Woodlawn Capital Pty Ltd v Motor Vehicles Insurance Ltd

Primary judgments

1. The matter was heard by Stevenson J in the Commercial List of the Equity Division. His Honour delivered four judgments in the proceedings. References in my reasons to judgment paragraph numbers are, unless otherwise indicated, to those in the principal judgment.
2. The principal judgment (Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1503) was handed down on 30 October 2014 and dealt with most of the issues then between the parties, some being reserved for determination after the parties had had the opportunity to consider his Honour's reasons and to make further submissions in a hearing on 30 March 2015. His Honour's findings on the issues dealt with in the principal judgment were summarised (from [24]-[47]) as follows.
3. His Honour concluded that Woodlawn had acted in breach of contract in a number of respects, the most significant being its investment of the Portfolio in breach of the Investment Mandate, but that MVIL had not proved that it had suffered any damage as a result of that breach and that, in any event, Woodlawn was not liable for such damages by reason of an exclusion clause (cl 5) in the IMA and AMA respectively.
4. His Honour found that all the relevant agreements (i.e., the IMA, the AMA and the Trust Deed) had been validly terminated on 17 November 2011; that such termination had effect under the IMA and AMA as a termination for an event of default; and that Woodlawn had no entitlement to fees beyond those that had accrued to the date of termination (and hence no entitlement to early termination fees). As to the accrued fees claimed by Woodlawn, his Honour found that it had not been entitled to charge GST on the fees under the successive IMAs and found in favour of MVIL on the "fees on fees" issue (an issue relating to MVIL's contention that there had been double counting in relation to the calculation of fees).
5. His Honour concluded that, by not having an AFSL, Woodlawn had committed a further event of default as it was in breach of a warranty that it held all relevant licences and authorities, but, as adverted to earlier, held that MVIL had lost its statutory right (under s 925A of the Corporations Act) to rescind the agreements by reason of it not having exercised the right within a reasonable period and having affirmed the agreements. (Had the agreements been validly rescinded, the effect of that would have been that Woodlawn would not only have lost any entitlement to recover fees but it would also have been liable to refund all amounts it had deducted from the fund by way of fees, charges and commission.)
6. His Honour further found that Woodlawn had engaged in misleading and deceptive conduct but that MVIL had not made out a "no transaction" case in respect of the licences issue.
7. As to Woodlawn's claims, as noted earlier its entitlement to accrued fees under the AMA was established and quantified (though subject to any set-off of amounts that might be found to be owing by Woodlawn to MVIL following determination of the issues left open in the principal judgment) but its claims for early termination fees and for damages for injurious falsehood in relation to the press release failed.
8. The balance of the issues in the proceedings, which included: the question of costs, the consequences of his Honour's findings on the GST and "fees on fees" issues, and MVIL's claim for pre-judgment interest, were dealt with in a third judgment published on 10 April 2015 (Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2015] NSWSC 401). By then, an issue as to the claimed accessorial liability of Woodlawn's directors that had been left open in the principal judgment was no longer pressed by MVIL.
9. In the third judgment, his Honour concluded, relevantly, that: MVIL was entitled to repayment of AUD 559,194 for wrongly appropriated GST (that claim not being excluded by an exclusion clause in the IMA); Woodlawn was entitled to its reasonable costs and expenses of administering the fund while it remained in its possession by reason of the March freezing orders (but only in an amount of AUD 18,936 referrable to external accountants' costs); MVIL was entitled to pre-judgment interest; Woodlawn should pay one-third of MVIL's costs of the proceedings; and MVIL should pay the directors' costs of the proceedings but only to the extent (if any) that those costs exceeded those otherwise incurred by Woodlawn.
10. In the meantime, prior to the listing of the matter for submissions on the then remaining issues in the proceedings, MVIL had applied to have the sum of AUD 20m paid to it out of the fund the subject of the March freezing orders and Woodlawn had in turn applied for release to it of the sum of AUD 2,957,521 in respect of its accrued fees (there remaining in dispute an amount of AUD 633,634 of claimed accrued fees relating to the GST issue and the "fees on fees" issue). Those applications were dealt with in his Honour's second judgment (Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1846), delivered ex tempore on 17 December 2014. In the context of that application, Woodlawn's directors gave to the Court an undertaking (the Undertaking) described by his Honour, and recorded in the Court orders, as an undertaking to "restore any funds released" in the event that the Court were so to order ([19]).
11. Orders were made on 21 April 2015 in accordance with short minutes of order prepared by the parties to reflect his Honour's reasons in the first and third judgments.
12. His Honour's fourth and final judgment in the matter was delivered in June 2015 and related to an unsuccessful application by MVIL for orders to enforce or give effect to the Undertaking in circumstances where Woodlawn had failed to pay the judgment debt in relation to pre-judgment interest (Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2015] NSWSC 845).

Appeal proceedings

1. Woodlawn has appealed on two issues: the making of the order for the payment by it of pre-judgment interest (in the sum of AUD 4,866,115.11) and the making of the costs order against it. In response to MVIL's cross-appeal, it has filed a notice of contention seeking to affirm on additional grounds his Honour's decision on what I will refer to as the s 925A issue, i.e., the finding that MVIL had lost its statutory right of rescission.
2. MVIL, by amended notice of cross-appeal, appeals from the dismissal of its cross claim in respect of the s 925A issue and the order that it was entitled only to one-third of its costs of the proceedings. It has also filed an amended notice of contention raising the s 925A issue and issues as to the costs and interest orders.
3. In separate proceedings, heard together with the main appeal proceedings, MVIL has sought leave to appeal in respect of the refusal by his Honour in June 2015 to make orders in relation to the Undertaking. Woodlawn opposes the grant of such leave.
4. Woodlawn accepts that if MVIL succeeds on its cross appeal in relation to the s 925A issue then those parts of Woodlawn's appeal which rely on the respective agreements will not arise (because in those circumstances Woodlawn would not be entitled to enforce the agreements having regard to s 925E of the Corporations Act). In that event, the only remaining issues in Woodlawn's appeal would be those relating to the award of pre-judgment interest to MVIL (and then only on the basis raised by ground 5 of its notice of appeal) and its claim for costs on the basis of its position as trustee (ground 8).
5. It is therefore convenient to deal first with the s 925A issue.

Section 925A issue - MVIL's cross-appeal grounds 1 & 2; MVIL's amended notice of contention ground 1; Woodlawn's notice of contention grounds 1 & 2

1. In its amended notice of cross appeal, MVIL contends that the primary judged erred: 1 … in holding that, by operation of s 925A(2) and (3) of the Corporations Act 2001 (Cth), [MVIL] could not exercise the right under s 925A(1) of the Corporations Act (which it otherwise was entitled to exercise) to rescind the three agreements between it and [Woodlawn] …: a. because [MVIL] knew all of the facts necessary to enliven the right to rescind the Agreements under s 925A(1) on about 7 July 2011; b. when his Honour should have held that [MVIL] did not know all of those facts or matters necessary to enliven the right to rescind the Agreements under s 925A(1) before December 2011; and c. consequently his Honour should also have held that [MVIL] exercised its right conferred by s 925A(1) to rescind the Agreements within a reasonable time after learning those facts and matters, and without having affirmed the Agreements. 2 … because of the error referred to in ground 1, in holding that [MVIL]: a. had not rescinded the Agreements under s 925A(1) of the Corporations Act; b. was not entitled to judgment for an amount including an amount equal to all fees paid by [MVIL] to [Woodlawn] together with interest thereon from the date of rescission; c. was only entitled to a judgment in a sum which allowed [Woodlawn] to set off fees the trial judge held were payable by [MVIL] to [Woodlawn] under the agreement described as the "Asset Management Agreement"; and d. was only entitled to one third of its costs of the proceedings.
2. Similarly, in its amended notice of contention, in relation to grounds 1-7 of the grounds of appeal, MVIL contends that: 1 The trial judge should have held that the respondent had exercised the right under s 925A(1) of the Corporations Act 2001 (Cth) to rescind the agreements between it and [Woodlawn] (respectively the IMA and AMA) and that, by operation of s 925E of the Corporations Act, [Woodlawn] was not entitled to rely on clause 5 of the IMA or clause 6.3 of the AMA.
3. Woodlawn, in its notice of contention seeks the principal judgment to be affirmed on the s 925A issue on the following additional grounds: 1 The primary Judge should have held that [MVIL] had knowledge of all of the facts which gave rise to the requirement that [Woodlawn] hold an Australian Financial Services Licence for the purpose of ss 924A and 925A of the Corporations Act 2001 (Cth) ("Act") by reason of its execution and knowledge of the terms of the Investment Management Agreements, the Asset Management Agreement and the Trust Deed ("Agreements"). 2 In the alternative, the primary Judge should have found that [MVIL] failed to discharge its onus of proving when it first became aware of all the facts necessary to enliven the right to rescind the Agreements under s 925A(1) of the Act.

Relevant statutory provisions

1. Section 925A(1) of the Corporations Act, read with s 924A of the Act, provides a statutory right of rescission where an agreement is entered into by a person (the "non-licensee" - here, Woodlawn) and another person (the "client", not being a financial services licensee - here, MVIL) that constitutes, or relates to, the provision of a financial service by the non-licensee if: (a) the agreement is entered into in the course of a financial services business carried on by the non-licensee; and (b) the non-licensee does not hold an Australian financial services licence covering the provision of the financial service, and is not exempt from the requirement to hold such a licence.
2. Pursuant to s 766A(1) of the Corporations Act, a person provides a financial service if that person provides "financial product advice" within the meaning of s 766B of the Act (s 766A(1)(a)) or "deal(s) in a financial product" within the meaning of s 766C of the Act (s 766A(1)(b)).
3. The statutory right of rescission conferred by s 925A(1) is subject, relevantly for present purposes, to the operation of sub-ss 925A(2) and (3) of the Act. (Sub-section (4) is irrelevant since there is no suggestion that Woodlawn informed MVIL before the relevant agreements were entered into that it did not hold an AFSL.) The first three sub-sections of s 925A provide as follows: (1) Subject to this section, the client may, whether before or after completion of the agreement, give to the non-licensee a written notice stating that the client wishes to rescind the agreement. (2) The client may only give a notice under this section within a reasonable period after becoming aware of the facts entitling the client to give the notice. (3) The client is not entitled to give a notice under this section if the client engages in conduct by engaging in which the client would, if the entitlement so to give a notice were a right to rescind the agreement for misrepresentation by the non-licensee, be taken to have affirmed the agreement.
4. The consequences of rescission include that the non-licensee is unable to enforce the relevant agreement or to recover its fees in any form (ss 925E and 925F) and that all fees paid prior to rescission are recoverable (s 925H).

Findings as to the existence of a right of rescission

1. Having had regard to the text of the respective agreements and evidence given by Mr Breen as to MVIL's investment process, as summarised in a document he had drafted called "Investment Advisory" ([347]-[352]), his Honour found that Woodlawn gave MVIL "financial product advice" within the meaning of s 766B of the Corporations Act ([354]). In particular, his Honour had regard to the facts that, under the respective IMAs, Woodlawn's duties included the giving of "advice" and "recommendations", which were to be consistent with the attached Investment Mandate, and that, under the AMA, Woodlawn was appointed "to advise on and where appropriate manage" the Portfolio (cl 2(a)) and part of its duties (cl 3.1(a)(2)) was to advise on the management of the Portfolio.
2. His Honour further found that Woodlawn had dealt in a financial product for the purposes of s 766C of the Act (see [355]-[367]). His Honour did not accept Woodlawn's contention that the exception in s 766C(3) was enlivened because, although it acted at all times as trustee, it nonetheless dealt with financial products on its own behalf and as principal. His Honour also rejected Woodlawn's submission that the effect of Regulation 7.1.35 had the effect that, despite s 766C, Woodlawn did not deal in financial products.
3. His Honour said that it was clear that Woodlawn carried on its financial services business in Australia ([392]) and that the fact that its client was abroad was irrelevant ([393]); and rejected Woodlawn's submission that, as an agent of MVIL, it was immune from the application of Part 7 of the Corporations Act by reason of derivative Crown immunity ([396]).
4. Hence, his Honour concluded (at [406]) that Woodlawn was at all relevant times required to hold an AFSL. There was no dispute that Woodlawn did not hold such a licence until 29 July 2011. His Honour therefore found that the warranty given by Woodlawn in the respective agreements (the IMA and AMA) that it held all requisite licences and authorities was false; that Woodlawn had committed an event of default as defined in cl 8.4(k) of the IMA and AMA; and that a statutory right of rescission under s 925A had arisen ([409]).
5. There is no challenge to any of those findings. Woodlawn accepts (as it did at all relevant times) that it did not hold an AFSL when it entered into the relevant agreements and now accepts (having previously denied) that it was required to do so. Rather, the challenge by MVIL to his Honour's decision on the s 925A issue goes to his Honour's conclusion that MVIL had lost its statutory right of rescission. MVIL maintains that his Honour wrongly identified the requisite facts of which MVIL had to be aware before time started running for the purposes of determining whether the right of rescission was exercised within a reasonable time (s 925A(2)) or whether there had been an affirmation of the relevant agreements (s 925A(3)) (the entitling facts). Before turning to his Honour's findings on this issue, it is necessary to add some further details to the chronology of events briefly set out earlier in these reasons.

Further factual background relevant to question of MVIL's awareness of the entitling facts

1. In around April/May 2011, Woodlawn obtained advice from its then lawyers (McCullough Robertson) which Woodlawn described (in the timeline of events later provided by Woodlawn to its second set of lawyers) as being that there "may be an issue with enforceability of contract" and that "the enforceability issue has arisen" as Woodlawn did not hold an AFSL and, as such, the warranty in the IMA "may have been breached" by it (my emphasis). The advice was put somewhat more definitively than that in an (undated) email from McCullough Robertson (which presumably is the email referred to in the said timeline of events) to the directors of Woodlawn. There, it was said that: On the basis Woodlawn Capital does still not hold an AFSL it has been in breach of the agreement since it commenced. I recognise it has been the intention to obtain the AFSL immediately when ASIC first raised the issue back in 2009 but this is still outstanding. On the basis there is no AFSL there is a real issue with the enforceability of the arrangement. (my emphasis).
2. The tenor of that advice was not that there was any "licensing ambiguity" (as Mr Breen chose to describe it in later correspondence with MVIL) but, rather, that Woodlawn had been in breach of the agreement (there referring to the IMA) since it commenced and therefore that there was a "real issue" (which I would read as meaning more than "some doubt" or ambiguity) with its enforceability. In cross-examination, Mr Breen accepted that in May 2011 his previous solicitors had told him that Woodlawn did need an AFSL; that it had always needed one; and that the contract could be "rejected" if it did not have one.
3. In any event, however the April/May 2011 advice may have been understood by the directors of Woodlawn at the time, nothing was conveyed to MVIL at that point as to Woodlawn's lack of an AFSL and whether it was or might be required to hold one, or as to there being any issue as to the enforceability of the agreements.
4. Mr Breen's apparent explanation for not informing MVIL of the licensing position at that stage, given after the cross-examination referred to at [54] above was the non-responsive answer to the following question: Q. But you didn't tell your client that, did you? A. We had lost confidence in that legal advisor and sought a second opinion.
5. Notwithstanding his professed lack of confidence in the advice received from McCullough Robertson, it seems that Mr Breen did not wait to obtain a second opinion before commencing steps to apply for an AFSL. He signed an application for that purpose (which was lodged with ASIC by letter dated 23 June 2011 after it had been counter-signed by Mr McNamara) on 8 June 2011.
6. It was not until 27 June 2011 that Woodlawn retained other lawyers (Baker & McKenzie) for advice, among other things, on whether Woodlawn was appropriately licensed as at the signing of the contracts. (Presumably, this was the second opinion to which Mr Breen referred in his cross-examination.) No written advice from Baker & McKenzie going to the licensing issue was produced. Mr Breen's recollection was that the advice was explained in a teleconference just prior to the drafting of a letter to MVIL, to which I refer below (at [60]ff). His account of the advice given was that "[t]here was suitable ambiguity from Baker's and they said that we may require an AFSL, but it was best to get one to ensure that there was no further ambiguity". Mr Breen said that he had kept no record of that teleconference.
7. At around the same time as Woodlawn was seeking a second opinion as to the licensing issue, MVIL, apparently at the direction of its sole shareholder, was contemplating the termination of its arrangements with Woodlawn. On 5 July 2011, the company secretary of MVIL (Mr Doko) forwarded to Mr Breen a copy of an email that Mr Doko and the then Investment Manager of MVIL (the now deceased Mr Poponawa) had received earlier that day from the Managing Director of MVIL, Dr Mua. In that email, Dr Mua had asked Mr Doko and Mr Poponawa to "determine the severance consequence as IPBC [MVIL's parent company] wants us to sever the agreement". Mr Doko in turn asked Woodlawn to advise on the "break cost" as per Dr Mua's email. Mr Breen's response that same day (with no hint of any "licensing ambiguity" or issue as to the enforceability of the agreements) was to the effect that the termination fees payable if the IMA were to be terminated early would be PGK 22,500,000.
8. However, by letter dated the following day, addressed to Mr Poponawa, Woodlawn did draw attention to the existence of an issue as to the enforceability of the agreements (the 6 July letter). I interpose to note that Mr McNamara deposed in his affidavit ([80]) that the 6 July letter was written after Woodlawn had received advice from Baker & McKenzie; and Mr Breen, who signed the 6 July letter, said that it was drafted in conjunction with Baker & McKenzie. If so, then the fact that it followed hot on the heels of the request by MVIL for information as to any break cost may simply be fortuitous. Nevertheless, in terms of the chronology of events it can be noted that the first communication of any licensing "ambiguity" came at a stage when the implications of unenforceability of the agreements must have had a real commercial significance to Woodlawn, MVIL by then having signalled an intention to terminate the agreements.
9. There was some conflict in the evidence (to which I refer later) as to whether this letter was sent to MVIL on 6 July 2011 or handed to its representatives at the end of a meeting on 7 July 2011. His Honour seems to have accepted that it was sent in advance of the meeting, presumably on the date that it bore.
10. The 6 July letter commenced by referring to the IMA and AMA in place between Woodlawn and MVIL and went on, relevantly, as follows: Under the Australian regulatory framework the provision of financial services is regulated by the Australian Securities and Investment Commission (ASIC). For an Australian company to provide financial services it is required to either (i) hold its own Australian Financial Services License [sic] (AFSL), or (ii) be an Authorised Representative of a third party AFSL holder. Initial legal advice received by Woodlawn Capital, and an ASIC review indicated that Woodlawn Capital met its licensing requirements. However subsequently, Woodlawn Capital has received further separate legal advice which indicates that its initial authorisations may not have met all of ASICs licencing [sic] obligations. This legal advice also suggests that the initial licensing arrangements under which Woodlawn Capital was operating may affect the enforceability of the IM and AM Agreements. As such we thought it best to bring this to your attention both verbally and in writing so that MVIL was aware of this matter. Subsequent to this new legal advice, Woodlawn Capital has immediately implemented authorisation changes to remove any licensing ambiguity and made itself a Corporate Authorised representative of an appropriate AFSL holder …. Additionally, Woodlawn Capital has also submitted an application for its own AFSL … and we are of the opinion that this will be granted in the next month or two. Once we have received our AFSL we will advise you in due course. (my emphasis)
11. Both Mr Breen and Mr McNamara, each of whose evidence on this issue was accepted by his Honour (at [425]), deposed in their respective affidavits to having had a meeting with Dr Mua and Mr Poponawa in Brisbane on 7 July 2011 at which they said there was a discussion about the contents of the 6 July letter. His Honour noted that neither Mr Breen nor Mr McNamara was challenged in cross-examination about the conversation on 7 July 2011.
12. Mr Breen's version in his affidavit of the 7 July 2011 conversation, consistently with the terms in which the 6 July letter was couched, was not to the effect that Woodlawn required an AFSL but rather was to the effect that: "[w]e have received some legal advice about the need for Woodlawn to have an Australian Financial Services Licence" and that "we are concerned that our agreements with MVIL may not be enforceable if Woodlawn needs an AFSL but does not have one" (my emphasis). Nevertheless, on his version of the conversation it was at least clear that what was conveyed to the MVIL representatives was that Woodlawn did not have an AFSL (since they were told that Woodlawn had thought ASIC did not require it to have a licence and that Woodlawn was now "fast-tracking" the issue of a licence). According to Mr Breen, Dr Mua's response was that they (presumably, MVIL) were happy with the work Woodlawn had done and he saw no reason why they should change anything; and Mr Poponawa agreed that things should "continue as they are, business as usual".
13. Mr McNamara's affidavit version of the conversation was similar to that of Mr Breen, though he does not give an account of what either Mr Breen or he had said about the content of the 6 July letter. Mr McNamara said that Dr Mua said, in effect, that MVIL was happy with the work Woodlawn had done for MVIL; it had been of great assistance; they understood that any issues with the licence would be remedied; that if there had been a breach it had not left MVIL out of pocket so they saw no reason to interfere with the contracts that were in place and that they would like all of the agreements to continue. He said that Mr Poponawa had agreed and had said that things "should continue as they are".
14. No evidence was adduced by MVIL from Dr Mua (who by the time of these proceedings had left the employ of MVIL, apparently not at his own instigation - see [70] below). Affidavits sworn by Mr Poponawa, who died before the proceedings were heard, were read in the proceedings. Mr Poponawa's affidavit evidence was that the 6 July letter had been given to him at the 7 July meeting and that Mr McNamara and Mr Breen did not refer to or speak about the 6 July letter at the meeting on 7 July 2011 and had only handed the letter to him and to Dr Mua at the end of the meeting. He denied that a conversation to the effect of that recounted by each of Mr McNamara and Mr Breen had taken place and deposed that he was not happy with Woodlawn's performance in managing the fund and would not have said that things should continue as they were. His Honour understandably approached that evidence with caution as Mr Poponawa's evidence had not been able to be tested in cross-examination ([421]).
15. On 29 July 2011, Woodlawn was granted an AFSL. It is not clear whether that fact was directly communicated to MVIL at the time, as Mr Breen's 6 July letter had foreshadowed. Nevertheless, by at least 3 August 2011 the fact that Woodlawn held an AFSL was disclosed at the footer of Woodlawn's email communications.
16. Mr McNamara deposed in his affidavit that, following the meeting on 7 July 2011, Woodlawn continued to manage the MVIL fund; bought and sold securities from time to time; rendered services to MVIL under the AMA; and provided financial management services to MVIL. He deposed that he had heard nothing from MVIL, or anyone else on its behalf, concerning "the licensing issue" in 2011 and that Woodlawn would not have continued to perform work for MVIL after 7 July 2011 (other than whatever work might have been legally required of it in the discharge of its duty to account as the trustee of the fund) if Woodlawn had been told that any of the agreements with MVIL was at an end or that Woodlawn would not be paid for its work. His Honour referred to this evidence (at [439]) as being unchallenged.
17. That MVIL understood that Woodlawn was continuing to provide some investment or management services over the period from July 2011 is evidenced by, among other things, correspondence from MVIL on 9 August 2011 in which it confirmed that from 30 June 2011 the base currency for the IMA was to be the Australian dollar and requested that all portfolio reports and performance statistics be calculated using that currency.
18. According to both Mr Breen and Mr McNamara, they had a discussion with Mr Doko (shortly after they received advice from Mr Doko on 13 September 2011 that Dr Mua had been asked to resign by the new board of MVIL) in which Mr Doko said words to the effect that MVIL was happy with the work Woodlawn was doing and to ask that Woodlawn "keep going, business as usual, until things work themselves out" and "carry on as usual".
19. The September 2011 quarter was described by Mr McNamara as an extremely volatile period in global financial markets with significant falls in the value of stocks and shares around the world. It is not disputed that trading in this quarter had a significant negative impact on the MVIL Portfolio managed by Woodlawn.
20. It was against this background that in November 2011, following the change of government in Papua New Guinea and subsequent change in the board of MVIL, MVIL sent its letter requesting the "repatriation" of the funds (referred to at [11] above). In the course of the correspondence following that request, MVIL made reference (in the 6 January 2012 letter referred to at [14] above) to the fact that Woodlawn had "only acquired its AFS licence from ASIC a few months ago".
21. The subsequent 13 February 2012 letter from MVIL's solicitors expressly terminating the respective agreements (referred to at [16] above) also made reference to the fact that Woodlawn had not held an AFSL in the context of asserting a breach of warranty/event of default. The letter did not advert to the statutory right of rescission under s 925A of the Corporations Act or state in terms that MVIL wished to rescind the respective agreements, although it made clear MVIL's position that the agreements were thereby (presumably if not before) being terminated.
22. I interpose to note that reliance is placed by MVIL on Shepherd v Felt & Textiles of Australia Ltd [1931] HCA 359; (1931) 45 CLR 359 for the proposition that it was entitled as at 17 November 2011 to rely on any grounds available to it at the time (whether known or not), including the statutory right to rescind, in order for there to be a valid termination. Reference is made in this context to the application by Ball J of the principles in Shepherd v Felt to rescission ab initio in Elsewhere Investments Pty Ltd v Oksa [2014] NSWSC 537 (at [62]). No issue was taken on appeal in the present case as to the sufficiency of the wording of the 17 November 2011 letter (or for that matter the 13 February 2012 letter) to amount to a valid exercise of the statutory right of rescission, assuming that such a right had not already been lost by one or both of those dates. (MVIL also points to the relief sought in the proceedings as conveying its wish to rescind the agreements.)

Requisite awareness for the purpose of s 925A(2)

1. Sub-section 925A(2) (which has been extracted earlier at [46] above) refers to awareness by the client "of the facts entitling the client to give the notice". It was accepted by both parties that the requisite awareness does not include awareness of the existence of the statutory right to rescind. That was made clear by the Full Court of the Federal Court in ABN AMRO Bank NV v Bathurst Regional Council [2014] FCAFC 65; (2014) 224 FCR 1. There, the Full Court (Jacobson, Gilmour and Gordon JJ) said (at [1422]) that: … The conditioning facts before a notice may be given pursuant to the provision [s 925A] are twofold. First, when did the client become aware of the facts entitling it to give a notice. This says nothing about awareness of any right to rescind, that is an awareness of the meaning and effect of ss 924A and 925A of the Corporations Act as applicable to the relevant facts. It is merely the client's awareness of "the facts" giving rise to such an entitlement which is required. The facts are those, proof of which, in combination, are capable of establishing the matters set out in s 924A(1). The second condition is that the notice be given within a "reasonable period" after the client became relevantly aware. (my emphasis)
2. At [1426], the Full Court, while accepting that matters of complexity in relation to a particular agreement "are no doubt a factor in the length of time it might take for a client to become relevantly aware" of the entitling facts, emphasised that the starting point of the enquiry under s 925A was when the client first became aware of all the relevant facts proof of which was necessary to establish the matters set out under s 924A. The Full Court described this as "a simple question of fact capable, ordinarily, of direct proof".
3. The entitling facts in the ABN AMRO case were said by the Full Court (at [1410]) to be those that had been identified by the primary judge (Jagot J): first, that the party providing the financial services did not hold an AFSL covering the provision of financial services in relation to the particular financial product in question (there, derivatives referred to as Rembrandt 2006-3 notes); second that it was not exempt from the requirement to hold an AFSL covering the provision of the financial service in relation to those notes; third the terms of the AFSL that the financial services provider did hold (which did not permit it to deal in derivatives); and fourth, the legal character of the said notes (which were not debentures but were derivatives).
4. In the present case, no issue arises as to awareness of any particular limits on the provision of financial services covered by the holder of an AFSL, as was the case in ABN AMRO, since it is accepted that Woodlawn had no AFSL at all.

Findings as to MVIL's knowledge of facts entitling it to rescind

1. The entitling facts were identified by his Honour as being those referred to in s 924A ([427]) and were articulated as follows ([434]): … that IMAs and the AMA had been entered into in the course of a financial services business carried on by Woodlawn … and that Woodlawn did not have, but required, an AFSL at the time it entered those agreements.
2. His Honour concluded (at [429]), by reference both to the 6 July letter and to the discussion at the 7 July 2011 meeting, that MVIL became aware in July 2011 both that Woodlawn required an AFSL and that it did not have one ([429]).
3. His Honour considered it implicit in the statement contained in the 6 July letter (that an Australian company providing financial services "is" required to hold an AFSL) that Woodlawn was providing financial services ([431]) and, while acknowledging that the statements in the 6 July letter and in the conversation on 7 July 2011 used the word "may", his Honour was of the view that, combined with the revelation to MVIL that Woodlawn was in the process of applying for an AFSL, those statements "must have made clear" to Dr Mua and Mr Poponawa, and hence to MVIL, that Woodlawn required an AFSL ([432]-[433]).
4. As to the fact that Woodlawn did not have an AFSL, his Honour said it was clear that MVIL became aware of this from the 6 July letter and the 7 July conversation since Woodlawn "said as much" and had stated that it had taken steps to obtain an AFSL ([430]).

Was there an error in identification of the entitling facts or the finding that MVIL became aware of them in July 2011?

1. MVIL contends that his Honour erred both in the identification of the entitling facts and in applying a test of constructive knowledge (there referring to his Honour's use (at [434]) of the expression "put on notice of the facts") as opposed to actual knowledge or awareness.
2. As to the first of those alleged errors (identification of the entitling facts), MVIL submits that the entitling facts included: the appropriate characterisation under the Corporations Act of the actual service provided as a "financial service"; that the service provider (Woodlawn) was not, but was legally required to be, licensed to provide that particular service to the rescinding party; and that Woodlawn was not exempt from that requirement under any specific statutory provision. This broadly accords with Woodlawn's stated position as to the requisite entitling facts in its written submissions.
3. Where that articulation of the entitling facts relevantly differs from that given by the primary judge (see [79] above) lies in the inclusion (as a separate entitling fact) of the fact that Woodlawn was not exempt from the requirement to hold such a licence. His Honour did not expressly refer to the fact that Woodlawn was "not exempt" from the requirement to hold an AFSL; rather, he referred to it being "required" to hold an AFSL. (Senior Counsel for MVIL, Mr Giles SC, described the forensic battleground at first instance on this issue as being one as to the awareness of Woodlawn needing an AFSL - not that it did not need one because of an exemption, which no doubt helps to explain the terms in which his Honour framed the issue.)
4. Sub-section 924A(1)(b) in terms refers to the non-licensee being "not exempt from the requirement to hold such a licence" (as opposed to the non-licensee being "required" to hold such a licence). They are in a sense opposite sides of the same coin. Lack of an exemption from a requirement to hold an AFSL is predicated on there being a requirement to do so in the first place (i.e., a requirement from which one is not exempt). From the opposite perspective, if the ultimate conclusion is that one is required to hold an AFSL then that implicitly involves a conclusion that there is no applicable ground of exemption from such a requirement.
5. As Woodlawn submits, the phrase "required an AFSL" is a rolled up conclusion which expresses the legal effect of a number of facts. Sub-section 924A(1)(b) necessarily encompasses both a conclusion as to the existence of a requirement to hold an AFSL and the absence of any applicable exemption from that requirement. Thus, while, for the purposes of subs 925A(2), what is required is not knowledge of the legal effect of the entitling facts (i.e., that there is a legal entitlement to rescind), those facts themselves appear to involve conclusions as to various matters (including the characterisation of the non-licensee's business as a financial services business and the lack of an exemption from the requirement to hold an AFSL).
6. Consistently with the way in which the relevant entitling facts were identified in ABN AMRO, and with the wording of subs 924A(1), the relevant entitling facts in my opinion were as Woodlawn has submitted: first, that the agreements were entered into in the course of a financial services business carried on by Woodlawn (the entitling fact raised by subs 924A(1)(a)); second, that Woodlawn did not hold an AFSL covering the provision of the financial service at the relevant time; and, third, that Woodlawn was not exempt from the requirement to hold such a licence - i.e., put in positive terms, that it was required to hold such a licence (the last two entitling facts being raised by subs 924A(1)(b)). I do not agree that his Honour relevantly erred in the identification of the entitling facts when he described the third of them without express reference to the lack of an exemption from the requirement to hold an AFSL. I read the reference to the requirement to hold an AFSL in his Honour's reasons as encompassing the conclusion that there was no exemption therefrom.

Was the correct test of awareness applied?

1. As to the second alleged error, the level of knowledge or awareness that his Honour considered was required, MVIL points to his Honour's use of the expression "put on notice" and argues that whether the 6 July letter put MVIL "on notice" or on enquiry (as to whether Woodlawn required, and was not exempt from, the requirement to hold an AFSL) is not the issue; rather, what is required by s 925A(2) is actual awareness.
2. MVIL notes that the general rule at common law is that there can be no affirmation where the party entitled to rescind "is merely suspicious, put on inquiry, or has … constructive notice of the relevant facts" (as stated by D O'Sullivan, S Elliott, R Zakrzewski in The Law of Rescission, 2014, 2nd ed, Oxford University Press at [23.26], though the authors do go on to say at [23.30] that it may be that a lesser degree of knowledge is required for election outside the general law of rescission, referring to Australian decisions relating to statutory rights to rescind). MVIL submits that actual awareness, in the sense considered in Unilever Australia Ltd v Petrevska [2013] NSWCA 373; (2013) 85 NSWLR 677 at [22]ff, was required in the present context.
3. In ABN AMRO, the question whether the client was "relevantly aware" of the entitling facts was approached on the basis of actual not constructive awareness, though (as the parties here accept) it was not necessary for the client to be aware of the legal effect of those facts.
4. If his Honour's use of the phrase "put on notice" is read in context as meaning that the 6 July letter and statements made in the July conversation amounted to an implicit disclosure of the second and third of the entitling facts, from which awareness on the part of MVIL can reasonably be inferred, then the finding at [434] is a finding of awareness (not constructive awareness) of the matters both expressly and implicitly disclosed or conveyed by Woodlawn. His Honour's observation that "Mr Breen said as much in the second paragraph of his letter" points to the language earlier used by his Honour in [434] as being the language of implicit disclosure, not that of constructive awareness in the sense of the recipient simply being put on enquiry. I am therefore not persuaded that his Honour erred in assessing the level of awareness that was required for the purposes of determining the s 925A issue.

Challenges to the findings as to the s 925A issue

1. Turning then to the particular findings challenged by MVIL, it accepts that in July 2011 it was, in effect, told that Woodlawn did not have an AFSL. (Such a conclusion is inescapable having regard to the text of the 6 July 2011 letter and the discussion that his Honour accepted took place on 7 July 2011. There would be no need to apply for an AFSL if Woodlawn was already the holder of one.) However, MVIL contends that his Honour erred in holding that at the same time it also learnt the following three things: first, that Woodlawn was carrying on a "financial services business" by providing "financial product advice"; second, that Woodlawn was subject to a requirement to hold an AFSL for those services; and, third, that Woodlawn was not exempt from such a requirement.
2. As to the first, MVIL contends that his Honour erred in concluding (at [431]) that it was implicit, in the statement contained in the 6 July letter that for an Australian company to provide financial services it "is" required either to hold its own AFSL or to be an Authorised Representative of a third party AFSL holder, that Woodlawn was providing financial services.
3. However, the 6 July letter commenced by drawing attention to the IMA and AMA and was clearly written with reference to those agreements. The statement as to the general regulatory requirements for a company providing financial services in that context could only sensibly be read as conveying that what was encompassed in the provision of services under those agreements was the provision of financial services. Otherwise there could be no point to the discussion that followed as to the euphemistically described "licensing ambiguity". In my opinion, his Honour did not err in concluding that the letter conveyed to MVIL that Woodlawn was carrying on a financial services business by reference to the services it provided under the IMA and the AMA.
4. Woodlawn also points to the knowledge that MVIL had, having executed the respective agreements, of the duties Woodlawn had under those agreements, in particular the giving of advice and recommendations which were to be consistent with the Investment Mandate. It argues that his Honour's findings as to the giving of financial product advice within the meaning of s 766B(1) (at [347]-[354]) and the dealing in financial products within the meaning of s 766C (at [355]-[367]) were based on the terms of the agreements of which MVIL became aware when it executed the agreements.
5. There can be no argument that MVIL was not aware of the terms of the agreements it had executed. It was aware that Woodlawn's services related to the investment and management of its Portfolio and that Woodlawn was providing those services as part of its business for the fees provided for in the agreements. It must be concluded that in those circumstances MVIL, when it received the 6 July letter, if not before, was aware that the financial services being provided by Woodlawn in the course of performing its duties under the respective IMAs and AMA were such as to fall within the ambit of what was described in the 6 July letter as "the provision of financial services" to which the Australian regulatory provisions were generally applicable, even though the letter went on to suggest there was some ambiguity as to whether an AFSL was required to cover the provision of those services.
6. The second and third of the matters to which MVIL points (the requirement, and lack of exemption from the requirement, to hold an AFSL) can be considered together. MVIL emphasises that the 6 July letter was expressed in the language of potential risk, referring to concerns about the impact of "licensing ambiguity". It is submitted that the language used does not support the findings of awareness (at [431] and [434]) and that neither did the conversation on 7 July 2011. MVIL argues that the letter amounted to an admission (in ambiguous language) that Woodlawn did not have an AFSL and suggested that there was some risk that it might require one. It is submitted that the general statement at the commencement of the letter as to the requirement under Australian regulatory law for an Australian company providing financial services to hold an AFSL was not a disclosure of the fact that Woodlawn did require (and was not exempt from holding) an AFSL. I agree.
7. Woodlawn submits that his Honour was correct in holding that the revelation that Woodlawn was in the process of applying for an AFSL must have made clear to MVIL's representatives that Woodlawn required an AFSL. I disagree. The 6 July letter seems to have been drafted so as to avoid any such admission - the very reference to "licensing ambiguity" makes that clear. Woodlawn was not conveying by that letter that it required an AFSL; rather, it was conveying that, in order to remove any doubt, it was applying for one. Similarly, Mr Breen's account of what he said at the 7 July meeting was in very qualified terms: that he thought that ASIC did not require Woodlawn to have a licence but "now the lawyers think we may need one" and was concerned that the arrangements "may not be enforceable if Woodlawn needs an AFSL but does not have one" (my emphasis). Woodlawn's application for an AFSL in that context was being put forward as something to remove any "uncertainty" in the business relationship and because it might need such a licence (not because it acknowledged that it did need one).
8. Woodlawn submits that knowledge of the facts giving rise to the conclusion that Woodlawn was not exempt from the requirement to hold an AFSL is proved by reference to the terms of the agreements entered into by MVIL as Woodlawn's only client, pointing out that the facts which negatived the potential exemptions in the Corporations Regulations 2001, cll 7.1.35, 7.1.35(1), 7.1.35(2) (referred to by his Honour at [369]-[388]) were facts relating to the terms of the agreements themselves. So, for example, it points out that under the Trust Deed, MVIL had the power to direct Woodlawn as to how to deal with the trust property (cl 3.1(c)) and hence MVIL was "entitled" to give an instruction to Woodlawn to acquire a "particular financial product" for the purpose of s 1012IA of the Act (as a result of which the financial product was one held under a "custodial arrangement" and sub-regulation 7.1.35(2) was satisfied - as found by his Honour at [385]-[386]).
9. That, however, amounts to a submission that MVIL was aware that Woodlawn required an AFSL because of terms in the relevant agreements that, as a matter of law, had that result. It requires awareness of the legal consequences of those contractual provisions. I do not agree that awareness of those legal consequences can be established simply by reference to the execution of the agreements themselves.
10. Particularly when Woodlawn seems to have been at pains in the 6 July letter and in the 7 July 2011 conversation to emphasise the "licensing ambiguity" (Mr Breen going so far as to say at [50] of his affidavit that "Australia's financial services licensing is very difficult to understand. Even the lawyers seem to have difficulty"), the suggestion that MVIL's awareness of the requirement (and lack of any relevant exemption from that requirement) that Woodlawn hold an AFSL was established simply by reason of its execution of agreements imposing duties that were later held to have negatived a potential exemption from such a requirement cannot be accepted.
11. Woodlawn submits that the inference his Honour drew (at [433]) - that it must have been clear to MVIL from the statements made in the 6 July letter and the 7 July meeting, as well as the revelation that Woodlawn was in the process of applying for an AFSL, that Woodlawn required an AFSL - was one that was properly open to be drawn from the words used and the action taken, in a context in which the respective senior executives were meeting to discuss a "very important question, which bore on the enforceability of the agreements under which they were doing business together". I do not accept that proposition. The tenor of the 6 July letter and the 7 July 2011 conversation, as recounted by Messrs Breen and McNamara, was that Woodlawn was taking steps to obtain an AFSL in circumstances where there was some doubt as to whether they needed one (a "licensing ambiguity") and that this gave rise to an "uncertainty" as to the enforceability of the arrangements between the parties; not that there was some issue of critical importance to be considered or resolved as to the enforceability of the agreements because it required and did not hold an AFSL (still less that MVIL might by reason of the licensing "issue" have an entitlement at that stage to rescind the agreements and to recover all the charges and fees paid since their inception).
12. I therefore consider that the evidence did not support the inference that his Honour drew as to Woodlawn becoming aware in July 2011 that Woodlawn was required to hold an AFSL (and was not exempt from that requirement).
13. That gives rise to the issue raised by the second ground in Woodlawn's notice of contention. MVIL maintains that, on the evidence, it first knew all of the relevant facts at the earliest in December 2011. (That is slightly earlier than the date it contended in its third amended commercial list statement it first became so aware - that being 17 January 2012 - but is not material for present purposes.)
14. The relevance of the December 2011 date is that this was when an external lawyer (Mr Keehn) had given advice to the managing director of IPBC, Mr Abe, to the effect that Woodlawn needed an AFSL when it began to manage and invest MVIL's funds in 2009, but that Woodlawn did not obtain an AFSL until late July 2011. Mr Abe deposed in his affidavit to a conversation to that effect occurring after he had received an AFSL search of Woodlawn from IPBC's legal counsel on 5 December 2011 and deposed that when he received the AFSL search was the first time he had become aware that Woodlawn had not obtained an AFSL until 29 July 2011. Similarly, Mr Keehn deposed to having had such a conversation with Mr Abe in December 2011. Mr Keehn deposed that he then received instructions to draft a letter of termination (that being the draft of what was sent by MVIL on 6 January 2012).
15. The difficulty for MVIL seeking to place reliance on the evidence of Mr Abe and Mr Keehn as to their knowledge of Woodlawn's licensing status, and the requirement that it hold an AFSL, is that Mr Abe was the managing director of IPBC (MVIL's sole shareholder) and Mr Keehn's advice was given to IPBC. There is no evidence that Mr Keehn's advice was conveyed to any officer of MVIL and no suggestion that there was a basis on which the knowledge of IPBC should be imputed to MVIL. Hence, Woodlawn submits that the knowledge of Messrs Abe and Keehn is irrelevant to the enquiry that needs to be made for the purpose of s 925A. I agree.
16. In ABN AMRO, it was accepted that the client had the onus of establishing when it became relevantly aware ([1437]); i.e., of adducing sufficient evidence to enable a finding to be made by way of properly drawn inference about the date upon which it became aware of the relevant facts. There was no dispute in the present proceedings as to where the onus lay in this regard.
17. MVIL did not call Mr Doko or any other member of its board or executive as a witness to prove when it became aware that Woodlawn required, and was not exempt from the requirement to hold, an AFSL. Woodlawn thus submits that if (as I consider is the case) the execution by MVIL of the agreements, along with the 6 July letter and 7 July 2011 conversation, are not sufficient to prove that MVIL became aware of all of the entitling facts in July 2011, then MVIL has failed to discharge its onus of proving when it did first become relevantly aware. I agree.
18. That being so, there is, as Woodlawn submits, no starting date from which a "reasonable period" may be measured for the purposes of s 925A(2), as was the case in ABN AMRO, and hence it is not possible to be satisfied whether any of the letters from MVIL in the period 17 November 2011 to 13 February 2012 were given within a reasonable period from that date.
19. Therefore, the cross-appeal should be dismissed and the finding of his Honour on the s 925A issue should be affirmed for the reason articulated in the second ground of Woodlawn's notice of contention.

Pre-judgment interest

1. MVIL was awarded the sum of AUD 4,893,115.11 for pre-judgment interest. Order 4(b), which was in terms agreed by the parties, noted that this amount consisted of:

• pre-judgment interest of $134,041.83 on the sum of $559,194 calculated in accordance with Schedule A hereto; and
• pre-judgment interest of $4,759,073.28 being interest on the outstanding balance of the Fund (allowing for the payments made from the Fund to [MVIL] on 19 March 2012 and 18 December 2014) from time to time at Supreme Court rates less accumulated interest earned by the Fund, calculated in accordance with Schedule B hereto.

1. The sum of AUD 559,194 represented the amount that his Honour held had been wrongly appropriated by Woodlawn in relation to GST. The remaining amount on which pre-judgment interest was awarded represented the MVIL funds retained by Woodlawn from 1 December 2011, the quantum of which was reduced first in March 2012, when Woodlawn released the "undisputed" funds to MVIL, and later in December 2014, when the March freezing orders were varied to permit the release of the bulk of the retained funds to MVIL and a smaller amount on account of accrued fees to Woodlawn. Woodlawn points out that the award for pre-judgment interest was calculated on the basis that the sum of AUD 2.957m that had been released to Woodlawn in December 2014 incorporated a set-off (against the sum of about AUD 3.5m that his Honour had found was owing to it by way of accrued fees under the AMA) of the GST and other amounts owing by Woodlawn as a result of accounting errors in its calculation of fees under the IMA.
2. His Honour dealt with the claim for pre-judgment interest in the third judgment (at [74]-[92]). His Honour referred (at [81]) to the submission for Woodlawn that interest should not be ordered because Woodlawn was at all times entitled to exercise a lien over the whole of the "frozen" fund and entitled to maintain that lien until its entitlement to be paid was finally determined; and noted that there had been detailed submissions directed to the correctness of those propositions. His Honour (at [83]) considered that it was not necessary to resolve those questions (although later indicated what his conclusion would have been had it been relevant to do so) on the basis that: … assuming the correctness of Woodlawn's contentions as to its lien, the fact is that I have now determined that, for the most part, Woodlawn was not entitled to retain the funds.
3. His Honour went on (at [84]) to say: Thus, in a practical sense, MVIL has been held out of the vast bulk of its money and, in my opinion, should have interest to judgment (at a rate equal to the difference between court rates and the rate of interest which actually accrued) by way of compensation.
4. His Honour accepted the submission for MVIL that the award of pre-judgment interest was a conventional order following contested litigation in which one party is held out of its money.
5. Ground 1 of the notice of appeal contends that his Honour erred in entering judgment against Woodlawn for the pre-judgment interest. The bases on which it challenges the pre-judgment interest order are articulated in grounds 2-5: first, that such a claim was released by cl 5 of the IMA (ground 2); second, that even if cl 5 did not operate to release a claim for pre-judgment interest, MVIL was not entitled to such interest because Woodlawn had been entitled to exercise a lien over the fund pending the quantification and satisfaction of its entitlement to the claimed fees under the IMA and AMA (grounds 3 and 4); and, finally, that his Honour's discretion miscarried having regard to various matters, including Woodlawn's right under the general law and pursuant to s 59(4) of the Trustee Act 1925 (NSW) to be indemnified for its properly incurred fees, costs and trustee expenses (ground 5).
6. I will deal with the respective grounds of appeal in that order. First, however, I note that in its submissions Woodlawn argues that there was no judgment for MVIL for payment of a sum by Woodlawn to MVIL on which pre-judgment interest of AUD 4,893,115.11 was calculated in the usual way; rather that, once the respective interests of trustee and beneficiary in the trust fund had been ascertained, the March freezing orders were simply varied to permit Woodlawn to pay trustee expenses (of AUD 18,936) to the external accountants and the balance of the trust fund was then released to MVIL. MVIL, in response, points to order 2(b) of the 21 April 2015 orders (requiring Woodlawn to pay the balance of the fund, after payment out of the external accounting expenses, together with all accumulated interest thereon to MVIL), as being in effect judgment for payment of the relevant sum. In circumstances where it does not seem to have been suggested to his Honour that there was no power to award pre-judgment interest (or that in his discretion he should not do so) in the absence of entering formal judgment in relation to the sum to be released to MVIL, it cannot now be said that his Honour erred in so doing.

Appeal grounds 1 and 2; amended notice of contention ground 1A - proper construction of cl 5 of the IMA

1. Turning then to the first basis on which the decision to award pre-judgment interest is challenged, ground 2 of the notice of appeal is that: 2 The Court below should have held that upon the proper construction of the release in clause 5 of the [IMA and AMA] … any claim by [MVIL] for the said pre-judgment [interest] of $4,866,115.11 was released.
2. In its amended notice of contention, MVIL contends that his Honour's decision in this respect should be affirmed on the ground that: 1A The trial judge should have held that, on the proper construction of the IMA and AMA, cl 5 of each of the IMA and AMA did not release or otherwise affect [MVIL]'s claim for interest, pursuant to s 100 of the Civil Procedure Act 2005 (NSW), on the sums in respect of which [Woodlawn] failed to account to [MVIL].
3. Clause 5, which appears in identical terms in both the IMA and the AMA provides as follows: 5 Indemnity The Investment Manager [Woodlawn] seeks to assist the Investor [MVIL] in the manner set out in this deed. However, MVIL agrees that [Woodlawn] is not liable for any claims, actions, proceedings, demands, liabilities, losses, damages, costs and expenses suffered by MVIL arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed, including but not limited to loss suffered by MVIL as a result of [Woodlawn's] negligence or a breach of this deed. [Woodlawn] does not warrant, represent or guarantee that any of the investment objectives stated in the [Mandate] will be achieved. MVIL agrees with [Woodlawn] (for itself and on trust for each of the related entities, affiliates, directors, officers, employees and agents of [Woodlawn] ("Indemnified Persons") that: (a) MVIL will indemnify and hold harmless the Indemnified Persons from and against all claims, actions, proceedings, demands, liabilities, losses, damages, costs and expenses arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed, in which any Indemnified Person may suffer or incur loss in any jurisdiction; (b) all costs and expenses incurred by any Indemnified Person are to be reimbursed by MVIL promptly on demand, including those incurred in connection with the investigation of, preparation for or defence of, any pending or threatened litigation or claim within the terms of this indemnity or any matter incidental thereto; and (c) no Indemnified Persons will have any liability whatsoever to MVIL for or in connection with things done or omitted to be done pursuant to the deed; other than in respect of any liabilities, losses, damages, costs or expenses which are determined by a judgement [sic] of a Court of competent jurisdiction to have resulted from the wilful default or negligence on the part of the Indemnified Person. Sums already paid by MVIL under this Indemnity but which fall within this proviso will be reimbursed in full. MVIL will notify [Woodlawn] if MVIL becomes aware of any claim which may give rise to a liability under this indemnity. Without prejudice to any claim MVIL may have against [Woodlawn], no proceedings may be taken against any director, officer, employee or agent of [Woodlawn] in respect of any claim MVIL may have against [Woodlawn]. This indemnity will continue after the termination of this deed.
4. There is no equivalent clause in the Trust Deed.
5. In the principal judgment, his Honour construed cl 5 as being broad enough to exclude what would otherwise be Woodlawn's liability to compensate MVIL for any loss it had suffered by reason of breach of contract, breach of fiduciary duty, breach of trust or breach of general law duty, including breach of an obligation implied in the deed ([323]) (other than a wilful breach or wilful negligence) ([322]; [327]). His Honour rejected the submission by MVIL that cl 5 should be construed as excluding "unauthorised dealings" from the operation of the release. His Honour did so on the basis that the clause expressly provided that the release included loss suffered by MVIL as a result of a breach of the deed ([318]). Woodlawn contends that the same reasoning should have led his Honour to conclude that there was no liability on the part of Woodlawn for pre-judgment interest. It submits that such a claim is one that also arises out of, or in connection with, the deed (relevantly, the IMA) or any other matter or activity referred to or contemplated by the deed.
6. The first matter to address in this regard is the complaint by Woodlawn that his Honour failed to deal with its argument (made in written submissions at [32] and [37]) to the effect that the claim for interest had been contractually released. There is some force to that submission. Although MVIL argues that his Honour had already twice considered the construction of the release (in the principal judgment at [304]-[330], concluding that the release covered liability for breach of the terms of the agreements, and in the third judgment at [41]-[47], concluding that the release did not cover liability for overcharging), there is nothing in his Honour's reasons on the pre-judgment interest issue to suggest that his Honour's acceptance of MVIL's submissions on this issue was a result of the conclusion his Honour had earlier reached as to the proper construction of cl 5. Rather, his Honour expressly addressed only Woodlawn's defence to the pre-judgment interest claim that was based on the lien issue.
7. In essence, the dispute between the parties as to the construction of the release in this context is as to the ambit of the words "arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed". Both parties accept that those are "relational terms" in the sense explained by French CJ in R v Khazaal [2012] HCA 26, (2012) 246 CLR 601 at [31] and must be construed both as part of the contract as a whole and as part of the clause in which they appear.
8. Woodlawn contends that the claim for pre-judgment interest was pleaded, and has succeeded, in effect as a claim for damages for breach of the deed (i.e., the IMA) and hence was a claim falling within the release in cl 5. It points to the allegations pleaded in MVIL's third amended commercial list statement that: Woodlawn had refused and failed to transfer or repatriate the Investment Management Portfolio in accordance with the directions given by MVIL ([72]) and that this was a breach of the terms of the trusts on which Woodlawn held MVIL's property ([132]). It notes that MVIL claimed damages for breach of contract ([209(t)(i)]); alternatively equitable compensation for breach of trust (209); an order for the payment forthwith of the Portfolio ([209(x)]); and interest ([211]). (As to the interest claim it was not suggested that this was sought otherwise than pursuant to s 100 of the Civil Procedure Act 2005 (NSW).)
9. Woodlawn contends that, implicit in his Honour's statement that MVIL had been "held out of the vast bulk of its money", is that as at 1 December 2011, Woodlawn had an obligation to pay the sum of AUD 27,943,319 to MVIL which it breached by failing to pay that sum, with the result that MVIL was entitled to compensatory damages for loss of use of the money it should have been paid, calculated as interest on the moneys outstanding from time to time.
10. It notes that interest under s 100 of the Civil Procedure Act is compensatory (Ruby v Marsh [1975] HCA 32; (1975) 132 CLR 642 at 663). It argues that MVIL's claim for pre-judgment interest is a claim for damages or compensation for breach of the obligation to repatriate the trust fund on demand or a claim arising out of a matter or activity contemplated by the Trust Deed. For that latter proposition, it points to the definition of Portfolio in the IMA and the terms of cl 9.3 (which acknowledge that the Portfolio is held on trust in accordance with the terms of the Trust Deed) as establishing the requisite connection between loss of use of the fund and the obligation to repatriate the fund on demand under the IMA or the Trust Deed. Similarly, it is argued that the exercise or purported exercise of a trustee's lien for unpaid fees is a matter or activity referred to or contemplated by cl 3.2 of the Trust Deed.
11. Against the argument by MVIL that such a broad construction of the cl 5 release would mean that, in effect, Woodlawn has undertaken no enforceable obligations under the IMA/AMA, it contends that the words "claims, actions, proceedings … and expenses" in cl 5 indicate that the clause is limited to the genus of claims or liabilities of a monetary variety and does not extend to claims for the performance of its obligations. (On that basis one would think that, at the very least, Woodlawn must accept that a claim for the return of the investment funds in performance of its obligations as trustee would not be excluded by the release contained in cl 5. While it points to the recognition in the Trust Deed that the trustee does not have to account free of fees (cl 3.2), there were no fees payable under the Trust Deed (and none owing under the IMA).)
12. MVIL maintains that Woodlawn's liability for repayment of the wrongly withheld funds arises from its failure to account in equity and under clauses 2.1(b), 2.2 and 3.2 of the Trust Deed and that a claim for interest accruing on the fund by reason of the failure to account is distinguishable from the claims for breaches of the IMA which his Honour accepted were covered by the release in cl 5. MVIL submits that cl 5 is directed to acts or omissions in the attempted performance or mistaken non-performance of the IMA and AMA. It places weight on the references in cl 5 to MVIL's investment objectives and to Woodlawn "seeking to assist" MVIL as disclosing that the release was directed to the performance or non-performance of the investment function, not to a wrongful refusal to account.
13. MVIL submits that, just as the release was held not to extend to Woodlawn's liability to account for the trust funds (which Woodlawn accepts) or to repay amounts overcharged by Woodlawn (a finding with which Woodlawn does not now cavil), the release in cl 5 does not extend to a claim for wrongly withholding money after the termination of the respective agreements.
14. MVIL argues that Woodlawn's construction would substantially cut down the express obligation imposed on Woodlawn by the Trust Deed to account to MVIL (a submission which his Honour accepted in the third judgment at [87]) and would mean that Woodlawn could hold MVIL's money indefinitely without cost to Woodlawn. Woodlawn, on the other hand, argues that there is no rationale for reading down the wide words of the release to cover some damages claims but not all and submits that there is nothing surprising or unusual in there being a release in the widest possible terms (absent dishonesty and bad faith) in a context in which the activities contemplated by the deed include the investment of the trust fund in derivatives (there referring to Armitage v Nurse [1998] Ch 241 at 250-252 per Millett LJ).
15. MVIL invokes the principle of contractual construction applied in Darlington Futures Limited v Delco Australia Pty Limited [1986] HCA 82; (1986) 161 CLR 500 at 509 and 510 namely, that a contract or series of contracts should be construed in a way which gives effect to all of the clauses, such that a right given by one clause is not rendered nugatory by the construction adopted (in relation to the argument above) and that applied in Kupang Resources Limited v International Litigation Partners Pte Limited [2015] WASCA 89 at [125] to the effect that two documents relating to the same transaction and which are executed simultaneously ought to be construed together. Woodlawn in response argues that those very principles would be offended if cl 3.2 of the Trust Deed (which exempts from the duty to account any fees which Woodlawn was entitled to receive in its capacity as investment manager of the trust property under the IMA) is ignored. It rejects the submission by MVIL that its construction would enable it to hold MVIL's money indefinitely, on the basis that were it to do so this would come within the bad faith exception.
16. MVIL also invokes (though only faintly) the contra proferentem rule to the extent that there is any ambiguity in the release clause, noting that the IMA and the AMA were prepared by Woodlawn.

Consideration of challenge to pre-judgment interest order on basis of operation of cl 5

1. Woodlawn's submission to the effect that the claim for pre-judgment interest is, or amounts in effect to, a claim for damages, must be rejected. The fact that the rationale underlying awards of interest is to compensate a party does not convert a claim for pre-judgment interest into a claim for damages. Indeed, if a party wishes to claim damages for loss of use of money (of the kind considered in Hungerfords v Walker [1989] HCA 8; (1989) 171 CLR 125 at [9]-[10]) it must be pleaded as such.
2. Nor does the fact that MVIL claimed damages for breach of the IMA (including for breach of the obligation to comply with the repatriation direction) have the result that the alternative claim for an order compelling the trustee to account for the trust funds is within the scope of the release. The parties entered into three agreements, at or about the same time, under which Woodlawn assumed different obligations or acted in different capacities. The requirement that it account to MVIL in its capacity as trustee, after termination of the respective agreements, for the funds held by it on trust for MVIL does not readily fall within the notion of a claim arising out of, or in connection with, agreements pursuant to which it invested and managed the funds (albeit that there was an acknowledgment in cl 9.3 of the respective agreements that it held the Portfolio in its capacity as trustee under the Trust Deed and accepting that the agreements were executed at around the same time as the Trust Deed and were to be considered together as part of the same suite of agreements).
3. I am not persuaded that his Honour erred as contended for by ground 2 and, subject to consideration of the remaining grounds of appeal in relation to the pre-judgment issue, I would affirm his Honour's order for pre-judgment interest on this issue on the basis articulated in ground 1A of MVIL's amended notice of contention.

Appeal grounds 3 and 4; MVIL's amended notice of contention ground 1B - lien

1. Grounds 3 and 4 raise what I will refer to as the lien issue. As framed, those grounds are as follows: 3 Further and in the alternative, the Court below erred in holding that the right to be paid its outstanding fees under the AMA of $3,591,155 from the Fund (as defined in the orders of McDougall J made on 20 March 2012) under clause 6.3 of the AMA was not a security interest. 4 The Court below should have held that [Woodlawn's] right to be paid its said fees of $3,591,155 from the Fund under clause 6.3 of the AMA conferred a proprietary right upon the appellant which constituted a beneficial interest having priority over the beneficial interests of [MVIL] whereupon [Woodlawn] was entitled to retain possession of the Fund until its fees, costs and trustee expenses had been ascertained and paid.
2. MVIL contends in its amended notice of contention (in relation to these grounds, and the remaining grounds 1-5 of the grounds of appeal) that: 1B The trial judge should have held that, if (contrary to his Honour's reasons) cl. 6.3 of the AMA created a security interest over the Fund, that security interest only entitled [Woodlawn] to hold a portion of the Fund equal to the amount of fees to which it was entitled (and not the entirety of the Fund), and that security had no impact on [Woodlawn]'s liability to pay interest.
3. His Honour dealt with the question of lien in his third judgment (from [87]). His Honour said that if it were relevant to reach any conclusion concerning the question of lien, the starting point was cll 3.2 and 4.2(b) of the Trust Deed. (Woodlawn contends that this was the wrong starting point, for reasons I will deal with shortly, and that the correct starting point was cl 6.3 of the AMA.)
4. The respective clauses to which his Honour referred are as follows: 3.2 Obligation to account With the exception of any fees which the Trustee is entitled to receive in its capacity as investment manager of the Trust Property under the Investment Management Agreement, the Trustee stands possessed upon trust absolutely and must account to the beneficiary for all income, distributions and other benefits received by the Trustee in respect of the Trust Property 4.2 Indemnity... (b) The Trust Property is charged with, and is security for, the Trustee's performance of the trust arising under this document in respect of all rights of reimbursement and indemnity arising out of this document.
5. Clause 6.3 of the AMA, on which Woodlawn relies, provides that: If Fees and Expenses remain unpaid for longer than the period agreed to in the Asset Management Mandate, then: (a) [Woodlawn] has the right to withdraw amounts it is owed from the cash funds held in the Portfolio....
6. His Honour's reasoning was that since, as at the date of termination of the agreements, MVIL did not owe Woodlawn any fees under the IMA (the accrued fees being due under the AMA), the charge created by cl 4.2(b) of the Trust Deed was not applicable ([88]) and that although Woodlawn had a statutory entitlement under s 59(4) of the Trustee Act to reimburse itself in respect of properly incurred expenses this entitlement was confined to the sum of AUD 18,936 in respect of the amounts owing to the external accountants ([90]).
7. His Honour referred (at [91]) to cl 6.3 of the AMA but did not consider that this advanced the matter, saying that it did not create a security interest (referring in that context to Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 at 613 per Lord Wilberforce) and that it did no more than confer on Woodlawn a right to withdraw money ([92]).
8. The reason that Woodlawn submits that his Honour adopted an incorrect starting point for the analysis on the lien issue when referring to the said provisions of the Trust Deed is that it maintains that this was not the basis upon which the lien was claimed by Woodlawn. In particular it disavows any suggestion that there was an equitable assignment of trust property.
9. It must be noted, in this regard, that in its amended first cross-claim/cross summons Woodlawn sought a declaration that the payment of outstanding fees under the AMA "is secured by a charge over the Trust Property made the subject of the Trust Deed" and, at least in this Court, there was some fluidity in the way in which its asserted right to retain possession of the trust fund was articulated (as I discuss shortly). His Honour may therefore be forgiven for thinking that some kind of charge or security interest over the cash funds held in the Portfolio was being asserted. In any event, what was made clear at the hearing of this appeal was that there was no lien claimed as having arisen by virtue of the provisions of the Trust Deed. As I understand the submissions now made, what is claimed is a contractual right that has the same incidents (or is on the same terms) as, or in some way gives rise to, an equitable lien. In those circumstances, ground 3, though not formally abandoned, was not separately argued. Rather, Woodlawn's fundamental proposition in relation to the lien issue was that raised by ground 4.
10. Woodlawn maintains that the contractual right to withdraw moneys from the cash funds held in the Portfolio in cl 6.3 of the AMA (that clause also appearing in the IMA) gave rise to an equitable lien in support of that contractual right or created a contractual right of lien that equity would enforce by way of specific performance or injunctive relief "so as to preserve the fund for the purpose of that right being secured in that way". In essence its argument is that the contractual right conferred by cl 6.3 has the same structure or operation as that of an equitable lien or is on the same terms as an equitable lien (though not an equitable lien as such). It contends that this "lien" exists until the correct amount owing to it by way of fees has been established.
11. Woodlawn invokes the principles discussed and applied in Agusta Pty Limited v Provident Capital Limited [2012] NSWCA 26, Chief Commissioner of Stamp Duties (NSW) v Buckle [1998] HCA 4; (1998) 192 CLR 226; and CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98 in support of this argument. In particular it says that cl 6.3 confers on it a "right to be indemnified out of trust property" in the sense discussed by Barrett JA in Agusta. There, at [41], his Honour (with whom Campbell JA and Sackville AJA agreed) considered the nature of the right of a trustee to be indemnified out of trust property and said: The right of a trustee to be indemnified out of trust property is often described as a charge or lien: see, for example, Vacuum Oil Co Pty Ltd v Wiltshire [1945] HCA 37; (1945) 72 CLR 319; Octavo Investments Pty Ltd v Knight [1979] HCA 61; (1979) 144 CLR 360. In Chief Commissioner of Stamp Duties v Buckle [1998] HCA 4; (1998) 192 CLR 226, the High Court preferred to regard it as a proprietary right constituting a beneficial interest enjoying priority over the beneficial interests of the beneficiaries. It is anomalous to refer to a person having a charge or lien over property of which the person is the owner. And as was emphasised by the High Court subsequently in CPT Custodian Pty Ltd v Commissioner of State Revenue [2005] HCA 53; (2005) 224 CLR 98, the "trust fund" enjoyed by the beneficiaries cannot be identified or quantified until the trustee's superior beneficial interest has been quantified and satisfied. The trustee's right is inseparable from and co-extensive with the trustee's obligations, both those already discharged but not yet reimbursed and those incurred but not yet discharged.
12. Woodlawn submits that MVIL was not entitled to pre-judgment interest on any part of the trust fund for any period prior to 17 December 2014 because the trust fund enjoyed by MVIL could not be identified or "quantified" until Woodlawn's superior beneficial interest had been so quantified and satisfied.
13. Woodlawn contends that the effect of the orders made on 17 December 2014 was to determine that it was entitled to exercise a lien over the trust fund until its entitlement to be paid moneys out of that fund had been "quantified" and "satisfied", referring to his Honour's statement in the second judgment at [17] that Woodlawn's entitlement to accrued fees had "now been 'quantified'" and his Honour's acceptance of Woodlawn's submission (at [12] and [18]) that this entitlement would be relevantly satisfied were it to be permitted to draw from the fund the sum of AUD 2,957,251 for its accrued fees under the AMA of AUD 3,591,155 (after adjustment of AUD 633,634 in respect of the wrongly appropriated GST and the fees on fees issue).
14. In response to the suggestion that the existence of the claimed lien was determined in the second judgment, when his Honour said that the fees had now been quantified and would be satisfied for the purposes of Agusta and CP Custodian if that part of the fund were to be released (at [17]-[18]), MVIL points out that the second judgment was an interlocutory decision and submits that the finding in relation to lien was not necessary for its determination, the issue there being only the existence of an arguable case. MVIL notes that, for the purposes of the interlocutory argument, it had accepted that Woodlawn arguably had a lien (although it had maintained that this was doubtful) and argues that there is no inconsistency between the second judgment and the rejection in the third judgment of Woodlawn's submissions on the lien issue. I accept MVIL's submission that, for the purposes of later determining the lien issue on a final basis, nothing can be drawn from his Honour's reference in the second judgment as to the quantification and (then imminent) satisfaction of Woodlawn's entitlement to accrued fees.
15. Woodlawn also points to the articulation of the nature of a trustee lien to be found in Chief Commissioner of Stamp Duties v Buckle (at [47]-[51]) where Brennan CJ, Toohey, Gaudron, McHugh & Gummow JJ said: In aid of [the trustee's] right to reimbursement or exoneration for liabilities properly incurred in the administration of the trust, the trustee cannot be compelled to surrender the trust property to the beneficiaries until the claim has been satisfied. In that sense, the entitlement to reimbursement or exoneration confers a priority in the further administration of the trust… Until the right to reimbursement or exoneration has been satisfied, "it is impossible to say what the trust fund is". The entitlement of the beneficiaries in respect of the assets held by the trustee which constitutes the "property" to which the beneficiaries are entitled in equity is to be distinguished from the assets themselves. The entitlement of the beneficiaries is confined to so much of those assets as is available after the liabilities in question have been discharged or provision has been made for them. To the extent that the assets held by the trustee are subject to their application to reimburse or exonerate the trustee, they are not "trust assets" or "trust property" in the sense that they are held solely upon trusts imposing fiduciary duties which bind the trustee in favour of the beneficiaries. The entitlement to reimbursement and exoneration was identified by Lindley LJ as "the price paid by cestuis que trust for the gratuitous and onerous services of trustees". The right of the trustee has been described as a first charge upon the assets vested in the trustee, as one upon the "trust assets", and as conferring upon the trustee an "interest in the trust property [which] amounts to a proprietary interest". However, the starting point in the class of case under consideration is that the assets held by the trustee are "no longer property held solely in the interests of the beneficiaries of the trust". The term "trust assets" may be used to identify those held by the trustee upon the terms of the trust, but, in respect of such assets, there exist the respective proprietary rights, in order of priority, of the trustee and the beneficiaries. The interests of the beneficiaries are not "encumbered" by the trustee's right of exoneration or reimbursement. Rather, the trustee's right to exoneration or recoupment "takes priority over the rights in or in reference to the assets of beneficiaries or others who stand in that situation". A court of equity may authorise the sale of assets held by the trustee so as to satisfy the right to reimbursement or exoneration. In that sense, there is an equitable charge over the "trust assets" which may be enforced in the same way as any other equitable charge. However, the enforcement of the charge is an exercise of the prior rights conferred upon the trustee as a necessary incident of the office of trustee. It is not a security interest or right which has been created, whether consensually or by operation of law, over the interests of the beneficiaries so as to encumber them in the sense required by s 66(1) of the Act. In valuing the interests of beneficiaries which are conveyed by an instrument, there is no encumbrance which the Act requires to be disregarded. (footnotes omitted)

Consideration

1. It must be noted that in the present case, the contractual right was in terms a right on the part of Woodlawn to "withdraw" amounts from cash funds that were held by it (in trust) in order to satisfy a contractual liability for fees "owed" to it in its capacity as asset manager (under the AMA) or, had the issue arisen in relation to the IMA, in its capacity there as investment manager. It was not in terms a right to retain possession of those funds pending quantification and payment of whatever fees it might (reasonably or otherwise) claim were outstanding. That, in my opinion, is significant.
2. I also note that, as a general rule, trustees are not entitled to remuneration, absent provision for remuneration under the trust deed or by way of agreement with the beneficiaries or court order (see the discussion in Jacobs' Law of Trusts in Australia, JD Heydon & MJ Leeming, 7th ed, 2006, LexisNexis, at [1739]). The right of indemnity (at general law or under s 59(4) of the Trustee Act) is for the discharge of costs and liabilities reasonably and properly incurred in the conduct of the trust (see Jacobs, supra, at [2104]). Here, Woodlawn is asserting an entitlement to exercise a lien to enable satisfaction of fees it claimed not in its capacity as trustee but in its capacity as asset manager under the AMA (in the case of the accrued fees) or as investment and asset manager respectively under the IMA/AMA (in the case of the claimed early entitlement fees).
3. Woodlawn's submissions seem to involve an assumption that the contractual right to withdraw moneys out of the trust fund to satisfy its entitlement to fees in its capacity as investment or asset manager amounted to a right to retain possession of those funds and constituted a "superior beneficial interest" in respect of the funds held by it in its capacity as trustee. I do not agree. In effect, Woodlawn is conflating its role as trustee under the Trust Deed with its quite different roles as investment manager/asset manager under the IMA/AMA. Those agreements are principally concerned with the investment and management of the Portfolio of assets, not the holding of money as trustee (that being the subject matter of the Trust Deed), even though an acknowledgement of Woodlawn's position as trustee in respect of those funds was contained in the IMA/AMA (cl 9.3). (The existence of that acknowledgment was accepted by Woodlawn as representing the high point of its argument in relation to the interconnection between the respective agreements for the purposes of its arguments based on cl 5)
4. His Honour in my view correctly held that cl 6.3 of the respective agreements was no more than an administrative provision.
5. Insofar as reliance is placed on what was said in Buckle, that was a case in which what was being considered was the trustee's right to reimbursement or exoneration for liabilities properly incurred in the administration of a trust, not, as here, the contractual right of an investment or asset manager (who, in a different capacity, holds the said funds on trust) to withdraw amounts due to it in payment of its fees as investment or asset manager. Their Honours explained, in the passage quoted earlier, on which Woodlawn relies, that the enforcement of what was in the sense there being considered an equitable charge was an exercise of prior rights conferred on the trustee "as a necessary incident of the office of trustee". Here, the right to withdraw moneys from the trust fund in respect of fees owed to Woodlawn under the AMA cannot in my view be characterised as a right conferred on Woodlawn as a necessary incident of its office as trustee (as so appointed under the Trust Deed).
6. While the authors of Jacobs' Law of Trusts, supra at [315], suggest that a trustee may have a lien or charge upon the trust assets for the trustee's fees (if the trustee is entitled by statutory provision or the terms of a trust instrument or court order to charge fees), it appears that what is there being contemplated are fees to which the trustee is entitled in its capacity as trustee.
7. In oral submissions, Woodlawn placed weight on what was said by Campbell J, as his Honour then was, in Firth v Centrelink [2002] NSWSC 564; (2002) 55 NSWLR 451 at [32] to the effect that there are various circumstances in which equity recognises a person as having a right, akin to a security, to be paid or recouped money from a particular item of property of another person, and refers to that right as being a "lien". The examples there given by his Honour include the lien of a trustee over the trust property to secure liabilities incurred by the trustee in the authorised conduct of the trust (his Honour referring to Jennings v Mather [1902] 1 KB 1 and the 6th edition of Jacobs' Law of Trusts in Australia, at [2104]).
8. In Firth, Campbell J contrasted equitable liens, which did not depend upon the person who has the lien having possession of the property over which the lien exists, with common law liens (i.e., possessory liens often arising when parties are in a contractual or quasi-contractual relationship - Tresize v Bilato Nominees Pty Ltd (1986) 83 FLR 44 per O'Leary CJ at 46). In Hewett v Court [1983] HCA 7; (1983) 149 CLR 639, Wilson and Dawson JJ (at 653) similarly defined the common law lien, in the course of distinguishing it from an equitable lien, in the following terms: At common law a lien, which may be particular or general, consists of the right of one person to retain possession of goods of another until his claims are satisfied. See Hammonds v. Barclay… An equitable lien is, however, different. It exists independently of possession and arises by operation of equity from the relationship of the parties, rather than being created by the act of the parties as in the case of an equitable charge.(citations omitted)
9. As noted above, cl 6.3 in its terms did not confer on Woodlawn a right to retain possession of the trust fund until payment of fees due under the AMA (or IMA). It simply permitted Woodlawn, if it so chose, to withdraw money to pay fees "owed" to it under the AMA. The existence of a contractual right to do so would obviously preclude any later argument that it was in breach of its duty (as asset manager or, for that matter, as trustee) in so doing. It is a mechanism (perhaps not dissimilar in operation to a direct debit authority) to enable Woodlawn to effect payment to itself out of fees due to it. The fact that this contractual right might be capable of enforcement in equity does not convert it to a lien.
10. Nor does the interconnection between the relevant agreements assist Woodlawn's argument. Woodlawn argues that termination of the AMA and repatriation of the trust fund are in effect the same event, each being connected with the AMA and the matters and activities of the AMA. However, it seems to me more accurate to describe them as sequential events: on the termination of the agreements (and the Trust Deed), Woodlawn has an obligation as trustee to account to MVIL for the funds then held by it as trustee. It is important not to conflate the different capacities under which Woodlawn owed obligations to MVIL in relation to the portfolio of assets it held on MVIL's behalf.
11. Thus in my opinion his Honour did not err as contended by ground 4 of the notice of appeal.
12. It is not therefore necessary to consider MVIL's contention point, which is that even if cl 6.3 created a lien, Woodlawn was not entitled to retain the entirety of the fund, as opposed to the amount of fees to which it was entitled. That argument was put on the basis that the reference in cl 6.3 to amounts Woodlawn "is owed" can only refer to fees which are in fact owing to Woodlawn. Suffice it to say that I consider there is force in that argument. I do not accept that it renders at nought the entitlement conferred by cl 6.3, as Woodlawn suggested. It simply means that if Woodlawn had exercised the contractual right to withdraw moneys on the basis of a (wrongly held) belief that it was owed particular fees it would do so at the risk of later being found to have not been contractually entitled to do so.

Appeal ground 5 - Discretion

1. In the alternative to the above grounds of appeal on the pre-judgment interest issue, Woodlawn contends that, assuming there was a liability capable of attracting interest in the first place so as to give rise to a discretion to award pre-judgment interest under s 100 of the Civil Procedure Act, the exercise of that discretion miscarried. Ground 5 is as follows: 5 Further and in the alternative, the discretion of the Court below to award pre-judgment interest miscarried by reason of the court acting on incorrect principle by failing to have regard to: (a) the release and indemnity in clause 5 of the IMA and the AMA; (b) the right of the appellant to retain possession of the Fund by way of lien until its fees, costs and trustee expenses had been ascertained and paid; and (c) the right of the appellant to be indemnified for fees, costs and trustee expenses properly incurred as a matter of general law and under section 59(4) of the Trustee Act 1925.
2. Woodlawn argues that the failure of the primary judge to have regard to the said matters caused the exercise of discretion to miscarry in the House v R sense ([1936] HCA 40; (1936) 55 CLR 499 at 504-505), each being either an error of principle or a failure to take into account a relevant consideration.
3. Although in argument it was said that because the fund was frozen by consent in March 2012 that should have an effect on whether pre-judgment interest was to be paid, it was not submitted that there was implicit in MVIL's consent to the March freezing orders that any entitlement to interest should be limited to what was accrued on the frozen funds.

Consideration

1. For the reasons set out above, while I accept that his Honour did not expressly address the question of construction of cl 5 in the context of determining the claim for pre-judgment interest, this did not cause his discretion to miscarry since the clause as properly construed did not in my opinion operate to release such a claim. His Honour did address (though only on a contingent basis) the lien argument and did not err in concluding that cl 6.3 of the AMA did no more than confer a contractual power to withdraw moneys for fees that were owed to Woodlawn under that agreement. The right of indemnity at general law or under the Trustee Act did not extend to the reimbursement of fees owed to Woodlawn as asset manager.
2. In those circumstances, Woodlawn has not pointed to any error in the exercise of his Honour's discretion to award pre-judgment interest that would warrant appellate intervention. It is not therefore necessary to address MVIL's complaint that the question of interest was not argued as a matter of discretion before the primary judge and therefore that Woodlawn should not be permitted to contend that his Honour's discretion miscarried by failing to consider a point not argued before him.
3. Ground 5 is not made out.

Indemnity costs - appeal grounds 6-8; MVIL's cross-appeal ground 2; ground 2 of MVIL's amended notice of contention

1. Both parties have raised issues as to the costs orders made by the primary judge. Relevantly, his Honour ordered that Woodlawn pay one-third of MVIL's costs.
2. Woodlawn contends that it was entitled to be indemnified for its costs of defending the proceedings whether as of right under the general law, under s 59(4) of the Trustee Act, or pursuant to the right of indemnity contained in cl 5 of each of the IMA and AMA. MVIL has cross-appealed as to the order that it only receive one-third of its costs and has filed an amended notice of contention in which it seeks to have the costs judgment in its favour affirmed on various bases. MVIL's ground on the cross-appeal fails as a consequence of the conclusion I have reached in relation to the s 925A issue and need not be considered further.
3. His Honour dealt with the question of costs in his third judgment from [93]-[104], noting that a number of issues had arisen in relation to costs.
4. First, his Honour rejected the submission that Woodlawn was entitled to its costs of the proceedings on an indemnity basis by reason of cl 5 of the IMA ([95]). His Honour was of the view that the indemnity for costs referred to in cl 5 was directed to any costs incurred by Woodlawn in relation to proceedings brought against it by a third party and not by MVIL.
5. Second, his Honour rejected the contention by Woodlawn that it was entitled to be indemnified out of the trust fund for its costs of defending the proceedings on the basis that they were costs "incidental to the execution of the trust" ([97] of the third judgment) and accepted the submission for MVIL that in the proceedings Woodlawn was acting for its own benefit and not for the benefit of the fund and was engaging in adversarial litigation in its interest against the interest of the beneficiary. His Honour said (at [97]) that "it deserts reality to characterise Woodlawn's costs of these proceedings as being "incidental to the execution of the trust"".
6. His Honour noted (at [100]) that, to a large extent, neither MVIL nor Woodlawn had succeeded in making out the case each had propounded in the proceedings but (at [101]) that MVIL had established its entitlement to have returned to it the bulk of the funds that Woodlawn retained following termination of the IMA and AMA on 17 November 2011. His Honour did not think it appropriate to make an order by reference to the various issues won and lost; and noted that neither party had suggested that this should occur ([102]).
7. Accordingly, his Honour's conclusion that the appropriate order was that Woodlawn pay one third of MVIL's costs was an application of what has been referred to as a broad 'rule of thumb' approach to the question of costs. In circumstances where: MVIL had recovered the bulk of the retained funds; Woodlawn had succeeded in recovering about 15% of the overall amount it had claimed; MVIL had failed in its claim for recovery of all the fees paid in the course of the agreements but Woodlawn had in turn failed on its claim for almost all of the retained funds; and both sides had failed on various other claims that had been made (though noting that on the trading claim MVIL had nevertheless succeeded in establishing breaches that enabled it to establish the validity of its termination of the agreements), an approach which avoided the complexity and cost of issue by issue costs assessment is not by any means surprising.

Operation of cl 5 in this context

1. The first basis on which Woodlawn argues that the costs order against it was in error is set out in ground 7 of its notice of appeal, as follows: 7 The Court below should have held that upon the proper construction of the release and indemnity in clause 5 of the IMA and the AMA [Woodlawn] was released from any claim for costs by [MVIL] in these proceedings and [Woodlawn] is entitled to be indemnified by [MVIL] in respect of its own costs of the proceedings, as a matter of contract, including the costs of the cross summons in the court below and interest on costs.
2. There are, as evident from the way in which cl 5 is framed, two components to the argument based on cl 5: first, that it operated to release Woodlawn from any claim by MVIL for MVIL's costs; and, second, that it operated so as to give Woodlawn a contractual right to be indemnified for its own costs. Woodlawn contends that his Honour overlooked the operation of the release in cl 5 when determining the issue of costs of the proceedings.
3. Both the release and the indemnity are qualified by the requirement that the relevant claim, action, proceeding, demand, liability, loss, damage, cost or expense be something "arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed".
4. After those words the release goes on to state "including but not limited to loss suffered by MVIL as a result of [Woodlawn's] negligence or a breach of this deed". The indemnity, on the other hand, goes on to include the words "in which any Indemnified Person may suffer or incur loss in any jurisdiction" (see cl 5(a)) and to exclude liabilities, losses, damages, costs or expenses which are determined to have resulted from the wilful default or negligence "on the part of the Indemnified Person".
5. Woodlawn's argument that MVIL's claim for costs was released by cl 5 was put on the same basis as that in relation to the pre-judgment interest issue. In relation to the indemnity provided for in cl 5, Woodlawn contends that his Honour wrongly construed it as applying only in respect of claims "brought against the "Indemnified Persons" by third parties" ([32] of the third judgment). His Honour reached that conclusion on the basis that the notification requirement in the third last paragraph of cl 5 used language not apt to describe a claim by MVIL itself, on the basis that it would not be a natural use of language to say that a party "becomes aware" of a claim which it proposes to bring, or has brought, itself ([34]).
6. His Honour (at [35]) considered that this conclusion was reinforced by the second last paragraph of cl 5, which carves any claim that MVIL may have against Woodlawn out of MVIL's covenant not to sue any director, officer, employee or agent of Woodlawn in respect of any claim MVIL may have against Woodlawn.
7. Woodlawn argues that the indemnity for costs in cl 5 applies to the cost of claims against Woodlawn by MVIL, as well as to third party claims. It notes the reference in the release part of the clause to "costs … suffered by MVIL arising out of, or in connection with, this deed", which it submits makes it clear that the release relates to claims, costs and the like by MVIL against Woodlawn, not to claims/costs by any third party. It argues that the indemnity should be similarly construed as extending also to claims by MVIL.
8. Woodlawn points to the reference to "wilful default" in the proviso to the indemnity and argues that this can only relate to wilful default by Woodlawn under the deed since it is impossible for a third party to make a claim "arising out of" a deed to which it is not a party. It submits that the construction contended for by MVIL (and accepted by his Honour) renders nugatory the words "arising out of … this deed" and offends the very principles of construction on which MVIL itself relies in other submissions (namely those articulated in Darlington Futures Limited v Delco Australia Pty Limited). Emphasis is placed on the words "any" and "all" as being words of wide import. Woodlawn submits that the clause was objectively intended to be a wide exclusion clause for its benefit.
9. As to the textual matters on which his Honour placed weight, Woodlawn argues that the notification obligation can have a commercially sensible operation in relation to claims by MVIL against Woodlawn since it would mean that Woodlawn is given advance notice of any claim MVIL may become aware of against it and it can take whatever steps are necessary to defend the claim. Similarly, it is submitted that the words commencing "[w]ithout prejudice to any claim MVIL may have" do not justify reading down the scope of the indemnity; rather that they confer an additional right upon other Indemnified Persons, namely, the benefit of a covenant not to sue.
10. Woodlawn invokes his Honour's own reasoning (at [311]-[323] of the principal judgment) as leading to the conclusion that it is entitled to be indemnified for all of its costs and expenses of the proceedings. Woodlawn accepts that its costs of the cross summons are in a slightly different position but says that, with the exception of the injurious falsehood claim (which it maintains took up "next to no time and cost" in the proceedings), the cross summons was a defensive cross claim and submits that it triggers the indemnity in cl 5 in the same way.
11. MVIL maintains its argument that the indemnity does not apply to the costs liability in these proceedings because it was directed only at third party claims. In that regard, MVIL relies on the arguments raised before his Honour but also puts forward a submission not made when the matter was before his Honour to the effect that the definition of "Indemnified Persons" in the indemnity part of cl 5 does not include Woodlawn.

Was there a contractual release in respect of MVIL's costs claim?

1. Turning first to the release, it seems to me unarguable that at least some of the costs incurred by MVIL in the proceedings were costs that arose out of or in connection with an activity referred to or contemplated by the IMA and AMA. So, for example, costs in relation to the claim by MVIL that Woodlawn had breached the Investment Mandate, and hence the IMA, in the context of its trading activities in relation to the fund must surely fall within those words. Just as a claim for damages for breach of the IMA in this respect was held by his Honour to fall within the terms of release so also would MVIL's costs of litigating such a claim. Similarly, costs incurred in defending the claim for accrued fees under the AMA would properly be characterised as costs incurred in connection with that agreement. (These costs were, of course, costs relating to issues on which MVIL was largely, if not wholly unsuccessful, and hence would not be assumed to have been intended to fall within the one-third costs order.)
2. On the other hand, for the reasons that his Honour gave for concluding that liability for the overcharging/GST issues was not within the scope of the release (findings not challenged on this appeal) so also would MVIL's costs of bringing those claims not be the subject of the release. Similarly, having regard to the conclusions earlier reached as to the pre-judgment interest issue, I would on the same basis conclude that MVIL's costs of seeking orders that Woodlawn to account to it, as trustee, for the trust fund (i.e., to comply with its obligations as trustee following termination of the respective agreements) are not included in the release.
3. Ordinarily, there would be much to commend the course his Honour took of applying a broad brush approach to the exercise of the costs discretion. However, if the operation of the ultimate costs order in MVIL's favour were such that it did encompass some or any costs that were the subject of the contractual release, then it would be in error. It is impossible to determine whether that is the case without the benefit of a costs assessment carried out on an issue by issue basis. Therefore, unfortunate as it seems to me to be in terms of creating scope for further costs and delay in the proceedings, I am of the opinion that the costs order should be set aside and, subject to consideration of the balance of the issues raised in relation to costs, that there should be an award of costs in MVIL's favour in respect of those discrete issues in the proceedings on which it succeeded and which were not the subject of the contractual release (namely, the overcharging/GST issues, the requirement that Woodlawn account to it, as trustee, for the trust fund (which would encompass its defence of the lien issue), and its costs of the claim for pre-judgment interest).

Was there a contractual indemnity in respect of Woodlawn's costs?

1. Turning to Woodlawn's argument that his Honour should have held that it was indemnified for all of its costs of the proceedings pursuant to a contractual right of indemnity, I have concluded that the indemnity does not cover Woodlawn's costs of the proceedings.
2. In reaching that conclusion I place little weight on the notification part of the clause. Though I accept that it would seem unnecessary for MVIL to be required to advise Woodlawn if it became aware of a claim that it, itself, might have against Woodlawn, there might be reasons why a party in Woodlawn's position would wish to be notified of a potential claim against it before the claim was actually brought.
3. Rather, I consider that the express exclusion from the indemnity of liabilities, losses, damages, costs or expenses resulting from negligence on the part of the Indemnified Persons (by contrast with the express inclusion in the release of loss suffered as a result of Woodlawn's negligence) points to the conclusion that the indemnity is not relating to claims against Woodlawn. It makes little sense to indemnify Woodlawn in respect of a claim against it, liability for which has already been released. The disconformity between the release and the indemnity, if the latter is not restricted to third party claims, is a strong indicator in support of the construction for which Woodlawn contends and which his Honour adopted. Woodlawn attempted to meet this difficulty by arguing that the words "wilful default or negligence" in the proviso to the indemnity should be read as "wilful default or wilful negligence". However, there is nothing textually to suggest that the adjective "wilful" was objectively intended to qualify both nouns.
4. There is a second, and in my opinion more compelling, reason to reject Woodlawn's arguments on this issue. That is that, as I read the definition of "Indemnified Persons" in the opening words of the indemnity, it applies only to the parties on trust for whom Woodlawn holds the benefit of MVIL's agreement to indemnify: namely, "each of the related entities, affiliates, directors, officers, employees and agents" of Woodlawn. In other words, the indemnity operates such that MVIL is contractually agreeing with Woodlawn (the party which can enforce that agreement as a contractual matter but which also holds the benefit of that agreement on trust for each of the then named "Indemnified Persons") that it will indemnify the said Indemnified Persons (not including Woodlawn) in respect of claims, liabilities and the like falling within the indemnity part of the clause.
5. Woodlawn thus has the benefit of the release for claims made against it (provided the claims fall within the release part of the clause) and can rely on the fact that entities associated with it have the benefit of an indemnity in respect of the claims the subject of the indemnity part of the clause. This would presumably be of benefit to Woodlawn which might, absent the agreement by MVIL to indemnify those other persons, be the recipient of claims by them in relation to liability that those other persons might have in carrying out functions arising out of or in connection with the matters or activities contemplated in the deed. Such a construction of the clause makes explicable the apparent difference in scope, where the claim is a claim in negligence, between the release and the indemnity.
6. While I accept that on this construction there remains some infelicity in the inclusion in the indemnity of reference to claims "arising out of this deed", in circumstances where the Indemnified Persons are not a party to the deed and not contractually bound thereby, it may well be that the expression "arising out of this deed" would in an appropriate case extend to accessorial claims (say, by MVIL against an officer, employee or agent of Woodlawn for inducing or assisting in a breach by Woodlawn of the deed or for misleading or deceptive conduct in relation to the deed) or claims by other entities against an Indemnified Person that arise out of Woodlawn's conduct as investment/asset manager, to which the indemnity would apply. The fact that there are textual difficulties on either side's preferred construction of the indemnity means that infelicity in the use of the language does not mandate the construction for which Woodlawn contends.
7. Therefore, although in large part on a basis not argued before the primary judge, I consider his Honour was correct in concluding that Woodlawn was not contractually entitled to be indemnified in respect of the whole of its costs of the proceedings.

Trustee's right of indemnity re costs

1. The second basis on which Woodlawn challenges the costs order made against it is set out in ground 8 of the notice of appeal: 8 Further and in the alternative, the Court below erred in not holding that the costs of [Woodlawn] of successfully defending [MVIL's] claims were trustee costs and expenses properly incurred and that [Woodlawn] is entitled to be indemnified by [MVIL] in respect of those costs, as of right, under the general law and under section 59(4) of the Trustee Act 1925, including the costs of the cross summons in the court below and interest on costs.
2. Relevant in considering that ground is the issue raised in MVIL's amended notice of contention, namely that: 2 The trial judge should have held that [Woodlawn] had no right to exercise an indemnity under s 59(4) of the Trustees Act 1925 (NSW) [sic], r 42.25 of the Uniform Civil Procedure Rules 2005 or the trust deed between the parties in relation to the costs of the proceedings having: (a) not obtained advice under s 63 of the Trustees Act [sic] to the effect that it was proper for [Woodlawn] to defend [MVIL]'s claim and to bring a cross-summons; (b) having substantially been unsuccessful in the proceedings; and (c) having conducted itself unreasonably and, or, in substance for its own benefit rather than for the benefit of the respondent as beneficiary of the trust.
3. Woodlawn relies (as it had done before his Honour) on the principle that a trustee is entitled to be indemnified out of the trust fund against "all his proper costs, charges and expenses incident to the execution of the trust" (see National Trustees Executors and Agency Company of Australasia Limited v Barnes [1941] HCA 3; (1941) 64 CLR 268 at 277 per Williams J) and on s 59(4) of the Trustee Act, which provides a statutory right of indemnity to the same effect.
4. Woodlawn argues that this principle applies to costs, charges and expenses incurred by it in defending the claims brought by MVIL even where its defence was unsuccessful, referring to the statement by Williams J in Barnes at 279 that: If a trustee is sued by beneficiaries who complain of some act or omission by the trustee, he is entitled to defend his conduct as an incident of such administration (In re Llewellin; Llewellin v. Williams [(1887) 37 Ch D 317 at 327]). Even if he fails in the suit, he may be allowed his costs out of the estate, but, if he succeeds, as in this case, he is clearly entitled thereto. (my emphasis)
5. Woodlawn complains that the primary judge did not refer in his reasons in the third judgment on the costs issue to the above passage in Barnes and nor did his Honour refer to the following authorities to which Woodlawn had made reference in its submissions: Llewellin (1887) 37 Ch D 317 at 327, where Stirling J said: A trustee is entitled in an ordinary case to recover out of the trust estate, as charges and expenses properly incurred, all his costs of an action which he has properly defended; of which the case of Walters v Woodbridge [(1878) 7 Ch D 504] is a very strong illustration; and so where a tenant for life has properly defended an action to restrain him from exercising his powers under the [Settled Land] Act the difference between solicitor and client and party and party costs would seem to me to be charges and expenses incidental to the exercise of the power. and Walters v Woodbridge (1878) 7 Ch D 504, where James LJ said (at 510): The Court is very strict in dealing with trustees, and it is the duty of the Court, as far as it can, to see that they are indemnified against all expenses which they have honestly incurred in the due administration of the trust.
6. His Honour did, however, refer to the contention made by Woodlawn that it was entitled to be indemnified as a matter of general law and expressly noted that this contention was made by reference to what Williams J had said in Barnes. Moreover, his Honour clearly addressed, albeit briefly and largely by adoption of MVIL's submissions on the point, the question whether the costs of defending the proceedings were incidental to the execution of the trust. Therefore, the complaint that his Honour did not refer to the particular passages in the above authorities does not assist Woodlawn. His Honour clearly had in mind the question whether a costs order should be made in Woodlawn's favour by application of the principle articulated in Barnes.
7. Woodlawn characterises the present litigation as a case where it was sued by MVIL (the beneficiary) which complained of some act or omission by it as trustee. In so doing, in my opinion it places disproportionate focus on the claim made by MVIL that it account to it as trustee for the trust fund and downplays the commercial benefit to or of the claims made in respect of the IMA and AMA.
8. Woodlawn points by way of example to Armitage v Nurse where an order limiting the trustees' entitlement to reimburse themselves out of the trust fund (to only 20% of their costs) because they were defending themselves and had taken points which cost money and in respect of which they were unsuccessful was set aside. At 263, Millett LJ (with whom Hutchison and Hirst LJJ agreed), referring to the circumstances in which it has been suggested that trustees may lose their right of recoupment for the costs of unsuccessfully defending themselves against an action brought by the beneficiary, made reference to statements in Turner v Hancock (1882) 20 Ch D 303 (at 305) to the effect that those rights "can only be lost or curtailed by such inequitable conduct on the part of a mortgagee or trustee as may amount to a violation or culpable neglect of his duty under the contract" and in In re Spurling's Will Trusts; Philpot v Philpot [1966] 1 WLR 920 at 935-936 to the effect that it is not enough, to deprive trustees of their right to recoup their costs out of the trust fund, that the claim is a claim to recover money from them for the benefit of the trust, and that "even if the claim succeeds, yet they may not have so conducted themselves as to lose their right of recoupment".
9. Woodlawn notes that in the present case it successfully defended itself against the s 925A claim (and a claim that the agreements were unenforceable having regard to provisions applicable under the law of Papua New Guinea - the s 46B claim), the value of which it says was about AUD 10m, as well as MVIL's claim for damages in relation to its trading (in which the damages claimed amounted to about AUD 7.6m). It notes that it succeeded in establishing its entitlement to accrued fees of AUD 3,591,155 (against which was offset the amounts it owed in respect of the GST and "fees on fees" issues). It also points out that his Honour rejected MVIL's claim that it was guilty of wilful breach. MVIL in response points out that although its claim for damages in relation to the trading claim failed, it succeeded in establishing that there had been breaches of the relevant agreements entitling it validly to terminate those agreements, as a consequence of which it successfully resisted the claim by Woodlawn to be entitled to early termination fees in a substantial amount.
10. MVIL argues that his Honour correctly found that Woodlawn could not rely on the indemnity under general law to recover its costs because the proceedings were not "incidental to the execution of the trust". MVIL submits, as it did at first instance, that this was an adversarial commercial dispute about Woodlawn's own rights and liabilities, including rights and liabilities that did not relate to the trust (such as Woodlawn's claims for fees payable under the AMA and for damages for injurious falsehood), and says that Woodlawn sued as a commercial litigant in its own right.
11. MVIL argues that a trustee which litigates in substance for its own benefit and not for the benefit of the fund is treated as any other litigant for the purpose of costs (referring to r 42.25(2) of the Uniform Civil Procedure Rules in this regard). It places reliance on what was said in Spencer v Fielder [2015] 1 WLR 2786 (at [27]) to the effect that what matters is whether, in substance, trustees who are parties to litigation are acting in the best interest of the trust rather than for their own benefit. (See also in this context the discussion in Frost v Bovaird [2012] FCAFC 60; (2012) 203 FCR 95 from [53]-[84].)
12. MVIL points out that his Honour's characterisation of the proceedings (as not being incidental to the execution of the trust) also prevents Woodlawn from relying on the right of indemnity under s 59(4) of the Trustee Act. It submits that the expenses concerned were not expenses incurred in or about execution of the trustee's trusts or powers but were expenses incurred by conduct outside the scope of the trust (referring to Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) [2002] NSWCA 29 at [9] and [14] per Spigelman CJ).

Consideration

1. In determining this issue, it is important to note that the general principles articulated in Barnes do not gainsay that there remains a discretion as to the application of those principles in circumstances where the trustee has unsuccessfully defended proceedings brought against it in its capacity as trustee (see Warton v Yeo [2015] NSWCA 115 per Basten JA at [6]). The trustee "may" in those circumstances be allowed costs out of the trust fund; but there may also be circumstances in which it is appropriate that the trustee not have the benefit of a costs order in its favour. There is no absolute rule in this regard. Moreover, while the circumstances in which a trustee may be deprived of a costs order include where it has acted with impropriety those are not the only circumstances in which that may be the appropriate result. It is also relevant to take into account whether the trustee has been acting in substance for its own benefit in the litigation (as reflected in UCPR r 42.25(2)).
2. In the present case, in my opinion his Honour did not err in concluding that Woodlawn had acted in substance for its own benefit in adversarial proceedings and was not litigating in the interests of the beneficiary (MVIL) or as an incident of the execution or administration of the trust. Certainly, the claims made by MVIL included claims made against Woodlawn in its capacity as trustee (requiring it to account for the trust fund that it had retained on termination of the proceedings) but in essence a very large part of the dispute was as to whether Woodlawn was entitled (as it had claimed it was) to charge substantial early termination fees on the termination of its respective appointments as investment manager and asset manager.
3. True it is that Woodlawn claimed a charge over the trust property the subject of the Trust Deed (that now being asserted to be not a charge but a contractual right having the same incidents as an equitable lien over the trust fund) until its claimed entitlement to fees had been determined. Ultimately, however, the right it had was no more than a contractual right to withdraw moneys from the trust fund to pay its own fees under the commercial agreements it had entered into with MVIL. The suggestion that this gave rise to a charge or an equitable lien was, with respect, a novel one and involved the conflation of Woodlawn's different capacities under the respective agreements.
4. As noted, in the course of the proceedings, the right Woodlawn maintained it was entitled to exercise when retaining the trust fund was variously described as an equitable lien, a charge, a contractual right supported by an equitable lien and a contractual right that has the same operation or terms as an equitable lien. At the time the repatriation request was refused, the funds retained exceeded by around AUD 4m the maximum amount of any fees claimed by Woodlawn. The suggestion that it was to the benefit of the fund that the amount of the accrued fees be ascertained and that this was germane to the administration of the fund, ignores the substantial commercial benefit Woodlawn sought to achieve through its cross-claim in the proceedings.
5. Both parties may be seen, in hindsight, to have made overarching claims. Nevertheless, it defies common sense not to conclude that Woodlawn was in substance acting for its own benefit in seeking the recovery of a substantial amount of fees claimed by it as owing not in its capacity as trustee but under commercial agreements by which it was appointed as investment/asset manager.
6. In those circumstances, his Honour did not err in my opinion in exercising his discretion as to costs against making an order that Woodlawn be indemnified for its costs of the proceedings.

Notice of contention

1. Having reached that conclusion, it is not necessary to consider ground 2 of MVIL's notice of contention, in which it seeks to support his Honour's conclusion on costs on two additional bases: first, the failure of Woodlawn to seek directions from the Court under s 63 of the Trustee Act to the effect that it was justified in defending the claim and bringing the cross-claim as trustee (referring to In re Beddoe; Downes v Cottam [1893] 1 Ch 547 and Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar the Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand [2008] HCA 42; (2008) 237 CLR 66); and, second, that as it was unsuccessful in the proceedings there was no clear entitlement on general law principles to the indemnity, and there would simply be a discretion in the court to allow an indemnity (referring to Barnes and Warton v Yeo to which I have referred already).
2. Woodlawn accepts that it did not apply for judicial advice before it filed its defence and cross summons (a step that the High Court in the Macedonian case at [74] considered to be necessary as a consequence of the provisions of s 63 of the Trustee Act) but points out that the High Court in that case did not address the question of the consequence of such a failure of a trustee and argues that it is a matter that goes only to the exercise of discretion under the general law and s 59(4) of the Trustee Act. Whether or not the failure to seek such advice should sound in an order depriving the trustee of its costs, it reinforces the characterisation of this litigation as being in the commercial interests of Woodlawn. In any event, this is not necessary to decide as I have already concluded that there was no error in the exercise of his Honour's discretion not to make an order indemnifying Woodlawn as trustee for its costs of the proceedings.

Application for leave to appeal re undertaking given by directors of Woodlawn

1. The final issue to be determined is MVIL's application for leave to appeal from the refusal of the primary judge to grant the relief sought by MVIL in June 2015 to enforce or give effect to the Undertaking given by Woodlawn's directors at the time the March freezing orders were varied to permit the release, inter alia, of funds to Woodlawn on account of accrued fees that had been found due to it under the AMA (which was, as noted earlier, an undertaking "to restore any funds released in the event that the Court was to so order").
2. The circumstances in which the Undertaking was given have already been summarised. In the present proceedings, it is accepted by the respondents to the leave application (i.e., the directors and Woodlawn, to whom I will refer in order to avoid confusion as the opponents) that the Undertaking is still on foot and that the Court could make an order for the restoration of the funds released to Woodlawn if it were disposed to do so (opponents' submissions at [20]; [40]). Indeed, the opponents rely on the subsistence of the Undertaking as a reason why leave to appeal from the fourth judgment should not be granted.
3. The final orders made in the proceedings on 21 April 2015 (by way of the adoption of short minutes of order agreed between the parties) included the following note: 4(c) The entitlement of [Woodlawn] to be paid accrued fees of $3,591,155 pursuant to its cross claim has been satisfied by it giving [MVIL] credit for fees overpaid and "fees on fees" totalling $633,634 and the payment of $2,957,521 pursuant to the orders made on 17 December 2014.
4. After the final orders were made, Woodlawn released the balance of the trust funds that it held to MVIL. However, Woodlawn has not paid the judgment debt of AUD 4,807,635.71 (which represents the pre-judgment interest it was ordered to pay).
5. By notice of motion filed on 12 May 2015, MVIL sought orders to give effect to the Undertaking, including an order that the directors of Woodlawn pay to it the sum of AUD 2,957,521 (i.e., an amount equivalent to the amount that had been released to Woodlawn pursuant to the November 2014 variation of the March freezing orders). The relief sought included in the alternative an order that the directors pay the said amount to Woodlawn as trustee for MVIL and that Woodlawn, forthwith on receipt of that amount pay it to MVIL "in partial reduction of paragraph 3 of the judgment entered on 21 April 2015".
6. Woodlawn maintains that the orders sought by MVIL had no connection with the Undertaking, since they were directed at the payment of moneys by the directors personally, not by Woodlawn, and did not seek that the directors procure Woodlawn to restore the funds "so released" to Woodlawn as trustee of the fund (but had sought the payment of that amount to MVIL).
7. His Honour heard the motion on 26 June 2015 and dismissed it with costs, delivering ex tempore reasons for that decision (the fourth judgment). His Honour considered that the fact that it was open to MVIL to enforce its judgment against Woodlawn, whose entitlement to be paid "has been satisfied" by the interlocutory release of funds, weighed against the exercise of discretion in favour of MVIL to enforce the Undertaking ([24]-[25] of the fourth judgment).
8. MVIL contends that his Honour erred by misconstruing the Undertaking and that, in any event, his Honour's discretion miscarried in the House v R sense. In its draft notice of appeal, it seeks an order that the directors pay the said sum to Woodlawn to hold on trust for MVIL. (It no longer seeks an order for payment by the directors of that amount direct to it.)
9. The errors identified by MVIL in his Honour's refusal to grant the relief it sought may be summarised as follows.
10. First, MVIL submits that his Honour did not take into account all the circumstances in which the Undertaking was proffered, including his Honour's expressed reasons for accepting the Undertaking, and in effect erroneously construed the purpose and effect of the Undertaking as being a question "of unconfined discretion".
11. MVIL maintains that enforcement of the undertaking was governed or directed by its purpose and that this was as security for the repayment of the money paid to Woodlawn if, after any set-off (consequent upon the determination of the outstanding GST/fees on fees issues) Woodlawn owed MVIL more than the balance of the then frozen trust fund.
12. MVIL notes, by reference to European Bank Limited v Robb Evans of Robb Evans & Associates [2010] HCA 6; (2010) 240 CLR 432 at [14]-[18], that interlocutory undertakings are often designed to protect parties from the consequences of an interlocutory decision should it ultimately turn out not to be the correct way of adjusting the interests between the parties and maintains that the Undertaking given by the directors was the same or analogous to the kind of undertaking to be proffered as the "price" for interlocutory relief such as the usual undertaking as to damages. It submits that, while there is a discretion not to enforce an undertaking of that type, the discretion is directed to disentitling conduct by the successful party and is confined (referring to Financial Services Authority v Sinaloa Gold plc [2013] UKSC 11; [2013] 2 AC 28 at [18]-[19], applying F Hoffman-La Roche & Co AG v Secretary for Trade and Industry [1975] AC 295 at 361E).
13. MVIL points to the language used when the Undertaking was given, namely that it was "for the return of the fund if called upon to do so" and that it was proffered as a personal undertaking from the directors "in support of Woodlawn", 17 December 2014); and argues that, by analogy with the usual undertaking as to damages, the Undertaking was proffered as the "price" for the release of funds to Woodlawn in the context of the uncertain outcome of the claims then still to be decided by the Court and the potential liability and inability of Woodlawn to pay a judgment debt in excess of the balance of the then frozen trust fund.
14. The opponents do not cavil with the proposition gleaned by MVIL from Robb Evans but point out that the Court there (at [14]) emphasised that the undertaking (there, an undertaking as to damages) is given to the court for enforcement of the court and is not a contract between the parties or other cause of action on which one party can sue another. They also argue that the analogy sought to be drawn with the usual undertaking as to damages is flawed.
15. The opponents submit that the Undertaking was not given as a form of security or promise on which MVIL could sue the directors but was for the enforcement by the court. They argue that the "comfort" the primary judge said he drew from the Undertaking was not related to the facilitation of debt collecting by MVIL but was because it enabled the court to reconstitute the fund if thought fit. They further submit that the usual undertaking as to damages is "typically" occasioned by a judgment that goes against the party giving the undertaking and note that in the present case the final judgment resolved the question of its entitlement to be paid the AUD 2.9m in its favour.
16. The second perceived error is identified as being that, having misconstrued the Undertaking, his Honour erroneously took into account the impact of the events following the interlocutory release of the funds (including the final orders and commencement of proceedings in this Court) as favouring making no further order. MVIL submits that the impact of the events following the release of the funds constituted good reason to make the order.
17. MVIL points to the fact that the final orders reserved to it liberty to apply and noted the continuing effect of the undertaking unaffected by the orders. It maintains that, once it became clear that Woodlawn was not prepared to satisfy the judgment debt, in the absence of countervailing factors the court's discretion should have been exercised to correct the interlocutory adjustment by holding the directors to their Undertaking. It further submits that the existence, at the time the motion was heard, of the appeal proceedings was not a reason for refusing an order (though it accepts it may have been a reason for staying the order) and submits that this involves House v R error.
18. MVIL notes that his Honour had earlier in his reasons referred to the purpose of the Undertaking as protecting MVIL against the risk of Woodlawn's non-compliance with the final orders (see [26] of the fourth judgment; [19] of the second judgment) and says that this is inconsistent with what was said at [28] of the fourth judgment as to the existence of the appeal proceedings.
19. MVIL also points to the fact that his Honour did not accept an argument by Woodlawn in November 2014 that the funds should not be released to MVIL because of the possibility of an appeal (second judgment at [9] and [10]), and says that the possibility of an appeal was similarly not the reason for the court's acceptance of the Undertaking from Woodlawn's directors (second judgment at [19]).
20. The third perceived error is said to be an error in concluding that the form of the 21 April orders could not be reconciled with the enforcement of the Undertaking and that this was a matter that weighed against the exercise of discretion in MVIL's favour (see [27] of the fourth judgment).
21. MVIL maintains that on the proper construction of the Undertaking there was nothing in the form of the 21 April orders to prevent the Court from enforcing the Undertaking and argues that this is also an error in the House v R sense.
22. Fourth, it is submitted that his Honour erred in considering that only Woodlawn, and not its directors, could "restore" moneys to the trust fund (see [21] of the fourth judgment).
23. In response to those complaints, the opponents submit that on entry of the final judgment the question of entitlement of the AUD 2.9m as between MVIL and Woodlawn was res judicata and there was no basis upon which the primary judge could rationally and consistently order that a sum be repaid by Woodlawn in face of a final judgment that it was entitled to be paid that sum; nor was there any basis for an order that the directors do so if such an order could not be made against Woodlawn.
24. Finally, MVIL submits that there was no principle preventing third parties (the directors) from paying money to a trustee to be held on trust and therefore his Honour wrongly considered that only Woodlawn could restore moneys to the trust fund. It submits that unless the Undertaking allowed for or required the directors to reconstitute the fund if called upon to do so, then it had no content and that, objectively, it could not have been intended to have no content.
25. The essence of the response by the opponents to the proposition that his Honour erred in not giving relief by reference to the Undertaking is to the effect that it was acknowledged in the note to the court orders that release of the funds to Woodlawn operated as payment as against an entitlement that had already been found as a matter of right and that what is now sought by MVIL is a duplicated claim of right as to the same fund. The opponents argue that Woodlawn had the benefit of a finding not only that it was entitled to the accrued fees but also that it was entitled to be paid those fees out of the trust fund pursuant to cl 6.3 of the AMA and note that there was no appeal against those findings. In those circumstances it is argued that the claim against the directors is an attempt to recover the same amount of money for the second time. The argument is that the Undertaking was premised on the basis that the moneys would be restored because a claim to those moneys had been established as against Woodlawn; and that there was no such finding.

Consideration

1. I am not persuaded that his Honour erred in the exercise of his discretion in the House v R sense, so as to warrant appellate intervention. His Honour's reasons do not indicate that his Honour considered that he was exercising an unconfined discretion in the sense suggested by MVIL. His Honour was clearly mindful of various factors, including the circumstances in which the Undertaking was proffered, the orders that had been made, and the events as they had transpired at the conclusion of the hearing. His Honour did not fail to take into account considerations that should have been taken into account and the considerations he did have regard to were relevant to the exercise of his discretion. The weight that his Honour placed in balancing those various considerations did not disclose an error of principle nor was the result so manifestly wrong as to bespeak an error of the kind required to warrant interference by this Court.
2. Leaving aside the opponents' argument that the directors could not "restore" the fund because the sum in question was released to Woodlawn (which seems to me an exercise in semantics), the purpose of the Undertaking, as is apparent from the transcript of the occasion when it was proffered, was to provide a mechanism by which the fund the subject of the March freezing orders could be restored (relevantly, for the benefit of MVIL though I note that a similar undertaking was given in Woodlawn's favour by MVIL) if it transpired (as it did) that there were further adjustments to be made as to the amount owing to Woodlawn, or payable to MVIL, once the matter had been finally determined.
3. The Undertaking must be seen as having been given by the directors and accepted by his Honour on the basis that if it later transpired that there were additional amounts to be set-off against the amount to which his Honour had held Woodlawn was entitled in respect of its accrued fees, such that MVIL would be prejudiced by any of the "frozen" fund having been released prior to the final determination of all issues in the proceedings, then the directors would make good (and in that sense restore) an equivalent sum to that which had been released to Woodlawn if required to do so.
4. The complaint by MVIL, in effect, is that had the Undertaking not been given Woodlawn would have retained the sum in question (subject to the March freezing orders) and this would have enabled MVIL to offset (against a judgment for the accrued fees in favour of Woodlawn) the judgment it ultimately obtained for pre-judgment interest. I am not unsympathetic to that complaint. The directors of Woodlawn in effect secured payment to the company, in advance of the final determination of all the issues in the proceedings, of moneys to which Woodlawn had been held to have a contractual entitlement but against which there was the prospect of a set-off in MVIL's favour once the remaining issues in the proceedings were determined. MVIL is now in the position that Woodlawn has not met a liability that could otherwise have been partially discharged by way of set-off of the respective judgments. It seems to me that the character of the funds being retained by Woodlawn as trust funds does not relevantly change that situation. In other words, it does not seem to me that it would be necessary, to enliven the Undertaking, that there be established a liability on the part of Woodlawn of a particular character (such as a liability of it as trustee to reconstitute the trust fund or to restore to it amounts wrongly appropriated from the trust fund).
5. Moreover, to the extent that the opponents rely on the terms of the consent orders in support of their resistance to enforcement of the Undertaking, that raises concerns as to whether on the construction now advanced the Undertaking had any real content at the time it was proffered (though Senior Counsel for Woodlawn was adamant that it did).
6. Nevertheless, it was a question of discretion as to whether his Honour considered that in all the circumstances there should be an order enforcing or giving effect to the Undertaking. His Honour was not persuaded that the directors should be required, in effect, to pay back the amount that had been released to Woodlawn and hence to reconstitute the trust fund. Reasonable minds may well have differed as to whether the Undertaking should be enforced. That is not to the point. I am not persuaded that his Honour erred in the exercise of his discretion in the House v R sense such as to warrant appellate intervention in this regard. I would therefore refuse leave to appeal with costs.

Conclusion

1. For the reasons set out above I would dismiss the appeal and, subject to the relief to be granted consequent upon my conclusion as to the operation of cl 5 to release costs in relation to particular issues in the proceedings, the cross-appeal.
2. As to the costs of the appeal, the end result is that, apart from the variation in the costs order (which may or may not ultimately produce a more favourable outcome for Woodlawn and which will presumably lead to the incurring by both parties - absent agreement as to the apportionment of costs between the respective issues - of yet more costs being incurred in the costs assessment exercise), Woodlawn has been unsuccessful in its challenge to his Honour's decisions. In those circumstances, I consider that MVIL has in substance been the successful party on the appeal and should have its costs of the appeal.
3. The orders I propose are as follows: 1. Appeal allowed in part. 2. Set aside order 6 of the orders made on 21 April 2015 and in lieu thereof order 6 should be as follows: 6(a) Woodlawn pay MVIL's costs on the party/party basis of the following issues: 1. the liability of Woodlawn to account to it for the balance of the funds retained by Woodlawn after termination of the respective agreements between the parties in November 2011 (after the deduction of those accrued fees that were established to be owing under the Asset Management Agreement); 2. the liability of Woodlawn to restore to the trust fund, and account to MVIL for, amounts wrongly appropriated in respect of GST and the "fees on fees" issue; 3. the claim by MVIL for pre-judgment interest; and 4. the claim by Woodlawn for damages for injurious falsehood. 6(b) MVIL pay Woodlawn's costs on the party/party basis of the following issues: 1. the s 925A issue and s 46B claim; and 2. MVIL's claim for damages for breach of the IMA in respect of its trading activities and for misleading and deceptive conduct (other than the costs of MVIL in establishing the existence of events of default entitling it validly to terminate the respective agreements) and the claim for accrued fees under the AMA. 1. Order Woodlawn to pay MVIL's costs of the appeal. 2. Dismiss with costs the cross-appeal. 3. Dismiss with costs the application by MVIL for leave to appeal from the decision of Stevenson J of 26 June 2015.
4. GLEESON JA: I have had the advantage of reading in draft the comprehensive reasons of Ward JA. I agree with the orders proposed by Ward JA for the reasons given by her Honour.

Amendments 11 March 2016 - Typographical amendments DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 11 March 2016