Toyama Pty Ltd v Landmark Building Developments Pty Ltd;Landmark Building Developments Pty Ltd v Stanislaus Anthony Carroll & Anor

Supreme Court of NSW|2007-02-09|Before: White J

CITATION : Toyama Pty Ltd v Landmark Building Developments Pty Ltd;Landmark Building Developments Pty Ltd v Stanislaus Anthony Carroll & Anor (No 2) [2007] NSWSC 55

DECISION : See paragraphs 44-48 of judgment.

CATCHWORDS : EQUITY - Trusts and trustees - Powers, duties, rights and liabilities of trustees - Indemnity, lien and reimbursement - Trustees appointed to act as trustees for sale - Prior to completion of sale, trustees proposed to withhold an amount from proceeds of sale to cover legal costs in respect of proceedings threatened by beneficiary - Beneficiary objected to trustees' proposal - Trustees backed down and did not retain any moneys from proceeds of sale in respect of future costs or remuneration - Beneficiary pursued threatened proceedings - Trustees incurred substantial legal costs - Whether trustees entitled to order that beneficiary pay trustees' costs of proceedings brought by beneficiary on indemnity basis - Where proceeds of sale already distributed to beneficiaries - Order that beneficiary pay trustees' costs of proceedings brought by beneficiary other than costs incurred in breach of trust - EQUITY - Trusts and trustees - Powers, duties, rights and liabilities of trustees - Remuneration - Allowance by the Court - Whether trustees entitled to remuneration for work in defending proceedings brought against them by beneficiary - Order that trustees entitled only to their proper remuneration in administration of trust for sale.

LEGISLATION CITED : Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW)

Toyama Pty Ltd v Landmark Building Developments Pty Ltd [2006] 197 FLR 74 NMFN Property Pty Ltd v Citibank Ltd (No 2) (2000) 109 FCR 77 Mead v Watson (2005) 23 ACLC 718 Naviera Mogor SA v Societe Metallurgique De Normandie (The "Nogor Marin") [1988] 1 Lloyd's Rep 412 Strathlorne Steamship Co Ltd v Andrew Weir & Co (1934) 50 Lloyd's List Law Rep 185 Toplis v Grane (1839) 5 Bing NC 636 Dugdale v Lovering (1875) LR 10 CP 196 CASES CITED : In Re Diplock; Diplock v Wintle [1948] 1 Ch 465 Balkan v Peck (1998) 43 NSWLR 706 Hardoon v Belilios [1901] AC 118 J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VR 891 Re Phillips [1938] 4 All ER 483 J H G Sunnucks, J G Ross Martyn, K M Garnett, Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 16th ed, Stevens & Sons, London, 1982 Re Application of Sutherland (2004) 50 ACSR 297; 22 ACLC 1326 Foster v Spencer [1996] 2 All ER 672

Toyama Pty Ltd v PARTIES : Landmark Building Developments Pty Ltd; Landmark Building Developments Pty Ltd v Stanislaus Anthony Carroll & Anor (No 2)

Plaintiff: R Bell COUNSEL : Defendant: T Hall Trustee: Mr B W Rayment QC

Plaintiff: Cameron Gillingham Boyd SOLICITORS : Defendant: Proctor & Associates Trustee: Bartier Perry

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

4541/02 Toyama Pty Limited v Landmark Building Developments Pty Limited; Landmark Building Developments Pty Limited v Stanislaus Anthony Carroll & Anor (No. 2) JUDGMENT 1 HIS HONOUR: In my reasons for judgment in Toyama Pty Ltd v Landmark Building Developments Pty Ltd [2006] 197 FLR 74, I considered a claim by the trustees that they be paid such remuneration as the Court might approve in respect of their administration of a statutory trust for sale, that they be entitled to retain the amounts received by them from the proceeds of sale of the trust property on account of their remuneration in respect of the administration of the statutory trust for sale, that the beneficiaries pay to the applicants such additional amount by way of remuneration as the Court should approve as the applicants' proper remuneration, and that the application be referred to the registrar for the assessment of the applicants' proper remuneration. I held that although the orders appointing the trustees made no provision for their remuneration, the trustees were entitled in the Court's inherent jurisdiction to be remunerated for the execution of their duties as trustees. I said that unless it were agreed or held that the trustees should be remunerated by way of commission calculated on the sale proceeds, the appropriate course was to refer the trustees' claim for remuneration to a registrar or deputy registrar for assessment and certification of the trustees' proper remuneration.

2 I also noted that no submissions had been made about the trustees' claim that not only should they be permitted to retain amounts received by them from the sale of the trust property on account of their remuneration, but that the beneficiaries should pay them such additional amount by way of remuneration as the Court should approve as their proper remuneration.

3 I stood the matter over for further submissions and to deal with any further issues which arose with respect to the trustees' remuneration.

4 There was no dispute that the trustees' remuneration should be allowed at reasonable hourly rates generally applicable to them as solicitors, rather than as a commission on the sale price.

5 In his affidavit of 30 May 2005, Mr Carroll said that the trustees sought an order that Landmark reimburse to them the costs and expenses incurred by them in administering the trust for sale and pay to them remuneration for acting as trustees for sale, including such costs and expenses as had been incurred subsequent to paying Landmark and Toyama the proceeds of sale of the trust property, other than the amount of $250,909.09 which had been retained as the amount of GST to be remitted to the Commissioner.

6 The sale of the property at 5 Laman Street, Nelson Bay, New South Wales, was completed on 3 October 2003. The trustees rendered memoranda for the work done by them as trustees up to that time. It appeared from further evidence adduced by the trustees that on 21 October 2003, the trustees remitted to the beneficiaries the net proceeds of sale after retention of the GST. The amounts claimed by the trustees for the work done by them up to 3 October 2003 and the expenses incurred by them up to that date were deducted before the net proceeds of sale were distributed. An adjustment was also made to the distribution made to Landmark by deducting an amount totalling $11,001.23 pursuant to an indemnity costs order made against Landmark on 24 September 2003. That costs order was made against Landmark when Windeyer J ordered that a caveat which Landmark had caused to be lodged on the title to the property be removed. Accordingly, up to 21 October 2003, the only moneys retained by the trustees were the moneys retained on account of GST. Interest was earned on those moneys.

7 Prior to the completion of the sale, the trustees were apprehensive that Landmark would bring proceedings against them. The trustees were in a dilemma. They had exchanged contracts for the sale of the property. Mr Carroll deposed that he considered he was under an obligation to the Court to proceed to achieve settlement of the sale of the trust property as expeditiously as possible, and to account to the beneficiaries for the proceeds of sale. However, he was concerned about his personal liability, and the liability of his co-trustee, arising from the matters threatened by Landmark and for legal expenses which would be entailed if any of the threats were carried through. In August 2003, Mr Carroll instructed his solicitor to prepare a form of release to be sought from the beneficiaries of the trust for sale. On 8 September 2003, the solicitors for the trustees forwarded to the solicitors for the beneficiaries a form of deed of release which the trustees asked be provided on completion of the sale and the handing over of the balance of the purchase moneys.

8 Landmark had threatened legal action relating to the GST issues. On 15 September 2003, the solicitors for the trustees advised Barrak Lawyers, who acted for Landmark, that the trustees proposed to deduct the cost of obtaining detailed taxation advice from Landmark's two-thirds share of the net proceeds of sale, and to withhold $100,000 to cover legal costs, including counsel's fees, in respect of the threatened legal action relating to the GST issues raised by Landmark. They advised that this amount would not be withheld if Landmark signed a satisfactory deed of release.

9 Landmark claimed that the trustees had no entitlement to debit $100,000 from its entitlements. Landmark said that it would only withdraw its caveat upon being given certain undertakings, including an undertaking that the sum of $100,000 would not be withheld from the sale proceeds.

10 On 19 September 2003, Proctor & Associates, who then acted for Landmark, contended that the proposal to withhold $100,000 of "our client's funds" was contrary to the orders pursuant to which the trustees were appointed. Proctor & Associates also asserted that the trustees' suggestion that Landmark's two-thirds share of the net proceeds of sale would only be released upon the giving of a deed of release and indemnity amounted to duress and standover tactics. They asserted that the trustees had no entitlement to withhold any sum of money without an order from the Court. As amended on 13 March 2003, the orders for the appointment of the trustees provided that one-third of the net proceeds of sale be paid to Toyama, and two-thirds of the net proceeds of sale be paid to Landmark immediately upon completion.

11 Mr Carroll withdrew the request that the beneficiaries provide a release to the trustees, or that moneys be retained to cover future expenses incurred by the trustees. He did so because of the threats made by Proctor & Associates on behalf of Landmark not to withdraw the caveat, and because he was concerned to complete the sale as expeditiously as possible. No moneys were retained on account of any further remuneration or expenses of the trustees. Mr Carroll deposed that: "Had it not been my desire to avoid further Court proceedings with the beneficiaries of the trust for sale and my understanding of my duty as a trustee for sale to expeditiously complete the sale and account for the proceeds of sale to the beneficiaries of the trust for sale, I would not have paid the whole of the balance of the proceeds of sale (after deducting amounts for expenses, remuneration and anticipated liability for GST) to the beneficiaries of the trust for sale."

12 In my first judgment, I ordered that Landmark pay the trustees' costs of its notice of motion. Had the trustees kept trust funds in hand, they would have been entitled to have recourse to the trust funds to obtain a complete indemnity in respect of the costs properly incurred by them in defending Landmark's claim. The trustees also claim that they would have been entitled to be paid proper remuneration for their time in providing instructions to their solicitors to defend Landmark's claim, including considering and approving correspondence, attending conferences with counsel in relation to the proceedings, and attending the hearing of the proceedings, including attending to give evidence. 13 The trustees submit that an indemnity costs order should be made against Landmark so as to restore the trustees to the same position which they would have occupied if an appropriate retention had been withheld from Landmark's share of the proceeds of sale. Alternatively, they submit that Landmark should be required to restore the trust fund which was distributed to it so that the trustees can have recourse to it from which to satisfy their right to be indemnified in respect of expenses properly incurred. They also submit that they should be entitled to remuneration for the work done in connection with the proceedings, and that Landmark should pay that remuneration, or, in the event of its being insolvent and unable to pay, that Toyama should pay such remuneration.

14 Landmark has objected to the charges made by the trustees which were deducted from the net proceeds of sale on 21 October 2003. The trustees do not object to the registrar determining whether the charges made were proper.

15 In its points of contention, Landmark disputed that the trustees were entitled to charge for the costs of preparing a deed of indemnity. Landmark has also disputed the deduction from the proceeds remitted to it of the costs incurred by the trustees in applying for the removal of the caveat, which was the subject of the indemnity costs order.

16 There is no merit to those objections. The trustees were entitled to approach the Court to protect their position against the proceedings which Landmark had threatened. It is probable that had they done so, they would have received advice that they were justified in retaining sufficient trust funds to meet their anticipated liabilities arising from such proceedings. The preparation of a deed of release was a proper and prudent step for the trustees to have taken with a view to avoiding such costs. Ultimately, the trustees capitulated to Landmark's demands and released its share of the proceeds without retaining a fund from which they could be indemnified. But, that did not render it unreasonable or improper for the trustees to have incurred expense in the drafting and forwarding of the proposed deed of release. Clearly, they were entitled to deduct from Landmark's share the amount of costs for which Landmark was liable under the indemnity costs order.

17 It would not be appropriate to make an indemnity costs order pursuant to the power in s 98(1) of the Civil Procedure Act 2005 (NSW). In NMFN Property Pty Ltd v Citibank Ltd (No 2) (2000) 109 FCR 77 at 92, Lindgren J said: "The ordinary rule is that an award of costs is on the party and party basis and that it is only a special case that the discretion to depart from that rule will be properly exercised. … In my opinion, there is no counterpart ordinary rule that in the absence of special circumstances indemnity costs would be ordered where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation. Even in a proved case of fraud, for example, in my opinion the presumption is that a costs order against the fraudulent party would be on the party and party basis. The conduct of a party that is relevant to the issue of indemnity costs is the party's conduct as litigant." (Citation omitted.)

18 This passage was referred to with approval by the Court of Appeal in Mead v Watson (2005) 23 ACLC 718 at [9]. The Court of Appeal said: " … the impugned conduct of the party against whom such an award of indemnity costs is sought must be connected with the litigation itself. In particular, it must be related to the way the litigation is conducted."

19 Mr Rayment QC, who appeared for the trustees, also submitted that there was a general principle that: "If X asks Y to do something which Y is not bound to do or is bound only to X to do and Y does it, then ordinarily Y should indemnify X. The person acting should have an indemnity from the requester for the detriment suffered by him from so acting, which would include a liability [incurred] to any third party, or, here, being put back in a position he would have been in if he had not acted on the request, that is, having the fund available." 20 Two authorities were cited for this proposition: Naviera Mogor SA v Societe Metallurgique De Normandie (The "Nogor Marin") [1988] 1 Lloyd's Rep 412 and Strathlorne Steamship Co Ltd v Andrew Weir & Co (1934) 50 Lloyd's List Law Rep 185.

21 In the latter decision, the Court of Appeal applied the judgment of Tindal CJ in Toplis v Grane (1839) 5 Bing NC 636 as cited in Dugdale v Lovering (1875) LR 10 CP 196 at 200: "We think this evidence brings the case before us within the principle laid down in Betts & Anor v Gibbins 2 Ad & E 57, that when an act has been done by the plaintiff under the express directions of the defendant which occasions an injury to the rights of third persons, yet if such act is not apparently illegal in itself, but is done honestly and bona fide in compliance with the defendant's directions, he shall be bound to indemnify the plaintiff against the consequences thereof."

22 In The Nogor Marin, Mustill LJ, in giving the judgment of the Court, stated the law as follows: " 1. The general principle is that - … when an act is done by one person at the request of another which act is not manifestly tortious to the knowledge of the person doing it, and such act turns out to be injurious to the rights of a third party, the person doing it is entitled to an indemnity from him who requested that it should be done. 2. This is, however, a general principle, not a conclusion of law, which is always to be drawn. As Mr Justice Grove was careful to point out in Dugdale v Lovering , whether there is an obligation to indemnify must greatly depend on the circumstances of each individual case. Notes of caution to a similar effect may be found elsewhere in the authorities. 3. A special situation exists where the person receiving the request or demand has a duty to act upon it. Here, as we understand it, the right of the indemnity does arise by operation of law, except in the case where there is a 'default' on the part of that person. The merits of a fourth proposition have been much disputed in argument here and below. If we are right in the analysis of the issues which arise on the particular facts of this case, at which we have arrived, it makes no difference whether the proposition is right or wrong, and there is nothing to be gained by exploring it at length. We will however briefly state that in our judgment it is correct. The proposition is: 4. The 'default' which disqualifies the plaintiff who acts ministerially is the same as the 'manifestly tortious' act which is an exception to the general principle. It always involves an element of turpitude and does not extend to the case where the actor has carelessly failed to make enquiries which would have revealed the true nature of the act, or where he has culpably but not recklessly drawn the wrong inference from such enquiries as he has made. "

23 These principles are not of assistance in the present case. If the result of the trustees' capitulating to Landmark's demand had been that they had thereby incurred a liability to a third party, then the principles would be analogous. But that is not the case. No authority was cited to support a principle of general application that if X requests or directs Y to act in a certain way and Y chooses to do so, X is liable to indemnify Y against all the adverse consequences of his or her so doing. Stated as such a broad proposition, it is obviously wrong. For example, if X asks Y to invest in X's business and the investment proves to be unsuccessful, X is not liable to indemnify Y merely upon proof that the investment was made at X's request.

24 Mr Rayment QC also referred to In Re Diplock; Diplock v Wintle [1948] 1 Ch 465. However, In Re Diplock has nothing to say about the present issue. 25 Mr Hall, solicitor, who appeared for Landmark, submitted that the trustees were only entitled to exercise a claim for reimbursement from the assets of the trust held by the trustees. He submitted that once the trust assets were distributed, the trustees' right to be indemnified against all costs properly incurred in the administration of the trust was gone. That submission is also incorrect: Balkan v Peck (1998) 43 NSWLR 706.

26 In Balkan v Peck, the trustees distributed the proceeds of sale of a flat in London to the beneficiaries overlooking their liability to pay capital transfer tax. They were held entitled to be indemnified by the beneficiaries against that liability. The right of a trustee to a personal indemnity from a beneficiary who is sui juris in respect of a liability incurred as a result of the holding of trust property, and irrespective of whether the property was acquired at the request of the beneficiary, is firmly established (Hardoon v Belilios [1901] AC 118; J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd [1985] VR 891 at 936). "[T]he basis of the principle is that the beneficiary who gets the benefit of the trust should bear its burdens unless he can show some good reason why his trustee should bear the burdens himself" (J W Broomhead (Vic) Pty Ltd v J W Broomhead Pty Ltd at 936; Balkan v Peck at 712).

27 In Balkan v Peck, Mason P, with whom Priestley JA and Shepherd AJA agreed, said (at 714):

"It is no answer to the trustees' personal right of indemnity with respect to a proper trust expense to say that the trustees could have or even should have recouped the liability out of the trust property when it was in their hands. The personal right is distinct from the right of indemnity out of trust assets."

28 The liability in respect of which the trustees claim a right to be indemnified by the beneficiaries is their liability to their solicitors and counsel to pay legal costs in connection with the proceedings brought by Landmark. These liabilities did not arise as a result of the trustees' holding the trust property. Nonetheless, the same broad principle that a beneficiary who gets the benefits of a trust should bear its burdens unless he or she shows good reason why the trustee should bear the burdens himself or herself, applies as between Landmark and the trustees. Landmark has obtained the benefit of the trustees' appointment as trustees for sale and has obtained the benefit of receiving its share of the proceeds of sale. By challenge to the way the trustees have executed the trust, it has subjected the trustees to the incurring of legal expenses. It has failed in that challenge. It is only just that it should indemnify the trustees against all expenses properly incurred in defending the claim, so that the trustees would be put in the same position as that in which they would have been had they still had possession of the trust funds.

29 On the same principle, there is no reason that Toyama should bear the burden of the liabilities incurred by the trustees in defending Landmark's claim. It did not claim any equitable compensation from the trustees. It was not responsible for the trustees incurring those costs. It did not stand to benefit from Landmark's claim.

30 This is consistent with the way in which costs of an administration action are borne by particular classes of beneficiaries. If a claim in relation to a trust involves a particular class of beneficiaries, the costs of the administration suit will be borne by that class (Re Phillips [1938] 4 All ER 483; and see the cases cited in J H G Sunnucks, J G Ross Martyn, K M Garnett, Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 16th ed, Stevens & Sons, London, 1982, 833, footnote 8).

31 If the Court determines that costs are to be paid on an indemnity basis out of property held by a trustee who is a party to the proceedings, the trustee is entitled to all costs, other than those that have been incurred in breach of his or her duty as a trustee (r 42.5(a) of the Uniform Civil Procedure Rules 2005 (NSW)).

32 That rule is not directly applicable. However, the principle upon which Landmark is liable to indemnify the trustees in respect of costs incurred is the same as the principle upon which the trustees would have been entitled to recourse to Landmark's share of the trust estate were that estate still held or controlled by them. Accordingly, I will order that Landmark pay all costs of the trustees of the proceedings, other than any costs that may have been incurred in breach of their duty as trustees, to the extent such costs are not recovered from Landmark's share of the trust estate or pursuant to the orders made on 28 February 2006.

Remuneration 33 The question of whether the trustees should be remunerated for their work in defending the claim against them raises a different question. A successful litigant is not entitled to recover compensation for his or her own time in bringing or defending proceedings, except such as may be recovered on an assessment of costs. This is usually limited.

34 In Re Application of Sutherland (2004) 50 ACSR 297; 22 ACLC 1326, Campbell J said (at [11] and [12]): "11 Although generally a trustee is not entitled to remuneration for his time and trouble in execution of the trust, there is an inherent equitable jurisdiction to allow a trustee remuneration, which is usually exercised sparingly and in exceptional cases: In Re Worthington, decd; Leighton v MacLeod [1954] 1 WLR 526. This inherent jurisdiction can be exercised in circumstances such as where the duties are extensive and the trustee can perform them only by seriously sacrificing his own interests ( Marshall v Holloway (1820) 2 Swans 432 at 452-3, 36 ER 681 at 689; Re Cox's Will (1890) 11 LR (NSW) Eq 124), where the trustees are not prepared to act without being remunerated and no alternative trustees can be found ( In re Freeman's Settlement Trusts (1887) 37 Ch D 148), or where it is otherwise advantageous to the trust estate to allow the remuneration ( Plomley v Shepherd (1896) 17 LR (NSW) Eq 215; Johnston v Johnston (1903) 4 SR (NSW) 8 at 11-12). In exercising that jurisdiction one factor that the Court takes into account is whether there is really any practical alternative to allowing the remuneration: even before the time when there were trustee companies who were authorised to act as trustees for a remuneration, the Court recognised that if no trustee could be found who was willing to act without remuneration, the alternative was for the trust to be administered by the Court, in which case it was ' at best unprofitably invested and generally frittered away' : Richardson v Allen (1870) 10 SCR (Eq) 1 at 3; Re Cox's Will (1890) 11 LR (NSW) Eq 124 at 126. 12 The Court's inherent jurisdiction to allow remuneration to a trustee is wide. It exists whether the appointment of the trustee was made by the Court or not: In Re Masters, decd [1953] 1 WLR 81. It extends to allow the Court to approve the retention of remuneration for future work done, as well as past work done: Nissen v Grunden (1912) 14 CLR 297 at 307-8; In re Keeler's Settlement Trusts [1981] 1 Ch 156 at 161-2; Re White; Tweedie v Attorney-General (2003) 7 VR 219 at 233. It allows the court to authorise payment of remuneration at a higher rate than that originally allowed by the trust instrument: In Re Duke of Norfok's Settlement Trusts; Perth (Earl) v Fitzalan-Howard [1982] Ch 61. It extends to allowing remuneration to constructive trustees: Boardman v Phipps [1967] 2 AC 46; In re Jarvis, decd; Edge v Jarvis [1958] 1 WLR 815 at 820. It extends to permit the Court to allow remuneration to a trustee for work he does in acting as director of a company in which the trust funds are invested: In re Keeler's Settlement Trusts [1981] 1 Ch 156 at 162. Whether the jurisdiction is actually exercised in any particular factual circumstances is, of course, a completely separate question to whether the jurisdiction exists. "

35 For the reasons I gave in my first judgment, it is appropriate for the trustees to be allowed remuneration for their work in execution of the trust. The work which I described which so entitled them was extensive and complicated work to bring about the sale of the property. 36 In their notice of motion filed in Court on 15 June 2005, the trustees sought orders: " 3. That the applicants are entitled to be paid such remuneration as the Court may approve in respect of their administration of the statutory trust for sale, including (a) retaining vendors' agent and solicitor in respect of the sale; (b) instructing solicitors and counsel to advise in relation to claims in respect of copyright in relation to development applications and plans relating to the trust property; (c) instructing solicitors to commence proceedings to seek directions in respect of the use of the development applications and plans relating to the trust property in the promoting and sale of the trust property, including assisting solicitors in the preparation of evidence to be used in that application; (d) instructing solicitors to commence proceedings to obtain an order that the caveat lodged by the second respondent be removed from the title of the trust property, including assisting solicitors in the preparation of evidence to be used in that application; (e) instructing solicitors and counsel in respect of a claim by the second respondent initiated by notice of motion filed 5 December 2003, including assisting solicitors in preparation of evidence to be used in that application. 4. That the applicants are entitled to retain the amounts received by them from the proceeds of sale of the trust property on account of their remuneration in respect of the administration of the statutory trust for sale and that the respondents pay to the applicants such additional amount by way of remuneration as the Court shall approve as the applicants' proper remuneration. 5. Direct that this application be referred to the Registrar for the assessment of the applicants' proper remuneration. " 37 Landmark's notice of motion of 5 December 2003 sought substantially the same relief as was sought in its notice of motion of 13 August 2004, but failed to join the trustees as parties. 38 I have already dismissed Landmark's claims in that notice of motion. 39 The trustees are entitled to remuneration for work done in executing the trust. This includes all the work referred to in paragraph 3(a)-(d). 40 However, it is one thing to say that trustees should be allowed remuneration for their work in executing the trust. It is another to say that they should be allowed remuneration for their own time in defending claims brought against them by a beneficiary in the absence of any entitlement under the instrument creating the trust to be paid such remuneration.

41 Thus, in Foster v Spencer [1996] 2 All ER 672, trustees of a sporting club were allowed remuneration for their work in selling trust land. However, no order for their future remuneration was made where the trust assets had been reduced to cash, and where the remaining task was to determine the beneficial interests in the trust property.

42 In my view, it is necessary to discriminate between remuneration for the trustees' own time for work done in further execution of the trusts, and remuneration for their time in defending the claims against them for alleged breach of trust. Undoubtedly, more work had to be done after the distribution of the net proceeds of sale to the beneficiaries. The trustees had ongoing duties in the administration of the trust to deal with their liability for GST. Following my first judgment, the trustees have had dealings with the Australian Taxation Office. To the extent they have done work in the administration of the trust for which they have not been remunerated, they are entitled to such remuneration. The beneficiaries are liable to pay the trustees' remuneration for their administration of the trust in the proportion of their respective beneficial interests, to the extent that the trustees have not recouped such remuneration already, and are not able to recoup such administration from any trust assets remaining in their hands. However, I do not accept that they are entitled to remuneration for their own time in defending the claims brought against them.

43 It is accepted that Landmark is entitled to an enquiry before the registrar as to the reasonableness of the amounts claimed and paid to the trustees in respect of their work done up to 7 October 2003. The trustees are also entitled to remuneration for their work in executing the trust, as distinct from defending Landmark's proceedings, beyond that date.

44 For these reasons, I refer the proceedings to a registrar or a deputy registrar to assess and certify the trustees' proper remuneration in administration of the trust for sale in accordance with these reasons. I declare that the plaintiff (Toyama) and the first defendant (Landmark) are liable to pay to the trustees in the proportion of one-third and two-thirds such amount as may be certified as being the trustees' proper remuneration, to the extent that such remuneration has not been received by the trustees and to the extent that there are no trust assets held or controlled by the trustees from which such remuneration can be paid. 45 I order that the first defendant (Landmark) pay all of the trustees' costs of Landmark's notices of motion of 13 August 2004 and 5 December 2003, other than costs that may have been incurred in breach of their duties as trustees, to the extent such costs are not recovered from Landmark's share of the trust estate or pursuant to the orders of 28 February 2006. 46 Toyama did not seek costs of Landmark's notice of motion. 47 Notwithstanding their failure on one point, the trustees have been substantially successful in obtaining the relief sought in their notice of motion of 15 June 2005. I make no orders as to costs of the hearing of 19 May 2006. Otherwise, I order Landmark to pay the trustees' costs of the trustees' notice of motion dated 7 June 2005 and filed on 15 June 2005, including the costs of the hearing on 22 March 2006.

48 I make no orders as to the plaintiff's (Toyama's) costs of the trustees' notice of motion, or the hearings of 22 March 2006 and 19 May 2006.

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At a glance

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Legislation Cited (2)

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