Plaintiff v Defendants

VANTA PTY LTD (ACN 005 190 965) (as trustee of the MANTOVANI FAMILY TRUST)

SALVATORE ROCCO MANTOVANI (personally and as executor of the will of TERESA MANTOVANI)

CARMINE VINCENZO MANTOVANI (personally and as executor of the will of TERESA MANTOVANI)

1 The Mantovani Family Trust ('the family trust') was established by Teresa Mantovani ('Teresa') in 1976. At some time prior to the commencement of the proceeding in 2019, the original deed of settlement for the family trust ('the deed') was lost. The only document remaining in the possession of the parties is a schedule to the original deed ('the schedule'), which sets out some basic information about the family trust.

2 The plaintiff and the second, third and fourth defendants are the adult children of Teresa. The schedule names each of them, along with Teresa and any of their children and grandchildren, as the beneficiaries of the family trust. The schedule also names the first defendant, Vanta Pty Ltd ('Vanta'), as trustee. Vanta was incorporated in 1976 and has since been controlled by members of the Mantovani family. The second and third defendants are the current directors and shareholders of Vanta.

3 Following Teresa's death in 2015, the plaintiff and the defendants fell into dispute as to their entitlements to the assets of the family trust held by Vanta, the consequences of the loss of the deed, and the distribution of Teresa's estate. The plaintiff contended that, as a result of the loss of the deed, the family trust had failed for uncertainty, with the result that Vanta held all trust assets on resulting trust for the estate of Teresa. The defendants, by contrast, maintained that the schedule provided sufficient evidence of the terms of the deed such that the family trust could continue to operate.

4 By originating motion filed 21 February 2019, the plaintiff sought various orders and declarations pursuant to r 54.02 of the Supreme Court (General Civil Procedure) Rules 2015 ('the Rules') against Vanta and each of the second, third and fourth defendants. The orders and declarations sought included an order for the production of certain documents relating to the family trust, including the deed, and a declaration that as a consequence of the loss of the deed, all assets held by Vanta were held on resulting trust for the estate of Teresa.

5 The trial of the proceeding was held on 19 July 2021. Reasons for judgment were delivered on 25 November 2021 ('the reasons').[1] It was determined that, as a result of the loss of the deed, the family trust had failed for uncertainty and that as a consequence Vanta held the assets of the family trust on resulting trust for the estate of Teresa.[2] Orders were made for the taking of an account of moneys received and disbursed by Vanta in respect of the trust property and for the payment of all amounts found to be due to Teresa's estate.[3]

6 The parties were also directed to file and serve written submissions as to the costs of the proceeding in the event they were unable to agree on the costs. As the parties were unable to agree, this ruling provides reasons for the orders to be made regarding the costs of the proceeding.

7 The jurisdiction of the Court to order costs of a proceeding is exercised as a matter of discretion, in accordance with established principles. This jurisdiction, which is conferred by s 24(1) of the Supreme Court Act 1986 (Vic), must be exercised in accordance with Order 63 of the Rules.[4]

8 The usual order as to costs is that costs follow the event, that is, a successful litigant is generally entitled to a costs award in his or her favour and the unsuccessful party or parties will generally bear liability for the costs of the unsuccessful litigation.[5] The central principle is to make an order that is fair and just between the parties in the circumstances of each case.[6]

9 The prima facie position is for costs to be ordered by the Court on the standard basis, meaning that a party is entitled to their costs of a reasonable amount that have been reasonably incurred. However, the Court has discretion to award costs other than on the standard basis where a proceeding exhibits a special feature or circumstance.[7] The circumstances in which the Court may consider a special costs order are not closed, and depend upon the facts of the relevant case.[8] A special costs order usually means an order for costs on an indemnity basis, that is, an entitlement to all costs except those which are of an unreasonable amount or have been unreasonably incurred. Some circumstances which have been held to warrant a special costs order include where a party commences or continues a proceeding for an ulterior motive or in wilful disregard of known facts or clearly established law.[9]

10 In addition to general costs principles, some specific considerations underpin an award of costs in cases involving trustees. In Re Buckton,[10] Kekewich J set out a tripartite classification of disputes involving trustees and explained the costs consequences that typically flow from cases in each category. The first is an action brought by trustees relating to the construction of a trust instrument or some other question arising in the course of the administration of a trust, in which case the costs of all parties are treated as necessarily incurred for the benefit of the estate and are ordered to be paid out of the fund on an indemnity basis.[11] The second is where a dispute involves an application which is made by a party other than the trustee, but raises the same issues as the first category and would have justified an application by the trustee. In this instance, the same rule applies in relation to a trustee's costs, because the application is considered to be for the benefit of the trust estate.[12] The final category of trustee dispute involves the bringing of a hostile claim against a trustee (or another beneficiary) by a beneficiary. Costs in this type of case are treated in the same way as in ordinary litigation, that is, they follow the event.[13] As was observed by his Honour:

It is often difficult to discriminate between cases of the second and third classes, but when once convinced that I am determining rights between adverse litigants I apply the rule which ought, I think, to be rigidly enforced in adverse litigation, and order the unsuccessful party to pay the costs.[14]

However, in such cases, a trustee that properly, albeit not necessarily successfully, defends a claim for the benefit of the estate will be entitled to their costs out of the estate, to the extent that they are not recovered from another party.[15]

11 As such, as a general rule, a trustee has an implied right of indemnity for any expenses properly incurred in the administration of the trust, including costs of a proceeding. This right is not absolute and is subject to the discretion of the Court. Both the Trustee Act 1958 (Vic)[16] and the Rules[17] provide for a trustee's entitlement to costs from the trust fund, unless otherwise ordered by the Court. The basis for this principle is that persons engaged in litigation in a representative capacity should not be out of pocket because of the litigation.[18] However, a trustee's right of indemnity from a trust fund is limited to expenses properly incurred. The concept of 'proper' expenditure excludes costs which are of an unreasonable amount, have been unreasonably incurred, or have been incurred as a result of conduct that demonstrates want of prudence or diligence.[19]

12 In the case of an application for judicial advice made by a trustee or where a trustee is successful in litigation, it is generally straightforward to establish that costs of the proceeding have been properly incurred in the management and administration of the trust and the trustee can usually exercise its right to indemnity. This is less straightforward in the case of a trustee who is unsuccessful in litigation, particularly in respect of legal costs incurred in proceedings that are adversarial in nature or which involve the making of allegations of breach of trust against the trustee or which involve a personal benefit for a trustee.[20] In such instances, the trustee may be held to have no recourse to an indemnity and be personally liable for their own costs, as well as the costs of the other side.[21]

13 Even if a trustee is unsuccessful in a proceeding that is adversarial in nature or which concerns the personal interests of a trustee, this is not determinative of the question of costs. Instead, the Court is required to consider whether the costs incurred by the trustee were not improperly incurred for the purposes of a trustee's right to indemnity.[22] The question of whether a cost or expense was not improperly incurred depends on the duty upon the trustee that resulted in incurring that cost, which in the case of litigation is likely to involve considering whether in incurring the cost the trustee failed to exercise the care and diligence that a person of ordinary prudence would exercise.[23] Where an action or a defence brought or maintained by a trustee fails, the onus lies on the trustee to establish that its costs were not improperly incurred.[24]

14 For this reason, a trustee who is in doubt as to whether to commence or defend an action is typically advised to seek directions of the Court in this respect. By doing so, a trustee can obtain orders providing the Court's prior sanction to take a specific course of action, thereby effectively confirming that proceeding costs will have been properly incurred and authorising an indemnity from the trust. Such an order is commonly termed a Beddoe order, based on an observation made in that case by Lindley LJ that:

...a trustee who, without the sanction of the Court, commences an action or defends an action unsuccessfully, does so at his own risk as regards the costs, even if he acts on counsel's opinion; and when the trustee seeks to obtain such costs out of his trust estate, he ought not to be allowed to charge them against his cestui que trust unless under very exceptional circumstances.[25]

15 The plaintiff submits that the appropriate costs orders in the circumstances of this proceeding are:

(a) the second and third defendants pay the plaintiff's costs of the proceeding including any reserved costs personally, and without any right of indemnity against Vanta (as trustee of the family trust) or Teresa's estate, on an indemnity basis, to be taxed in default of agreement; and

(b) the second, third and fourth defendants pay the defendants' costs of the proceeding including any reserved costs personally, and without any right of indemnity against Vanta (as trustee of the family trust) or Teresa's estate.

16 In support of the first of these submissions, the plaintiff observes that he enjoyed substantial success in the proceeding and thus there is no reason to depart from the usual order that the defendants pay his costs. The plaintiff contends that it is appropriate that only the second and third defendants be ordered to pay his costs, as they were the active defendants in the proceeding and therefore the opposing or 'real' parties to the litigation.

17 The plaintiff submits it would not be appropriate for an order to be made that Vanta pay the plaintiff's costs given that Vanta is merely a corporate vehicle under the control of the second and third defendants. The plaintiff notes that the consequence of finding Vanta to be liable for costs would be that the trust assets available to Teresa's estate would be diminished, which in turn would reduce the plaintiff's entitlement under Teresa's will. For this reason, the plaintiff submits, it would be fair and just in the circumstances to order that the second and third defendants pay the plaintiff's costs.

18 The plaintiff further submits that the proceeding involves the type of special circumstances that justify the making of an order for costs on an indemnity basis. In support of this submission, the plaintiff refers to the following matters:

(a) For several years the defendants maintained that the family trust had been terminated and reconstituted.[26] This was one of the primary defences raised in the proceeding and was included in the second and third defendants' outlines of evidence for trial, but was abandoned immediately before trial, with the defendants 'essentially capitulating on their primary defence at the 11th hour'. The plaintiff submits that the mounting and subsequent abandonment of this argument resulted in an unnecessary increase to the costs of the proceeding.

(b) No explanation was provided by the defendants as to why their argument that the family trust had been reconstituted was abandoned at such a late stage of the proceeding. The plaintiff submits that if this argument ever had merit, it would be expected that a reason for its abandonment would have been provided. The plaintiff further refers to the fact that no reconstituting document was ever produced by the defendants in support of this argument, no explanation was provided for the failure to produce such a document, and the financial statements produced by Vanta showed that income of the trust assets was always treated as income of the family trust, and not of a reconstituted trust. For these reasons, the plaintiff submits, the Court should infer that there was never a proper basis for the reconstitution argument.

(c) The relief sought by the plaintiff included the production of documents and accounts relating to the family trust. The defendants resisted producing the documents throughout the proceeding on the basis that the family trust had been terminated and reconstituted and the plaintiff was no longer a beneficiary.[27] However, late in the proceeding the defendants capitulated on this argument and agreed to produce the documents. The plaintiff submits that the defendants ought to have produced these documents much earlier and failed to provide any explanation for the resistance to, and delay in, doing so.

(d) The defendants resisted producing the documents sought by the plaintiff relating to the family trust on the basis that such production would be 'oppressive'. The plaintiff submits that the relatively insubstantial quantity of documents ultimately provided by the defendants in response to orders for production of documents showed this argument to have little merit. In addition, no justification was provided for the failure to produce the documents earlier. The plaintiff submits that if the documents provided do indeed represent the totality of the documents held by the defendants relating to 43 years of trust activity, 'they could easily, and should obviously, have been provided several years earlier'.

(e) The remaining substantive issue for resolution at trial was whether the family trust had failed for uncertainty as a result of the loss of the deed. There was no issue between the parties that the deed had been lost. The plaintiff submits that Vanta thus had an obligation to take steps to regularise the administration of the family trust by application to the Court. No such steps were taken and the only explanation for the failure to take such steps was the argument that the family trust had been terminated and reconstituted. However, upon the abandonment of such an argument, the plaintiff submits that there was 'no justification in law or practice' for Vanta to continue to administer the trust as it saw fit without reference to the terms of any deed at all. The arguments mounted by the defendants in support of such a course of action were unsupported by, and indeed contrary to, authority, and 'therefore hopeless'.

(f) The conduct of the defendants throughout the proceeding, as described in (a) through to (e) above, was inconsistent with the overarching purposes of the Civil Procedure Act 2010 (Vic). Pursuant to s 28 of the Civil Procedure Act, the Court is empowered to award costs in a manner that reflects any conduct that is inconsistent with the overarching purposes of the Act and the making of an order for costs that reflects the defendants' contravention of these standards is appropriate.

(g) The defendants were on notice from the Court as to the lack of merit of their position from as early as 2020.[28]

(h) The defendants were on notice that the plaintiff would be seeking an indemnity costs order against the second and third defendants personally.

19 In relation to the defendants' costs, the plaintiff submits that:

(a) The second and third defendants should not be entitled to any indemnity from assets of the family trust for costs ordered against them or for their own costs.

(b) The first defendant also should not be entitled to any indemnity from the assets of the family trust for costs ordered against it or for its own costs. Although a trustee is ordinarily entitled to indemnity out of the trust for expenses properly incurred, it is inappropriate in the circumstances for any such order to be made. The plaintiff submits that Vanta's costs were not 'properly incurred' and therefore Vanta ought not be entitled to any indemnity, for the following reasons:

(i) Vanta, acting prudently, ought to have applied for a Beddoe order earlier in the proceeding to seek to obtain costs protection. Had the defendants made a Beddoe application on proper material, including any advice received as to the merits of their proposed defence, the Court may have refused such an application at an early stage and thereby precipitated resolution.

(ii) The nature of the proceeding was one of hostile litigation, in which the plaintiff sought to impugn Vanta's conduct under the control of the second and third defendants. It also involved a dispute between rival claimants to the beneficial interest in assets of the family trust. The plaintiff submits that in the case of hostile litigation, a trustee will not ordinarily be entitled to any indemnity where it takes an active role in such litigation and fails - particularly in the absence of a Beddoe order.[29]

(iii) An indemnity is generally granted where a trustee's conduct is directed towards the protection of the trust estate. Given that the defendants' position up until trial was that the family trust had been terminated and reconstituted, it could not be said that their defence of the proceeding was pursued properly in the administration of the trust, as such a defence was predicated on the family trust no longer existing.

(iv) By denying the existence of the family trust, the second and third defendants acted in pursuit of their own personal interests, in that such a finding would leave them in control of Vanta, as trustee of the putative reconstituted trust. The plaintiff submits that in no sense could such conduct be said to be furthering the interests of the family trust or an incident of the proper administration of the family trust so as to justify an indemnity.

(v) Whether costs are properly incurred is a question of fact, involving consideration of the circumstances in which the litigation arose, the real prospects of success in the litigation, the conduct of the trustee, and the persons who would have benefitted from the successful conclusion and result of the litigation. The plaintiff submits that the findings made by the Court earlier in the proceeding,[30] as well as in the reasons,[31] clearly show that the conduct of the defendants was unreasonable and therefore any costs incurred by Vanta were not properly incurred.

(c) The first, second and third defendants should also not be entitled to any indemnity from Teresa's estate, on account of their failure to resolve the issues that have inevitably arisen as a result of the loss of the deed.

(d) The fourth defendant should likewise not be entitled to any indemnity from Teresa's estate. The plaintiff submits that making such an order would unduly burden the plaintiff in the circumstances. Although the fourth defendant took no active role in the proceeding, as was foreshadowed in a letter sent by the plaintiff's solicitors to the fourth defendant's legal representatives on 4 February 2021, the fourth defendant was in a position of conflict, by virtue of his personal interests in the litigation and his obligation as executor to maximise the size of the estate. The plaintiff submits that the appropriate order would be that the costs incurred by the fourth defendant of and incidental to the proceeding be borne by him personally, with no right of indemnity out of Teresa's estate.

Submissions of the first, second and third defendants

20 As a preliminary matter, the first, second and third defendants submit that the making of orders relating to the costs of the proceeding would be premature, as the proceeding has not yet concluded. In the reasons, orders were made for the taking of an account and the payment of moneys owed to Teresa's estate and such an account has not yet been taken. They submit that the quantum of any such payment is a factor relevant to the costs discretion and it would therefore be appropriate to stand over the question of costs to the conclusion of the accounting procedure.

21 Further, the defendants submit that given that the defence in the proceeding was conducted by Vanta, and the declaration and final orders were made against it, there was no basis for the plaintiff's characterisation of the second and third defendants as the 'real', 'active' or 'true' defendants. They submit there was no basis upon which the costs consequences of the proceeding could be diverted to the second and third defendants. Further, the defendants submit that the plaintiff's focus on asserting that the second and third defendants should have no right of indemnity against the assets of the family trust is misplaced as they are not trustees and accordingly it is unclear how they would ever have had such recourse.

22 Insofar as the orders to be made in respect of costs are concerned, the defendants submit that the plaintiff's submissions engage two separate questions, namely, whether or not a trustee should enjoy an indemnity and whether or not a separate party or a non-party should be liable for the costs of some other party. The defendants submit that the circumstances do not justify a costs order which simultaneously denies Vanta an indemnity, but also shifts its liability for costs to the second and third defendants. Such a position is said to be contradictory, in that it lays blame at Vanta's feet while it also maintains that Vanta's costs burden ought to fall on another party. Accordingly, it is 'not appropriate to demote well-worn rules to achieve an outcome of practical utility for the plaintiff'.

23 The defendants also submit that holding Vanta's directors - namely, the second and third defendants - personally liable for losses that should be owed by Vanta would amount to piercing the corporate veil. They submit that the costs liability of a party to its lawyers is a contractual matter and it is therefore inappropriate for the Court to order that Vanta's directors be personally liable to pay its costs.

24 The defendants also contest the plaintiff's characterisation of Vanta as a corporate vehicle under the control of the second and third defendants. The defendants submit that the conduct of the second and third defendants in managing trust property over many years and distributing to themselves a modest amount for their efforts cannot be characterised as self-interested or carried out without regard to the interests of other beneficiaries, including the plaintiff. They submit that it is incorrect to suggest that a corporate trustee is merely a 'vehicle' and that, in substance, its true actors are its directors, and that its true interests are those of its directors.

25 Finally, the defendants submit that an order for indemnity costs ought to be made against the plaintiff in favour of the second and third defendants. They submit that the plaintiff has not been successful against the second or third defendants and the final orders are not directed towards either of them. They also submit that neither the originating motion nor the reasons establish why either the second or third defendant should have been added as parties.

Submissions of the third and fourth defendants (in their capacity as executors of Teresa's estate)

26 The third and fourth defendants, in their capacity as executors of Teresa's estate, submit that, in line with the submissions made by the plaintiff, there was no compelling reason why a costs order ought to be made against the estate. In support of this submission, they submit that the proceeding was not protracted in any way by the estate and that no complaint was made against the estate for non-production of documents.

27 They also refer to the plaintiff's letter of 4 February 2021, in which the solicitors for the plaintiff advised the estate's solicitors that they would not seek an order for costs against the executors. An application for judicial advice under Order 54 of the Rules was not made, as the estate would not have been able to fund such an application without selling estate property. The third and fourth defendants submit that any efforts to do so would have been resisted by the plaintiff.

28 In considering the appropriate orders to be made in relation to the plaintiff's costs, a useful starting point is the classification of trustee disputes outlined in Re Buckton.[32] On the one hand, the proceeding could be construed as falling within the second category, in the sense that many of the issues raised by the plaintiff in his originating motion, for example, the consequences of the loss of the deed, were questions or issues that could have been brought by Vanta in its capacity as trustee. However, these issues were not raised by Vanta, in what amounts to a clear breach of its duties as trustee.[33] Further, the resolution of these questions was impeded by Vanta at various stages of the proceeding, including through its active resistance to producing documents relating to the family trust and its making (and subsequent abandonment) of allegations that the family trust had somehow been terminated and reconstituted.

29 Accordingly, the reality is that the proceeding falls within the third category of trustee disputes set out in Re Buckton. The proceeding is properly characterised as one of hostile litigation, in that it was in substance adversarial litigation that involved allegations of impropriety and breach of trust against Vanta and comprised a dispute between rival claimants to the beneficial interest in assets of the family trust. In trustee disputes of this nature, costs are to be treated in the same way as in ordinary litigation, that is, they follow the event.[34] Given that the plaintiff was substantially successful in his claims, it is appropriate that the defendants who took an active role in the proceeding (or some of them) should bear the plaintiff's costs of and incidental to the proceeding.

30 In terms of the proper basis upon which to make such an order, the relevant question is whether the proceeding exhibited a special feature or circumstance so as to warrant an award of costs on an indemnity basis. In considering the totality of the conduct of the active defendants throughout the proceeding, as detailed in the plaintiff's submissions, the circumstances are such that an order for indemnity costs is warranted. More specifically, the proceeding exhibited special circumstances that entitle the plaintiff to an award of costs on an indemnity basis.

31 First, the proceeding came about because Vanta, under the control of the second and third defendants, was acting in breach of its duties as trustee by administering the family trust and dealing with trust assets without any reference to the terms of the deed, which had been lost for several years. Rather than approaching the Court for advice as to the consequences of the loss of the deed, as was incumbent upon them, the defendants elected to adopt positively this course of action until the plaintiff, a beneficiary of the family trust, was left with no option but to seek assistance from the Court by initiating this proceeding.

32 Secondly, following the commencement of the proceeding, rather than assisting to expediently and properly resolve the issues raised, the defendants chose to contest the application, adopted an adversarial approach to the proceeding, and unreasonably and unnecessarily protracted the dispute by refusing to provide documents and accounts relating to the family trust, as well as by mounting an argument, with no apparent evidentiary basis, that the family trust had been terminated and subsequently reconstituted. The potential implications of this approach were foreshadowed early in the proceeding,[35] yet the defendants elected to persist until the eve of the trial, at which time they essentially capitulated on both fronts, providing the documents sought and abandoning the reconstitution argument.

33 Thirdly, specifically in relation to the reconstitution defence, on the evidence before the Court, it may be inferred there was no evidentiary basis for the claim that the family trust had been terminated and reconstituted. Early in the proceeding this claim comprised the defendants' primary defence to the plaintiff's case, yet the only evidence ever presented in support was in the form of affidavit evidence from the second and third defendants. No reconstituting document was ever produced, nor were any accounts or documentation to prove the existence of such a trust. Further, and significantly, the defendants abandoned this argument on the eve of the trial without providing any explanation.

34 These circumstances, in particular the conduct of the first, second and third defendants and the course of action adopted by them throughout the proceeding, warrant an order that the plaintiff is entitled to an award of costs on an indemnity basis.

35 It is necessary to consider which of the defendants that took an active role in the proceeding, that is, Vanta, the second defendant and the third defendant (in his personal capacity) should bear the plaintiff's costs. While the plaintiff submits that the second and third defendants ought to be ordered to pay his costs, the defendants submit that it is appropriate to order that only Vanta pay the plaintiff's costs.

36 Of relevance is that the defence was actively run by the first, second and third defendants and submissions were made jointly on behalf of all three of them. The argument that the family trust had been terminated and reconstituted in a different form was raised, pursued and subsequently abandoned by all three defendants and supported by affidavits sworn by the second and third defendants. In light of these circumstances, the defendants' submission that the defence was conducted by Vanta exclusively and that it alone ought therefore bear the cost consequences of the proceeding cannot be sustained. Nor can it be accepted that making a costs order against the second and third defendants in their personal capacities would amount to piercing the corporate veil. The second and third defendants elected to take an active role in the proceeding and jointly conduct the defence in their personal capacities, as well as to mount the reconstitution argument and engage in other problematic conduct. Accordingly, they are jointly liable for the cost consequences that flow from their conduct.

37 In making orders in respect of costs, the Court must make an order that is fair and just between the parties in the circumstance of each case.[36] A costs order against Vanta alone would have the consequence of either diminishing the assets of the resulting trust which has arisen in favour of Teresa's estate or, if Vanta is found to have no recourse to an indemnity, making a costs order in the plaintiff's favour that could not be satisfied. Neither outcome would be fair or just in the circumstances, nor would such an order be truly reflective of the nature of the proceeding and the conduct of the second and third defendants. In light of the manner in which the proceeding was conducted by the defendants, it is fair and just in the circumstances that the second defendant and third defendant (in his personal capacity) pay the plaintiff's costs personally.

38 As trustee, Vanta is entitled to an indemnity from the assets of the family trust for any of its costs that have not been improperly incurred, that is, have not been incurred through conduct on the part of the trustee that is unreasonable,[37] beyond its power, in bad faith or without the care and diligence of a person of ordinary prudence.[38] Accordingly, in seeking an indemnity, Vanta bears the onus to establish that its costs were properly incurred. No submissions were made by the defendants directed to establishing this. In fact, a consideration of Vanta's conduct and that of the second and third defendants throughout the proceeding leads to the opposite conclusion.

39 As observed by the Court,[39] the first, second and third defendants unreasonably protracted the dispute by resisting the production of various documents and records relating to the family trust that were in their possession. More critically, by mounting the argument, with no apparent evidentiary basis, that the family trust had been terminated and subsequently reconstituted and then abandoning this argument immediately before the trial, Vanta's conduct cannot be characterised as reasonable or proper. At best, Vanta, under the control of the second and third defendants, acted without the care and diligence of a person of ordinary prudence and, at worst, its conduct amounts to bad faith.

40 Further, as was found in the reasons,[40] by administering the family trust and dealing with trust assets without any reference to the terms of the deed for many years, Vanta was acting in breach of its duties as trustee. In circumstances where the catalyst for the litigation was Vanta's failure to seek directions from the Court as to the consequences of the loss of the deed and the resultant dispute that arose between the plaintiff and the second, third and fourth defendants as to entitlements to assets of the family trust, it would be unjust and entirely inappropriate to permit Vanta to have recourse to an indemnity from trust assets.

41 Finally, also relevant to the question of indemnity is the fact that Vanta did not make a Beddoe application in respect of the proceeding. By failing to seek the Court's advice as to whether to continue the proceeding and instead choosing to adopt the course of action it did and to engage in the conduct outlined above, Vanta left itself open to whatever cost consequences followed. For this reason, it is inappropriate to find that Vanta is entitled to any indemnity from the assets of the family trust.

42 Accordingly, in all of the circumstances, Vanta should bear its costs personally.

Costs of the second defendant and third defendant (in his personal capacity)

43 In view of their active involvement in conducting the defence, it is appropriate to order that the second defendant and the third defendant (in his personal capacity) bear their costs of the proceeding personally, without any right of indemnity against Vanta (as trustee of the family trust) or Teresa's estate.

Costs of the third and fourth defendants (in their capacities as the executors of the estate of Teresa Mantovani)

44 As with a trustee's right of indemnity, an executor is entitled to an indemnity out of the estate for costs of a proceeding, provided such costs are properly incurred in the administration of the estate. The plaintiff's submission that an indemnity from Teresa's estate for the third and fourth defendants (in their capacity as executors) would be unduly burdensome to the plaintiff is not to the point. The relevant consideration is whether the executors' costs have been properly incurred in the administration of Teresa's estate. A consideration of the limited extent to which the third and fourth defendants (in their capacities as executors of Teresa's estate) were involved in the proceeding and their conduct throughout it clearly shows that their costs can properly be characterised as such. Accordingly, the third and fourth defendants, in their capacities as executors of Teresa's estate, will have recourse to an indemnity from Teresa's estate for their costs of the proceeding.

(a) The second defendant and the third defendant (in his personal capacity) pay the costs of the plaintiff of and incidental to the proceeding, including any reserved costs personally, on an indemnity basis, to be taxed in default of agreement, without any right of indemnity against the first defendant (as trustee of the family trust) or the estate of Teresa Mantovani, deceased;

(b) The first defendant bear its own costs of and incidental to the proceeding, including any reserved costs personally, without any right of indemnity against the family trust or the estate of Teresa Mantovani, deceased;

(c) The second defendant bear his own costs of and incidental to the proceeding including any reserved costs personally, without any right of indemnity against the first defendant (as trustee of the family trust) or the estate of Teresa Mantovani, deceased;

(d) The third defendant (in his personal capacity) bear his own costs of and incidental to the proceeding including any reserved costs personally, without any right of indemnity against the first defendant (as trustee of the family trust) or the estate of Teresa Mantovani, deceased; and

(e) The third and fourth defendants, in their capacity as executors of the estate of Teresa Mantovani, deceased, be indemnified for their costs of the proceeding, including any reserved costs, from the estate of Teresa Mantovani, deceased.

[1] Mantovani v Vanta Pty Ltd (No 2) [2021] VSC 771 ('Reasons').

[4] Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) [2012] VSC 399, [11] (Croft J).

[5] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 97 (McHugh J).

[6] Earnshaw v Loy (No 2) [1959] VicRp 44; [1959] VR 252, 253 (Sholl J).

[7] Supreme Court (General Civil Procedure) Rules 2015 (Vic) ('Rules'), r 63.28.

[8] Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [8] (Harper J).

[9] Sunland Waterfront (BVI) Ltd v Prudentia Investments Pty Ltd (No 3) (n 4) [14]; Ugly Tribe Co Pty Ltd v Sikola (n 8) [7].

[10] [1907] UKLawRpCh 98; [1907] 2 Ch 406. See also Sons of Gwalia Ltd v Margaretic [2006] FCAFC 92; (2006) 232 ALR 119, 121-122 [5]-[9] (Finkelstein J).

[13] Ibid, 415. See also, Alsop Wilkinson v Neary [1996] 1 WLR 1220, 1224 (Lightman J); Sons of Gwalia Ltd v Margaretic (n 10) 122 [9].

[15] Sons of Gwalia Ltd v Margaretic (n 10) 122 [9].

[16] Trustee Act 1958 (Vic), s 36(2).

[18] See Miller v Cameron [1936] HCA 13; (1936) 54 CLR 572, 578-579 (Latham CJ).

[19] GE Dal Pont, Equity and Trusts in Australia (Lawbook Co, 7th ed, 2018) 682 [23.135], citing Turner v Hancock [1882] UKLawRpCh 79; (1882) 20 Ch D 303, 305 (Jessel MR, with whom Cotton and Lindley LJJ agreed); Re Beddoe [1892] UKLawRpCh 180; [1893] 1 Ch 547, 558 (Lindley LJ); Nolan v Collie [2003] VSCA 39; (2003) 7 VR 287, 303**-**310 [44]-[58] (Ormiston JA, with whom Batt and Vincent JJA agreed); Dimos v Skaftouros [2004] VSCA 141, [165] (Dodds-Streeton AJA, with whom Winneke P and Batt JA agreed).

[20] Di Benedetto v Kilton Grange Pty Ltd [2017] VSCA 119, [65]-[66] (Ferguson and McLeish JJA and Cameron AJA).

[21] Hopkins v Edwards [2020] VSC 456, [219] (Lyons J).

[22] Nolan v Collie (n 19) 307**-**308 [53]; Di Benedetto v Kilton Grange Pty Ltd (n 20) [64]-[66]; Hopkins v Edwards (n 21) [234].

[23] Nolan v Collie (n 19) 307**-**308 [51]-[53]; Di Benedetto v Kilton Grange Pty Ltd (n 20) [64]; Hopkins v Edwards (n 21) [219].

[24] Di Benedetto v Kilton Grange Pty Ltd (n 20) [65].

[28] See Mantovani v Vanta [2020] VSC 736, [81].

[29] Citing Charlesworth Nom Pty Ltd v Charlesworth [2017] VSC 445, [21]-[24], [34] (Croft J).

[30] See Mantovani v Vanta (n 28) [81].

[32] [1907] UKLawRpCh 98; [1907] 2 Ch 406.

[34] Re Buckton (n 10) 415; Alsop Wilkinson v Neary (n 13) 1224; Sons of Gwalia Ltd v Margaretic (n 10) 122 [9].

[35] Mantovani v Vanta (n 28) [81].

[36] Earnshaw v Loy (No 2) (n 6) 253_._

[37] Di Benedetto v Kilton Grange Pty Ltd (n 20) [68].

[38] Ibid, [64]; Nolan v Collie (n 19) 307**-**308 [53].

[39] Mantovani v Vanta (n 28) [81].