New South Wales Supreme Court CITATION : Metropolitan Petar v Mitreski [2006] NSWSC 336 HEARING DATE(S) : 18 & 19 April, 2 & 4 May, 7 June, 28 & 29 July, 15 & 16 September, 6 & 18 October and 2 November 2005 JUDGMENT DATE : 27 April 2006 JURISDICTION : Equity JUDGMENT OF : Hamilton J DECISION : Sixth defendant restrained from using for future costs of these proceedings with certain exceptions property the subject of the plaintiffs' judicial advice application. Application for injunction otherwise refused. CATCHWORDS : EQUITY [338] Equitable remedies - Injunctions - Interlocutory injunctions – Application to restrain use of property alleged to be subject to charitable trust to pay defendants' costs of proceedings - Appropriate balancing exercise. LEGISLATION CITED : Supreme Court Rules 1970 Part 52A r 42 Uniform Civil Procedure Rules 2005 r 42.25 Alsop Wilkinson (A Firm) v Neary [1996] 1 WLR 1220 Application of Macedonian Orthodox Community Church of St Petka Incorporated [2004] NSWSC 388 Application of Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2005] NSWSC 558 Chandler v Church Chancery Division 21 December 1987 unreported Harman J Drummond v Drummond [1999] NSWSC 923 Hayman v Equity Trustees Ltd (2003) 8 VR 548 His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia & New Zealand v Macedonian Orthodox Community Church St Petka Incorporated NSWCA 8 December 2004 unreported Kirwan v Cresvale Far East Ltd (in liq) (2002) 44 ACSR 21 Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 Metropolitan Petar v Mitreski [2003] NSWSC 262 Metropolitan Petar v Mitreski [2003] NSWSC 1089 Metropolitan Petar v Mitreski [2004] NSWSC 210 CASES CITED : Metropolitan Petar v Mitreski [2004] NSWSC 439 Metropolitan Petar v Mitreski [2005] NSWSC 330 Metropolitan Petar v Mitreski [2005] NSWSC 331 Metropolitan Petar v Mitreski [2005] NSWSC 332 Metropolitan Petar v Mitreski [2005] NSWSC 384 National Trustees Executors and Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 PCW (Underwriting Agencies) Ltd v Dixon [1983] 2 All ER 158 Re Beddoe; Downes v Cotton [1893] 1 Ch 547 Re Biddencare Ltd [1994] 2 BCLC 160 United Mizrahi Bank Ltd v Doherty [1998] 1 WLR 435 Walters v Woodbridge (1878) 7 Ch D 504 Biscoe on Mareva and Anton Piller Orders (2005) [6.21] Meagher, Gummow & Lehane's Equity Doctrines and Remedies (4th ed, 2002) [21-375], [21-380] His Grace Metropolitan Petar, the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand (P1) The Very Reverend Father Mitko Mitrev (P2) Lambe Mitreski (D1) Pero Damceski (D2) PARTIES : Boris Minovski (D3) Eftim Eftimov (D4) Mile Marcevski (D5) Macedonian Orthodox Community Church St Petka Incorporated (D6) Naum Despotovski (D8) Attorney General for State of NSW (D9) FILE NUMBER(S) : SC 3369/97 B A J Coles QC, T G R Parker SC and R E Steele (Ps) COUNSEL : G O Blake SC and C Sclavos (Ds1 - 6 & 8) R Lancaster and Dr M McFadden (D9) Sachs Gerace Lawyers (Ps) SOLICITORS : McConnell Jaffray (Ds1 - 6 & 8) I V Knight, Crown Solicitor (D9) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J THURSDAY, 27 APRIL 2006 3369/97 HIS EMINENCE PETAR THE DIOCESAN BISHOP OF THE MACEDONIAN ORTHODOX DIOCESE OF AUSTRALIA & NEW ZEALAND & ORS v LAMBE MITRESKI & ORS JUDGMENT 1 HIS HONOUR: This is an application by notice of motion filed on 14 March 2005 for an interlocutory injunction restraining the sixth defendant from: (a) applying or using any moneys held by the sixth defendant; and (b) encumbering or charging any property held by the sixth defendant, for the purpose of payment of the legal costs and disbursements incurred by the sixth defendant otherwise than in accordance with: (c) the order of Palmer J in the application for judicial advice Application of Macedonian Orthodox Community Church of St Petka Incorporated [2004] NSWSC 388, which order was made on 7 May 2004; (d) any further order of the Court in the judicial advice application; or (e) any other order of the Court. In this judgment the first to sixth and eighth defendants are collectively referred to as "the defendants". The Attorney General is the ninth defendant. 2 The defendants at my direction furnished a list of the payments that they propose to make if not restrained. That is in the form of a letter from the defendants' solicitor to the plaintiffs' solicitor dated 8 September 2005 and attachments. That was not marked as an exhibit, but has been treated as a submission. It should be noted that the defendants in that document eschewed any intention to make any payment for costs out of the land at 66 Railway Street Rockdale on which the church building stands ("the church site") and the chattels constituting Holy Objects. 3 The issues which arise in the determination of an interlocutory injunction application were discussed by McLelland J in Kolback Securities Limited v Epoch Mining NL (1987) 8 NSWLR 533 at 535 as follows: "As I see it, the position is as follows. Where a plaintiff's entitlement to ultimate relief is uncertain, the Court, in deciding to grant or refuse an interlocutory injunction, must consider what course is best calculated to achieve justice between the parties in the circumstances of the particular case, pending the resolution of the uncertainty, bearing in mind the consequences to the defendant of the grant of an injunction in support of relief to which the plaintiff may ultimately be held not to be entitled, and the consequences to the plaintiff of the refusal of an injunction in support of relief to which the plaintiff may ultimately be held to be entitled: see, eg, Appleton Papers Inc v Tomasetti Paper Pty Ltd [1983] 3 NSWLR 208 at 216; A v Hayden (No 1) (1984) 59 ALJR 1 at 4-5; 56 ALR 73 at 79. Where the uncertainty depends in whole or in part on a contested question of fact it is not appropriate for the Court to decide that question on the interlocutory application. Where the uncertainty depends in whole or in part on a contested question of law, it may or may not be appropriate for the Court to decide that question on the interlocutory application, depending on circumstances, eg, whether the question is novel or difficult, or is susceptible of resolution on the present state of the evidence, or whether the urgency of the matter renders it impracticable to give proper consideration to the question: see, eg, A v Hayden (No 1) (at 4; 78); Cohen v Peko-Wallsend (1986) 61 ALJR 57 at 59; 68 ALR 394 at 397. If the Court does decide the question of law the uncertainty is to that extent removed. Unless the plaintiff shows that there is at least a serious question to be tried which if resolved in its favour would entitle it to final relief, then the requirements of justice as between the parties will dictate that an interlocutory injunction should be refused: Australian Coarse Grain Pool Pty Ltd v Barley Marketing Board of Queensland (1982) 57 ALJR 425; 46 ALR 398; Tableland Peanuts Pty Ltd v Peanut Marketing Board (1984) 58 ALJR 283; 52 ALR 651; A v Hayden (No 1) ; Castlemaine-Tooheys Ltd v South Australia (1986) 60 ALJR 679; 67 ALR 553 and Cohen v Peko-Wallsend Ltd ." His Honour at 536 indicated that, in general terms, the strength of the applicant's case will not be assessed, with exceptions not material to the present application. 4 On this application a deal of evidence was led and extensive submissions were made, written and oral. I have dealt with this evidence and these submissions in these reasons for judgment only so far as I have found it necessary for the purpose of determining the application before me. FACTS 5 The application can be determined only in the light of relevant history. 6 There has already been one trial in these proceedings in relation to questions ordered to be decided separately. Those questions were, as set out in Metropolitan Petar v Mitreski [2003] NSWSC 262 ("my substantive judgment") at [47]: "(a) Whether the property referred to in Schedule A and any other property referred to in paragraph 11 of the Further Amended Statement of Claim ("the Property") was, prior to it being vested in the Sixth Defendant, held upon any and if so what trust, (i) for the purposes of the Macedonian Orthodox Church (as that term is defined in the Further Amended Statement of Claim); (ii) for some other purpose or beneficiary,. And [sic] if so what purpose or beneficiary. (b) Whether any trust found under (a) above is a valid charity. (c) Whether effect of the vesting of the Property in the Sixth Defendant was that the Sixth Defendant thereafter held the Property free of either trust.'" 7 In my substantive judgment, delivered on 4 April 2003, I answered those questions as follows at [102]: "(a)(i) & (ii) The property referred to in Schedule A was prior to the transfer of the legal titles to the sixth defendant held upon trust to permit the trust property to be used by The Macedonian Orthodox Church St Petka Rockdale as a site for a church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox Religion. I am unable on the evidence to answer the question as to other property. (b) Yes. (c) No. " 8 I determined the form of declarations to be made as a result of those answers as follows. Those orders have, at the request of the parties, not finally been made, to the intent that there should ultimately be only one set of orders and, consequently, one substantive appeal in the proceedings. See Metropolitan Petar v Mitreski [2003] NSWSC 1089 at [3]: "The orders that I propose to make are as follows: 1 Declare that the property referred to in Schedule A hereto ("the trust property") was prior to the transfer of the legal titles to the sixth defendant held upon charitable trust to permit the trust property to be used by the Macedonian Orthodox Church St Petka Rockdale NSW Australia as a site for a church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement practice and promotion of the Macedonian Orthodox Religion ('the trust'). 2 Declare that in accordance with the terms of the trust and in the events which have happened the trustee is bound to permit the sixth defendant to use the trust property as a site for a church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement practice and promotion of the Macedonian Orthodox Religion." The relevant Schedule A is attached as Schedule A to this judgment. I shall refer to the trust to which I have decided the Schedule A property is subject as "the declared trust". 9 There remain for trial a large number of issues, including issues as to whether the property of the sixth defendant other than the Schedule A property is subject to the declared trust; whether a large variety of conduct of the defendants was or was not in breach of trust; and whether the sixth defendant should be removed as trustee. 10 At the time of the first trial and of my substantive judgment, the relevant form of the statement of claim was the further amended statement of claim filed on 14 December 2001. That did not contain any allegation that the defence of the proceedings was itself a breach of trust. 11 The first time that such an allegation surfaced was in a letter from the plaintiffs' solicitor to the defendants' solicitor on 12 November 2003 as follows: "In particular, our clients are concerned about the funding of your client's defence in these proceedings. On the face of it, funds that, on His Honour's findings, are required to be held for the purposes of a charitable trust are being expended on maintaining a defence that involves denying the existence of such a trust and, in the alternative, seeking to protect the Sixth Defendant's position as trustee. If His Honour finds that such expenditure is a breach of trust, the Sixth Defendant, and possibly others, will be liable to repay it. On the face of it, the Sixth Defendant lacks assets of its own from which it could meet such a liability. If you are able to correct this assumption, please do so. In these circumstances, our clients see it as quite inappropriate that the Defendants should continue to fund their defence of the litigation out of assets that are prima facie trust assets. The Defendants would, of course, be entitled to raise their own funds. [sic] separate from the trust assets, for the purpose of defending the proceedings; but so far as our clients are concerned, that is not what is happening." In terms, that letter referred only to conduct involving breach of trust by a defence denying the existence of the trust. 12 The first pleading allegation that the defence of the proceedings was itself a breach of trust was made in the fourth amended statement of claim filed on 26 November 2003, in which was inserted the following paragraph: "29E The Association has defended these proceedings by denying the trust alleged in paragraphs 16 and 19 above and by asserting that the parish property is not held upon trust, or alternatively is held upon trust subject to the constitution of the Association." That conduct was alleged by paragraph 30 to be a breach of trust. It is important to note for the purposes of this application that the parish property referred to was the limited property referred to in Schedule A. In par 29F it was alleged that the sixth defendant had expended moneys which formed part of the parish property in mounting the defence referred to in par 29A [sic]. The reference to par 29A simply does not make sense. To any extent that the allegation in the letter of 26 November 2003 or in par 29E above was true at one time, it was no longer true after the delivery of my substantive judgment, since the defendants did not thereafter contend for any form of trust other than a trust in the form of the declared trust. 13 Until early 2004, the sixth defendant from time to time paid the defendants' solicitor's costs out of funds of the sixth defendant. No complaint at all was made about this course of conduct until the letter of 26 November 2003 and then, as will be seen by reference to [12] above, that complaint was made in a context where the breach of trust formally alleged in the proceedings was limited to the Schedule A property and did not extend to all property of the sixth defendant. 14 On 9 March 2004 the plaintiff's solicitor, despite what was said in his letter of 26 November 2003, alleged in a letter to the defendants' solicitor that the expenditure even of money collected by the sixth defendant specifically for the defence of the proceedings would be in breach of trust. 15 An application to restrain the sixth defendant from expending funds on costs was included in a multi partite application for interlocutory relief which was heard on 22 and 23 March 2004. The injunction which the plaintiff then sought was in similar terms to the injunction now applied for, in that it was sought to restrain the use by the sixth defendant of any of its funds to pay costs outstanding to its lawyers. On 23 March 2004 I dealt with that application in Metropolitan Petar v Mitreski [2004] NSWSC 210. Concerning that head of the application, I said: "8 There has been further debate about whether or not I should at least grant an injunction restraining the use by the sixth defendant of any of its funds to pay costs outstanding to its lawyers. The sixth defendant is proceeding to obtain judicial advice concerning this matter. I am told that there is no intention at present to make payment to the lawyers out of any funds of the sixth defendant or for the lawyers to receive any payment pending the obtaining of that judicial advice. The fact that the sixth defendant is proceeding to obtain that advice bespeaks a care on its part to use funds only in proper circumstances. On the application for restraint, I bear this fact in mind. I also bear in mind that it is not clear that all funds of the sixth defendant are impressed with this trust. There is, for instance, no reason to think that the funds recently raised by appeal for the costs of the litigation are impressed with the trust. But, further than that, I have already said that it is far from clear on the evidence that all of the funds of the sixth defendant are impressed with the trust. On all the evidence, in the exercise of my discretion, I decline to grant relief of this sort." There was much less evidence on that application than has been led on the present application. 16 At about that time, the defendants' advisors became sufficiently alarmed about the position to institute separate proceedings for judicial advice. Those proceedings were commenced by a summons filed in April 2004. The summons sought judicial advice as to whether it would be justified: "(a) in defending the proceedings or alternatively in defending the proceedings until 9 July 2004 or such other time as the Court determines; (b) in seeking relief under s 85 of the Trustee Act 1925 (NSW) in respect of any breach of trust; (c) in disposing or encumbering the real estate in Schedule A of Metropolitan Petar v Mitreski [2003] NSWSC 262 other than the property known as 66 Railway Street, Rockdale and/or any other property it holds and applying monies thereby obtained or monies comprising such property in payment of its reasonable costs (including fees and disbursements charged by legal practitioners) of the Proceedings." 17 A first judgment in those proceedings was delivered by Palmer J on 7 May 2004: Application of Macedonian Orthodox Community Church St Petka Incorporated supra ("the first Palmer judgment"). At that stage the second trial was fixed to commence before me for three weeks commencing on 9 August 2004, although that fixture has since been vacated by reason of the pendency of the judicial advice proceedings. His Honour made a number of pertinent points in that judgment. These included that the defendant would not be able to conduct its defence at the second trial unless it had recourse to the Schedule A property, which was undisputedly trust property: [8]. In [9], his Honour adverted to the fifth amended statement of claim which, although not then filed, would allege that the expenditure of such money in defence of the proceedings would in itself be a breach of trust. It was for that reason that the sixth defendant sought judicial advice as to whether it would be justified in disposing of or encumbering the Schedule A property other than the church site and applying moneys thereby obtained in payment of its costs. His Honour proceeded to make an interim determination of the application as a matter of urgency in order to keep the proceedings on track for the trial then fixed. His Honour recognised that the situation was far from clear as to what property was subject to the declared trust and whether or not the conduct sought to be restrained would be in breach of trust. In essence, his Honour advised that the sixth defendant would be justified in using trust funds to continue preparing for trial up to and including 9 July 2004. His Honour stood the matter over to that time for further advice. The plaintiffs in these proceedings appealed to the Court of Appeal against the first Palmer judgment. No further judicial advice has since been obtained. This is not for any reason attributable to the Court, but for various reasons attributable to the parties, including the appeal brought by the plaintiffs and the sixth defendant's delays in obtaining appropriate advice from counsel to lay before the Court on the judicial advice application. 18 A further relevant amendment to the statement of claim was made in the fifth amended statement of claim filed on 11 May 2004. In par 29F, "29A" was corrected to "29E". An issue raised in terms of par 29E is not material to the future conduct of the proceedings. As I have already said, the relevant allegation in that paragraph had already become exhausted after my determination of the terms of the trust in relation to the Schedule A property. 19 In the meantime, the plaintiffs were insisting that the matter go to trial, whether or not the defendants could be represented. However, in face of the fact that the plaintiffs had chosen to appeal from the advice given by Palmer J and thereby to deflect his Honour from giving any further advice until the matter was dealt with by the Court of Appeal, on 21 May 2004 I vacated the August fixture: Metropolitan Petar v Mitreski [2004] NSWSC 439. 20 The matter was not dealt with by the Court of Appeal until 8 December 2004. After some discussion it was accepted by the appellants that the appeal was incompetent and it was dismissed accordingly. Short reasons were given for the dismissal by Mason P, with whom Sheller and Bryson JJA agreed: His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia & New Zealand v Macedonian Orthodox Community Church St Petka Incorporated NSWCA 8 December 2004 unreported. 21 There was a flurry of correspondence between the solicitors in February and March 2005. In a letter from its solicitor of 1 March 2005 the sixth defendant declined to give an undertaking requested by the plaintiffs' solicitor on 16 February 2005 not to spend any further money on legal costs and disbursements except in accordance with judicial advice. Extensive reasons were given for refusing the undertaking. 22 As noted in [1] above, it was on 14 March 2005 that the current notice of motion was filed. 23 The plaintiffs brought forward a sixth amended statement of claim and sought leave to file it. This was, of course, opposed. I heard that application on 28 February and 14 and 31 March and delivered judgment on 31 March 2005: Metropolitan Petar v Mitreski [2005] NSWSC 330. Leave was granted to make some but not all of the amendments sought. On 1 April 2005 the sixth amended statement of claim was filed in accordance with that leave. It was not until then that the definition of "parish property" for the purposes of the statement of claim was widened by the insertion of the very tortuous par 19C. Paragraph 29E was amended to extend the conduct complained of to denying that the parish property in the wider sense is subject to the declared trust or is held on trust at all. There is a complaint in a simplified par 29F that the sixth defendant has applied parish funds in the wider sense in defending the proceedings. The result is that as of 1 April 2005 it was formally alleged in the substantive proceedings that any expenditure from the sixth defendant's funds on the defence of the proceedings is a breach of trust. 24 On 31 March 2005 I granted a temporary injunction, which was varied on 1 April 2005 and was renewed in wider terms on 19 April 2005: Metropolitan Petar v Mitreski [2005] NSWSC 331, 332, 384. The injunction, as still in force, is in the following terms: "The defendants are restrained from paying any legal costs out of the assets of the 6th defendant (with the exception of $22,030 raised by a lottery for costs of these proceedings) other than (a) costs the payment of which is authorised under judicial advice given by Palmer J; (b) the costs of transcript and court fees; and (c) reasonable legal costs of opposing the relief claimed by the plaintiffs in their notice of motion filed on 14 March 2005 and any appeal therefrom." 25 Palmer J further heard the judicial advice proceedings on 2 June 2005. The application on that occasion was for the following advice: "(1) That, for the purposes of paying: (a) its further reasonable legal costs and disbursements to be incurred in procuring an opinion of counsel as to its prospects of success in the Main Proceedings (no 3369 of 1997) up to $166,875; and (b) its reasonable legal costs and disbursements incurred to date in these proceedings; the Association is justified in having recourse to: (i) such funds as may be realised by disposing of or encumbering the [Schedule 'A' assets] and/or any other trust property it holds (other than the Holy Objects as defined in the Statement of Claim (version 7); and/ or (ii) such funds as comprise other trust property." The application was, as usual, fiercely opposed by the plaintiffs. 26 His Honour delivered a second judgment on 10 June 2005: Application of Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2005] NSWSC 558. His Honour again emphasised that he would give advice only in relation to the property concededly held upon the declared trust. He would not give advice as to the other property of the sixth defendant. His Honour took the view that the use of that other property should be dealt with through the medium of an injunction application, which was indeed current in the form of the subject motion before me. His Honour at [26] – [35] described the course that he anticipated such an application ought follow. I am in agreement with what his Honour said and, in general terms, have conducted and propose to determine this application accordingly. This will also have the advantage that, in the parallel sets of proceedings, the course to be followed in relation to all of the sixth defendant's property will be determined. 27 As Palmer J is now on leave, Young CJ in Eq is now seized of the judicial advice proceedings and further directions and advice are being sought from his Honour. LAW 28 The following is a summary of principles of law that I have taken into account in determining this application. Paragraphs [29] to [32] substantially follow written submissions on behalf of the defendants, which in my view correctly state the law in this regard. 29 A trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in and about the execution of the trustee's trusts or powers: Trustee Act 1925 s 59(4). This provision is statutory recognition of the rule that a trustee is entitled to be indemnified out of the trust estate against all his proper costs, charges and expenses incident to the execution of a trust: National Trustees Executors and Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 274 per Starke J, at 277 per Williams J (with whom Rich ACJ agreed at 273). 30 Part 52A r 42 of the Supreme Court Rules 1970 provided: "42 Trustee or mortgagee (1) Where a person is or has been a party to any proceedings in the capacity of trustee or mortgagee, he shall, unless the Court otherwise orders, be entitled to the costs of the proceedings out of the fund held by the trustee or out of the mortgaged property, as the case may be, in so far as the costs are not paid by any other person. (2) The Court may otherwise order pursuant to subrule (1) only where: (a) the trustee or mortgagee has acted unreasonably, or (b) in the case of a trustee, he has in substance acted for his own benefit rather than for the benefit of the fund." The word "fund" extended to any property held on trust for any purpose: Part 52A r 3(a). Although Part 52A r 42 has now been repealed, it has been replaced by Uniform Civil Procedure Rules 2005 r 42.25, which is to the same effect. The entitlement to indemnity is not subject to an order being made by the Court to the effect that the trustee may exercise it or have the costs out of the estate. 31 In Drummond v Drummond [1999] NSWSC 923 Austin J at [43] – [47] gave a most useful summary of the principles as to the trustee's right to recover legal costs out of the trust fund: "[43] In Miller v Cameron (1936) 54 CLR 572, 578, Latham CJ explained that 'as a rule, a trustee is allowed his costs out of the trust estate if his conduct has been honest, even though it may have been mistaken'. In Re Weall; Andrews v Weall (1889) 42 ChD 674, 677, Kekewich J spoke of the 'tenderness which the Court is anxious to exhibit towards trustees honestly exercising discretion in discharge of their duties, often difficult and still more often thankless'. In Re Jones; Christmas v Jones [1897] 2 Ch 190, 197 the same judge said that 'a man who fulfils the difficult duties of an administrator, executor or trustee is, in common sense and common justice, entitled to be recouped to the very last penny everything that he has expended properly - that is to say, without impropriety - in his character of administrator, executor or trustee ...'. Thus it is normally the case that an executor who commences or defends an action in the capacity of executor is entitled to be indemnified out of the estate for the costs incurred in doing so, even if the litigation is unsuccessful, the executor's conduct is found to have been mistaken, and the other party in the litigation is held to be entitled to an order for costs. [44] This exception to the normal rule that costs follow the event, which permits an executor to recover costs from the estate, is itself subject to some exceptions, as is plain from Latham CJ's reference to honest conduct and Kekewich J's reference to impropriety. There are two 'sub-exceptions' which are arguably relevant to the present case. [45] The first is the sub-exception for 'impropriety'. As Kekewich J made clear in Re Jones , cases of impropriety include an executor taking or defending proceedings in breach of trust, or conducting the proceedings in such a way that the Court, on a general view of the case, regards the executor's conduct as 'not honestly brought forward' ([1897] 2 Ch 190, 198). Additionally, recourse to the estate may be denied to an executor 'where the claim is of monstrous character, that is, one which no reasonable man could say ought to have been put forward' (at 198). In Re Weall the trustees allowed a solicitor to deduct fees which were not properly chargeable to the life tenant from the rental income of the estate. Kekewich J observed that while mistakes or errors in judgment would not disentitle the trustees to an indemnity, the beneficiaries were entitled to expect 'reasonable prudence' of the trustees (42 ChD at 678 - 9). ……… [47] Secondly, the rule which gives an executor the prima facie entitlement to be indemnified out of the estate for costs relates only the costs incurred in the administration and distribution of the estate. Such costs are to be distinguished from costs incurred by an executor in furtherance of a personal interest: Miller v Cameron (1936) 54 CLR at 578 - 9; Re Jones [1897] 2 Ch at 197 - 8; Plimsoll v Drake (No 2) (Supreme Court of Tasmania, Zeeman J, unreported, 8 June 1995). Executors who pursue personal interests in litigation are 'not fighting for the estate any more than if they were not executors at all': Skrimshire v Melbourne Benevolent Asylum (1894) 20 VLR 13, 18 per Madden CJ. An executor who prosecutes or defends proceedings in the capacity of, say, creditor or beneficiary of the estate rather than in the capacity as executor cannot expect to recoup the costs of litigation from the estate simply on the basis that he or she is also an executor. In Miller v Cameron Latham CJ took the view that a trustee who defended an action for his removal was thereby representing his own interests and not those of the trust estate. In Plimsoll v Drake Zeeman J reached a similar conclusion where a trustee unsuccessfully asserted the right to demand a release before distributing the trust estate to the beneficiaries." In National Trustees Executors and Agency Co of Australasia Ltd v Barnes supra Williams J said at 278 - 279: "The main contention has been whether these costs are recoverable under the indemnity. The learned Chief Justice of the Supreme Court of Victoria decided that they were not because they were incurred by the trustees in defending themselves against a personal liability and therefore on their own behalf and not for the benefit of the trust. He considered the principle to be that the costs of trustees of defending such a suit are chargeable against the estate in all cases in which the defence is for the benefit of the estate. … If it is necessary to show such a benefit, then the fact the trustees establish that they have administered properly would be sufficient, but I am satisfied that it is not necessary to do so. Such expressions as acting 'for the benefit of' 'with reference to' or 'on behalf of' the trust estate or in the discharge of his duty as a trustee are used indiscriminately in the judgments, but they all mean the same thing, namely, that the question is whether the costs, charges and expenses are properly incurred by the trustee as an incident of his administration of the estate. 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 (3)). 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." This passage was cited with approval by Kellam J in Hayman v Equity Trustees Ltd (2003) 8 VR 548 at [63]. 32 The fact that, in defending a suit for the benefit of a trust estate, a trustee also defends his own character and actions as trustee does not disentitle him to indemnity for his costs: Walters v Woodbridge (1878) 7 Ch D 504 per Jessel MR at 509 - 510 and James LJ at 510, with each of whom Thesiger LJ agreed at 510; Kirwan v Cresvale Far East Ltd (in liq) (2002) 44 ACSR 21 per Giles JA at [259], with whom Meagher JA agreed at [3]; and per Young CJ in Eq at [430]. 33 In my view, this is not a case in the category of Re Beddoe; Downes v Cotton [1893] 1 Ch 547, where a trustee's right to indemnity out of the trust fund is finally determined after litigation is concluded. Nor is it a case where what is sought is a pre emptive order, ie, a finally binding order in relation to a trustee's costs before the determination of the issues in the proceedings: cf Re Biddencare Ltd [1994] 2 BCLC 160; Alsop Wilkinson (A Firm) v Neary [1996] 1 WLR 1220. This is an application to restrain the use of funds on an interlocutory basis. In this case, as has been plain at all times, if the trustee utilises funds in a way that is ultimately determined not to be justified, it will be liable to repay them. 34 The above principles apply where the fund to be resorted to for costs is undisputedly or has been found to be subject to the trust. In this case, it is contested that some of the property involved is subject to the trust. In relation to this property, the matter is more akin to the area of Mareva orders, where the principle is applied that, even where the fund under restraint may be used up, the restraint will not be permitted to prevent the defence of the proceedings. Thus, in Chandler v Church Chancery Division 21 December 1987 unreported, Harman J said: "The litigant is entitled to be heard and have his day in court. The question for me is at whose expense should he have that day? I have to balance the fact that this is likely to be a long, heavy and complicated case involving vital matters for Mr Church, against the fact that if I grant this application and Mr Church is found to be a defaulting trustee he will have spent the whole trust fund in defending himself." And in PCW (Underwriting Agencies) Ltd v Dixon [1983] 2 All ER 158 at 164 Lloyd J (in the Commercial Court of the Queen's Bench Division) said: "The distinction between the ordinary Mareva plaintiff (to use Ackner LJ's phrase) and the case where the plaintiff is laying claim to a trust fund on the so-called wider ground, is thus clear. In the latter case the whole object is to secure the trust fund itself so that it should be available if the plaintiff should prove his claim. In the former case by contrast the plaintiff is not entitled to any security. The purpose of the jurisdiction, as is now clearly established, is not to provide the plaintiffs with any form of pre-trial attachment. It is simply to prevent the injustice of a defendant removing or dissipating his assets so as to cheat the plaintiff of the fruits of his claim. Can the plaintiffs then bring the present case within the wider jurisdiction? I have grave doubts. Both in A v C [[1981] QB 596] and Chief Constable of Kent v V [[1983] QB 34] the claim related to specific identifiable bank accounts. It is difficult to regard the whole of a man's assets as a fund in that sense, even though his assets may in part contain or be derived from money improperly come by. But even if I could regard the whole of the defendant's assets as a trust fund, I would be quite unwilling to uphold the ex parte order in the present case on that basis. All injunctions are, of course, in the end discretionary. I would regard it as unjust in the present case if the defendant were compelled to reduce his standard of living, to give up his flat or to take his children away from school, in order to secure what is as yet only a claim by the plaintiffs. I would regard it as even more unjust that he should be prevented from defending himself properly (for that is what it would amount to), merely because the plaintiffs say that in doing so he is using somebody else's money. ………… In my view justice and convenience require in the present case that the first defendant should be allowed the means of defending himself, even if it could be said that the plaintiffs had laid claim to the whole of his assets as a trust fund. Similarly justice and convenience require that he should be able to pay his ordinary bills and continue to live as he has been accustomed to live heretofore. So whether the case is put on the basis of the Mareva jurisdiction or the so-called wider jurisdiction to trace in equity I reach the same conclusion." See also the useful summary of these and other authorities by Michael Burton QC sitting as a deputy High Court Judge in United Mizrahi Bank Ltd v Doherty [1998] 1 WLR 435. And see generally Biscoe on Mareva and Anton Piller Orders (2005) [6.21]. DECISION 35 In my view, the matter falls for consideration under three heads, to which different considerations apply: first, in relation to all property up to the time it became clear that the plaintiffs were claiming that any use of the sixth defendant's property was a breach of trust; secondly, thereafter in relation to the use of the Schedule A property; and, thirdly, thereafter in relation to property not conceded to be subject to the declared trust. 36 As to the first, that is costs incurred before the allegation of breach of trust became plain, the plaintiffs have a stronger prima facie case, at least in relation to the Schedule A property, since there is no doubt that that property is subject to the declared trust. There is still contest as to whether or not the various conduct complained of was in breach of trust. In this case, there are much the same matters to be considered in the balancing exercise as are weighed in [39] and [40] below in relation to the third head. However, on this head there are discretionary considerations, which in my view will, upon any balancing of the relevant considerations, lead to the conclusion that injunctive relief ought be refused. These arise from delay by the plaintiffs and hardship to others. The plaintiffs, the applicants for relief, stood by for months on end before taking any objection to the use of trust property to fund the defence of the proceedings. The Attorney General, who is charged with supervision of the public interest in charitable trust funds and who is a party to the proceedings, has not joined in the plaintiffs' application, indicating in submissions made to the Court that he supports neither the plaintiffs nor the defendants. During the lengthy period which it took the plaintiffs to reach the stance they have now taken, the defendants continued to incur costs and their lawyers continued to do large amounts of work on the basis that the objection to this course had not been formulated. By reason of the course of action which the defendants and their lawyers have pursued since April 2004, there is no reason to doubt that, had their conduct been challenged earlier, they would have applied to the Court earlier for judicial advice in respect of the Schedule A property. The work having been done, it would inflict grave hardship on both the defendants and their lawyers to grant relief in respect of costs incurred on that basis. See Meagher, Gummow & Lehane's Equity Doctrines and Remedies (4th ed, 2002) [21-375], [21-380]. 37 It may be suggested that this situation should be regarded as having come to an end when it became plain to the sixth defendant that any expenditure by it on costs was objected to, ie, about the time the summons for judicial advice was taken out in April 2004. Until about that time, the warnings given were in relation either to a course of conduct that was not then being pursued or to a course of conduct that was not within the pleadings as they then stood. However, the Court has held that judicial advice should be given only prospectively. In effect, this means prospectively from 7 May 2004, when the first Palmer judgment was delivered, authorising conduct from that date. There was no delay by the sixth defendant after the filing of that summons. The due prosecution of those proceedings resulted in preliminary judicial advice being given only about a month after the commencement of those proceedings. As I see it, advice will not be given in those proceedings concerning expenditure incurred before then. In my view, injunctive relief should be refused in relation to costs incurred by the defendants in these proceedings up to and including 7 May 2004. 38 So far as the second head is concerned, the defendants have in effect conceded by their application for judicial advice that the Schedule A property should not be used for costs, except in accordance with judicial advice, at least as to costs incurred since the time when they first obtained judicial advice. They took that course of action and have continued and continue to prosecute that application for judicial advice. The application is only in relation to the Schedule A property, and the Court has made it plain that that is the correct approach, since it will not give advice in relation to property not conceded to be subject to the trust. Furthermore, the Court will give advice only prospectively, ie, in relation to costs yet to be incurred. I do not propose to allow the defendants to pursue one course in the proceedings for judicial advice and another course in these proceedings, as to the appropriate use for costs of the Schedule A property. In general terms, I propose to continue, in relation to the use of the Schedule A property to pay costs, the injunction now current. It will apply in relation to costs incurred after 7 May 2004. That may be inconvenient, because the defendants' authorisation to use such funds was current only to 19 July 2005. But that is by reason of complications in the proceedings caused by the actions of the parties, over which I have no control. 39 Thirdly, the situation in relation to the property not conceded to be subject to the declared trust in respect of costs incurred after 7 May 2004 is more difficult. This is because the plaintiffs' prima facie case is weaker, in that it is not conceded, but hotly contested, that this property is subject to the trust. Further, the property involved is not established to be subject to the declared trust. On their application in respect of this property, the plaintiffs have established that there is a serious question to be tried, resolution of which in their favour would establish that the property is subject to the declared trust. They say that, in some regards at least, they have a strong case. The defendants contend, and I accept, that they have established a countervailing case that this property is not subject to the declared trust. I have already said that this is not one of those cases in which the relative strengths of the cases should be determined on the interlocutory application: see [3] above. It is, indeed, a case where that would be impracticable, bearing in mind the convoluted state of this litigation. I do not propose to attempt to untangle the tangled skein relating to the various types and items of property into categories and determine the strength of the case in respect of each. In addition, of course, there is in this case also strong contest as to whether any of the conduct complained of was in breach of trust. 40 In face of the competing prima facie cases, the balancing exercise which the Court must conduct was adverted to thus in submissions put to the Court by Mr Lancaster, of counsel on behalf of the Attorney General: "In the Attorney's position your Honour is faced with, with respect, a very difficult decision on the balance of convenience by reason in large part, on the one hand, with what should be the Court's desire to protect what is reasonably arguably charitable church property and, on the other hand, to permit the party that holds it to run a case about whether or not that is so." The relevant considerations include the following. Since the Court is not making a pre emptive costs order (indeed, any costs order), the sixth defendant will be liable to repay any moneys expended, if it is ultimately found they should not have been expended in that way. On the other hand, there may be doubts as to their recoverability. But the defendants are likely to be precluded from defending the proceedings, if the sixth defendant's property may not be used for that purpose. To the extent that an injunction is granted, the plaintiffs' undertaking as to damages is of dubious worth, bearing in mind the six figure sum outstanding under a judgment debt in favour of their former solicitors in respect of their own costs of these proceedings. 41 The conclusion that I have come to by reference to all the relevant considerations is that there should be no injunctive relief in relation to the sixth defendant's property, other than the Schedule A property. In relation to that subject matter, I do not consider that any of the defendants' submissions put as precluding any injunctive relief at all at the plaintiffs' suit should preclude relief. Most of those submissions are based on questions of fact which cannot or should not be determined on this application. In relation to the second and third heads, those submissions do not arise for decision, in view of my conclusion that relief should be refused. 42 As I have already indicated, because of the defendants' course in seeking judicial advice in relation to the Schedule A property, there should be a restraint upon the use of that property except in accordance with judicial advice given by the Court or as otherwise permitted by the Court. I have already excepted from the temporary injunction still current the costs of conducting this motion and any appeal therefrom and I propose to continue that exception; bearing in mind the complicated and difficult nature of the application and its importance to the continued representation of the defendants in the proceedings generally, it has been and continues to be vital that the defendants be represented thereon. 43 Short minutes should be brought in to give effect to this decision. ********** 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.