Supreme Court New South Wales Medium Neutral Citation: Chin Kwun Kwong v Dennis Ming Chung Low (Costs) [2018] NSWSC 1339 Hearing dates: 29 June 2018 Date of orders: 27 July 2018 Decision date: 27 July 2018 Jurisdiction: Equity Before: Rein J Decision: See [30] - [34] Catchwords: COSTS – Party/Party – Payable out of a fund – Trust – Where proceedings settled with none of the issues which the Plaintiff came to Court originally to ventilate or later advanced needing to be resolved – Where proceedings settled with only one minor matter left in dispute – Where Plaintiff seeks an order that his costs be paid out of the trust assets – Where Defendants resist such an order and maintain that the Plaintiff should pay their costs (as well as bearing his own) and that their costs be paid out of the trust assets – Whether the Plaintiff as trustee acted unreasonably or for his own benefit in seeking judicial advice – Relevance of Plaintiff's reliance on Counsel's advice and failure to seek the Attorney General's approval or leave of the Court considered; HELD: Parties' costs as agreed or assessed to be paid on the indemnity basis out of the Trust assets. Legislation Cited: Charitable Trusts Act 1993 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Attorney-General (NSW) v Stuart (1994) 34 NSWLR 667 Chin Kwun Kwong v Dennis Ming Chung Low [2018] NSWSC 719 Dulhunty v Dulhunty [2010] NSWSC 1465 Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 Miles v Sydney Meat Preserving Co Ltd (1912) 16 CLR 50 Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 O'Brien v McCormick [2005] NSWSC 619 Panama and South Pacific Telegraph Co. v India Rubber, Gutta Percha, and Telegraph Works Co (1875) 10 Ch App 515 Parkes-Linnegar & Anor v Watson (No 2) [2011] NSWSC 181 Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 Re Whiteley; Bishop of London v Whiteley [1910] 1 Ch 600 Winn v Harding (No 2) [2017] NSWSC 601 Texts Cited: Jacobs' Law of Trusts in Australia (Heydon and Leeming, Butterworths, 7th ed, 2006) The Law and Practice Relating to Charities (Picarda, Bloomsbury Professional, 4th ed, 2010) Category: Costs Parties: Chin Kwun Kwong (Plaintiff) Dennis Ming Chung Low (First Defendant) Bernard Hor (Second Defendant) Wing Yip Yee (Third Defendant) Attorney General for New South Wales (Fourth Defendant) Representation: Counsel: Mr J. O'Sullivan (Plaintiff) Mr M. Oakes SC and Mr K. Tang (First, Second and Third Defendants) Mr P. Singleton (Fourth Defendant) Solicitors: Darian Iacono & Legal (Plaintiff) Raymond Lee & Co. (First, Second and Third Defendants) Crown Solicitor's Office (Fourth Defendant) File Number(s): 2014/00327875 Publication restriction: Nil Reasons for Judgment 1. On 9 May 2018, I delivered reasons for judgment in this matter: see Chin Kwun Kwong v Dennis Ming Chung Low [2018] NSWSC 719. Those reasons should be read together with these reasons and I will use the same terminology. There had been, effectively, a settlement of the proceedings with only one relatively minor matter left in dispute. The parties had agreed that there should be a declaration in respect of land at Glebe on which is located a temple, known as the Sze Yup Kwan Ti Temple ("the Temple"), and the basis on which the land is held. The terms of the Trust as declared are set out as a schedule to the earlier reasons. The one matter in dispute was whether there should be incorporated into the schedule a provision permitting a trustee to record, by audio or audio-visual means, the meetings of trustees ("the A/V Clause"). The Plaintiff wanted such a clause and the First, Second and Third Defendants ("the Defendants") did not, and they were supported in their opposition by the Fourth Defendant, the Attorney General. I ruled against the Plaintiff on that point. 2. What is now before the Court is a dispute over costs. The Plaintiff seeks an order that his costs, which he claims are approximately $360,000, be paid out of the trust assets. The Defendants resist such an order and maintain that the Plaintiff should pay their costs (as well as bearing his own) and that the Defendants are entitled to be paid their costs out of the trust assets. There is no dispute that the Plaintiff has incurred considerable legal costs (although the amounts claimed are not admitted given the absence of supportive documents) and there is also agreement that the Defendants' costs are in the order of $327,000 (see the affidavit of Mr Raymond Lee, solicitor). As will be apparent, the costs on both sides of the record are of a very significant magnitude. The Attorney General does not seek an order for costs and no order is sought against him. 3. Putting to one side the A/V Clause issue, which it is agreed involved an extremely limited contest, the case has been settled with none of the issues which the Plaintiff came to Court originally to ventilate or later advanced needing to be resolved. 4. In this case, there was a declaration in terms agreed between the parties but it was framed in terms different to the 1897 Trust Deed. Costs orders normally follow an 'event', and if there has been no determination by the Court, the consequence is that there is no 'event' for costs to be tied to: see Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 at [2] per Basten JA and [29] - [30] per Payne JA (with whom Meagher JA agreed). 5. There are exceptions to the rule about costs in the absence of a determination (see Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622) but it is not suggested that any of those exceptions apply here. 6. The Plaintiff accepts the effect of these authorities and did not seek to assert that the declaration made by the Court following upon the agreement of the parties was an 'event' relevant to costs. Rather, he relies on Rule 42.25 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), which is in the following terms: 42.25 Costs of trustee or mortgagee (cf SCR Part 52A, rule 42) (1) Subject to subrule (2), a person who is or has been a party to any proceedings in the capacity of trustee or mortgagee is entitled to be paid his or her costs in the proceedings, in so far as they are not paid by any other person, out of the fund held by the trustee or out of the mortgaged property, as the case may be. (2) The court may order that the person's costs not be so paid if: (a) the trustee or mortgagee has acted unreasonably, or (b) in the case of a trustee, the trustee has in substance acted for his or her own benefit rather than for the benefit of the fund. 1. The Defendants dispute the Plaintiff's entitlement to an order pursuant to UCPR Rule 42.25, asserting that the Plaintiff has not acted reasonably, and they were supported in this contention by the Attorney General, although with emphasis on different points. The Defendants assert that the Plaintiff had, in substance, acted for his own benefit. The Defendants also sought, in written submissions filed on their behalf ("DSC"), at paragraph 1(d), an order that the Plaintiff reimburse the funds of the Trust "to the extent that they have been or are applied in paying the Defendants' costs". 2. The Plaintiff is one of four trustees of the Trust. The other three trustees are the Defendants. There had been disputes between the Plaintiff and the Defendants concerning the management of the Trust, including whether or not the trustees were required to act unanimously, effectively giving them the right of veto over the decision-making process. The Defendants contended that the trustee could act by majority vote. 3. On 6 November 2014, The Plaintiff filed a Summons seeking judicial advice about matters relating to the Trust but the advice sought did not include advice as to whether the Trust was a charitable trust and whether the Plaintiff was required to obtain the agreement of the Attorney General to the commencement of proceedings. Sections 5 and 6 of the Charitable Trusts Act 1993 (NSW) ("the Act") provide: 5 Definition of "charitable trust proceedings" (1) In this Part, charitable trust proceedings means proceedings in the Court brought, whether by any trustee of a charitable trust or by any other person, under the Court's statutory or general jurisdiction with respect to any breach or supposed breach of a charitable trust, or with respect to the administration of a charitable trust. (2) However, in this Part charitable trust proceedings does not include: (a) proceedings for the bringing of any appeal, or (b) proceedings relating merely to the construction of a trust instrument. 6 Bringing of certain charitable trust proceedings to be authorised by Attorney General or by leave (1) Charitable trust proceedings are not to be commenced in the Court unless: (a) the Attorney General has authorised the bringing of the proceedings, or (b) leave to bring the proceedings is obtained from the Court. (2) The Court is not to give such leave unless satisfied that the Attorney General has been given an opportunity to consider whether to authorise the proceedings or that the referral of the matter to the Attorney General is not appropriate because of the urgency of the matter or other good cause. (2A) Any such authority or leave may also be given after charitable trust proceedings have been brought so as to enable the continuation of those proceedings. (3) A person who does not otherwise have standing may bring charitable trust proceedings if authorised by the Attorney General to bring those proceedings. (4) Nothing in this section applies to the bringing by the Attorney General, with or without a relator, of charitable trust proceedings or any other proceedings relating to a charitable trust. 1. The Plaintiff's affidavit, filed in support of the Summons, made reference to a number of disputes between himself and the Defendants, including disputes about accounts, access to information, decisions made to set up a website and to employ a caretaker. The affidavit annexed the advice of Mr P. King, barrister, which set out the matters on which Mr King had been asked to advise, his response to those questions and his view that they were all matters appropriate for judicial advice. Mr King made clear in his advice that he had not been asked to advise whether or not the Trust was a charitable trust. 2. On 24 February 2016, Mr Oakes SC and Mr K. Tang provided their advice to the Defendants in response to that of Mr King and shortly thereafter the advice of Mr Oakes and Mr Tang was provided to the Plaintiff's solicitor. Mr Oakes and Mr Tang expressed the view that the Trust was a charitable trust. They agreed that one of the matters identified by the Plaintiff was a matter suitable for judicial advice. In relation to one of the matters raised in the Summons, they expressed the view that that issue required notice to the Attorney General. 3. There were delays in part attributable to a change in representation for the Plaintiff but, in June 2016, the Plaintiff filed an Amended Summons reformulating somewhat the questions for advice, dropping the issue of breach of trust and, in March 2017, the Plaintiff filed a Notice of Motion seeking leave to further amend the Summons to include alternative claims for declaratory relief, although still without any reference to the issue of charitable trust. 4. The Plaintiff's Notice of Motion was fixed by the Equity Registrar for hearing before me on 24 May 2017 and I indicated on that occasion that I thought the matter was more appropriately one for declaratory relief, rather than judicial advice and that it appeared to involve matters going beyond the construction of the Trust Deed. I raised the issue of the apparent charitable status of the Trust and Mr O'Sullivan asserted that the Trust was a non-charitable purpose trust: see T2.22-T3, 24 May 2017. I directed that the Attorney General be notified of the proceedings. By letter dated 2 August 2017, the Crown Solicitor advised the parties that the Attorney General took the view that the Trust was a charitable trust and queried "whether there is a real legal dispute between the parties that warrants the litigation brought by the Plaintiff to resolve it." On 3 August 2017, the Attorney General's position that authority would not be given to the Plaintiff to proceed with the litigation was advised to the Court. Hearing of the Plaintiff's motion was listed for 11 September 2017, but the matter did not proceed on that date because of the position of the Plaintiff identified at T3.50-T6.21 (6 September 2017). 5. Section 6 of the Act does give the Court power to grant leave for proceedings to continue, but only if the Attorney General has been given an opportunity to consider whether to authorise the proceedings. If the proceedings were not "charitable trust proceedings" then neither the authority of the Attorney General nor leave of the Court was required. It was agreed on 6 September 2017 that there would be a separate question heard on whether the Trust was a charitable trust or not and that question was set down for hearing on 11 December 2017 before me. 6. In the meantime, Mr Laughton and Mr O'Sullivan had, on 31 October 2017, provided to the Plaintiff a joint opinion in which they stated: "2. In our view, the Trust: 2.1. is not charitable; and 2.2. fails because it offends the rule against perpetuities." Detailed reasons were given for those views. 1. In the lead up to the hearing of the separate question, I received extensive submissions from Mr Laughton (and Mr O'Sullivan), by attachment of their advice of 31 October 2017 referred to above, Mr Oakes (and Mr Tang) and Mr Singleton, Counsel for the Attorney General. At the hearing on 11 December 2017, I pointed out that it seemed to follow from the Plaintiff's submissions that, if the Plaintiff was correct in his assertion that the Trust was not charitable, then the Trust must have failed and would risk being ceded to the Crown bona vacantia. Thus, if the Trust was charitable, approval of the Attorney General or leave of the Court was required and neither had been obtained, but if the Trust was not charitable, the Trust must have come to an end (I refer to this conundrum for the Plaintiff in my earlier reasons for judgment at [5]). The identification of the problem (and the extensive efforts of Mr Singleton on behalf of the Attorney General) seems to have led to its resolution (as I explained in my earlier reasons). 2. The Plaintiff accepts that the Defendants are entitled to be paid their costs out of the Trust's assets. He contends that his costs should also be paid out of those assets. 3. The Defendants' claim that the Plaintiff has "acted unreasonably, or in substance, acted for his own benefit, rather than the benefit of the fund": see DSC, paragraph 5. They submit that it is the duty of a trustee of a charitable trust not to impugn its charitable status. They submit that the Plaintiff, at first, only indirectly challenged the trustees' status. The Defendants took the position that, even if advice was sought, then leave of the Attorney General was required for that. 4. Mr Singleton, in his submissions on behalf of the Attorney General, took the position that the case should be viewed as one based on UCPR Rule 42.25. He accepted that the Plaintiff was acting as trustee and described the critical question as being whether or not the Plaintiff had acted unreasonably. He contended that the Court could view part of the conduct of the Plaintiff as unreasonable and part of that conduct as reasonable, and he identified as unreasonable conduct the following matters: 1. That Mr King had noted in his advice that he had: "…not been asked to consider whether or not such a trust is a charitable trust. However, it cannot, I think for present purposes, be disregarded that the Trust is not a normal family or private trust, but has real community and public 'benefits'." and in "disregard of that qualification – indeed warning", the Plaintiff's Summons failed to put forward for determination the question of whether the Trust was a charitable trust and the question which was put forward for judicial advice contained a false dichotomy and precluded an answer to the effect that the trust was a charitable trust. 1. The Plaintiff failed to consult the other trustees. 2. The Plaintiff failed to obtain the consent of the Attorney General as to the commencement of the proceedings. 3. The Plaintiff commenced proceedings without raising "the determinative issue" (i.e. the Trust's charitable status). 1. It would seem that [19(4)] is really part of [19(1)] above. As I have noted previously, Mr King advised that the questions posed to him were suitable questions to be raised for judicial advice. He did not recommend that the Plaintiff seek judicial advice on the question of the charitable status of the Trust. The advice from Mr Oakes and Mr Tang did not expressly state that the proceedings should raise that issue, but they do refer to the fact that the Trust had been operating as a charity and was registered with the Australian Tax Office and the Australian Charities and Not-For-Profits Commission. The one matter which they identified as requiring the approval of the Attorney General as a precursor to the litigation (i.e. paragraph 1.9 in the original Summons: see page 9 attached to the affidavit of Mr Dennis Low of 26 February 2016) was then deleted by the Plaintiff from the Summons. I should note that, in his submissions on costs, Mr Oakes submitted that the proceedings were suitable for judicial advice and it would not have mattered if declaratory relief had not been sought: T25.3-T26.7. 2. In relation to [19(2)] above, I am unable to accept that it was 'unreasonable' for the Plaintiff not to have consulted with the Defendants. It was the Defendants with whom he was in conflict and, in any event, there was evidence from the Plaintiff that he had raised the issue with his co-trustees: see Exhibit A of which the affidavit of the Plaintiff of 10 February 2017 forms part. 3. Mr Laughton, in his submissions, pointed out that the Plaintiff has at all times, both in the commencing of these proceedings and in propounding his claim that the Trust was not a charitable trust, acted on the advice of Counsel. Mr King, having referred to Dulhunty v Dulhunty [2010] NSWSC 1465 and Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar The Diocesan Bishop of The Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66, advised that the Plaintiff should seek judicial advice in late 2014 and Mr Laughton and Mr O'Sullivan gave their advice in 2017 that the Trust was not a charitable trust. 4. There is authority that supports the contention that the fact that a trustee has acted in accordance with Counsel's advice is a relevant matter. In Parkes-Linnegar & Anor v Watson (No 2) [2011] NSWSC 181 at [8], Pembroke J said: "8 A trustee will, of course, usually be taken to have acted reasonably if he acts on the advice of counsel. But there are limits to this protection and legal advice is not always a passport to relief. It depends in part on the precise content of that advice and the facts provided by the trustee to counsel. If the trustee is aware of material facts that are not put before, or not considered by, the person from whom the advice is sought, he will not be entitled to shelter behind the advice. Equally, if the trustee disregards subsequent events or further facts and continues to act on the advice, when reconsideration is clearly called for, his conduct may not be reasonable: In re Paulings Settlement Trusts [1964] 1 Ch 303 at 358-359 (Upjohn LJ)." I think that Mr Singleton's submission that there must be an objective element in determining whether reliance on advice is sufficient is supported in the passage cited. 1. Mr Laughton described the reliance on legal advice as "the nub of the entire costs question". Mr Oakes and Mr Singleton drew attention to the fact that Mr King made it clear that he had not been asked to advise whether the Trust was a charitable trust. That may be so, but Mr King did not say that he thought that question should be added to the list of questions for judicial advice. 2. The submissions on costs of the Defendants and of the Attorney General seem to focus on the failure of the Plaintiff to recognise that, for the commencement of the proceedings, the approval of the Attorney General was required, or alternatively that leave was required from the Court and even in the case of a summons seeking judicial advice. Mr Oakes challenged the Plaintiff's contention that members of the general public were excluded from visiting the Temple as a basis for resisting the charitable status of the Trust (see T24.30-35). The difficulty with these contentions is that they assume that the Trust was a charitable trust. If it was not, neither the Attorney General's approval nor leave from the Court were required to commence these proceedings. On 24 May 2017, I took the view that the fact that the Trust had been operating as a charitable trust for many years and that it was, at the very least, arguable that it was a charitable trust was reason enough for the Attorney General to be notified, but that did not of itself resolve the underlying issue. Importantly, "the charitable trust" issue was part of the underlying dispute as well because one issue which divided the parties was that the Plaintiff claimed that the trustees had to act unanimously, whereas the Defendants rejected that contention. It was accepted in the course of argument before me that trustees of a charitable trust can act by majority, whereas in a private trust, generally speaking, the trustees cannot do so: see Re Whiteley; Bishop of London v Whiteley [1910] 1 Ch 600 cited in Dulhunty (supra) at [36] per Slattery J and see Jacobs' Law of Trusts in Australia (Heydon and Leeming, Butterworths, 7th ed, 2006) at [1614] and cases cited in footnote 59. 3. On the question of whether the Plaintiff was acting for his own benefit, the Plaintiff had grievances relating to conduct of the Trust and whether or not they were valid, has not been determined. He gave evidence of his family's and his own involvement with the Temple over a long period (see Exhibit A, Affidavit of 24 June 2016), and I do not think it has been established that he in any way acted for his own benefit. As Mr Laughton pointed out, the Defendants did not explain what was asserted to be the "personal benefit" that the Plaintiff sought by the proceedings. 4. A significant element in the assertion by the Defendants of unreasonable conduct by the Plaintiff is the Plaintiff's attack on the charitable status of the Trust. Mr Oakes submitted that it was obvious that a trustee could not impeach the trust of which he was a trustee. Mr Oakes conceded that he had not been able to find any authority to that effect, and relied on the observation of James LJ in Panama and South Pacific Telegraph Co. v India Rubber, Gutta Percha, and Telegraph Works Co (1875) 10 Ch App 515 at 526 that "the clearer a thing is, the more difficult it is to find any express authority or any dictum exactly to the point": and see Miles v Sydney Meat Preserving Co Ltd (1912) 16 CLR 50 at 81 per Isaacs J, and Attorney-General (NSW) v Stuart (1994) 34 NSWLR 667 at 680 per Hunt CJ at CL, where reference is made to that observation. The Defendants also referred to The Law and Practice Relating to Charities (Picarda, Bloomsbury Professional, 4th ed, 2010) at p 629: "Trustees of a charity, within the limits of their authority, whatever they may be, should be guided only by a desire to promote the lasting interest of the charity." 1. Generally speaking, a trustee who incurs legal expenses in connection with his duties as a trustee is entitled to be reimbursed from the trust assets: see O'Brien v McCormick [2005] NSWSC 619 at [56] per Campbell J (as his Honour then was) and the cases there cited and Winn v Harding (No 2) [2017] NSWSC 601 at [13] per Darke J. 2. I was initially inclined to think that the fact that the Plaintiff contended that the Trust was not charitable and that his contention, if accepted, would lead, in effect, to the demise of the Trust and potentially to its assets being ceded to the Crown, was a reason why the Plaintiff could not be said to be acting reasonably viz-a-viz the Trust. That is, his contentions were inimical to the continuation of the Trust. 3. On further reflection, however, I have come to the view that, if the Plaintiff's contention that the Trust was not a charitable trust was correct, and the consequence of that was that the Trust would have to be wound up with the Trust assets very likely being ceded to the Crown, that was not a course which, as a trustee, he should be precluded from pursuing. It is not a denial or repudiation of the Trust, but rather of its charitable status, and I do not think that a trustee should be discouraged from addressing fundamental problems with the trust once he becomes aware of them. Additionally, looking at the matter broadly, the consequence of these proceedings has been, through the declaration made, to make the status of the Trust clear (it being agreed that the declaration was framed in different terms to the 1897 deed: see T35.31-T36.1 and see T37.43-T38.2) and hopefully to remove uncertainty about a number of aspects of the Trust and its management, a positive outcome for the Trust and all the trustees as Mr Laughton contended. It also means that the Attorney General will be able to take whatever action that needs to be taken in respect of the Trust should there be continuing conflict between the trustees without there being any question as to his entitlement to do so. 4. I think the course of this litigation has been unfortunate and it is possible that, had the Attorney General been notified in early 2015, the position reached in April 2018 would have been reached a lot earlier. I also think that the charitable trust issue should have been raised at the outset, but I am not convinced that the failure to do so, particularly having regard to the fact that the Plaintiff sought Counsel's advice on what steps he should take, means that the Plaintiff was, as a trustee, acting unreasonably so as to deprive him of the costs of the proceedings. It was open to the Defendants to raise that requirement as soon as they received the Summons, which would have brought forward the very helpful involvement of the Attorney General. I am not persuaded that the Plaintiff's conduct in applying to the Court for advice, adding a claim for declaratory relief, and resisting the Defendants contention that the Trust was (as structured) a charitable trust, amounts to unreasonable conduct and this is reinforced by the outcome of the proceedings made possible by the parties themselves and the involvement of the Attorney General. 5. I have referred to the Defendants' claim that the Plaintiff should, in effect, pay their costs. This does not appear to be based on a claimed 'event', since the Defendants themselves rely on Nichols (supra) as a block to the plaintiff's recovery of costs given the absence of a determination by the Court of the issues that divided them (and the Plaintiff does not put his claim on that basis). It is, therefore, not clear on what basis the Defendants claim to be entitled to an order that their costs should be paid by the Plaintiff, but to the extent that the Defendants' claim is predicated on unreasonable conduct by the Plaintiff, its rejection is encompassed by what I have said in relation to the Plaintiff's claim for costs under UCPR Rule 42.25. 6. There was evidence before me that the Trust assets are sufficient to pay for all the parties' costs without recourse to sale of the real estate on which the Temple is located (see Mr Kwong's affidavit of 29 May 2018). 7. In my view, therefore, the order that should be made is that the Plaintiff's and the Defendants' costs (including the costs of this application) as agreed or assessed should be paid on the indemnity basis out of the Trust assets. I do not accept that there is a need for a declaration in this connection as the Plaintiff contended. I will invite the parties to agree on a mechanism for agreement in relation to the quantum of the Plaintiff's costs that will avoid the need for an expensive process of assessment. ********** Amendments 19 December 2018 - Amendment to case name. 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: 19 December 2018