW) reflecting a compromise between the procedure for affording private advice to trustees and the need for affected persons to be given a hearing in some cases. His Honour noted that the ability of the court to provide well measured advice may be affected if the Court is not given the benefit of what a competing interest might say if allowed to inform the Court of a different perspective from that presented by the trustee appearing ex parte.[39] That is particularly so where the Attorney-General has, in this case, determined not oppose the application, in effect disavowing any interest in participating in it.
49 The objectors also submit that they are and represent parishioners of the Church of Saint Dimitrij Solunski and have commenced the Main Proceeding alleging that they are the proper controlling will and mind of Association. In that proceeding, they have sought relief which is protective of the Association's property, including the Church Property, the Church House and the proceeds of its sale. Relevantly, they have sought and obtained the Undertaking from the Association and the other defendants in the Main Proceeding with respect to the Church Property. They say there is an analogy in the allegations in the Main Proceeding with the cases where beneficiaries seek the removal of a trustee, or allege misconduct by the trustee in the administration of the trust. The proper approach in such cases is for the trustee to defend itself and if exonerated, or found to have acted properly in defending a claim made by a beneficiary, to be indemnified out of the trust estate to the extent that a party/party costs order does not afford an adequate indemnity.[40] Nevertheless, as Brereton J noted in Re Uncle's Joint Pty Ltd,[41] the High Court in Macedonian Church St Petka[42] recognised that it was open to trustees faced with an allegation of misconduct by a beneficiary to apply for judicial advice, pursuant to which they might be entitled to resort to trust assets for their defence.
(a) if the Association is granted an indemnity for its costs in the Main Proceeding out of the assets of the Trust, that indemnity will also benefit the individual defendants, the members of the Temporary Committee, who are self-evidently not the trustee and the fight in the Main Proceeding is significantly about control of the Association (as trustee of the Trust) by those defendants. They are the real contestants in the Main Proceeding;
(b) the interest of the Objectors goes well beyond their interest as members of the congregation, and they are not inter-meddlers, as their interest is that they claim to be the committee in control of the Association;
(c) the grant of an indemnity for the Associations' costs of defending and counterclaiming in the Main Proceeding must result in depletion of the assets of the Trust and that cannot be undone, as the only substantial asset is the Church Property itself. That militates against the grant of any indemnity; and
(d) the confidential advice of Counsel, exhibited to the affidavit in support of this application, was the subject of a form of waiver by virtue of the requirement arising out of the undertaking (given in response to a threatened injunction application) that the Objectors have notice of any proposal to encumber or deal with the Church Property.[43] By parity of reasoning with an inter partes injunction application, where the advice could not be relied upon and remain privileged, so it should be in this matter.
51 The Association contended that the Objectors have no standing to be heard in this application and the Court should refuse to hear them because:
(a) the function of the application is to give private and personal advice and protection to the trustee;[44]
(b) the application is entirely separate from the Main Proceeding and 'deciding whether it would be proper for a trustee to defend proceedings instituted about the trust is radically different from deciding the issues that would be agitated in the principal proceeding. The two steps are not to be elided. In particular, the judicial advice proceedings are not to be treated as a trial of the issues that are to be agitated in the principal proceedings';[45]
(c) for the purposes of giving advice to the Association, the Court need only be satisfied that the Association is the trustee of a trust, that the Main Proceeding, in which the Association is sued, involves the trust or trust property, and that it would be proper, on the material available to the Court, for the Association to continue to defend and counterclaim in those proceedings;[46]
(d) in this application, the Court has not been asked to determine the issues to be agitated at trial in Main Proceeding. For example, the Court has not been asked to determine, and need not determine whether the sale of the Church House was valid and the application of proceeds of sale was proper, whether the Bishop's decision to dismiss the Church Administrative Committee and to appoint the Temporary Committee was valid, or whether the annual general meeting purportedly held on 2 December 2018 was valid;
(e) given the confined issues before the Court in this application, it is difficult to see how the Objectors could assist the Court. The Applicants fail to identify any reason why they might be able to assist the Court in this application for private advice;
(f) in assessing the relevance of the authorities concerning private trusts,[47] which hold that an interested person may be permitted to be heard, it needs to be born in mind that charitable trust is a trust for a purpose, not a person, so that there is no particular person or persons who might be said to have an interest in the trust and a right to be heard in the application. There is a world of a difference between persons who are interested, in the sense that they are enthusiastic litigants in the Main Proceeding and wish to inter-meddle, and somebody who has an interest, like the Bishop did in the Macedonian Church St Petka case;
(g) it is the function of the Crown, through the Attorney- General, to look after the interests of the public and represent the objects of the charity.[48] The Attorney-General is the only competent party to protect charitable trusts and look after the interests of the public in those trusts.[49] That is why the Association named the Attorney-General as defendant and contradictor to the proceedings. The Attorney-General was given the opportunity to make submissions on the application in protection of the charitable trust, but, having reviewed the application, declined to do so. The Objectors fail to identify any reason why the Attorney-General is not competent to look after the interest of the public in this application. The Objectors are not beneficiaries of the trust and should not be permitted to oppose the application in lieu of the Attorney-General, who has decided not to do so;
(h) the Objectors contend that because one of the issues in contention in the Main Proceeding is the proper constitution of the controlling committee of the Association, the Court should hear from both sides claiming to represent the Association. That argument is misconceived. In the Main Proceeding, the Objectors brought proceedings against, among others, the Association itself. The Association now seeks indemnification out of the trust property for its reasonable costs in defending the proceeding. It does not seek the costs of the Temporary Committee in defending the proceeding. In any event, the proper constitution of the committee is not an issue that is necessary to be decided in this application. On the contrary, it is an issue that is due to be, and ought properly to be, agitated at trial in the Main Proceeding;
(i) there is no counterpart in Victoria for the provisions of the New South Wales Trustee Act 1925, ss 63(8)-(11), which were, in any event, introduced to protect the beneficiaries of private trusts;[50] and
(j) the undertaking given in the Main Proceeding was only to give 10 days' notice of any dealing with the title. It was not that the Association would not deal with the title at all. That undertaking is limited and does not extend to entitling the Objectors to have notice of, and to participate in, this Beddoe application.
52 It can be seen clearly from the submissions, that there are arguments each way in relation to the participation of the Objectors in this application. It is undoubtedly correct that the function of the application is to give private and personal advice and protection to the trustee and that there is no beneficiary entitled to be heard, the Trust being one for a charitable purpose.
53 The authority of the decisions relating to private trusts, such as Charlesworth, are in my view limited in their application to this case, an application by the trustee of a charitable purpose trust. It may be true that the Objectors represent some members of the congregation of the Church in question, but their interest is ill-defined except by reference to their interest arising out of the Main Proceeding. The terms of r 54.03(c) of the Rules gives to the trustee as plaintiff the discretion as to whom it should make a party where there are persons having a beneficial interest under the trust in question. So far as this application is concerned, there is nothing in the Rules that requires the Association to make any person a party to the application (other than the Attorney-General as a matter of charitable trust law). By r 54.04 of the Rules, the Court may order that any person not a party be given notice of the proceeding (and of any judgment in the proceeding) and the person given such notice may apply to be made a party.
54 These rules, although quite different in their detailed terms, are functionally equivalent to, and should be given a construction that is in accord with the requirements of, s 63 of the Trustee Act 1925 (NSW). The High Court considered the United Kingdom Rules, from which Order 54 is derived, as functionally equivalent to s 63 of the New South Wales legislation.[51] The plurality said:
That there should be such similarities in the effect achieved by the different provisions is hardly surprising when it is recognised that each is directed to the same end. Each provides for a procedure which, if adopted, will not only protect a trustee from later complaint that he or she should have acted otherwise, but also protect the trustee from personal liability for costs incurred. And where the question for the Court is whether the trustee would act properly in instituting or defending litigation, the answer given will necessarily affect the parties to that other litigation. In particular, the judicial advice proceedings may yield an order which will give one party to the litigation (the trustee) power to resort to a fund in order to meet the costs incurred in pursuit or defence of the litigation.[52]
55 In the circumstances of this application, these observations are critically important. It no doubt explains why there was no apparent controversy in the initial direction of the Court in the first application for judicial advice in Macedonian Church St Petka , that the plaintiffs in the Main Proceeding be given notice of the application.[53] In this application, the answer given will necessarily affect the Objectors, as the plaintiffs in the Main Proceeding. In particular, the judicial advice in this application - if given as sought by the Association - will yield an order which will give it power to resort to the assets of the Trust in order to meet the costs incurred in defending and counterclaiming in the Main Proceeding. Although the 'interest' of the Objectors is not an interest as beneficiaries of the Trust, their interest is as the putative committee of management of the Association as trustee of the Trust, and their concern is to preserve the assets of the Trust for its charitable purpose.
56 When I gave my short reasons on 19 March 2020 to allow the Objectors to participate in the Beddoe application, I said that it was central to my consideration that the Association had given the Undertaking in the Main Proceeding. That Undertaking is critical to the Objectors' interest in seeking to protect the Church Property - which is undoubtedly property of a charitable trust - the dispute being very significantly, but not only who controls that trust. So their 'interest' in participating in this application is also informed by their interests that arises pursuant to the Undertaking. The fact that the Association has undertaken to give notice of any dealing with the title to the Church Property seems to me to be an acknowledgment that they have an interest in the preserving that Property.
57 It is also true that the presence of a person to act in the role of a contradicter gives the Court the advantage of alternative views and submissions, especially where the Attorney-General has declined to assist the Court.
58 I reject the submission by the Objectors that there has been a waiver of client legal privilege over the confidential advice of Counsel, exhibited to the affidavit in support of this application. The basis of that contention was the Undertaking (given in response to a threatened injunction application) that the Objectors have notice of any proposal to encumber or deal with the Church Property.[54] There is no present analogy with an inter partes injunction application, where the advice could not be relied upon and remain privileged.
59 The retention of the privilege in respect of advice of this kind, designed to assist the Court in granting or withholding its judicial advice, is well established and was recognised by the High Court in the decision of the plurality in Macedonian Church St Petka.[55] As the NSW Court of Appeal observed in Application of Macedonian Orthodox Community Church St Petka Inc (No 3),[56] it is the usual practice for the Court to be assisted on an application for judicial advice by being provided with a legal opinion, and it would be contrary to principle to find an implied waiver.
60 It is clear from the pleadings in the Main Proceeding and from the submissions of both the Association and the Objectors that the Association is the trustee of a charitable purpose trust. It is the precise purpose and scope of the Trust - the definition of the charitable purpose or purposes - that is unclear or in dispute, or so it seems. It is also clear that a major part of the disputes exposed by the pleadings in the Main Proceeding concern who has the right to control the Association, the Objectors or the defendants in the Main Proceeding (other than the Association). But that involves the management and administration of the Trust as well as its purpose. The identification of the purpose is tied up with the common fight within parts of the MOC about hierarchical versus parish control. They cannot be disentangled. Moreover the Attorney-General is a party and does not oppose the application for relief set out in the originating motion, noting that this relief is sought by the Association and no other persons involved in the Main Proceeding.
61 The plaintiffs in the Main Proceeding claim to be the real management committee of the Association. The relief sought concerns the trust property, the Church Property, the church funds and the remaining proceeds of sale of the Church House. Although relief is sought under the Associations Incorporation Reform Act 2012 (Vic), the substantive dispute is about the constitution of the Association and the decision of the Bishop to remove the 2017 CAC and to appoint the Temporary Committee.[57]
62 The Association submitted that the question for the Court on a Beddoe application is whether it would be proper for the trustee to defend (and counterclaim) in the proceedings on the material then available.[58] The Court noted in Macedonian Church St Petka that a necessary consequence of the provisions of s 63 of the Trustee Act 1925 (NSW) and its equivalents is that a trustee who is sued should take no step in defence of the suit without first obtaining judicial advice about whether it is proper to defend the proceedings.[59] The fact that judicial advice may address substantive rights in contested proceedings is not a bar to the giving of judicial advice.[60]
63 The Association submitted that the fact that a trust is a charitable purpose trust, as opposed to a non-charitable private trust, is a matter that inclines toward the giving of judicial advice, since the public interest is necessarily involved.[61] The fact that a trust is for religious purposes also inclines toward the giving of advice because religious controversies do not commonly come before the courts unless they involve disputes about property rights.[62] There is no doubt that the Association is the trustee of a charitable purpose trust for the purposes of the Macedonian Orthodox Church.
64 In support of the Association's counterclaim, the affidavit of Mr Alexander exhibited documents which support the following propositions:
(a) on 22 April 1983, the Macedonian Orthodox Church Community 'St Dimitrija - the martyr', in Springvale, Victoria ('the Parish'), was accepted under the spiritual jurisdiction of the Macedonian Orthodox Church;[63]
(b) the Holy Bishop's Synod ('the Synod') stated that the Parish would be governed by the constitution of the Macedonian Orthodox Church,[64] the statute of the diocese,[65] the by-laws approved by the Synod ('the By-laws'),[66] the decisions and resolutions of the hierarchical authorities of the MOC;
(c) although the constituent documents of the Parish and Church are not very clear, perhaps because they are translations from the Macedonian language, the better view is that the By-laws of the original, unincorporated association dated 22 April 1983 created a charitable trust for the purposes of the Macedonian Orthodox Church;
(d) Article 3 of the By-laws provides that the Parish property, both real and personal, is 'owned by the General Assembly - the members of the Church and cannot be transferred'. The object of the trust is more clearly delineated in the document which was lodged with the Land Titles Office under the Religious Successory and Charitable Trusts Act 1958 (Vic). It states:
All church property, both real and personal, is vested in the church and cannot be transferred to a person or persons, company or any other institution.
(e) Article 3 must be read with the By-laws construed as a whole. Article 6 states the aims of the Parish are:
(i) to instruct its members in the spirit of orthodoxy;
(ii) to preserve the glorious traditions of thy Macedonian Orthodox Church;
(iii) to develop mutual love and brotherly understanding amongst its members;
(iv) through moral and spiritual teachings to shape useful and loyal citizens of Australia;
(v) to preserve the basic Christian truths and teachings pursuant to Article 7 of the Constitution of the Macedonian Orthodox Church in Skopje.
(f) Article 66 appoints the three original trustees for the purpose of Registration under the Religious Successory and Charitable Trusts Act 1958 (Vic) and sets out the terms of the trust. Although art 66(f) states that the property is held 'for and on behalf of the said Church and the members thereof', the repeated references in article 66 to the Religious Successory and Charitable Trusts Act 1958 (Vic), against the background of the aims of the Parish stated in article 6, lead to the conclusion that a charitable trust was intended, rather than a trust for particular beneficiaries;
(g) the Association submits that the revised article 3 in the registered version and the express provision in article 66(i) of the By-laws put beyond doubt the conclusion that the trust has as its object the charitable purpose rather than the members from time to time. Article 66(i) provides:
All provisions of the Religious Successory and Charitable Trusts Act relating to trustees of trusts for religious purposes shall apply to the trustees for the time being of the said Trust.
(h) on 31 January 1984, the trustees of the Trust were registered on the title to the Church Property. On 25 June 1991, the Association was incorporated as 'St Dimitrija' -The Macedonian Care Association Inc. By transfer of land dated 26 July 1994, the Church Property was transferred to the Association. On 12 October 1994, the Association was registered as sole proprietor on the Certificate of Title. The transferor is described as-
Vasil Milevski ... , Todor Blazevski ... , and Josif Lembovski ... being the trustees for the time being of the Macedonian Orthodox Church "St Dimitrija" Trust registered Folium 705 in the Register of Successory Trusts under Part II of the Religious Successory and Charitable Trusts Act 1958.
(i) the consideration for the transfer is recorded as 'Entitled in Equity'. Ordinarily this is a statement of summary for a transfer to the beneficiary. A new trustee is not 'entitled in equity' to the land. Instead a change of trustee is usually the subject of an application for a stamp duty concession made to the State Revenue Office. The stated consideration for the transfer of land in 1994 cannot be correct if the Church Property was already the subject of a charitable trust. The wrong stamp duty concession appears to have been used in 1994;
(j) the transferee is the Association. The transfer of land appears to have been duly signed by the transferors and the transferee and bears the common seal of the Association; and
(k) the Association will submit that upon the transfer it held the Church Property on the same trust as the previous trustees. A charitable trust, once established, can never fail.[67]
65 In Macedonian Church St Petka, the Attorney-General appeared as amicus curiae in the High Court and supported the Association's application for judicial advice. The Association submits that the Attorney-General is a proper and necessary party to this application to protect the interests of the public. The confidential advice of Counsel has been provided to the Attorney-General on condition that it be kept confidential.
66 The Association submits that for these reasons it would be proper for the Association to defend and counterclaim in the Main Proceeding and for the Court to make an order that the Association be entitled to indemnity from the trust property for its reasonable costs in defending and counterclaiming in the proceeding.
67 In relation to the substantive question of whether the Association should receive supportive advice and a right to be indemnified for the costs of the Main Proceeding out of the assets of the Trust, the Objectors initially submitted that:[68]
(a) in light of the true controversies between the parties, the application for judicial advice should be refused;
(b) if on the other hand the Court decides that the Association is justified in defending the Main Proceeding and prosecuting the Counterclaim, the Court should not make any indemnity order prior to the hearing and determination of the Main Proceeding; and
(c) alternatively, any order for indemnity for costs out of the trust assets should be limited to any issues touching on the trust. The terms of the transfer for no consideration and the circumstances of the transfer, show that the old trustees did not intend simply to dispose of trust property, but to step down as trustees in favour of the Association as new trustee. Read in this way there is no violation of the prohibition in article 3 of the By-laws (as registered) on transfer out of the Church Property.
68 The Objectors developed the contention that there should be no indemnity order for the payment of the Association's costs out of the assets of the charitable trust, with the following matters:
(a) there was no need for the Association to participate in the controversy as to who controls it. Although the Association is a necessary party, it could allow the competing groups of parties to conduct their respective cases and merely abide the Court's decision. It is not driven to take an active role in the dispute. It is not reasonable that the Association defend that part of the proceeding. Thus, the Court should not sanction recourse to the assets of the Trust to indemnify itself for the costs of defending the Main Proceeding;
(b) what the Association seeks, through the agency of those who purport to control it, being the second to fifth defendants in the Main Proceeding, is the costs of those defendants of their contention that they control the Association be indirectly paid by the Association, which then seeks indemnity for such costs from the trust assets. This should not be permitted at all and certainly not prior to the determination of the controversy in the Main Proceeding. It has strong echoes of what Croft J would not permit in Charlesworth;[69]
(c) no order for indemnity should be made pending the outcome of the Main Proceeding. If it is held in the Main Proceeding that the Objectors are in fact the properly constituted committee of management of the Association, then the Temporary Committee would be held to have had no authority to control the Association. Meanwhile, if the Association is given an indemnity out of the assets of the trust for its costs of defending the Main Proceeding, the assets will be depleted to the detriment of the objects of the trust and the future conduct of the Association by the Objectors. The determination of the issues in the Main Proceeding will inform whether it is reasonable and proper for the Trustee to have an indemnity for its costs out of the trust assets. This is particularly so where the principal issue in the Main Proceeding is who controls the Association and not the terms of the trust;
(d) any question relating to the charitable trust is irrelevant to the relief sought by the Association as to the property of the trust. The relief sought by the Association in its counterclaim is the recovery of possession of the Church Property and delivery up of it keys, delivery up of money collected at church services and from the sale of icons and an account of all money received by the Objectors from conducting church services since January 2019. These raise issues dehors the trust. They concern the question of who is in control of the Association and not any issue concerning the trust; and
(e) an indemnity order would frustrate a key objective of the Main Proceeding: By the Main Proceeding the Objectors seek, amongst other things, to ensure that the property of the Association is properly dealt with and not depleted. The Objectors sought orders protective of the Church title and to that end, on 23 August 2019, obtained the Undertaking. The indemnity from the assets of the Trust sought by the Association in this application undermines one of the objectors' key objects in bringing the Main Proceeding - namely to prevent the depletion of the Association's assets. An indemnity would do exactly that.
69 In support of the alternative of only allowing a limited indemnity, the Objectors pointed out that the indemnity sought by the Association is unlimited in its scope - it covers defending the whole of the proceeding, and prosecuting the whole of the counterclaim; whereas the Trust is peripheral to the Association's pleaded case in the Main Proceeding.
70 After the Objectors had been served with the affidavits and exhibits in support of the application, they made further written submissions, somewhat repetitive of the earlier submissions, to the following effect:
(a) the Beddoe applicant's forecast costs of the proceeding are extremely substantial. It is plain on the face of the assessment that the costs are not only of the Beddoe applicant's costs but the costs of the conduct of the main proceeding generally. It does not differentiate between the costs of the Association and the other defendants in the main proceeding;
(b) an indemnity from the trust assets for legal costs in the order contemplated by the assessment of Mr De La Rue will imperil the only substantial trust asset, the Church Property, which is an essential feature in the promotion or fulfilment of the trust purpose;
(c) the essence of the judicial advice sought is inimical to the promotion of the trust's purpose, or potentially so, and that makes it inappropriate for the Court to grant the advice sought;[70]
(d) the affidavit of Father Taleski exposes a problem with the Association's case, in that the Father is said to be a member of the Temporary Committee ex officio by virtue of his position as Elder of the Parish. In fact he ceased that position in February 2019. For this reason, the Court cannot have any confidence that those purporting to give instructions on behalf of the Association to make the Beddoe application have authority to do so. That should give rise to a doubt about the Association's authority to bring this application, which should lead to it being refused or deferred;
(e) no indemnity should be granted to the Beddoe applicant to enable it to defend the allegations made against it as to the sale of the Church House. These are allegations of maladministration of the trust by reason of the unauthorised sale of that property. Where there are allegations of maladministration of trust, ordinarily exoneration should be obtained before indemnity is granted;[71]
(f) for reasons that need not be set out here, Father Taleski's position as a member of the Temporary Committee should lead the Court to conclude that there is considerable doubt and substantial controversy about the Association's authority to bring this application, and accordingly it should defer the application for a grant of indemnity to the trial judge so that the relevant issues can be determined;
(g) the giving of judicial advice that it is appropriate for the Association to defend and counterclaim in the Main Proceeding does not mean that an indemnity out of the assets of the Trust in respect of the costs of doing so should be given;[72]
(h) in Auspac Corporate Managers v J Noble Pty Ltd,[73] Gzell J observed 'However, the Court will not always exercise power to give advice. It will not do so in contentious situations.'[74] His Honour went on to point out that:[75]
As Needham J explained in Harrison v Mills [1976] 1 NSWLR 42 at 45, there are many reasons for a Court refusing to hear a summons under the Trustee Act 1925, s'63 to determine matters of basic controversy. An immediate reason is that the proceedings are essentially private advice given by the Court ex parte to a trustee upon information supplied by the trustee. His Honour went on to say at 46, that where there is controversy, it is undesirable that the rights of the parties should depend to any degree upon facts that have not been established in the normal manner.
This applies no less to the instant application despite the fact that it arises out of a different factual matrix. This is so for all of the reasons submitted by the Objectors.
(i) the grant of an indemnity for the Association's costs would have the effect of indirectly funding the costs of the other defendants. If this were allowed the trust assets would be diminished for the gain of parties other than the trustee. The trustee should merely abide the outcome of the proceeding; and
(j) if an indemnity is granted it should be limited so that it does not include the costs of the disputes about who controls the trustee and the Church House, nor should it indemnify the other defendants' costs.
71 The Association responded to the following effect:
(a) a Beddoe order would not imperil the trust assets. Even if the Association were to fail in its defence of the Main Proceeding, the Trust assets would be sufficient to fund or secure payment of those costs. There is therefore no risk of depriving the Objectors the fruits of the litigation;
(b) the risk of diminution of the trust assets is of course relevant to the Court's discretion. But that factor must be weighed against the duty of the trustee to defend a misconceived or weak claim (having regard to the strength of the relative merits of the claim and defences in the Main Proceeding) as well as other relevant considerations. The Objectors' decision to sue the Association in the Main Proceeding always carried the risk of diminishing the trust assets, whether a right to indemnity be secured in advance by a Beddoe application (as the High Court in Macedonian Church St Petka firmly advises a defendant trustee to make, and the Deputy Bishop directed the Association to make) or granted after the determination of the Main Proceeding;
(c) the Objectors' submission that the Association should abide the outcome of the Main Proceeding is untenable in circumstances where the Objectors make allegations of impropriety against the Association, including (for example) an allegation that the Association sold the Church House in breach of trust. In effect, the Objectors are saying that the Association should not be permitted to defend itself. Where the objects of the trust are charitable purposes and not persons, as here, it is appropriate that the trustee take an active part in the proceedings, rather than leave the competing claimants to fight it out;[76]
(d) it begs the question for the Objectors to submit that the doubt about the authority of the Temporary Committee to give instructions on behalf of the Association should lead the Court to defer the question of indemnity to the trial judge. Whether the Temporary Committee was validly appointed is one of the matters to be agitated and decided in the Main Proceeding. In this application the Court need not be affirmatively satisfied that the Temporary Committee was validly appointed, only that it would be proper for the Association to defend the Main Proceeding;
(e) the fact that the sale of the Church House involves an allegation of maladministration of the trust is not a reason to refuse to grant an indemnity in respect of that matter. In Macedonian Church St Petka, the High Court stated that '[t]here is nothing in s 63 which limits its application to 'non-adversarial' proceedings, or proceedings other than those in which the trustee is being sued for breach of trust[.]';[77]
(f) Uncle's Joint is not authority for the proposition that 'where there are allegations of maladministration of trust, ordinarily exoneration should be obtained before indemnity is granted'. Rather, Brereton J observed that such indemnity was granted in Macedonian Church St Petka, although he noted that such advice will not invariably be given: it depends on the particular circumstances of each case;[78]
(g) the Association does not dispute that, in certain circumstances, it might be proper for a trustee to defend proceedings and yet not be permitted to indemnify itself out of the trust assets. The decision not to grant indemnity in Salmi v Sinivouri turned on the fact that the proceeding was essentially a fight between adult beneficiaries of a private trust.[79] This case is very different: it involves the validity of the Bishop's removal of the Objectors as committee members and the appointment of the Temporary Committee, and allegations of breach of trust against the trustee of a charitable trust, where the interest of the public is involved;
(h) in Auspac Corporate Managers v J Noble Pty Ltd[80], Gzell J went so far as to say that the Court will not give advice in contentious situations. At least since Macedonian Church St Petka, that statement is incorrect and should not be followed.[81] In any event, Gzell J refused to give advice in that case not because it was contentious but because it was uncontentious. His Honour refused to give advice on the ground that a Court will not grant relief on an abstract or hypothetical basis;[82]
(i) as to the submission that the Court should refuse to grant indemnity where the other defendants will benefit from it, no distinction can be drawn between the actions of the Association and those of its committee members qua committee members. Any allegation against the Association is also thereby an allegation against its committee members for the time being, and any allegation against the committee members of the Association qua committee members is thereby an allegation against the Association. The two cannot be disentangled. The Temporary Members are volunteers and have no financial stake in the trust assets or in the outcome of the Main Proceeding. It would be artificial and unfair to the Association to refuse to grant indemnity to it on the ground that the other defendants might benefit from that course; and
(j) there should be no limiting any indemnity to exclude any costs of the issues concerning who controls the Association, the sale of the Church House or the funding of the other defendants because:
(i) the dispute about who controls the Association is clearly a question in the management and administration of the trust. It is impossible to disentangle the control of the trustee from the trustee's management and administration of trust property;
(ii) the allegations about the New Rules and the sale of the Church House are allegations at one and the same time against the Association and its then committee members, including the second, third and fourth defendants. Similarly, the allegations that the Temporary Committee had acted in various ways, that the Association had failed to call an extraordinary annual general meeting, and that the Association had refused to permit inspection of the register of members, are allegations at one and the same time against the Association and the Temporary Committee through which it acted, including the second to fifth defendants; and
(iii) it would be practically impossible to limit a grant of indemnity to the Association to the exclusion of the committee through which it acts.
72 There are a great many matters that have been raised in opposition to the giving of judicial advice that it is appropriate for the Association to defend and counterclaim in Main Proceeding. I have attempted to set them all out, but I have to say not many of them are sound, generally for the reasons advanced in answer by the Association. That I do not deal with a particular contention of the Objectors does not mean I have not considered it. It means I accept the response of the Association.
73 The Main Proceeding concerns the management and administration of the trust property and the identification and interpretation of the constitution of the Association, which are the instruments concerning the administration of the charitable trust. This is the kind of dispute for which the Court's guidance on a Beddoe application is highly desirable, if not mandatory.[83] Father Taleski, who is the second defendant in the Main Proceeding, has in discussions with the Deputy Bishop been advised to make this application. When the application was initially filed, the Main Proceeding was at a relatively early stage. It is now, through no fault of the Association, much more advanced, the trial being fixed for 1 June 2020.[84]
74 It is important to focus the task of the Court in a Beddoe application into two broad questions. First, whether the Association is justified in defending and counterclaiming in the Main Proceeding. Second, if so, whether the Association should have recourse to the Trust assets for the costs of doing so?
75 In relation to the first question, in Re Application of Macedonian Orthodox Community Church St Petka Inc [No 3][85] Palmer J said:
In a judicial advice application in which the trustee asks whether it is justified in prosecuting or defending litigation, all the Court does is to reach a view as to whether the Opinion of Counsel satisfies it that there are suffıcient prospects of success to warrant the trustee in proceeding with the litigation. Counsel's Opinion must address the facts necessary to support the legal conclusions reached and must demonstrate that the propositions of law relied upon for those conclusions are properly arguable. Whether, in the light of Counsel's Opinion, there are 'suffıcient' prospects of success calls for another judgment, founded upon such considerations as:
- the nature of the case and the issues raised;
- the amounts involved, including likely costs;
- whether the likely costs to be incurred by the trustee are proportionate to the issues and the significance of the case;
- the consequences of the litigation to the parties concerned;
- in the case of a charitable trust, any relevant public interest factors.
76 I have read Counsels' Opinion carefully.[86] It is not long, but carefully considered and thorough. It specifically addresses the facts relating to the whether the Model Rules of the Association ever were adopted and the basis for the validity of the New Rules, amongst the other issues in the Main Proceeding. The propositions of law relied upon are in my view properly arguable.
77 I must consider whether there are sufficient prospects of success to warrant the Association funding its defence and counterclaim out of the assets of the Trust. I cannot engage in analysis of the opinion of counsel, for it is the subject of client legal privilege. Nor can I state what the strength of the Association's case is in relation to the facts which have been assumed in the opinion, but which had not yet been established.
78 In relation to the factors referred to above by Palmer J, in my view:
(a) the nature of the case is not adequately described as merely a dispute concerning the control of the Association. The respective contentions as to the validity of the New Rules and the operation of the various provisions of the Statute and Bye-laws, is but the surface of the real dispute, which is the one that is common to most, if not all disputes, involving the Macedonian Orthodox Church, and other Eastern Orthodox Churches.[87] It is the quest for control of the assets of a religious charitable trust between a local congregation or parish and the hierarchy of the Church. This particular Association undoubtedly holds it charitable trust assets for a particular branch of an existing hierarchical church, the MOC, and the disputes about control inevitably involve the management of those trust assets and whether they are subject to the doctrines and disciplines of the mother church. The disputes also involve the interaction between the governance model said to have been established under the New Rules and the requirements of the Associations Incorporation Reform Act 2012 (Vic) and what may be permissible under that legislation;
(b) the cost of the litigation are likely to be large and, as I have said, larger than estimated by the Association's costs consultant. But they are not so large as to diminish the assets of the Trust out of proportion to the importance of the resolution of the disputes; and
(c) the consequences of the litigation are critical to the continuance of the Springvale Parish of the MOC. The importance of the litigation to the section of the community who are or wish to be members of the congregation of that Parish is also great. The final resolution of the dispute as to the control of Church and administration of the Trust, which would seem to have divided the community, is in the public interest.
79 I agree with the submission by the Association that the fact that a trust is a charitable purpose trust, as opposed to a non-charitable private trust, is a matter that inclines toward the giving of judicial advice, since the public interest is necessarily involved.[88] The High Court made the point in Macedonian Church St Petka better than I can_:_
The fact that one of the purposes of proceedings for judicial advice is to protect the interests of the trust has particular importance where, as in this case, the trust concerned is a charitable purpose trust. In litigation brought by private persons having a particular view about the terms of a trust, the trustee will ordinarily be joined as a necessary and proper party to the proceedings. Unless some other party will act as contradictor, the burden of defending the suit will fall upon the trustee. If, as will often be the case with a charitable purpose trust, there is no other party that will act as contradictor, the claims made about the terms of the trust will go unanswered unless the trustee can properly resort to the trust funds to meet the costs of defending the litigation. And even if there is another party that will act as contradictor, it is almost always desirable, even necessary, for the trustee to take an active part in the proceedings so that issues are properly ventilated and argued.[89]
80 In relation to the second question, in Re Application of Macedonian Orthodox Community Church St Petka Inc [No 3][90] Palmer J said:
Where a trustee seeks an order that it is justified in defending a claim against the trust estate by recourse to the trust assets for the costs of the litigation, the question will be whether it is more practical, and fairer, to leave the competing claimants to the beneficial interest in the trust estate to fight the litigation out amongst themselves, at their own risk as to costs and leaving the trustee as a necessary but inactive party in the proceedings, or whether it is more practical, and fairer, that the trustee be the active litigant with recourse to the trust fund for the costs of the litigation. What is 'practical and fair' will depend on the particular circumstances of each case and will include:
- whether the beneficiaries of the trust estate have a substantial financial interest in defending the claim;
- what are the financial means of the beneficiaries to fund the defence;
- the merits and strengths of the claim against the trust estate;
- the extent to which recourse to the trust estate for defence costs would deprive the successful claimant of the fruits of the litigation;
- if the trust is a charitable trust rather than a private trust, what, if any, are the considerations of public interest.
81 It is convenient to use the factors identified by Palmer J (with necessary adjustments to the circumstances of this case) as a starting point for the consideration of whether the Association is justified in defending and counterclaiming in the Main Proceeding by recourse to the Trust assets, essentially the Church Property, for the costs of the doing so:
(a) because the Trust is for charitable purposes, there is no one who has a financial interest in defending the claims brought by the Objectors. The defendants in the Main Proceeding, the Association as trustee and the members of the Temporary Committee, have no financial interest and no means other than recourse to the assets of the Trust;
(b) the advice of Counsel, which I accept, provides that there are suffıcient prospects of success to warrant the trustee in proceeding to defend and counterclaim in the Main Proceeding. There is therefore sufficient merit and strength in the Association's case;
(c) recourse to the Trust's assets for the Association's costs will affect the values of those assets, but not deprive the objectors of the bulk of the assets, being the Church Property, particularly having regard to the fact, or so it seems, that the Objectors have been keeping the Association and the Temporary Committee out of the physical assets and income, the church buildings on the Church Property and the income derived from their use; and
(d) it is very much in the public interest that the determination of who is lawfully entitled to control and administer the Trust assets is resolved and it is only through the Association having recourse to the assets (to be indemnified for its costs) that such a resolution is likely.
82 I agree with the submission of the Association that no distinction can be drawn between the actions of the Association and the other defendants, who are joined because they are members of the Temporary Committee appointed by the Diocesan Bishop. The allegations made by the Objectors concerning the question of who is properly and lawfully in control of the Association is also an allegation against those committee members, and any allegation against those committee members is an allegation against the Association. The two cannot be disentangled. The Temporary Members are volunteers and have no financial stake in the trust assets or in the outcome of the Main Proceeding. They are but the hand, or amanuensis, of the Bishop who appointed them. It would be artificial and unfair to the Association to refuse to grant indemnity to it on the ground that the other defendants might benefit from that course.
83 The proposition that the proper course in this case is for the Association to take a neutral stance is misconceived. It will be a rare case where a trustee of a charitable trust will be able to take a neutral position. The Association taking a neutral position is neither practical nor fair, for the following reasons:
(a) the Trust is a charitable trust. No person is a beneficiary of the trust - neither the Bishop, Father Taleski nor any member of the Temporary Committee, indeed nor any of the Objectors. None of the contestants in this case is claiming or defending in order to augment or defend personal assets;
(b) as a matter of practicality, the Association cannot find the financial resources to contest whether the constituent documents said by the Association to determine the control of the Association (the Constitution of the MOC, the statute of the Diocese, the Bye-laws, the New Rules and the decisions and resolutions of the hierarchical authorities of the MOC) without recourse to the Church Property;
(c) it is not fair, in my view, to require the Association to take a neutral position as trustee in the litigation leaving it to the continuing members of the Temporary Committee to defend the litigation or to counterclaim. They are not beneficiaries of the trust, they have no financial interest in the trust property, and they either have no means or are not in a positon where they should be required, to fund the litigation at their own expense and at risk as to costs generally; and
(d) the circumstances of this case are a long way from those facing Brereton J in Uncle's Joint.[91]
84 The fact that a trust is for religious purposes also inclines toward the giving of advice because religious controversies do not commonly come before the courts unless they involve disputes about property rights.[92]
85 The matters to which I have referred concerning the common interest or 'entanglement' of the Association and the members of the Temporary Committee, and the prima facie entitlement of the trustee to indemnity for all costs and expenses properly incurred in performance of the trustee's duties, also supports the grant of an indemnity to the Association.
86 It will not be more practical nor fair for indemnity to await the outcome of the Main Proceeding where, as is the evidence before me, the defendants do not have the resources to defend the proceeding without recourse to the trust assets. The public interest in the resolution of the Association's defence of the claims and its counterclaim is, as I have said, of public importance and to leave the Main Proceeding effectively undefended would mean the defence and counterclaim are likely to be abandoned. That is a highly undesirable course. The Opinion of Counsel supports suffıcient prospects of success to warrant the trustee in proceeding with the defence and counterclaim. It should be remembered that, as the High Court has reminded us:
The very provision for the trustee to obtain judicial advice about the prosecution or defence of litigation is recognition of both the fact that the office of trustee is ordinarily a gratuitous office and the fact that a trustee is entitled to an indemnity for all costs and expenses properly incurred in performance of the trustee's duties. Obtaining judicial advice resolves doubt about whether it is proper for a trustee to incur the costs and expenses of prosecuting or defending litigation. No less importantly, however, resolving those doubts means that the interests of the trust will be protected; the interests of the trust will not be subordinated to the trustee's fear of personal liability for costs.[93]
87 For these reasons, I will advise the Association that it is justified in defending and counterclaiming in the Main Proceeding and that it is entitled to an indemnity in respect of its costs properly incurred in that regard from the assets of the Trust, in particular, but without limitation, the Church Property.
88 The Association's solicitors should submit orders for consideration and, if appropriate, for authentication.
[1] The Main Proceeding was commenced in the Magistrates' Court of Victoria and was transferred to this Court by Order of Magistrate Maxted on 17 April 2019.
[3] Attorney-General v Bishop of Worcester [1851] EngR 828; (1851) 68 ER 530, 546-7.
[4] Solicitor-General v Wylde [1945] NSWStRp 28; (1945) 46 SR (NSW) 83 ('Wylde'), 105-20 (Nicholas CJ).
[5] Letter dated 12 November 2019 to the Supreme Court of Victoria.
[6] Order made 21 February 2020 by McMillan J.
[7] The Parish has the same name as the Association.
[8] Petar, Metropolitan of Prespa & Pelagonia and Administrator of Australia and New Zealand (Metropolitan).
[9] The sixth defendant - who it seems was also appointed as a member of the Temporary Committee - has indicated that she no longer wishes to participate as a member of the Temporary Committee and therefore in the proceeding.
[10] Statement of Claim [5]; Defence and Counterclaim, filed 21 August 2019, [5] ('Defence and Counterclaim').
[12] Being the Macedonian Orthodox Church of St Dimitrij Solunski, Springvale, Victoria.
[13] Defence and Counterclaim (n 10), [12(a)].
[15] Defence and counterclaim (f 10) [3].
[16] Main Proceeding Amended Reply and Defence to Counterclaim filed 21 February 2020, [3(c)] ('Amended Reply').
[17] Affidavit of Mile Taleski, sworn 16 September 2019, Exhibit MT-1, including the auditor's report of 27 November 2018.
[18] Morris v Smoel [2013] VSCA 11 ('Morris v Smoel'), [21 (Maxwell P, Whelan JA agreeing)].
[19] Trustee Act 1925 (NSW), s 63; Trusts Act 1973 (Qld), ss 96-7; Trustee Act 1936 (SA) s 91; Administration and Probate Act 1919 (SA), s 69; Trustees Act 1962 (WA), ss 92, 95; Trustees Act 1925 (ACT), s 63. The Northern Territory has the same procedure as Victoria: Supreme Court Rules 1987 (NT), O 54..
[20] Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand & Anor [2008] HCA 42; (2008) 237 CLR 66, 90-1 [61] - [63] (Gummow A-CJ, Kirby, Hayne and Heydon JJ) ('Macedonian Church St Petka'). References to this decision are to the joint judgment unless stated to the contrary.
[21] Macedonian Church St Petka (n 19) 91 [64].
[24] Ibid 91 [64]; Morris Smoel (n 17) [22].
[25] Macedonian Church St Petka (n 19) 91 [64]; Morris v Smoel (n 17) [22]-[24].
[26] Macedonian Church St Petka (n 19) 93-4 [71].
[28] The submissions were dated 25 February 2020. They were not, and could not be, filed because the Objectors were not parties to the proceeding.
[29] Not including the confidential advice of Counsel exhibited to the affidavit of Mile Talevski in support of the application, which remained the subject of client legal privilege: See Macedonian Church St Petka (n 19) 78 [21], 121-2 [167]-[173].
[30] Subject to the deletion of a part of the affidavit of Mile Taleski sworn on 16 September 2019.
[31] Defence and Counterclaim (n 10) [3].
[33] Exhibit SC-6 to the Affidavit of Sarah Coffey dated 25 February 2020 filed in this proceeding, being her affidavit made 30 January 2020 filed in the Main Proceeding - see relevantly at [12], [13] and exhibit SC-3 to that affidavit.
[34] (2017) 54 VR 155 ('Charlesworth**'**), 158 [9].
[38] (2013) 10 ASTLR 251 ('Re Estate of Chow').
[39] Re Estate of Chow (n 38) 282-3 [198]-[199]; Charlesworth (n 34) 158 [7].
[40] [2014] NSWSC 321, [23]-[25] ('Uncle's Joint'); Charlesworth (n 33) [30].
[43] See the Undertaking in the order made on 23 August 2019 in the Main Proceeding.
[44] Macedonian Church St Petka (n 19) 91 [64].
[47] For example, Charlesworth (n 34) 157-8 [5]-[9].
[48] Wylde (n 4), 105-20 (Nicholas CJ).
[49] Bathurst City Council v PWC Properties Pty Ltd [1998] HCA 59; (1998) 195 CLR 566, 583 [39].
[50] Macedonian Church St Petka, (n 19) 91-2 [65].
[51] Macedonian Church St Petka, (n 19) 87 [48]-[49].
[52] Macedonian Church St Petka (n 19) 86 [45].
[53] Application of Macedonian Orthodox Community Church St Petka Incorporated [2004] NSWSC 388, [12].
[54] See the Undertaking in the order made on 23 August 2019 in the Main Proceeding.
[55] (n 19) 118 [161], 121-2 [168] -[173]; See also the decision of the NSW Court of Appeal in Macedonian Orthodox Community Church St Petka Inc v Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand [2006] NSWCA 160; (2006) 66 NSWLR 112.
[56] [2006] NSWSC 1247, [53].
[57] The sixth defendant has tendered his resignation from the Temporary Committee.
[58] Macedonian Church St Petka (n 19) 94[74].
[60] Ibid 100 [98] (Kiefel J), 102-3 [106] (plurality).
[63] Affidavit of Chris Alexander, sworn 19 September 2019, Exhibit CA-1 322.
[66] Ibid 322-34 (English), 335-44 (Macedonian).
[67] Smith v Kerr [1902] 1 Ch 774.
[68] Written submission dated 25 February 2020, made before being given access to the affidavits and exhibits in support of the application (with the exception of the privileged advice of Counsel).
[69] (n 33) 162 [20], 167-8 [33], 171-2 [38]-[40].
[70] Marley and others v Mutual Security Merchant Bank and Trust Co Ltd [1990] UKPC 44; [1991] 3 All ER 198, 201.
[71] Uncle's Joint (n 40) [22]-[26].
[72] Salmi v Sinivouri [2008] QSC 321, [17], [22].
[73] [2003] NSWSC 548 ('Auspac').
[76] Macedonian Church St Petka (n 19) [73].
[78] Uncle's Joint (n 40) [25]-[26].
[79] [2008] QSC 321, [22]-[24].
[81] See also Application of Willoughby City Council (as manager of the Talus Reserve Trust) [2016] NSWSC 1717, [85]-[87].
[83] Macedonian Church St Petka (n 19) 94 [74 ].
[84] Although there are recently applications that may affect that trial date.
[85] [2006] NSWSC 1247, [81], approved in Macedonian Church St Petka (n 19) 118-20 [159]-[164].
[86] It is called an 'advice', but it's proper characterisation for present purposes is as an opinion.
[87] See for example Radmanovich v Nedeljkovic [2001] NSWSC 492, where the basal question was described by the Judge as 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 (at [3]).
[88] Macedonian Church St Petka (n 19) 92 [67], 94 [73].
[90] [2006] NSWSC 1247 [62], approved in Macedonian Church St Petka (n 19) 96-7 [84].
[92] Macedonian Church St Petka (n 19) 92-3 [68].
[93] Macedonian Church St Petka (n 19) 93-4 [71].
Plaintiff
ATTORNEY GENERAL FOR STATE OF VICTORIA
(2008) 237 CLR 66
(2017) 54 VR 155
(1998) 195 CLR 566
(2006) 66 NSWLR 112