New South Wales Supreme Court CITATION : Tilley v Hunt [2004] NSWSC 558 HEARING DATE(S) : 30 April 2004 JUDGMENT DATE : 30 April 2004 JURISDICTION: Equity Division JUDGMENT OF : Windeyer J at 1 DECISION : Order that subject to orders already made the statement of claim be dismissed. Order that the first defendant pay 75 per cent of the plaintiff's costs of the proceedings. Order costs of the first defendant be borne by her and that she not be indemnified out of the trust estate for those costs or her costs of the proceedings. No order as to costs of the second defendant. CATCHWORDS : TRUSTS AND TRUSTEES - breach of trust through failure to lend moneys on security directed by court order - only remaining issue question of costs Michelle Jane Tilley (Plaintiff) PARTIES : Larraine Jean Hunt (First Defendant) Donald Jeffrey Hunt (Second Defendant) FILE NUMBER(S) : SC 2400 of 2002 COUNSEL : Mr M K Condon (Plaintiff) Mr L Ellison with him Mr J Patey (Defendants) SOLICITORS : Gathercole & Associates (Plaintiff) Roberts Mann (Defendants) - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION WINDEYER J FRIDAY 30 APRIL 2004 2400/02 MICHELLE JANE TILLEY v LARRAINE JEAN HUNT & ANOR JUDGMENT 1 HIS HONOUR: In this matter orders have been made in the past which have disposed of some of the matters in question and as a result of subsequent actions which have resulted in the mortgage previously in question being extended, the road which was originally between lots 10 and 11 referred to in the proceedings has been brought into the mortgage security. No further orders are necessary in the proceedings other than an order as to costs. In other words, it has been agreed that, as a result of the orders which have been made so far on the statement of claim and the events which have happened since then, the statement of claim can be otherwise dismissed and shortly I will make that order. 2 The only matter that remains is the question of costs. This matter commenced by summons filed on 22 April 2002 under which the plaintiff sought declarations that she was entitled to a trust beneficiary for a one quarter share of the profits, which I will refer to as the Greens Road Lower Portland property, and sought an order extending the operation of caveats which she had entered against those properties. An interlocutory order was made by Master McLachlan extending the operation of the caveats until further order. 3 Some six months later an order was made that the proceedings go ahead on pleadings and the plaintiff filed a statement of claim. In that document the plaintiff claimed a continued extension of the caveats until the proceedings were determined or an injunction restraining the defendants, who are the registered proprietors of the Greens Road land, from dealing with that land until the proceedings were determined and then sought an order for removal of the first defendant, who is the mother of the plaintiff, as a trustee of the trust, and that another person be appointed as trustee in her place, and she sought subsequent orders for the taking of accounts. 4 It is not necessary to go into the detailed history of the matter. In essence, as a result of Family Law proceedings, an order was made that an amount of money which came from the sale of a particular property be invested on terms of a trust or mortgage on the security of the Greens Road property. The plaintiff has a contingent interest in the trust asset, namely, the mortgage fund, dependent upon her surviving her mother, who is the life tenant. It follows that, although the mortgage provided for interest to be paid, as the first defendant is entitled to the income, and the property is in the name of her husband and herself, there was no purpose in her paying interest to herself. This appears to have been one of the original claims, but there was no foundation for it, in my view. There were, however, two problems with the trust fund. First, for reasons which are difficult to fathom, the mortgage when it came to be registered was not registered over the whole of the Greens Road land, but only over part of it. The part over which it was not registered has been used as security for another loan, nothing to do with the trust. On any basis, this was a breach of trust. 5 The second matter which was at least of some concern was that the mortgage provided that the principal sum should be repaid on a date in February 1992. It was, of course, not paid and the terms of the mortgage make it clear that it was envisaged that it could well have been left as a security overdue, but nevertheless continuing. The plaintiff or her advisers felt that there could be a problem in that an action for payment of the principal sum might have become statute-barred in February 2004. It is not necessary to decide whether or not acknowledgments or signatures to various trust accounts would have amounted to an acknowledgment. 6 What has happened since these proceedings commenced is that the first defendant, Mrs Hunt, has provided a valuation of the land which is the subject of security to the trust which has satisfied the plaintiff that the security is sufficient. It appears that the land is worth about double the sum secured on it. There is no longer any problem with that. Next, an additional trustee has been appointed to the trust. There were originally three trustees. Two of those trustees resigned or purported to resign and it has been agreed that these resignations ought to be treated as effective. An additional trustee has been appointed and the plaintiff no longer presses for the removal of the first defendant as trustee. Mr Cottell was appointed as trustee with the first defendant, by an order which I made at an earlier stage in the proceedings. The caveats have been removed from both parts of the property. It is not necessary, therefore, to decide whether or not the plaintiff had a caveatable interest in the land over which the mortgage was given or ought to have been given. 7 As a contingent remainderman in a trust fund, the asset of which is the mortgage in question, it is at least highly doubtful whether there was a caveatable interest at the time the original order extending the caveat was made. It could well have been proper for the Master to have thought that, in the words of the section, "the plaintiff may have an interest" had the matter gone to a final hearing. It is at least very doubtful indeed whether she would have been found to have an interest. On the other hand, she did have a right to ensure that the trust was properly administered and if there were some threat about this, which would probably have been thought to be a threat if part of the mortgage security was taken out of the security, then it is at least likely that she would have had a right to an injunctive order. None of that needs to be decided now except to give some indication of the claims made and the strength of the claims. 8 The fact now is that the plaintiff's position has been secured insofar as she has a right to have the trust properly administered. It seems clear that it is only as a result of these proceedings that a new additional trustee has been appointed to act with the first defendant, that the new mortgage over what might be described as the road land separating the two parts of the Greens Road land has been obtained, and the existing mortgage over Lot 10, has been extended, so that if a problem arose through the Limitations Act it will no longer arise. 9 None of that, it seems, would have happened had the proceedings not been commenced, therefore, it seems to me that what has happened is, although not necessarily by way of surrender, that the plaintiff is protected in the way in which she was entitled to be protected and is unlikely to have been protected had the proceedings not have been brought. It was only at the last minute that the first defendant produced evidence to show that, although there was a breach of trust, there did not appear to have been any damage to the trust beneficiaries of which, of course, she is one, and bearing in mind always that at the present moment she is entitled to the income from the trust estate. 10 It follows from this that, first, there is no basis upon which the costs of the first defendant should be ordered to be paid by the plaintiff. Second, that, insofar as the plaintiff has been successful but not completely successful, in view of the caveat application, she would be entitled to, generally speaking, an order for an appropriate amount of her costs to be paid by the first defendant. Thirdly, that, in my view, there would be no basis upon which the first defendant should be entitled to her costs out of the trust estate. 11 It is, however, not appropriate, in view of the time which was spent on the caveat claim, which I do not think was particularly great, that there should be a reduction in the plaintiff's costs, and I propose that her costs be limited to 75 per cent of her costs of the proceedings. 12 So far as the second defendant is concerned, to some extent he is an innocent party in this. He is married to the first defendant. It was land of which he is one of the registered proprietors which is subject to the mortgage and land of which he is one of the registered proprietors which ought to have been subject to the mortgage, but was mortgaged to another lending authority. There should be no costs order against Mr Hunt neither should he get costs. In any event, it is not suggested that there should be separate costs. 13 Order that subject to the orders already made the statement of claim be dismissed. Order that the first defendant pay 75 per cent of the plaintiff's costs of the proceedings. Order costs of the first defendant be borne by her and that she not be indemnified out of the trust estate for those costs or her costs of the proceedings. No order as to costs of the second defendant. Exhibits can be returned. ********** Last Modified: 06/25/2004 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.