Supreme Court New South Wales Medium Neutral Citation: Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2015] NSWSC 401 Hearing dates: 30 March 2015 Decision date: 10 April 2015 Jurisdiction: Equity Division - Commercial List Before: Stevenson J Decision: Parties to bring in short minutes to give effect to these reasons and dispose finally of the proceedings Catchwords: JUDGMENTS AND ORDERS – orders necessary to dispose of questions left outstanding from earlier judgment – whether further sums payable – whether trustee and its directors contractually entitled to indemnity costs – whether interest to judgment should be ordered – whether either party achieved substantial success – what costs orders should be made Legislation Cited: Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Independent Public Business Corporation of Papua New Guinea Act 2002 (PNG) Taxation Administration Act 1953 (Cth) Trustee Act 1925 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220 Frost v Bovaird [2012] FCAFC 60; (2012) 203 FCR 95 Holding and Management Ltd v Property Holding and Investment Trust plc [1989] 1 WLR 1313 McDonald v Horn [1995] 1 All ER 961 Miller v Cameron (1936) 54 CLR 572 Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1503 Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1846 National Trustees Executors and Agency Co of Australasia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268 Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 Texts Cited: J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia, (7th ed 2006, LexisNexis Butterworths) Category: Principal judgment Parties: Motor Vehicles Insurance Limited (Plaintiff) Woodlawn Capital Pty Ltd (First Defendant) Timothy Patrick Breen (Second Defendant) Timothy James McNamara (Third Defendant) Representation: Counsel: J Giles (Plaintiff) J C Kelly SC with D O'Connor (Defendants) Solicitors: Gadens Lawyers (Plaintiff) Uther Webster & Evans (Defendants) File Number(s): SC 2012/83573 Judgment 1. I heard these proceedings between 3 and 12 September 2014 and delivered judgment on 30 October 2014: Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1503. That judgment dealt with most, but not quite all, of the issues that divided the parties. 2. This judgment deals with those remaining issues. 3. In these reasons, I will use the same abbreviations as in the 30 October 2014 judgment. 4. As I set out in my judgment of 30 October 2014, on 24 July 2009 MVIL paid Woodlawn a sum in Papua New Guinea Kina equivalent to a sum in the order of $43.7 million to hold and invest pursuant to the First IMA. 5. When MVIL terminated the Second IMA and the AMA on 17 November 2011 the value of the Portfolio had reduced to something in the order of $30.5 million. 6. On or about 20 March 2012 Woodlawn repaid MVIL something in the order of $4.2 million. 7. In the meantime, MVIL applied for a freezing order. On 20 March 2012 Woodlawn and MVIL consented (on a without admissions basis) to a freezing order ("the Freezing Order") pursuant to which Woodlawn held the balance (in the order of $26.3 million) pending the outcome of these proceedings. Woodlawn claimed it was owed something in the order of $23 million for the fees to which I have referred. 8. On 17 December 2014 I varied the Freezing Order by, in effect, ordering that Woodlawn release to MVIL $20 million and that Woodlawn release to itself a little under $3 million on account of its accrued fees under the AMA: Motor Vehicles Insurance Ltd v Woodlawn Capital Pty Ltd [2014] NSWSC 1846 at [21]. 9. The balance of the funds remained restrained pending further argument, which occurred before me on 30 March 2015. 10. These reasons deal with the issues which were argued before me on that occasion. 11. The effect of my judgment of 30 October 2014 was that the parties failed to establish many of the claims that they agitated in the proceedings. 12. As to MVIL: 1. it failed to establish that the Trust Deed, the First and Second IMA and the AMA were ultra vires, void and of no legal effect by reason of lack of compliance with s 46B of the Independent Public Business Corporation of Papua New Guinea Act 2002 (PNG) (the effect of which would have been that Woodlawn was not entitled to retain any fees paid to it under the those agreements); 2. it failed to establish that it was entitled to rescind the IMAs and the AMA under s 925A of the Corporations Act 2001 (Cth) by reason of the fact that Woodlawn did not hold an AFSL (the effect of which would also have been that Woodlawn was not entitled to retain any fees paid under any of the agreements); 3. it failed to establish, and indeed abandoned, its contentions as to the "Overarching Investment Limitation"; 4. although it established a breach by Woodlawn of the "Dual Object" term in its investment mandate, it failed to prove damage or establish that its claim was not excluded by cl 5 of each of the IMAs and the AMA; 5. although it established Woodlawn had breached an implied term of the IMAs and the AMA by "commingling" trust funds with its own funds, it failed to establish an entitlement to terminate by reason of the fact that the commingling was remediable and not an Event of Default in the absence of notice; and 6. although it established that Woodlawn had engaged in misleading or deceptive conduct by falsely representing that it held all necessary "licences and authorities" and by writing its letter of 6 July 2011, it failed to establish a "no transaction" case in respect of the licences issue and failed to establish any contravention in relation to the letter. 1. MVIL did, however, establish its entitlement to the bulk (over 85 per cent by my calculation) of the funds that Woodlawn retained. It also established that Woodlawn was not entitled to charge GST on its fees under the IMAs or to charge "fees on fees". 2. On the other hand, Woodlawn established an entitlement to fees under the AMA accrued to 17 November 2011 in the sum of approximately $3.6 million and successfully resisted a claim for refund of past fees paid (an amount in the order of $6.35 million). 3. However, Woodlawn failed to establish an entitlement to fees beyond 17 November 2011 (an amount in the order of $19.5 million) and failed to establish its "injurious falsehood" claim. First issue – whether the deduction by Woodlawn of (a) GST and/or (b) the excess IMA fees calculated as "fees on fees" from the fund was an Event of Default and, if so, whether cl 8.4(b) or (c) of the Second IMA and AMA were engaged 1. These issues were expressly reserved for further consideration, at least in respect of the overcharging and overpayment of GST (30 October 2014 judgment at [512]). 2. Mr Giles, who appeared for MVIL, submitted that the wrongful appropriation of money by Woodlawn for GST and the excess fees claimed under the "fees on fees" calculation was a breach of each of the IMAs. 3. However, Mr Giles accepted that the reasoning at [205] to [211] of the 30 October 2014 judgment in relation to the "commingling" issue logically also applied to those breaches and that, applying that reasoning, the GST and "fees on fees" breaches were remediable with the consequence that cl 8.4(c) but not cl 8.4(b) of the Second IMA was engaged. 4. Mr Giles accepted that the consequence was that MVIL, having not given the necessary notice under cl 8.4(c), could not rely on these breaches to justify termination of the Second IMA or AMA. Second issue – Mr McNamara's and Mr Breen's accessorial liability 1. I reserved the question of the accessorial liability of Messrs McNamara and Breen for further consideration (30 October 2014 judgment at [42]). 2. Mr Giles accepted that, because of my conclusions in the 30 October 2014 judgment, the case against Messrs McNamara and Breen was "of no practical importance". 3. Accordingly, Mr Giles did not press the claim and, in effect, abandoned it. 4. The question arises as to Messrs McNamara and Breen's costs. 5. I can see no reason why MVIL should not pay Messrs McNamara and Breen's costs, albeit only to the extent that such costs exceed the costs that Woodlawn has, in any event, incurred. 6. Mr Kelly SC, who appeared with Mr O'Connor for Woodlawn and Messrs McNamara and Breen, submitted that such costs should be paid on an indemnity basis by reason of cl 5 of the Second IMA. 7. I have set cl 5 out at [55] of the 30 October 2014 judgment and set it out again here: "[Woodlawn] seeks to assist [MVIL] in the manner set out in this deed. However, MVIL agrees that [Woodlawn] is not liable for any claims, actions, proceedings, demands, liabilities, losses, damages, costs and expenses suffered by MVIL arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed, including but not limited to loss suffered by MVIL as a result of [Woodlawn's] negligence or a breach of this deed. [Woodlawn] does not warrant, represent or guarantee that any of the investment objectives stated in the [Mandate] will be achieved. MVIL agrees with [Woodlawn] (for itself and on trust for each of the related entities, affiliates, directors, officers, employees and agents of [Woodlawn] ("Indemnified Persons")) that: (a) MVIL will indemnify and hold harmless the Indemnified Persons from and against all claims actions, proceedings, demands, liabilities, losses, damages, costs and expenses arising out of, or in connection with, this deed or any other matter or activity referred to or contemplated by the deed, in which any Indemnified Person may suffer or incur loss in any jurisdiction; (b) all costs and expenses incurred by any Indemnified Person are to be reimbursed by MVIL promptly on demand, including those incurred in connection with the investigation of, preparation for or defence of, any pending or threatened litigation or claim within the terms of this Indemnity or any matter incidental thereto; and (c) no Indemnified Person will have any liability whatsoever to MVIL for or in connection with things done or omitted to be done pursuant to the deed; other than in respect of any liabilities, losses, damages, costs or expenses which are determined by a judgment of a Court of competent jurisdiction to have resulted from the wilful default or negligence on the part of the Indemnified Person. Sums already paid by MVIL under this Indemnity but which fall within this proviso will be reimbursed in full. MVIL will notify [Woodlawn] if MVIL becomes aware of any claim which may give rise to a liability under this Indemnity. Without prejudice to any claim MVIL may have against [Woodlawn], no proceedings may be taken against any director, officer, employee or agent of [Woodlawn] in respect of any claim MVIL may have against [Woodlawn]. This Indemnity will continue after the termination of this deed." 1. Messrs McNamara and Breen are each directors of the "Investment Manager" (Woodlawn) and are therefore "Indemnified Persons". 2. Mr Kelly submitted: 1. as a matter of construction, cl 5(b) informs the scope of costs and expenses incurred in "connection with" the deed and includes costs and expenses incurred by Messrs McNamara and Breen in defending themselves from claims by MVIL that they were knowingly involved in or a party to conduct which induced MVIL not to terminate the deed before 31 July 2011 (as alleged in the Further Amended Statement of Claim at [165] to [169]) and any accessorial liability claim for breach of trust (as alleged in the Further Amended Statement of Claim at [151] to [154A]) and; 2. "all" means "all" with the effect that Messrs McNamara and Breen therefore have a contractual right to their costs of these proceedings on an indemnity basis. 1. Mr Kelly submitted that, for the same reasons, Messrs McNamara and Breen should have interest on their costs as, he submitted, if the position were otherwise, they would not be indemnified for "all" of their costs and expenses. 2. Mr Kelly submitted that, in the circumstances, it would be appropriate to order that Woodlawn be at liberty to pay the costs of Messrs McNamara and Breen out of the frozen fund, as on the making of an order for costs on a common fund basis. 3. I do not accept those submissions. 4. In my opinion, on the proper construction of cl 5, the indemnity given by MVIL is only in respect of claims brought against the "Indemnified Persons" by third parties. 5. That is, in my opinion, made clear by the provision in the third last paragraph of cl 5 that: "MVIL will notify [Woodlawn] if MVIL becomes aware of any claim which may give rise to a liability to this indemnity." 1. Such language is not apt to describe a claim by MVIL itself. It is not a natural use of the language to say that a party "becomes aware" of a claim it proposes to bring itself, or has brought itself. If the parties intended that a claim by MVIL would enliven the indemnity in cl 5, they would have said so in terms. 2. That conclusion is reinforced by the second last paragraph of cl 5 which directs attention to claims that MVIL itself might have against Woodlawn and which provides, in terms, that MVIL may not bring proceedings against any "director, officer, employee or agent" of Woodlawn in respect of any claim that MVIL might have against Woodlawn. That clause is itself an answer to MVIL's accessorial claim against Messrs McNamara and Breen but is also a further reason to construe the indemnity as arising otherwise than in relation to claims made by MVIL itself. Third issue – GST 1. Woodlawn included GST in its tax invoices for fees rendered to MVIL and has remitted to the Australian Taxation Office (ATO) that part of the fees paid by MVIL as represented GST. 2. In my judgment of 30 October 2014 I concluded that GST was not payable in respect of the services rendered by Woodlawn under the IMAs (at [511]). 3. I indicated that I would invite submissions as to what consequences flowed from that conclusion, including as to whether the deduction by Woodlawn of GST was an Event of Default (at [512]). 4. As I have set out above, Mr Giles accepted that the deduction of GST was a remediable breach and thus not an Event of Default justifying termination of the Second IMA or the AMA. 5. The questions which remain are whether Woodlawn should now repay to MVIL an amount equal to the GST charged by Woodlawn, and appropriated by Woodlawn from the Portfolio (agreed at $559,194), and whether MVIL should give credit to Woodlawn for input tax credits Woodlawn has received on MVIL's behalf as a consequence of the GST payments. 6. Mr Kelly submitted that Woodlawn was not liable to make any payment to MVIL in respect of GST by reason of cl 5 of the Second IMA. 7. In particular, Mr Kelly relied upon the provision in cl 5 that Woodlawn was not liable for any claims or demands "arising out of, or in connection with, this deed, or any other matter or activity referred to or contemplated by the deed". 8. That phrase is, however, preceded and followed by wording which suggests that it was not the parties' intention in cl 5 to relieve Woodlawn from a liability to repay an overcharge. 9. Thus the first sentence of cl 5 recites that Woodlawn "seeks to assist" MVIL as set out in the deed and the phrase following refers to "loss suffered by MVIL" as a result of Woodlawn's negligence or breach of the deed. 10. That language suggests, in my opinion, that the parties were not contemplating that Woodlawn could, with impunity, overcharge (whether by unjustifiably deducting GST from MVIL's funds, or otherwise). 11. The construction advanced by Mr Kelly has the unlikely consequence that Woodlawn could overcharge MVIL and not be liable to reimburse MVIL (unless MVIL could establish "wilful default"; as to which, see [325] to [327] of my 30 October 2014 judgment). That involves the highly unlikely proposition that the objective intention of the parties was that if Woodlawn (which held MVIL's money) overcharged MVIL, Woodlawn was entitled to retain the amount overcharged. 12. I do not accept that this was the intention of the parties or the proper construction of cl 5. 13. Mr Kelly pointed to cl 6.4 of the Second IMA which provides that: "6.4 GST The parties agree that: (a) all payments under this deed have been calculated without regard to GST; (b) if the whole or any part of any payment under or in connection with this deed is the consideration for a taxable supply for which the payee is liable to GST, the payer must pay to the payee an additional amount equal to the amount referrable to GST, either concurrently with that payment or as otherwise agreed in writing…". 1. Mr Kelly submitted that Woodlawn's deduction of GST and remission of same to the Commissioner was a breach of cl 6.4(b) and thus a "breach of this deed" sufficient to enliven cl 5. 2. I do not accept that submission. As Mr Giles pointed out, cl 6.2(b) imposes an obligation on "the payer" (MVIL) and not on Woodlawn. Woodlawn was not in breach of cl 6.4(b) by deducting and remitting GST. It simply made deductions from the funds that it was not entitled to. 3. So far as concerns the "input tax credits" issue, Mr Kelly took me to evidence that, having remitted GST to the ATO, Woodlawn received on MVIL's behalf input tax credits in the sum of $470,126. 4. In that regard Mr Kelly submitted: "…Woodlawn contends that, if that sum of $559,194 in GST has been paid away in breach of the deed in some way which does [not] attract the indemnity in clause 5, a refund is available from the ATO (save and except for the sum of $122,068) by reason of the fact that the ATO granted the trust a Financial Services Rebate of over the period in question…Each of the arguments advanced by MVIL…is predicated upon an assumption that no refund, as of legal right, is available to MVIL or the MVIL Trust as against the ATO but no basis in fact or in law is advanced to support that proposition." 1. However, contrary to Mr Kelly's submissions, there is evidence that the ATO does not regard the relevant "refund" as being available to MVIL. 2. On 11 December 2014 the Deputy Commissioner wrote to "The Trustee of MVIL Trust" as follows: "Notice to pay unpaid net amounts Section 105-50 of Schedule 1 to the Taxation Administration Act 1953 Pursuant to section 105-50 of Schedule 1 to the Taxation Administration Act 1953, you are required to pay unpaid net amounts for the tax periods 01/10/2009 to 31/12/2009, 01/04/2009 to 3/06/2009, and 01/07/2010 to 30/09/2010. Reasons for the underpaid tax You claimed reduced input tax credits (RITC) for these tax periods and received payments for these credits. It has come to our attention that you are not entitled to these credits as you did not make creditable acquisitions for these periods." 1. It is common ground that, at the time this letter was written, the ATO's attention had been drawn to my reasons of 30 October 2014 and that the Deputy Commissioner's letter was written as a consequence of my findings concerning GST. 2. In those circumstances, I accept Mr Giles's submission that, in the events that have happened, Woodlawn's obligation is to reconstitute the trust fund. If reconstituting the trust fund (in effect repaying the money wrongly taken) will lead to tax consequences for MVIL (for example, that MVIL, by Woodlawn, may have claimed input tax credits that it now loses or may have overstated a capital or income loss), that is a matter between MVIL and the ATO. I accept Mr Giles's submission that the critical point is that Woodlawn is required to reconstitute the fund. 3. Further, I accept Mr Giles's submissions as follows: "…Woodlawn's contention has a result so strikingly improbable that it can be seen to be wrong. The effect of the first judgment is that Woodlawn has wrongly appropriated $559,194 from MVIL. Woodlawn had no entitlement to that money (which is MVIL's money), yet on its analysis, because it caused the 'MVIL Trust' to lodge incorrect BAS statements, Woodlawn is not required to repay MVIL's money to MVIL. In point of principle Woodlawn is required to repay the money appropriated…". 1. MVIL is entitled to repayment of the $559,194 from Woodlawn for the wrongfully appropriated GST. Fourth issue – Woodlawn's claim for fees and expenses from the fund 1. Woodlawn claims an entitlement to be reimbursed $47,944.60 for expenses incurred in, it claims, administering the fund created and frozen by the Freezing Order of 20 March 2012. 2. The $47,944.60 is made up as follows: 1. an amount of $14,348 described by Woodlawn's accountants' in a tax invoice of 27 August 2014 as: "Liaising with the Australian Taxation Office in respect of GST issues and reviews, preparation and lodgement of GST ruling, research and correspondence in respect of attending to all of the above requisitions"; 1. a further amount of $18,936 referred to in the same invoice for the following activities in relation to "2012 Income Tax", "2013 Income Tax" and "2014 Income Tax": "Preparation of yearend financial statements Resolution of queries with client data Preparation of…Income Tax Return for the Trust Provision of advice and assistance in respect to tax and accounting issues"; 1. amounts charged by those accountants for "Preparation of Trustee Solvency Statement" on 7 June 2012, 27 May 2013 and 29 May 2014, in the sums of $242, $242 and $253 respectively; and 2. an invoice from Woodlawn's solicitors, Messrs Uther Webster & Evans, for work done between 4 April 2014 and 30 October 2014 in the sum of $676.50. 1. In regard to those amounts Mr Kelly made the following submission: "The accounting and legal costs incurred by Woodlawn in lodging tax returns and attending to other tax administration matters in relation to the Frozen Fund - after it was frozen - are expenses properly incurred by Woodlawn while it was holding the Frozen Fund as trustee. The same expenses may also be said to arise in connection with the Second IMA, or an activity contemplated by the deed within the meaning of clause 5, namely, holding the fund pending final accounting. So long as the Frozen Fund remained in the hands of Woodlawn as trustee, it had accounting and tax administration liabilities under the general law. The amount in question is $47,944.60." 1. Mr Kelly sought to justify the payment of these expenses by reference to cl 5 of the Second IMA and s 59(4) of the Trustee Act 1925 (NSW). 2. Relevantly, cl 5(a) of the Second IMA provided that MVIL would indemnify Woodlawn in relation to "costs and expenses arising out of, or in connection with, this deed". 3. Section 59(4) of the Trustee Act provides that: "A trustee may reimburse himself or herself, or pay or discharge out of the trust property all expenses incurred in or about execution of the trustee's trusts or powers." 1. That statutory right is limited to expenses which are "properly" or "reasonably incurred": for example J D Heydon and M J Leeming, Jacobs' Law of Trusts in Australia, (7th ed 2006, LexisNexis Butterworths) at [2107]. No doubt that is why Mr Kelly submitted that the expenses were "properly incurred" by Woodlawn while it was holding the frozen fund as trustee. 2. Mr Kelly also drew my attention to an order which I made on 14 September 2012 varying the Freezing Order to permit Woodlawn, upon giving MVIL "five clear working days' notice" and such other information as it reasonably required, to make: 1. payments to the ATO "in satisfaction of any taxes due and payable by the MVIL Trust to the ATO pursuant to Australian taxation legislation"; and 2. payments for "any professional services firm engaged by [Woodlawn] with the prior approval of [MVIL] for the sole purpose of the preparation and lodgement of any and all relevant taxation reports or statements for the MVIL Trust or for any relevant dealings with the ATO on behalf of the MVIL Trust". 1. Dealing first with the 14 September 2012 order, I cannot see how this takes matters further. I was not taken to any letter from Woodlawn giving MVIL any such "five clear working days' notice" nor of MVIL giving "prior approval" to the engagement of any "professional services firm". 2. Mr Kelly did tender a letter from Uther Webster & Evans to Gadens Lawyers of 4 April 2014. But that letter, whilst providing information, did not otherwise appear to be notice of the kind contemplated by the orders. 3. Mr Giles submitted that Woodlawn is not entitled to reimbursement for any of these expenses because, at the relevant times, it held the funds in breach of its obligation under the Trust Deed to transfer the property as directed by MVIL. He submitted that, but for Woodlawn's wrongful conduct, none of the relevant costs would have been incurred. 4. However, by reason of the Freezing Order, Woodlawn remained in possession of the funds and was, in my opinion, entitled to its reasonable costs and expenses of administering the fund whether under cl 5(a) or under s 59(4) of the Trustee Act. 5. I do not consider that the expenses that Woodlawn incurred concerning the GST rulings (the $14,348) were reasonably incurred. As Mr Giles submitted, the obtaining of that GST ruling was directly inconsistent with, and indeed contradictory of, MVIL's interests in the proceedings and, for the reasons I explained at [510] of my 30 October 2014 judgment, proceeded upon a false basis. 6. As to the $18,936 incurred for the trust's 2012, 2013 and 2014 income tax return and for "provision of advice and assistance in respect of tax and accounting issues" for those years, it appears to be reasonable for Woodlawn to have engaged accountants to prepare the income tax returns and financial statements. Mr Giles submitted that the quantum of the fees charged suggested that, probably, the charges included work not performed for the benefit of the trust. However, I am not prepared to draw that inference. I therefore conclude that these fees were reasonably incurred. 7. I do not consider the balance of the fees to have been reasonably incurred. The sums incurred for the preparation of Woodlawn's "Solvency Statement" appear to be directed to Woodlawn's affairs. The narrative in the Uther Webster & Evans invoice suggests that the work there referred to related to the litigation between the parties. Fifth issue – interest to judgment 1. As Mr Giles submitted, the net effect of my reasons to date is that as at 1 December 2011, MVIL's entitlement to the funds held by Woodlawn is summarised in the following table: Description (A) Total in frozen accounts $30,341,646 (B) Unpaid AMA fees payable by MVIL to Woodlawn ($3,591,155) (C) Overpaid IMA fees, payable Woodlawn to MVIL $633,634 (D) GST, payable Woodlawn to MVIL $559,194 (E) Subtotal (B-C-D) ($2,398,327) (F) Fund net of fees (A-E) $27,943,319 1. On about the date of the Freezing Order, 20 March 2012, Woodlawn paid MVIL the $4.2 million to which I have referred at [11] above. 2. As a result, MVIL was entitled to $23,812,857 calculated as follows: Description (A) Total in frozen accounts $26,211,184 (B) Unpaid AMA fees payable by MVIL to Woodlawn ($3,591,155) (C) Overpaid IMA fees, payable Woodlawn to MVIL $633,634 (D) GST, payable Woodlawn to MVIL $559,194 (E) Subtotal (B – C – D) ($2,398,327) (F) Fund net of fees (A – E) $23,812,857 1. As I have mentioned, on 17 December 2014 I varied the Freezing Order to allow for $20 million to be paid by Woodlawn to MVIL and for $2,957,521 to be paid to Woodlawn on account of its accrued fees. 2. Thus, so far as concerns the funds retained by Woodlawn following MVIL's termination of the Second IMA and the AMA on 17 November 2011, the practical result of my findings is, as I have mentioned above at [13], that MVIL has established that it was entitled to more than 85 per cent of the funds retained by Woodlawn. 3. The funds, and interest accruing thereon, were held by Woodlawn pursuant to the Freezing Order of 20 March 2012. 4. In those circumstances, MVIL seeks an order pursuant to s 100 of the Civil Procedure Act 2005 (NSW) of interest to judgment. Mr Giles accepted that such interest would have to take account of the interest which actually accrued on the fund while it was frozen. It is common ground that interest accrued on the frozen fund at less than court rates, although the precise figures were not to hand during argument. Mr Giles sought an order for interest at a rate equal to the difference between court rates and the interest which accrued on the fund whilst it was frozen. 5. Mr Kelly submitted that interest to judgment should not be ordered because Woodlawn was at all times prior to my judgment of 17 December 2014 entitled to exercise a lien over the whole of the frozen fund, and entitled to maintain that lien until its entitlement to be paid was finally determined. 6. The parties directed detailed submissions as to the correctness of those propositions. 7. In my opinion, it is not necessary for me to resolve those questions because, assuming the correctness of Woodlawn's contentions as to its lien, the fact is that I have now determined that, for the most part, Woodlawn was not entitled to retain the funds. 8. Thus, in a practical sense, MVIL has been held out of the vast bulk of its money and, in my opinion, should have interest to judgment (at a rate equal to the difference between court rates and the rate of interest which actually accrued) by way of compensation. 9. As Mr Giles submitted, this is a conventional order following contested litigation in which one party is held out of its money. 10. I do not see that the fact that MVIL consented to the Freezing Order compels a contrary conclusion. MVIL moved for the Freezing Order in the face of an undertaking given on behalf of Woodlawn to refrain from dealing with the funds only to and shortly after the date on which the Freezing Order was made. I accept Mr Giles's submission that the Freezing Order was not intended by either party to alter their rights. It simply represented a commonsense and commercial compromise whereby, to use Mr Giles's language, MVIL "put its foot on the money" pending the hearing and whereby the parties agreed that interest accruing on the funds should also be restrained. 11. If it be relevant to reach any conclusion concerning the question of lien, the starting point is cll 3.2 and 4.2(b) of the Trust Deed, which are in the following terms: "3.2 Obligation to account With the exception of any fees which the Trustee is entitled to receive in its capacity as investment manager of the Trust Property under the Investment Management Agreement, the Trustee stands possessed upon trust absolutely and must account to the beneficiary for all income, distributions and other benefits received by the Trustee in respect of the Trust Property. … 4.2 Indemnity ... (b) The Trust Property is charged with, and is security for, the Trustee's performance of the trust arising under this document in respect of all rights of reimbursement and indemnity arising out of this document." 1. Mr Giles accepted that the effect of cl 3.2, when read with cl 4.2(b), is that the charge created by cl 4.2(b) secures payment of fees payable by MVIL to Woodlawn under the Second IMA. However, on the date MVIL terminated the Second IMA and the AMA, it did not owe Woodlawn any fees under the Second IMA. The accrued fees then due to Woodlawn were under the AMA. 2. As Mr Giles pointed out, the charge created by cl 4.2(b) of the Trust Deed is not enlivened by fees due under the AMA; the AMA is not referred to in the Trust Deed. 3. Woodlawn does have a statutory entitlement under s 59(4) of the Trustee Act to reimburse itself in respect of properly incurred expenses; but that entitlement is confined to the figure of $18,936 referred to at [72] above. 4. I do not see that cl 6.3 of the AMA takes the matter any further. That clause is in the following terms: "If Fees and Expenses remain unpaid for longer than the period agreed to in the Asset Management Mandate, then: (a) [Woodlawn] has the right to withdraw amounts it is owed from the cash funds held in the Portfolio…". 1. As I read cl 6.3, it does no more than confer on Woodlawn a right to withdraw money. It does not create a security interest: Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 584 at 613 per Lord Wilberforce. Sixth issue – costs 1. A number of issues arise. 2. First, Woodlawn contends that by reason of cl 5 of the Second IMA it is entitled to its costs of these proceedings on an indemnity basis. 3. For the same reasons that I rejected Messrs McNamara and Breen's corresponding contention, I do not accept this submission. The indemnity for costs referred to in cl 5 is directed to any costs incurred by Woodlawn in relation to proceedings brought against it by a third party, and not by MVIL itself. 4. Otherwise, Woodlawn contended that as a matter of general law, a trustee is entitled to be indemnified out of a trust fund against "all his proper costs, charges and expenses incidental to the execution of the trust" (National Trustees Executors & Agency Co of Australasia Ltd v Barnes [1941] HCA 3; (1941) 64 CLR 268 at 277 per Williams J) and that the costs incurred by Woodlawn in these proceedings should be so characterised. 5. 97 ­I do not accept that submission. In my opinion, it deserts reality to characterise Woodlawn's costs of these proceedings as being "incidental to the execution of the trust". 6. I accept the following submissions made by Mr Giles: "[I]n these proceedings Woodlawn has acted for its own benefit, in effect suing for its own fees and asserting various contractual rights against the interests of the beneficiary, MVIL. A trustee which litigates in substance for its own benefit and not the 'benefit of the fund' is treated as any other litigant for the purpose of costs: [Uniform Civil Procedure Rules 2005 (NSW), Uniform Civil Procedure Rule ('UCPR')] 42.25(2). That rule reflects the position at law. A trustee engaged in adversarial litigation in its interest against the interest of the beneficiary (or beneficiaries) is not entitled to costs from the trust and has the same exposure to costs as an ordinary litigant: Holding and Management Ltd v Property Holding and Investment Trust plc [1989] 1 WLR 1313 at 1324-5 per Nicholls LJ, Lloyd and Farquharson LJJ agreeing (cited in Jacobs' at [2109]); also (influenced by rule of court in effect the same as UCPR 42.25) McDonald v Horn [1995] 1 All ER 961 at 970-1 per Hoffmann LJ, Balcombe and Hirst LJJ agreeing; Alsop Wilkinson (a firm) v Neary [1996] 1 WLR 1220 at 1224 per Lightman J (approved on this point in Frost v Bovaird [2012] FCAFC 60 (2012) 203 FCR 95 at [68]-[80] per Jacobson, Siopis and Nicholas JJ); to the same effect Miller v Cameron (1936) 54 CLR 572 at 578-9 per Latham CJ. This was not a case brought by Woodlawn to determine the proper construction of the trust deed or in relation to management of the trust, or to preserve a trust asset. It was an adversarial dispute about Woodlawn's own rights and liabilities, including rights and liabilities that did not relate to the trust (eg Woodlawn's claims for fees payable under the AMA, injurious falsehood). … [T]he question of costs involves a practical characterisation of the character of the litigation. That is, whether Woodlawn was litigating in the interests of the beneficiaries as a whole (in this case a straightforward assessment as there is only one beneficiary, MVIL) or in its own interests. That question of practical characterisation creates no difficulty. This was a case about Woodlawn's and MVIL's correlative rights and liabilities, not about the construction or future administration of the trust. That assessment applies a fortiori in respect of the cross claim, which asserted claims personal to Woodlawn (for fees allegedly payable under various agreements, injurious falsehood)." 1. For those reasons, which I adopt, I do not consider that Woodlawn is entitled to be indemnified from the fund for its costs. 2. As to what costs order should be made, as I mentioned at the outset of these reasons, to a large extent neither MVIL nor Woodlawn succeeded in making out the case that they propounded in these proceedings. 3. However, MVIL has established its entitlement to have returned to it the bulk of the funds that Woodlawn retained following MVIL's termination of the Second IMA and the AMA on 17 November 2011. 4. I think it inappropriate to make an order for costs by reference to the various issues won and lost. Neither party suggested that this should occur. 5. In all the circumstances, it appears to me that the appropriate order for costs that I should make is that (subject to the question of Messrs McNamara and Breen's costs) Woodlawn should pay one third of MVIL's costs of the proceedings. 6. MVIL should pay Messrs McNamara and Breen's costs but only to the extent (if any) that those costs exceed those that have otherwise been incurred by Woodlawn. Conclusion 1. I invite the parties to confer and agree on what orders should be made to give effect to these, and my earlier, reasons and to dispose of the proceedings. ********** 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: 10 April 2015