Supreme Court New South Wales Medium Neutral Citation: Amir Ashrafinia v Mohammad Reza Ashrafinia; Parvaneh Karami Fakhrabadi v Mohammad Reza Ashrafinia (No. 2) [2014] NSWSC 145 Hearing dates: 30 September 2013, 14 & 24 October 2013, 31 October 2013, 9 December 2013. Decision date: 27 February 2014 Jurisdiction: Equity Division Before: Slattery J Decision: Costs orders and other orders consequential upon the principal judgment made. See paragraph [85]. Catchwords: PROCEDURE - various orders sought consequential upon the Court's principal judgment: Ashrafinia v Ashrafinia [2013] NSWSC 1442 - consideration of mechanism for the payment of the professional fees of the Court appointed expert - whether the judgment should be amended under the slip rule at the request of a non-party - whether the NSW Trustee and Guardian should be appointed trustee of the trust - issues of document production, preparation of evidence for claims for just allowances and costs considered. Legislation Cited: Legal Profession Act 2004 (NSW) NSW Trustee and Guardian Act 2009 (NSW), ss 12 and 13 Uniform Civil Procedure Rules, Pt 18 Cases Cited: Ashrafinia v Ashrafinia [2013] NSWSC 1442 Bar-Mordecai v Rotman [2000] NSWCA 123 Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Gore v Justice Corp Pty Ltd (2002) 119 FCR 429 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446. Warman International Ltd v Dwyer (1995) 182 CLR 544 Category: Costs Parties: First Plaintiff:- Amir Hossain Ashrafinia First Defendant:- Mohammad Reza Ashrafinia; Second Defendant:- Ashrafi Persian Trading Company Pty Limited First Plaintiff:- Parvaneh Karami Fakhrabadi First Defendant:- Mohammad Reza Ashrafinia Second Defendant:- Amir Hossain Ashrafinia Third Defendant:- Abbas Ashrafinia Fourth Defendant:- Ashrafi Persian Trading Company Pty Limited Representation: Counsel: Mr D. Jenkins (for Mohammad Reza Ashrafinia) Mr M. Sneddon; T. Fishburn (for Amir Hossain Ashrafinia) Mr G. McGrath SC (for Parvaneh Karami Fakhrabadi) Mr D. Currie (for Azadeh Ashrafinia) Solicitors: File Number(s): 2008/281524; 2011/166674 Publication restriction: No Judgment 1The Court gave its principal judgment in these proceedings on 30 September 2013: Ashrafinia v Ashrafinia [2013] NSWSC 1442. On 14 and 31 October 2013 the parties put oral argument as to appropriate orders consequent upon the principal judgment. The Court made a range of orders on 31 October 2013 to give effect to the Court's reasons in the principal judgment. 2Events matters and things are referred to in this judgment in the same way as they are in the principal judgment. Both judgments should be read together. 3There were seven issues still to be dealt with after the Court's principal judgment and after the orders made on 31 October. Those seven issues were: (1) Mr Russell's fees; (2) relief in relation to Chili Blue Backpackers; (3) Dr Richards' requested amendments to the judgment; (4) the NSW Trustee and Guardian; (5) the production of documents; (6) just allowances; and (7) costs. This judgment records which of those seven issues had been resolved and how, and it deals with those issues that remain. But first the position that resulted from the hearings on 31 October and 9 December should be stated. Orders Made on 31 October and 9 December 2013 4On 31 October 2013 the Court set aside its order appointing the NSW Trustee and Guardian (the "NSW Trustee") as trustee of the Trust, which is the subject of these proceedings, and set aside associated vesting orders. The reasons for these discharging orders is explained below in section (4) of these reasons. On 31 October the Court also adjourned for further hearing the question of whether or not the NSW Trustee should nevertheless be re-appointed as trustee of the Trust. 5On the same day the Court appointed Mr Allan John Hayes as trustee for sale of the Marsfield property and vested that property in him. The Court made machinery orders to effect the sale of the property by auction and then for the deduction of the fees of the court expert, Mr Russell, from the net proceeds of the sale after commission, sale and legal expenses of the trustee for sale, in respect of the sale. 6The Court then made orders to give effect to the reasons in the principal judgment declaring: that Mohammad and Amir hold their interest in the Marsfield property on trust for the Ashrafi Investment Trust; declaring that they held their interests in the Oporto property; and also declaring that they held their interests in unit 17 on trust for the Ashrafi Investment Trust. Declarations were also made that, when Trading held Units 4, 5 and 8 it did so on trust for, and upon the terms of, the Ashrafi Investment Trust. 7There was contention on 31 October as to whether or not the Court could make orders that Mohammad be restrained from disposing or otherwise dealing with his interest in the business or assets of CBB Management Pty Limited, known as "Chili Blue Backpackers and Youth Hostel". An opportunity was offered to the parties to file and serve any further submissions in respect of that issue. 8And Mohammad's cross-claim against Azadeh and Parvaneh in the 2011 proceedings was dismissed on 31 October and the proceedings were then stood over to 9 December 2013, with a view to hearing further argument on questions of costs, in respect of the payment of Mr Russell's legal costs and in respect of the distribution of the balance of the sale proceeds of the Marsfield property, together with any other outstanding matters. 9Further argument took place on 9 December 2013. The seven outstanding issues were then resolved or determined. The Court's decision after the argument on 9 December in respect of each of these seven issues is set out in these reasons. On 9 December the orders of 31 October appointing Mr Hayes as trustee for sale of the Marsfield property were also varied so: that the secured creditor, Citibank could be paid out of the proceeds of sale; that Mr Hayes' fees should be assessed by the Court if disputed; and that Karami give recent possession of the Marsfield property by 25 January 2014. 10In the course of argument on 9 December the Court directed that until judgment was given, no party was to communicate by email with my Associate as to any substantive issue in or in relation to the proceedings, other than to re-list the proceedings for further argument or directions. That direction will be made again and is included in the final directions in these proceedings. Given the number of unrepresented parties now in these proceedings, communications with my chambers have become unmanageable. Therefore the only communications with my chambers in this matter should be the sending of a simple email to my Associate and copied to all other parties asking for the proceedings to be re-listed. Once that listing date is given the party concerned should file a motion in the Registry (together with any supporting affidavit evidence) in the ordinary course and serve it on all other parties. And the motion may be made returnable for the date given by my Associate. (1) Mr Russell's fees 11The Court made orders on 31 October 2013 appointing Mr Alan John Hayes as trustee for sale of the Marsfield property. The sale of the Marsfield property was required to satisfy the charge that the Court expert, Mr Russell, holds over the Marsfield property to secure the payment of his fees incurred in that capacity. It was unsatisfactory that the Court expert, who had provided service to assist the Court, should remain unpaid for so long. 12Mr Russell's outstanding fees were $98,447.30. Interest on these fees up to 14 October 2013 at the rate of 8.5% totalled $9,796.82. In total, fees and interest amounted to $108,244.12 as at 14 October 2013. Interest accrues after 14 October 2013 at the rate of $22.03 per day. 13The orders the Court made on 31 October 2013 operated so that after expenses associated with the sale of the Marsfield property are met, Mr Russell's outstanding fees, including the daily interest accruing up to the date of his payment, will be satisfied from the net sale proceeds. 14The Court was not prepared to allow all Mr Russell's legal costs to be deducted from the sale proceeds until they were properly identified and, if necessary, assessed under the Legal Profession Act 2004. 15The opportunity afforded to the parties during the adjournment between 31 October and 9 December 2013 allowed Mr Russell's legal costs to be ascertained and agreed between the parties. As a result the parties reached agreement as to the quantum of these fees. The consent orders made on 9 December reflected by consent that the trustee for sale for the Marsfield property could deduct from the proceeds of sale and pay Mr Russell's company, Forensic Advisory Services Pty Limited, legal fees incurred on account of the recovery of his expert's fees. The agreed sum was that of $18,228.65 plus interest from 28 November 2013 at the rate of $4.39 per day. 16Once Mr Russell's outstanding expert's and legal fees are deducted from the proceeds of sale of the Marsfield property, the question arises as to how those fees should be borne among the parties to these proceedings. Deduction of the fees from the proceeds of sale of a Trust asset means that they are being treated as a liability of the Trust: declarations were made on 31 October 2013 to the effect that Mohammad and Amir hold that property on trust for the Trust. 17Once the Trust satisfies this liability to Mr Russell, the Trust will have borne a liability for one of the expenses associated with this litigation, an expense in my view, which has been incurred in the 2011 proceedings. Mr Russell's analysis had indirect relevance to parts of the 2008 proceedings but was primarily relevant to establishing the allegations of breach of trust in the 2011 proceedings. As the last section of these reasons shows, the Court will order that Amir and Mohammad pay the plaintiffs' costs of these proceedings. But as Mr Russell's fees are being paid out of Trust assets, the appropriate consequential order is that Amir and Mohammad should indemnify the Trust in respect of those fees and I will so order. 18It is not clear at the time of writing these reasons whether any of the parties have provided other funds to pay Mr Russell, and if so, in what amounts. Other orders may need to be made to provide for the way that those fees should be reimbursed. For example, to the extent that Amir and Mohammad have paid Mr Russell's fees, they should now bear those costs themselves. To the extent that Farami has paid any of Mr Russell's fees, the appropriate course could be for her to be either indemnified out of Trust assets, or for those fees to be expressly included in the costs order in her favour. 19Subject to any issue arising about the proper deduction of Mr Russell's accountancy fees and recovery fees, this issue is now concluded. (2) Relief in relation to Chili Blue Backpackers 20The issue of possible restraints upon Mohammad in relation to dealing with his interests in the Chili Blue Backpackers and Youth Hostel business (the Chili Blue business) was the subject of oral submissions on 31 October 2013 and final written submissions thereafter - on behalf of Karami on 3 December 2013 and on behalf of Dr Caitlin Richards (Mohammad's wife) and her relevant corporate interests on 6 December 2013. 21On 31 October 2013 the Court invited further submissions on this issue in Order 11 as follows: "11. The plaintiff and the first defendant in proceedings 2011/166674 file and serve any submissions in support of, or opposing, the making of an order that the first defendant by himself or his servants or agents be restrained from seeking to dispose of or otherwise deal with his interest in or the business or assets of CBB Management Pty Ltd A.C.N 157 676 349 known as "ChiliBlue Backpackers & Youth Hostel" conducted at 144 Victoria Street Potts Point, New South Wales, by 28 November 2013." 22Dr Richards raises a procedural issue about this direction. In her written submission of 6 December 2013 Dr Richards expresses concern that the Court made this order without requiring Karami to give any prior notice to CBB Management Pty Ltd. But this submission misunderstands the apparent scope of the order being sought, which was that Mohammad "by himself or his servants or agents be restrained from seeking to dispose of or otherwise deal with his interest in or the business or assets of CBB Management Pty Ltd". The Court's directions were for Mohammad and Farami to prepare submissions about an appropriate form of restraint upon Mohammad dealing with any interest he may hold in the Chili Blue business. Karami did not propose at any stage of these submissions that an order be made against Chili Blue itself. For that reason no notice to the proprietors of the Chili Blue business was required. Dr Richards' complaints about lack of prior notice of those directions to it were not soundly based. If notice to CBB Management were required before such orders could be made (and it could hardly be required when the only direction being made was a procedural one for the filing of submissions), the failure to give that notice may well be a problem for Karami, the proponent of the orders. That certainly does not make inappropriate the Court's giving of directions for the parties to exchange submissions on the issue. 23Strictly the Court had no obligation to give Dr Richards an audience in this matter, either in her own right or to speak on behalf of two companies with which she is associated as shareholder and sole director, CBB Management, or Ashrafi Richards Nominees Pty Limited ("Nominees"). But she sought to appear and make submissions in these respective interests. Had she been denied a hearing she was likely to put on a separate motion at a time of her choosing to seek further to be heard. So the Court took what appeared in accordance with Civil Procedure Act, s 56 to be the course, which would involve all the existing parties in the least ultimate cost and inconvenience in determining the real questions in issue. The Court gave her a hearing at the same time as other procedural issues were being debated. 24Now to the substance of the Chili Blue business issue. In her submission of 3 December, Karami contends: (1) that Mohammad has misappropriated at least $1,429,901.13 from the Trust; (2) that includes a sum of $36,500 paid between December 2007 and October 2008 to destinations associated with the Chili Blue business and which prima facie the Court has found was applied for Mohammad's and Caitlin's own benefit (principal judgment at [217]); (3) that prima facie Trust funds were used to acquire or maintain the Chili Blue business (principal judgment at [220]); (4) that the Court expert was not specifically requested to trace Trust funds into the Chili Blue business or the realty at Potts Point, where the business operates, but there is sufficient evidence that Trust funds had been used for those purposes (principal judgment at [104]); and (5) that Mr Russell traced Trust funds to the Chili Blue business in the total sum of $282,900 through various avenues. But whether there was more, was outside the ambit of Mr Russell's enquiries, and has not been determined. 25In support of his submission that further inquiries about those funds transfers may yet be made Mr McGrath SC, on behalf of Karami, refers to the Court's findings in the principal judgment at [327] to the following effect:- "[327] The Court will declare on the basis of its findings that the Marsfield Property, Unit 17, and the Oporto property, are or were Trust properties. The Court will declare that the Chili Blue backpackers business is charged in equity with the repayment of the moneys the Trust advanced to it between December 2007 and October 2008, together with any other monies found on inquiry to have been advanced to it. If it is useful to declare whether the Trading Apartments formerly owned by Trading, namely Units 4, 5 and 8 were Trust properties, the Court will declare that they are." 26Mr McGrath SC submits that Mohammad's assertion that he has no interest in the Chili Blue business or the realty on which it is conducted is of limited value in light of Amir's findings as to Mohammad's credit. 27Whether there are any other monies taken from the Trust and invested in the Chili Blue business is an open question, which as paragraph [327] of my judgment foreshadowed, may be the subject of further enquiry, should the plaintiff, Karami, or the new Trustee apply for such an inquiry. Mahommad's precise interest in the Chili Blue business is unclear and may only be clarified upon further inquiry about how he applied the Trust funds that he labelled as for Chili Blue business destinations. 28But that inquiry has not yet taken place. And the Court will not order it to take place until the new trustee of the Trust is appointed and has had an opportunity to assess whether it is in the Trust's interests to apply for such an inquiry. And it is to be remembered that the application of Trust funds to the Chili Blue business was only a very minor part of the hearing of these proceedings. In the meantime I am minded to grant a restraint against Mohammad in light of the Court's findings, subject to considering Dr Richards' submissions. 29Mr McGrath SC's submission accepts that CBB Management and any other companies associated with the Chili Blue business were not parties to these proceedings and that injunctive relief cannot be sought against them, only against Mohammad. 30Dr Richards put several submissions against any restraint involving the Chili Blue business. Many of the facts behind her submissions can be accepted. 31I accept that the Chili Blue business is operated by CBB Management from an address in Victoria Street, Potts Point, which CBB Management leases from Nominees. I also accept that Nominees owns this Victoria Street realty as trustee for the Ashrafi Richards Hybrid Trust (the Hybrid Trust). Dr Richards is the sole director of CBB Management. All shares in CBB Management are owned by Nominees. Dr Richards is also the sole director and shareholder of Nominees and is the legal owner of all the units in the Hybrid Trust. 32Dr Richards makes the point that CBB Management, is not the registered proprietor of the Victoria Street property, and was only first registered as a company in April 2012, and that Mohammad is not and has never been a shareholder in CBB Management, but has only been an employee taking bookings for the Chili Blue business since July 2012. 33Dr Richards' point, which is available to be put in Mohammad's case in any event, is that there is, on this evidence, no basis for any restraint against any entity owning the Chili Blue business or the real estate on which that business is conducted. 34The answer to Dr Richards' point is contained both in the principal judgment and in the evidence. In the principal judgment (at [220]), the Court made quite clear that unless the proceedings were to be differently constituted in the future that "in the meantime Mohammad may be restrained in relation to his dealings with the Chili Blue business". By this the Court meant to convey that at least a temporary restraint on Mohammad dealing with any interest he held in the Chili Blue business was justified, until the extent of any such interest and whether he held it on constructive trust for the Trust was determined by further inquiry. A fair reading of the relevant section of the principal judgment ([217] - [220]) makes this clear. 35Dr Richards' submissions seem to have interpreted the principal judgment as going further than this. She submitted that there are no grounds for the Court to grant an order preventing Mohammad from working for CBB Management, once he is medically fit. Dr Richards is correct about this. The Court will not impose any restraint on Mohammad's employment by CBB Management which he has had since about July 2012. But Karami does not seek such a restraint. Nor was a restraint ever likely to be granted against Mohammad earning future income as a mere employee of CBB Management. The relief Karami seeks is aimed at preventing Mohammad from disposing of any interest he may have in either CBB Management or Nominees, or their Chili Blue assets. 36Dr Richards' submissions seek, again in a way that is also in Mohammad's interests as well as her own, to argue that Mohammad could on the evidence hold no interest in any of the presently identified entities owning or controlling the Chili Blue business. They, CBB Management and Nominees, are all said to be newcomers, who took their interests in the Chili Blue business more than several years after the December 2007 to October 2008 funds transfers identified in the principal judgment. 37But the timing of CBB Management and Nominees taking over management and ownership of the Chili Blue business does not preclude Karami contending at a further inquiry into the subject, if one is ordered, that Mohammad holds an interest in either of these companies or in the business asset they either own or operate. Much will depend upon what the final evidence demonstrates about Mohammad's application of Trust funds in the Chili Blue business before Nominees acquired it and CBB Management began to operate it, and upon the terms upon which and from, whom Nominees acquired the Chili Blue business. And any inquiry into these matters will take place against the background that further examination of the evidence in Mr Russell's report (at table 5.03, page 22-24) in addition to the findings in the principal judgment (at [218]) shows that between July 2007 and December 2008, some $282,900 seems to have been transferred from the Trust's bank accounts to bank accounts of the Chili Blue business. 38A restraint will therefore be imposed on Mohammad sufficient to protect the Trust's interests until Karami and the Trustee can decide that further inquiry into the destination of Trust funds that Mohammad labelled for Chili Blue business destinations is not warranted. This will not be an indefinite restraint. Karami and the new Trustee will have to make a decision as to the course they propose to take on this issue in the reasonably near future. 39As the order the Court will make against Mohammad is still interlocutory in character, it may be necessary for the plaintiff, Karami, to give an undertaking as to damages before the order is made. Once that undertaking is given, the Court will make the following order: "Order that the first defendant in the 2011 proceedings be restrained until further order from dealing with or disposing of any legal or equitable interest he holds in Ashrafi Richards Nominees Pty Limited, the Ashrafi Richards Hybrid Trust, CBB Management Pty Limited, and of their assets without first giving 14 days notice of such dealing or disposal to the plaintiff in the 2011 proceedings." (3) Dr Richards' Requested Amendments to the Judgment 40In both written submissions and oral submissions made on and before 31 October 2013 Dr Richards requested amendments to aspects of the principal judgment she submitted were incorrect. 41Dr Richards proposed a series of amendments to paragraphs [196], [200], [201], [217], [218], [220] and [240] of the principal judgment. The jurisdiction which Dr Richards sought to have the Court exercise is that under UCPR, r 36.17 which permits the Court, if there is a clerical mistake or an error arising from an accidental slip or omission in a judgment or order to at any time correct the error or mistake. But the jurisdiction to correct such slips is very limited and if the proposed amendment requires the exercise of independent discretion or is a matter upon which a real difference of an opinion might exist, then the rule will not authorise the change: Storey & Keers Pty Ltd v Johnstone (1987) 9 NSWLR 446. 42I am prepared to accept for the purposes of argument that a non party, such as Dr Richards, can seek to invoke the slip rule. An academic article to which Dr Richards referred the Court "Tarrant J, Amending Reasons for Judgment" (2013) 2JCivLP 22 emphasises the breadth of the power to amend reasons for judgment. 43Dr Richards is not asking the Court to revise a judgment which was given orally and was later converted into written reasons. She is asking the Court to make a number of alterations to a judgment of 102 pages with some 335 paragraphs. 44Here the changes sought are matters of substance, which in my view would produce a result inconsistent with the reasons originally issued: Bar-Mordecai v Rotman [2000] NSWCA 123 at [193]. And with one exception Karami opposes all but one of Dr Richards' proposed amendments. 45It is not necessary to consider all of the proposed changes. It is sufficient to take an example, which is typical of the changes sought. Dr Richards seeks the deletion of paragraphs [200] and [201] of the principal reasons which provided as follows: "[200] Mohammad's May 2012 version is supported by the evidence from his wife Caitlin. But her evidence, like his, is oral and is unsupported by the necessary documents to show that any loan advances had been made to the Trust in the first place, that were being repaid. But I do not accept their evidence. If the transaction was as they say, one would expect there to be documents evidencing Caitlin's loans to the trust. If the transaction was a regular one there is no reason why documents evidencing Caitlin's advances to the trust would not have been properly documented. These are all business records and would ordinarily be kept for accounting and taxation purposes. Moreover, if the transactions were as stated in May 2012 it could be expected that they would not have to be explained by the two quite different accounts of them that Mohammad gave, in one case a year out from the trial, and in the other case just before trial. [201] I do not accept either Mohammad's or Caitlin's account of their dealings with the sale proceeds of Unit 8 Roslyn Gardens as being payments in satisfaction of the Trust's existing obligations to Caitlin. This means that these payments to Mohammad and Caitlin were unauthorised applications of the Trust's funds and not in satisfaction of trust liabilities." 46Dr Richards submits that these paragraphs do not accord with her uncontroverted evidence in her affidavit, evidence in the transactions to which she refers, or in her oral evidence. But what her submission fails to appreciate is that the Court has not accepted either her or Mohammad's evidence. These are credit findings. They are matters of substance which cannot be removed from the judgment without altering the Court's reasoning. They are findings based in part upon written evidence and in part upon the Court's observations of the witnesses. If these paragraphs are said to contain error, then Mohammad is free to pursue his remedies on appeal. 47The Court will make the change requested of paragraph [240] to which Karami consents, by deleting the words "He is married to a medical practitioner" and replacing them with the words "His wife has a doctorate". (4) The NSW Trustee and Guardian (the NSW Trustee) 48To give effect to the reasons in the Court's principal judgment, on 14 October 2013 the Court appointed the NSW Trustee as trustee of the Trust. But the NSW Trustee applied on 31 October 2013 to vacate this appointment. The Court decided on that date to vacate the orders it had made on 14 October. As the Court indicated in the course of argument on 31 October 2013, it accepted that the NSW Trustee had not been given notice of the application before 14 October and was therefore not in a position to put argument to oppose its appointment. The appointment of the NSW Trustee was therefore irregular and so the Court set the order aside. 49The Court has not yet made a substitute appointment. Once the orders appointing the NSW Trustee were vacated, the parties took almost the same positions that they had taken during the trial on this issue: Mohammad argued that the NSW Trustee should be reappointed; and, Karami and Azadeh argued that they should be appointed instead. But Mohammad argued that if the NSW Trustee were not to be re-appointed that Mr Hayes, the present trustee for sale of the Marsfield property was a suitable candidate for appointment. The Court continues to doubt that any family member could be a suitable candidate to act as trustee of the Trust. 50I see no reason now to compel the NSW Trustee to act as trustee of this Trust against its wishes; that is not in the interests of the trust. An appeal by the NSW Trustee from such an appointment is likely. If that appeal were successful it would likely to result in a further depletion of estate assets on otherwise avoidable litigation. I do not have to decide the question whether the Court has power to compel the NSW Trustee to accept on appointment in exercise of the Court's powers under the NSW Trustee and Guardian Act, ss 12 and 13, in light of the NSW Trustee's reasons for refusing to accept the appointment. Ms Pollard's evidence on the subject is compelling, that such an appointment is not one that the NSW Trustee is readily equipped to take up. Moreover, the issue is debatable and this Trust can ill afford to fund such debate. I therefore reject Mohammad's argument that the NSW Trustee should be reappointed. 51But the Court is presented with the problem that no party now advances a candidate to be trustee of the Trust other than a family member or the NSW Trustee. Unless a suitable non-family candidate is found the Court will have to face the unpalatable choice of appointing a family member as trustee. The Court is somewhat minded to accede to Mohammad's submission for the appointment of Mr Hayes. What is the right course in the circumstances will depend on what liquid Trust assets are left after the Marsfield property is sold. That will soon be known. If there are only a few liquid assets there may be little point in appointing a professional person such as Mr Hayes, as Trustee. So the Court will allow a further short period for the parties to nominate some independent person who can act as trustee of the trust, show the current state of the Trust's liquid assets, and to obtain Mr Hayes' consent to appointment. 52Any person suitable to act as an independent trustee in this case would have to have no association with any family member (even though perhaps nominated by a family member) and will preferably have professional qualifications sufficient for the person to make the judgments that would be required to administer the comparatively complex affairs and bitter family contests of this trust. Hopefully a person with such rare qualifications can be found. If no such person can be found, then despite the disadvantages, appointing a family member as replacement trustee may have to be faced. 53The Court will accordingly direct that any party wishing to nominate an independent trustee should obtain the consent, qualifications and professional charges of that person and circulate them to all other parties by Friday, 28 March 2014. These proceedings will be listed for further directions on Monday, 31 March 2014. By that time all parties should be in a position to indicate to the Court whether or not they consent to the appointment of an independent trustee nominated by any other party. (5) The Production of Documents 54At the hearing on 31 October 2013 Amir Ashrafinia sought the production of documents from his sister Azadeh. She resisted that claim. The Court ordered them to reduce their submissions on the issue to writing and encouraged them to consult with one another about the production of these documents. 55After the hearing on 31 October Amir corresponded with Mr Doyle, the solicitor acting on behalf of Azadeh. This produced a satisfactory result. Amir and Azadeh agreed between themselves a regime for the production of documents and some documents had already been produced by 9 December. Amir was present before the Court on 9 December and seemed satisfied with this outcome. So this issue no longer needs to be decided. (6) Just Allowances 56Mohammad and Amir have foreshadowed that they propose to claim an entitlement to just allowances for their trouble in acting as trustees of Trust assets. The other parties have foreshadowed they will contest these claims for just allowances. On 31 October 2013 the Court ordered Mohammad and Amir to file and serve any evidence upon which they propose to rely in relation to the issue of just allowances. 57But whether that evidence will be deployed is complicated by the fact that the Court has not yet appointed a new trustee of the Trust. Authority is clear that in a case such as this, where findings of breach of trust have been made against defendants, a trustee has a right of election between the remedies of account of profits and equitable compensation and a plaintiff may well elect to seek equitable compensation if the loss suffered by the plaintiff exceeds the profit made by the defaulting fiduciary: Warman International Ltd v Dwyer (1995) 182 CLR 544, at 559 ("Warman"). 58Evidence in relation to just allowances may therefore not be needed. Claims for just allowances will not be relevant if the new trustee only elects to pursue a claim for equitable compensation against the defendants in the 2011 proceedings. What happens on this issue should therefore await the appointment of a new trustee. 59Mr McGrath made submissions that the Court should make declarations consistent with the Court's principal judgment as to sums removed from the Trust by Mohammad or Amir that are now owing to the Trust. At the request of the trustee, when appointed, that may perhaps be readily done. But it should await the appointment of the trustee and his or Warman election. (7) Costs 60There are multiple disputes among parties about appropriate costs orders as a result of the principal judgment. The parties were at issue about costs orders in both the 2008 proceedings and the 2011 proceedings. 61The 2008 proceedings. Amir failed against Mohammad in the 2008 proceedings. Ordinarily costs would follow the event and Amir should pay Mohammad's costs of those proceedings. Amir resists such an order against him. He says that he only brought the 2008 proceedings at Azadeh's urging and in his mother's and sister, Leila's, best interests. 62Much of what he says about his motivation for bringing the 2008 proceedings can be accepted. His conduct was on a morally higher plane than that of his brother Mohammad. I do not think that Amir was as motivated toward personal gain as was Mohammad in his dealings with the subject matter of these proceedings. It is not necessary here to repeat what has been said on this subject in the principal judgment. But Amir's motivation is not an answer to Mohammad's claim for costs after Mohammad's success in the 2008 proceedings. Amir's joint-venture claim made in the 2008 proceedings was not well grounded. Mohammad has been put to the expense of defending those proceedings, for which he is now entitled to an order for costs against Amir. 63But relevant to the assessment of costs, one factor reduces the significance of this costs order against Amir. The 2008 proceedings and the 2011 proceedings were heard together. Without binding a later costs assessor, it nevertheless appears from the Court's perspective that significantly greater Court time was occupied with the 2011 proceedings than was occupied with the 2008 proceedings. Most of the costs that were incurred in the joint hearing of these two proceedings are accounted for by the allegations in the 2011 proceedings. As the Court's principal judgment shows, extensive expert and legal analysis was associated with each of the particular allegations of breach of trust made in the 2011 proceedings. Most of the background information, which it was necessary to adduce in both proceedings, would have been required for the 2011 proceedings alone. 64But Mohammad also submits that in addition to a costs order against Amir in the 2008 proceedings, he should have a costs order against Azadeh, because of her alleged financing and control of Amir's conduct of those proceedings. Azadeh resists such an order. This submission requires an examination of Azadeh's financial and decision-making relationship with the 2008 proceedings. 65The Court has a general discretion to make a costs order against a non-party to the 2008 proceedings, such as Azadeh. But whether or not such an order is made will depend upon: the degree and terms of financial assistance the non-party gave, whether the non-party funder had control over litigation, whether the non-party had a direct financial interest in the outcome of the case, and whether the proceedings involved matters of public interest: Gore v Justice Corp Pty Ltd (2002) 119 FCR 429, at 452 and [2002] FCA 354. 66Amir gave evidence about Azadeh's funding of the 2008 proceedings. The Court's findings based upon that evidence and the other documentary evidence follow and lead the Court to conclude that a costs order should not be made against Azadeh in the 2008 proceedings. 67Azadeh provided loans to Amir so he could carry on the 2008 proceedings. But she did not make an agreement with him that she would be entitled to any proceeds of the litigation in exchange for the loan. Until June 2011 her loans to Amir for this purpose, amounted to $137,072.37. But Amir always regarded himself as a free agent, able to decline Azadeh's offers of further funding, and able to decide for himself whether or not the 2008 proceedings should continue. But the funding was available from Azadeh. Amir was motivated to continue the 2008 proceedings. He wished to advance his mother's rights, and those of his sister Leila. So he continued to pursue them. That was Amir's dominant motive, and it was his decision, not Azadeh's. He did not continue with the 2008 proceedings because of any profit sharing arrangement in the litigation with Azadeh. I do not accept that Amir was under Azadeh's direction and control as a result of her funding of his costs in the 2008 proceedings, although the existence of that funding made him dependent on her goodwill for funds if he decided to continue. 68I accept that Amir looks back with some regret that the availability of funding from Azadeh made him go further with the 2008 litigation than he now regards as prudent. But that is largely the wisdom of hindsight. 69These findings do not support the making an order that Azadeh pay Mohammad's costs of the 2008 proceedings. 70Mohammad has also claimed costs on the indemnity basis against Amir after 27 May 2011 based upon an offer of compromise alleged to have been served on Amir. But the evidence about that offer of compromise dated 27 May 2011 (Exhibit 2) and any response that was made to it is rather unclear. I will therefore reserve for further consideration the question of whether or not the costs of the 2008 proceedings should be assessed against Amir on the indemnity basis after 27 May 2011. This will give the parties an opportunity to advance any other evidence or submissions relevant to this issue of indemnity costs. 71The 2011 proceedings. The plaintiff, Karami, was successful against Mohammad and Amir in the 2011 proceedings. In my view they should have a costs order against both of them jointly and severally, as she submits. She was substantially successful on most of her allegations of breach of trust, which she pursued in the 2011 proceedings. But Mohammad raises a number of specific issues against Karami in relation to the costs of the 2011 proceedings, which now require separate consideration. 72First, Mohammad claims an order that he should have the costs thrown away by reason of Karami's amendment of her Statement of Claim in the 2011 proceedings. There is no doubt that Karami abandoned a range of allegations she had made in the 2011 proceedings, when she amended her Statement of Claim only a few months before the trial began. Her abandoned claims were never undetermined. Many of facts relevant to the abandoned claims are background to the claims which Karami still pursued. In my view, the better course is that Karami should bear her own costs of her abandoned claims. But an order for costs in respect of these abandoned claims should not be made in Mohammad's favour. He too should bear his own costs of those abandoned claims. 73Mohammad also claims an order for costs in respect of Karami's amendment application by which she sought the Court's indulgence to amend. In my view she should not pay the costs of arguing for the amendment, which was contested but which once made, led to a successful outcome for her. But Mohammad was put to the expense of re-pleading his Defence to the Statement of Claim. He should have any of his costs thrown away by amending his Defence. 74Mohammad also submits: that the issues of breach of trust litigated in the 2011 proceedings are all separable; and that it is appropriate for a costs order to be made to differentiate between the breach of trust issues on which Karami was successful, and those on which she failed. Separate orders for costs in respect of individual issues are available in appropriate circumstances: Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 and James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. 75But Karami was successful in most of the seven particularised transactions of breach of trust. Costs should not be separately considered on each of the particulars of breach of trust. As the principal judgment makes clear, the facts underlying many of these issues overlapped substantially. And Mohammad concedes that Karami was successful in relation to particulars of breach of trust 1,3,4,5 and 6 and therefore was substantially successful overall. As to particular 2: despite Mohammad's claims to success on this particular, the result was sufficiently aligned with the particulars of breach of trust that Karami should not be denied an order for costs in respect of that particular. As to particular 7: despite Mohammad's submissions to the contrary, many of Karami's allegations were not statute barred, and were successful. Nor do I accept Mohammad's submission that Karami's failed attempts to have herself and Azadeh appointed trustees were a substantial part of the proceedings worthy of changing the overall costs order I will make in Karami's favour. 76There was debate about whether or not costs should be apportioned as between Mohammad and Amir in the 2011 proceedings. Mohammad submitted this was appropriate because of Amir's conduct of the 2008 proceedings. Mohammad submitted that Amir should be severally liable for 25 per cent of the costs of the 2011 proceedings with Mohammad, with Amir being jointly and severally liable for the remaining 75 per cent of the costs. But Amir's conduct in the 2008 proceedings should not affect his liability for costs in the 2011 proceedings. And to the extent this consideration has any weight, its counterweight is that Amir was distinctly less culpable than Mohammad in respect of most of the breaches of trust that were established. I see no basis for differentiating between Amir and Mohammad with respect to the costs of the 2011 proceedings. An order for costs should be made against both of them, which will operate jointly and severally. 77Finally, Mohammad submitted that the portion of Karami's costs for which Mohammad was liable in the 2011 proceedings should be offset against Mohammad's costs in the 2008 proceedings for which Azadeh should be made jointly and severally liable. But the Court has not found that Azadeh should be liable for any of Mohammad's costs of the 2008 proceedings. There is no basis for this claimed offset. 78Mohammad wholly failed on his cross-claim against Azadeh and Parveneh in the 2011 proceedings. Both Azadeh and Parveneh, the successful Cross Defendants, should have a costs order against Mohammad in respect of that cross-claim. Karami submitted that she should have the benefit of a costs order in respect of Mohammad's cross-claim. But I do not think she should have the benefit of such an order, as she was not a party to that cross-claim. 79Amir's Costs Submissions. Amir filed submissions about costs dated 21 October 2013. His submissions covered a number of matters other than about costs. Amir expresses puzzlement as to why Azadeh first supported him in the 2008 proceedings and then changed her mind and supported Farami against Amir and Mohammad in the 2011 proceedings. He submits that in those circumstances, like Mohammad in relation to the 2008 proceedings, if costs orders are made against him, Azadeh should be jointly liable with him on such costs orders in favour of Farami in the 2011 proceedings. 80I do not see any basis for the making of such an order against Azadeh in relation to the 2011 proceedings. As no costs orders are being made against Farami, Azadeh's support of Farami is irrelevant. To the extent that Azadeh encouraged Amir to bring the 2008 proceedings, the consequences of that have already been dealt with. And it is difficult to see in any event how, even if Azadeh encouraged Mohammad to bring the 2008 proceedings, she should as a result be liable for him as a defendant for the outcome of the 2011 proceedings. 81Amir also submits he should not be liable to pay any of Farami's costs because she too encouraged him to pursue the 2008 proceedings against Mohammad. But it seems to me that Farami's encouragement falls well short of the conduct required for a costs order to be made in the 2008 proceedings against her in respect of Amir's cost liability to Mohammad. 82Amir deals with a number of other matters in his costs submissions. He complains that the Trust really funded Mohammad's defence and so Mohammad is not really out of pocket. Once a trustee is appointed to the Trust, if that trustee elects to pursue a remedy for equitable compensation, a money judgment (subject to just allowances issues) may be entered against Mohammad. Although a judgment may well be entered against Amir for similar sums. 83Amir complains that Mohammad sold the three Trust properties for what is said to be "a profit of close to $500,000". The trustee, when appointed, may wish to pursue an account of profits in respect of these sales. That will be a matter for the trustee. Conclusions and Orders 84The Court will grant liberty to apply. This will allow the Court to deal with issues that may yet arise in relation to the implementation of these orders. One of these is any dispute that may arise about Mr Hayes' expenses. But before this or any other issue is brought back for the Court's determination the parties should first endeavour to resolve the disputed question themselves. 85In the result therefore and for the reasons given, the Court will make the following orders and directions:- (1) Subject to Order (3), order the first and second defendants to pay the plaintiffs' costs of proceedings numbered 2011/00166674 ("the 2011 proceedings"); (2) Order that the Cross-Claimant pay the first and second Cross Defendants' costs of the cross-claim in the 2011 proceedings; (3) Order the plaintiff in the 2011 proceedings to: (a) pay the defendants' costs thrown away of her 2012 amendment of the Statement of Claim; and (b) bear her own costs, as will the first defendant, of the claims abandoned by the 2012 amendment. (4) Order the plaintiff to pay the defendants' costs of proceedings 2008/00281524 ("the 2008 proceedings"), on the ordinary basis. (5) Reserve for further argument whether the costs orders in Order (4) should be paid on the indemnity basis. (6) Order the first and second defendant to indemnify the Trust in respect of the amount of Mr Russell's fees deducted from the proceeds of sale of the Marsfield property. (7) Direct that any party wishing to nominate an independent trustee, other than Mr Allan John Hayes, should obtain the consent, qualifications and professional charges of that person and circulate them to all other parties by Friday, 28 March 2014. (8) Direct that no party shall communicate with my Associate on any substantive issue in or in relation to these proceedings, other than to ask for the proceedings to be re-listed for further argument or directions, for which a motion will be required under UCPR, Pt 18. (9) Note that non-parties communicating with my Associate will be required to observe as a protocol, rather than as a Court order, the requirements of direction (8). (10) List these proceedings for further directions at 9.30am on Monday, 31 March 2014. (11) Grant liberty to apply. ********** I certify that this and the preceding pages are a true copy of the reasons for judgment of Justice Slattery delivered on 27 February 2014. Associate.................................. 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: 27 February 2014