RSL (NSW Branch) v AG; AG v RSL [2002] NSWSC 142 | Case summary

1052/94 ATTORNEY GENERAL FOR NEW SOUTH WALES v THE RETURNED AND SERVICES LEAGUE OF AUSTRALIA (NSW BRANCH) & ORS JUDGMENT 1 HIS HONOUR: The argument before me has concerned the costs of proceedings that dealt with the question of what property was held on a charitable trust, and subsequently the form of a cy-pres scheme in conformity with which the property held on that charitable trust should be dealt with. There were two sets of proceedings heard together, each commenced by summons. One of the summonses was taken out by the Returned and Services League of Australia (NSW Branch) ("the RSL") and other plaintiffs, the other was taken out by the Attorney General for New South Wales. Each dealt with land and a building previously used by the Northcott Neurological Centre at Lytton Street, Cammeray ("the Centre"), which land was proposed to be sold and subsequently was sold. The Attorney General, representing the public interest under the charitable trust, sought a declaration that 100 per cent of the proceeds of the sale of the Centre when sold should be declared to be held under the charitable trust. The RSL by its summons claimed that either none of the proceeds should be declared to be held under the charitable trust or, alternatively, that the proceeds should be declared to be so held as to 33 per cent only. 2 Those proceedings were heard by Cohen J, whose judgment (unreported) was delivered on 16 July 1996. As a result of that judgment his Honour declared that the RSL held an interest to the extent of 33 per cent of the net proceeds of sale of the Centre upon the charitable trust. His Honour declared that the balance of certain other bequests was also held upon the charitable trust. He ordered that a scheme to give effect to the trusts be settled. He reserved the costs of the proceedings, which had been contested. In determining that the RSL held the proceeds on trust as to 33 per cent only, his Honour adverted to the fact that the RSL had committed or contributed funds of its own to the Centre and its operation as well as the funds originally made the subject of the trust. The remaining 67 per cent of the proceeds, it was clear from his Honour's judgment, the RSL was now to be at liberty to treat as its own funds beneficially held. His Honour made it quite plain in the course of his judgment that there had been no wrong use of trust funds by the RSL and no breach of trust by it in what had occurred. 3 Correspondence went on over some years both as to the costs of the proceedings and as to the proper form of a cy-pres scheme to be presented to the Court. Along the way differing and inconsistent cy-pres schemes were put forward by the Attorney General on the one hand and the RSL on the other. In the end their differences concerning this were settled and a scheme, essentially the scheme propounded by the Attorney General, was brought forward for approval by the Court. This portion of the proceedings was heard by me and I delivered judgment on 22 May 2000: Hunter Region SLSA Helicopter Rescue Service Ltd v Attorney General for New South Wales [2000] NSWSC 456 ("my judgment"). The different nomenclature of that decision and this one arises from the fact that there were before me when I heard that application not only the two proceedings originally before Cohen J but a fresh set of proceedings commenced for the purpose of propounding the scheme. As a result of my judgment I made orders to give effect to the scheme brought forward. 4 Minutes of orders agreed to between the parties were brought forward to me and I made orders by reference to those minutes. Those orders were made on 22 May 2000 and entered on 31 August 2000. The question of costs was dealt with in those orders by agreement, but the orders agreed to by the parties and made by the Court at their invitation have unfortunately given rise to difficulties. Those orders are as follows: "(4) The capital and income comprising the charitable trusts shall, after payment of the costs of the parties, pursuant to Order 5, be applied by The Returned and Services League of Australia (NSW Branch) in accordance with the scheme.

(5) The costs of the parties, as agreed or assessed, shall be paid from the proceeds of the sale of the Northcott Neurological Centre. If assessed, the costs shall be assessed on a solicitor and client basis." 5 I shall make some brief reference to the content of the correspondence which passed between the parties between 1996 and 2000. There was some correspondence in 1997 from which it appeared that the Crown Solicitor, writing on behalf of the Attorney General, anticipated that the costs would be paid out of the whole of the proceeds of sale of the Centre before distribution between the RSL and the cy-pres scheme. To this the RSL's solicitors replied rather blandly that the costs should be paid "from the proceeds of sale of the Northcott Centre". However, it is agreed that there was no binding agreement between the parties as to what course ought to be followed as to costs at that stage, nor indeed until the settlement of the final form of minutes of order in 2000. Later in 1997 the RSL's solicitors wrote to the Crown Solicitor indicating that they were about to pay the 33 per cent of the proceeds bound by the charitable trust "into a separate account for a term of months, which will attract a high interest rate". There has been some suggestion before me on the costs argument that there arose from that statement an implied agreement or undertaking that the solicitors for the RSL would hold the other 67 per cent of the proceeds also in a separate account until the question of costs was finalised. 6 After some considerable gap in correspondence on the matter the question of costs was taken up again in correspondence in February 1999. From that time, through until the minutes of order were agreed upon, the plaintiffs' solicitors wrote in terms of the costs coming "from the trust funds" or "from the Neurological trust funds". Mr Barlow of the Crown Solicitor's office has sworn that he did not divine the significance of these words as indicating that the plaintiff was proposing that the whole of the costs be paid from the 33 per cent, but continued throughout negotiations of the belief that the source of the costs was to be the whole 100 per cent of the proceeds of the centre. 7 Before me there are two motions. One is a motion by the Attorney General that seeks an order that the plaintiff pay the costs of the parties as assessed or agreed from the net proceeds of sale of the Centre. It is put forward as being a motion for clarification of the meaning of orders 4 and 5 of 22 May 2000 made within the liberty to apply that was reserved in those orders. Whether or not that is an appropriate procedural vehicle for the clarification by the Court of the meaning of its orders, both parties before me seek the Court's clarification as to the meaning of orders 4 and 5 and invite the Court to make that clarification without further debate or any point being taken as to the form of the procedure leading to the clarification. Upon that invitation I propose to act. The RSL's motion is to the effect that, in the event that the proper interpretation of the orders is as contended for by the Attorney General, there should be an order setting aside orders 4 and 5 and an order in lieu that the costs of the parties as agreed or assessed be paid from the proceeds of the sale of the Centre held on the charitable trust and, if assessed, to be assessed on a solicitor and client basis. 8 A perusal of orders 4 and 5 reveals that the difficulty arises from an apparent conflict between the provisions of order 5 and the provisions of order 4. Order 5 provides for the costs to be paid from the proceeds of sale of the Centre. It is clear from the material before the Court that what was sold was the whole of the Centre, and upon that sale the plaintiff received proceeds of which only 33 per cent were, pursuant to Cohen J's declaration, to be held upon the charitable trust. On the other hand, order 4 read alone makes it fairly plain that the fund out of which the costs are to be paid is the capital and income comprising the charitable trusts, which is only 33 per cent of the proceeds of sale, together with the balance of the other bequests as to which Cohen J made a declaration. 9 The context in which the Court is asked to make a ruling as to the meaning of these orders is a curious one. On the one hand, as Mr Lancaster, of counsel for the Attorney General, has put to me, parties are entitled to make any agreement they please as to the source of costs and ask the Court to make an order accordingly. Unless there is some ground of public policy or other particular consideration by reference to which the Court would decline to make the order sought, it will make the order asked for by the parties. That emphasises that here the form of the orders was in a very real way the product of agreement and, whatever else it is proper or not proper to glean from the correspondence, there is no doubt that the orders were drawn and brought forward by the parties and the Court played no part in their drafting. On the other hand, the Court did make the orders as asked and they have been subsequently entered. To a very real degree they have become a creature of the Court. Both those factors, it seems to me, should be borne in mind in approaching the construction of the orders. 10 One matter about which there has been considerable argument is the degree to which I can take into account the extensive written negotiations between the parties to which I have referred in construing the orders. Because there was a motion before me for the setting aside of the orders, which proceeded at least in part by reference to concepts of mistake and to the subjective beliefs of the parties as to the meaning of the orders to be made, the full ambit of the negotiations and, indeed, the mental states of the solicitors principally engaged on each side were allowed into evidence. I indicated on allowing them into evidence that the fact that they were admitted would not lead me to take them into account in construing the orders to any degree beyond what was appropriate on the usual principles constituting what is commonly called the parol evidence rule. Mr M D Young, of counsel for the RSL, has pressed on me that they can be taken into account in construing the orders (the terms of which are consensual in origin) as falling within two of the exceptions mentioned by Mason J (as his Honour then was) in Codelfa Construction Proprietary Limited v State Rail Authority of New South Wales (1982) 149 CLR 337 at 352 - 353. Mr Young says that the correspondence may be looked at for the meaning of words such as "after" in order 4 and "the proceeds of the sale" in order 5. Alternatively, Mr Young says that the 1999 portion of the correspondence goes to show that the parties limited themselves in rejecting certain meanings being put upon certain words. I have considered Mr Young's submissions, but it seems to me that the central significance of the correspondence is as to, not the meaning of particular words or the rejection of certain constructions or versions by the parties, but the subjective intentions that were in the parties' minds in the course of negotiation. In my view the parties' subjective intentions as displayed in those letters cannot properly be taken into account in construing the orders. I should say that, if that correspondence could be taken into account, I should regard it as reinforcing rather than detracting from the conclusion to which I have otherwise come. 11 In coming to that conclusion, I have taken into account the terms of orders 4 and 5 of the orders, taken in the context of the whole of the orders in which they are embedded and against the general background of the proceedings. I take into account as part of the relevant background the fact that the moneys the subject of the trust fund had been paid into a separate account. I take into account that, on the natural and ordinary meaning of the correspondence concerning that, it was not apparent that the balance of the proceeds of sale was being paid into any separate account or held aside pending the determination of the costs. I do not construe what passed between the plaintiffs' and the Attorney General's solicitors concerning this as an agreement on the plaintiffs' part or any undertaking by the plaintiffs to hold that large sum of its own money separately or apart from its other funds for what turned out to be a period of years. Certainly, there is nothing on the face of the orders that suggested anything to the contrary of that, or that the RSL should in any way deal with the 67 per cent otherwise than as its own funds and as it chose. 12 On those matters alone, the conclusion that I have come to is that the combined effect of order 4 and order 5 is that the costs are to be paid out of only the funds the subject of the charitable trust. It is slightly odd in order 5 that the order should be for payment out of part of the trust funds only, ie, the part represented by the proceeds of sale. However, that may well be explained by the fact that it was known to both parties that those particular funds were being held in a separate account pending the determination of costs. Whilst there is some inconsistency between orders 4 and 5, I read order 4 in the context I have mentioned as the order which primarily defines the source of the costs. It refers specifically to the capital and income comprising the charitable trusts and directs their application by the RSL, after payment of the costs of the parties pursuant to order 5, in accordance with the scheme. The reference to order 5 in order 4 seems to me an indication that order 4 is the dominant or defining order. Order 5 I regard as a mechanical provision which performs the following work: it stipulates that the costs should be agreed if possible; it provides for their assessment in accordance with the mechanisms now provided for under the Rules of Court if agreement is impossible; it provides that, if assessed, they should be assessed on a solicitor and client basis, and it directs that they be paid out of the portion of the proceeds of sale of the Centre which the parties knew was being held aside as portion of the overall charitable trust fund pending the settlement of the costs of the proceedings. 13 In coming to that conclusion I have not adverted to the form of order for costs which would ordinarily or most likely be made in proceedings such as the present. Mr Lancaster has pressed on me that it is at least as likely, if not more likely in circumstances of this sort, that the whole fund the subject of the litigation would be made to bear the burden of the costs, ie, the whole fund arising from the sale of the Centre, rather than the more limited portion the subject of the charitable trusts. He has referred me to cases, principally of will trusts, where only portion of the estate has been found to be held on a charitable trust, but the costs have been ordered out of the whole or some other portion of the estate. However, I am of the view that where one is not dealing with a deceased estate which is in the course of administration and under which trusts arise, but a case concerning trusts long before established, whilst other orders are possible, it is more likely that the order for costs would be made out of the trust fund itself: see the decision of Harvey J in Robertson v Graham (1917) 17 SR(NSW) 676. The provisions of Part 52A r 42 of the Supreme Court Rules 1970, to which I have been referred, are in my view more indicative of that than of the contrary. Whilst it is true in one way to say that the subject matter of the proceedings was the whole of the Centre and its proceeds of sale, in my view the real focus of the proceedings was the trust fund, what portion if any of the Centre was bound by the trust and, when the trust fund was rendered liquid, how the trust fund should be applied by way of cy-pres scheme. It seems to me that if one is entitled to take into account in construing the order the likelihood as to what form of order the Court would make, the likely order would be for costs out of the trust fund. That would support the construction which I have in the circumstances placed upon orders 4 and 5. However, as I have said, I have come to that conclusion without adverting to that matter. 14 The Attorney General has very properly conveyed to the Court that, if that is the conclusion that the Court came to, that would be the end of the motions on his side of the record. The RSL has indicated that, if I came to the contrary conclusion, it would seek to press its motion for the orders to be set aside and an alternative order made. However, in view of the conclusion I have come to, there is no need for me to give consideration to that motion. 15 A submission was put to me by Mr Young that the order, if construed as contended for by the Attorney General, would be beyond the power as to costs conferred on the Court by s 76 of the Supreme Court Act 1970, by reason of the fact that it would in effect be an order that a party pay costs out of a particular portion of its own assets, bearing in mind that the 67 per cent of the "fund" constituted by the net proceeds of sale of the Centre was its own asset, with which it could do as it pleased. It may or may not be that the Court has power to order a person who it deems should be liable to costs to pay those costs out of a particular asset. I do not intend to determine this rather recondite argument as to power, as I do not think it is necessary for the decision of these applications. If there is power to make such an order it would only be made in most exceptional circumstances. 16 I do not think it is necessary for me to make any formal order on the Attorney General's motion arising out of these reasons, since I have clearly indicated in these reasons the Court's view as to the meaning and import of orders 4 and 5. As I understand it, I am not asked by the parties to make any formal order in that regard. The RSL's motion may be dismissed. However, so that the ambit of the costs ordered may be clear, I shall order that the costs to be dealt with under orders 4 and 5 in the manner in which I have indicated shall include all costs of both parties of the proceedings up to the present time.

RSL (NSW Branch) v AG; AG v RSL

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Judgment (8 paragraphs)

Cases Cited (2)