Kazar v Filaria Pty Limited & Ors [2004] ACTSC 124 (3 December 2004)

Last Updated: 6 December 2004

HENRY KAZAR v FILARIA PTY LIMITED and ORS

[2004] ACTSC 124 (3 December 2004)

TRUSTS - trustees - remuneration - breach of trust - relief from personal liability for breach

Trustee Act 1925, ss 85, 93

Supreme Court Rules, O 58

Trade Practices Act 1974

Cain v Watson [1910] VLR 256

No. SC 333 of 2004

Judge: Master Harper

Supreme Court of the ACT

Date: 3 December 2004

IN THE SUPREME COURT OF THE )

) No. SC 333 of 2004

AUSTRALIAN CAPITAL TERRITORY )

BETWEEN: HENRY KAZAR

Plaintiff

AND: FILARIA PTY LIMITED

ACN 056 933 843

First Defendant

AND: MILSTERN SALES PTY LIMITED

ACN 050 326 997

Second Defendant

AND: WALTPAN PTY LIMITED

ACN 003 120 492

I & V BUILDERS PTY LIMITED

ACN 008 540 216

ACTRAINT NO. 24 PTY LIMITED

ACN 008 597 760

Third Defendants

AND: HENRY POSCH

ALISON JANE WHITTLE

ROZILIE PATRICIA MUNDAY

IAN DONALDSON JOHNSTON

Fourth Defendants

ORDER

Judge: Master Harper

Date: 3 December 2004

Place: Canberra

THE COURT ORDERS THAT:

1. The plaintiff bring in short minutes to give effect to these reasons.

2. The application be stood over generally with liberty to restore on two days notice.

1. This is an application for approval of the remuneration of the plaintiff in his capacity as trustee of a number of units in the former Canberra International Hotel, now the Pavilion on Northbourne, a complex of hotel rooms and serviced apartments in Northbourne Avenue, Dickson.

2. Initially, there were no other parties to the application. On 28 May I made orders by agreement that four groups of defendants be joined as parties to the application. On 2 July, I ordered by consent that the first and seconds defendants cease to be parties.

3. On 12 October, the application was listed for hearing before Justice Gray. With the consent of the parties, his Honour granted leave for me to exercise as Master the jurisdiction of the Court relied upon by the plaintiff, under the Trustee Act 1925 and under Order 58 of the Rules of this Court. I then ordered by consent that the third defendants cease to be parties, leaving the fourth defendants as the only opponents to the application.

4. The trust was established by deed on 14 August 1993 between Filaria Pty Limited as trustee, Jacup Pty Limited and Millie Phillips as first beneficiaries and Jaywood Pty Limited as manager. The first defendant Filaria, Pty Limited, the second defendant Milstern Sales Pty Limited, Jaywood Pty Limited and Jacup Pty Limited are all companies controlled by Mrs Phillips. Mrs Phillips's plan was to buy the Canberra International Hotel, and, through registration of a units plan, to place the hotel rooms and apartments into separate individual titles so that they could be sold to investors. As part of the arrangement, she decided to place six of the unit-titled areas into a trust structure. These units included the hotel restaurant and kitchen, bar, function rooms, office and shop. The six restaurant-office-function units were described in the trust deed as the ROF units. The effect of the trust deed was that after a period, the trustee held the ROF units on trust for all of the individual unit holders of the hotel. Mrs Phillips, or companies controlled by her, retained a number of the hotel rooms and apartments, but the majority were sold to individual investors, including the fourth defendants.

5. By 1999, a dispute had arisen between Mrs Phillips and the unit investors. A number of the investors have brought proceedings in this Court against Mrs Phillips and companies controlled by her, seeking damages for breaches of the Trade Practices Act 1974. During 1999 it became apparent that it was inappropriate for Filaria Pty Limited to remain as trustee of the trust which held the ROF units. The plaintiff was then a partner with Ferrier Hodgson, a firm of accountants specialising in insolvency. He was asked to accept appointment as trustee in place of Filaria Pty Limited. Mr Kazar graduated in 1983 as a Bachelor of Economics, and commenced practising as an accountant, specialising in insolvency work, the following year. He has been a member of the Institute of Chartered Accountants since 1999 and a Fellow since 2003. He was appointed a registered liquidator in 1991 and an official liquidator and registered trustee in bankruptcy in 1995.

6. By deed dated 21 May 1999, the plaintiff became a trustee, and the first defendant immediately retired. Neither the original trust deed nor the deed of appointment and retirement contained any provision as to trustee remuneration.

7. By the time of the plaintiff's appointment, the ROF units were held by the trustee on behalf of all unit holders. The trust deed included an acknowledgement by the trustee that if Jaywood Pty Limited ceased to manage the hotel, the trustee was to seek to have the ROF units sold as soon as possible. Sale was expressed to be conditional upon the unit owners first paying to the trustee an amount of $60,000.00 to be held on trust for the first beneficiaries, Jacup Pty Limited and Mrs Phillips. Until the sale of the ROF units, the unit owners were empowered to direct the trustee to deal with the ROF units in a manner not inconsistent with the trust deed.

8. Mr Kazar's evidence was that following his appointment, he found some difficulty in understanding precisely what was required of him under the trust deed. He took legal advice from Mr G P Walker, solicitor. Mr Walker was at different times a partner or employee of Barker Gosling, Gary Robb and Associates, Hunt and Hunt and Hill and Rummery. Ultimately he moved to Meyer Clapham, the solicitors who had acted for Mrs Phillips throughout, and was unable to continue advising Mr Kazar. Mr Kazar initially sought Mr Walker's advice as to when and on what terms he should be seeking to sell the ROF units. Mr Walker obtained counsel's advice which clarified some issues but, on Mr Kazar's evidence, did not provide him with a clear course of action. He was aware that some unit owners were contemplating action against Filaria Pty Limited, and that the relief that they were seeking would include rescission of their purchase contracts. He was aware that those unit owners could be expected to oppose a sale of the ROF units. Mr Walker advised that it appeared to him that the purchasers might have reasonable prospects of success. Mr Kazar was also aware that Mrs Phillips wanted the ROF units sold immediately.

9. Filaria Pty Limited had purchased the Canberra International Hotel in 1993, and later in the same year converted the title to 162 units. The Phillips companies retained 42 units and sold 114. The contracts for sale of the units provided that the purchasers were to lease the units back to the vendor, and included five-year rental guarantees.

10. As the dispute between the investor unit owners and Mrs Phillips intensified, a majority of the unit owners, though not all, incorporated the Canberra International Hotel Unit Owners Association, through which they engaged a solicitor.

11. In early 1999, prior to Mr Kazar's appointment, the hotel was closed. The association, representing the majority of unit owners, called for tenders for a new manager. The successful tenderer was Pavilion on Northbourne. Mr Kazar agreed to allow Pavilion on Northbourne to use the ROF units to manage the hotel on an interim basis until more permanent arrangements could be made. He sought valuation advice as to an appropriate rental, and negotiated an arrangement which allowed him flexibility to carry out his duties under the trust. Filaria Pty Limited did not include its units in the Pavilion on Northbourne arrangement, and effectively set up its own hotel operating independently within the premises.

12. Mr Kazar formed the view that whilst the deed required him to sell the units as soon as possible, his duty was to obtain the best available price. He was aware that the majority of the unit owners did not want the ROF units sold until proceedings against Filaria Pty Limited were complete.

13. Mrs Phillips began to insist that Mr Kazar sell the ROF units. Eventually she commenced proceedings through her companies against Mr Kazar alleging a breach of trust and seeking orders for the sale of the units. There were inadequate assets within the trust to fund a defence to this action. Mr Kazar sought funding from the other unit owners, but none agreed to contribute. Ultimately, Mr Kazar found his position in the litigation untenable, and agreed to the orders sought. He commenced arrangements for the sale of the ROF units. He spent about $10,000.00 on advertising of an auction. At the last minute, Mrs Phillips insisted that he stop the sale. Mr Kazar's understanding was that Mrs Phillips had obtained advice that the sale of the ROF units might increase the losses of the unit owners and hence the level of damages for which Filaria Pty Limited might be held liable. This meant that all unit owners were opposed to the sale, and despite the Court order to which he had consented, Mr Kazar cancelled the auction.

14. In early 2000, Filaria Pty Limited made a claim against the trustee regarding the ownership of certain furniture and fittings in the ROF units. Mr Kazar knew that a number of the unit owners disputed the claim, asserting that the items were in effect property of the trust. Mr Kazar conducted an inspection to take an inventory of the disputed items, and arranged a valuation. His understating was that the issue was fundamentally one of whether or not the items were fixtures. Filaria Pty Limited instituted legal proceedings seeking declarations that it was the owner of the items. Again, Mr Kazar had inadequate funds within the trust to defend the action. He notified the unit owners and explained that he would be unable to defend the action unless they contributed funds for the purpose. None did so, and ultimately Mr Kazar saw himself as having no choice but to consent to the orders sought.

15. An arrangement was reached between Mr Kazar and the unit holders (other than those owned by interests associated with Mrs Phillips) whereby his fees for acting as trustee would be paid by the body corporate, which would raise the funds by levying unit owners. In July 2000, Filaria Pty Limited commenced legal proceedings challenging the lawfulness of this arrangement, which were ultimately successful.

16. At one point Mrs Phillips told Mr Kazar that she was contemplating resuming the management of the hotel. She also owned the Canberra Rex Hotel in Northbourne Avenue, Braddon, and her intention was to close that hotel and redirect its custom to the Canberra International Hotel. She had cash flow projections prepared, and she and Mr Kazar negotiated over a period of months as to the terms of the proposed arrangements. Ultimately, the arrangement did not proceed, because Mrs Phillips insisted as a condition that the litigation by individual unit owners against Filaria Pty Limited be discontinued. The plaintiff unit holders were not prepared to agree to this.

17. After the Court decision holding that it was unlawful for the body corporate to levy unit owners in order to raise funds for Mr Kazar's fees, he informed unit owners in January 2001 that he intended applying rental income from the ROF units to meet his fees and outgoings, and he began to do so from that time. His counsel concedes that he had no entitlement to adopt this course under the trust deed, and that the payments amounted to a breach of trust. Counsel asks that the Court forgive the breaches. There is no question that Mr Kazar kept all units owners fully informed in detail as to his charges, and how these were calculated. For example, in a report to all unit owners dated 10 April 2003, he attached a detailed bill of his fees running to 32 pages, showing every item of work, the time taken, the time unit charge and the charge for each item, with a description of the work done. The bill makes it clear that Mr Kazar's time was charged at $28.90 per unit, or $289.00 per hour, from his initial engagement until July 2000, when it was increased to $38.80 per unit or $388.00 per hour. There was a minimal increase in June 2002, to $39.00 per unit or $390.00 per hour. From the beginning of 2003, the charge was increased to $42.50 per unit or $425.00 per hour.

18. The bill charged not only for Mr Kazar's time, but, as is the practice in the accounting profession, for the time spent by others within his firm, including a partner, a number of employed accountants of different levels of experience and seniority, and secretarial and junior clerical staff. The charges for the employed accountants ranged from $89.00 per hour to $314.00 per hour. Secretarial and clerical staff ranged from $63.00 per hour to $123.00 per hour. By 31 March 2004 the total of the charges was just on $250,000.00, with $183,000.00 for Mr Kazar's time and the balance for partners and staff.

19. It is not entirely clear which of the payments made by Mr Kazar out of moneys received, other than for his and his firm's fees, may have been paid in breach of trust. By 31 March 2004, he had received in his capacity as trustee over $1.5m. He held some $390,000.00 at that date and had paid the balance out. A summary of payments shows that he had paid "trustees remuneration" of $246,873.55 to that date, and "trustees expenses" of $29,448.39. He had also paid $95,936.08 in legal costs (presumably including disbursements).

20. From 1 April 2004 to 11 October 2004, the day before the hearing of the application, Mr Kazar assessed his further charges at $34,263.30 calculated in the same manner, and his estimated costs to completion of his task as trustee at $14,891.00.

21. Mr Kazar initially calculated his fees by reference to a scale published by the Insolvency Practitioners Association of Australia. In 2000, the scale ceased to exist and the Association promulgated a statement of best practice regarding remuneration. Mr Kazar says that he used this statement as a guide when setting his fees.

22. Mr Kazar relies on an affidavit by Michael Hill, a partner with McGrath Nicol, a national firm of accountants specialising in insolvency work. Mr Hill is the partner in charge of the Canberra office of the firm, and has some 13 years experience in corporate restructuring and insolvency work. Mr Hill undertook a comparison of the rates at which Mr Kazar had calculated his fees and the rates charged over the same periods by a number of other firms practising in the insolvency field. All charged more than the IPAA scale. Mr Hill expressed the opinion that the rates charged by Mr Kazar were consistent with the IPAA guidelines and that they could be considered to be market rates. Additionally, the level of disclosure which Mr Kazar had made to the unit holders was consistent with IPAA guidelines.

23. Mr Hill also expressed the opinion that although the appointment was as a trustee, and was not what he called an insolvency appointment, nevertheless the nature of the work described to him was of a similar nature to the work undertaken by an insolvency practitioner, and it was appropriate for Mr Kazar to have used insolvency chargeout rates for the work.

24. Mr Kazar appears to me to have kept meticulous records of the work done and the time spent by himself and his firm's staff. I am satisfied that he has charged for work done in connection with the trust on precisely the same basis as he and his firm generally charge for insolvency work. It seems to me likely that Mr Kazar was selected for appointment as trustee because of the similarity between the tasks which were expected to be required of him and the functions of an administrator, receiver or liquidator.

25. There was in evidence a copy of the minutes of a general meeting of the Pavilion on Northbourne Body Corporate (Units Plan 932) held on 10 June 1999. A resolution was passed in the following terms:

That the Body Corporate agrees to pay the costs and expenses of Henry Joseph Kazar in acting as trustee of units 157-162 inclusive of Units Plan 932 including costs preparatory to accepting the appointment as trustee. Those costs are to be paid in accordance with the scale as promulgated from time to time by the Insolvency Practitioners Association of Australia with legal costs to be paid at the rate of $260.00 per hour for a partner and $190.00 for an employed solicitor. The Body Corporate acknowledges that Mr Kazar may have resort to the trust assets by way of indemnity for those costs but that Mr Kazar reserves his right to claim those costs and expenses prior to the disposition of those assets.

26. The mover of the motion was Ian Johnston, one of the fourth defendants in the present proceedings. The meeting was chaired by Mr Trevor Vickers, who on 15 June wrote to Mr Kazar informing him of the precise terms of the resolution, and saying that the committee of the body corporate respected the resolution as binding. The presumption of regularity enables me to infer that all unit holders received notice of the meeting. There was no other business, apart from confirmation of the minutes of the last meeting, and it appears that the sole purpose of calling the meeting was to pass the resolution about Mr Kazar's fees and expenses.

27. As I mentioned earlier, the first, second and third defendants have withdrawn their opposition to the application. The only opposition now comes from the fourth defendants, Mr Posch, Ms Whittle, Ms Munday and Mr Johnstone.

28. The fourth defendants base their opposition on a number of grounds. Firstly they say that the IPAA scale was inappropriate and that the trustee should be permitted to recover no more than would have been charged by the Public Trustee had it assumed the trusteeship. As to this, there is no evidence that the Public Trustee would have been prepared to accept appointment. The task of the trustee was very different to the responsibilities normally undertaken by the Public Trustee, whose duties typically involve such tasks as the administration of deceased estates and the management of damages recovered by infant plaintiffs. I accept the evidence of Mr Kazar and Mr Hill that the tasks involved in the trusteeship of the ROF units were considerably more complex and more akin to the work of an administrator, receiver or liquidator of a company.

29. The fourth defendants submit that the trustee should have accepted an offer put by the solicitors for the fourth defendants on behalf of some 59 unit holders, presumably including the fourth defendants, to purchase the ROF units for $60,000.00 pursuant to Clause 2.2. of the Trust Deed. The offer was expressed to be on behalf of all unit holders although manifestly the firm was not instructed by all unit holders: its clients were in dispute with Mrs Phillips and the companies she controlled, representing 42 units. Mr Kazar obtained advice from Mr Walker to the effect that, on its correct interpretation, Clause 2.2 of the Trust Deed did not permit him to accept the offer. The solicitors for the fourth defendant disagreed with Mr Walker's interpretation and told him so. The fourth defendants now criticise Mr Kazar, faced with this difference of opinion, for failing to approach the Court for judicial advice as to the correct construction of the clause. The argument, it seems to me, overlooks the fact that there was no inconsistency in the advice obtained by Mr Kazar. Mr Walker's advice to him was that whilst the clause was not entirely clear, and there might be room for argument, in his opinion the clause should be interpreted in a particular way. The solicitors for the fourth defendants were in no sense providing advice to Mr Kazar. He did not seek their advice and had no retainer with them. They were acting for a particular group of clients, and their responsibility was to advance the interests of those clients. It seems to me that Mr Kazar acted with complete propriety in rejecting the offer.

30. The next submission on behalf of the fourth defendants is that, in breach of the trust deed, he failed to sell the ROF units as soon as possible. The submission concedes that a trustee required by a trust deed to sell as soon as possible is not required to sell at a sacrifice, but is required to sell at the first favourable opportunity: Cain v Watson [1910] VLR 256. In respect of a trust of a registered interest in land, one would generally expect that there would be a market for the property, and that arrangements could be made for its sale, either by auction or private treaty, within a relatively short timeframe. However, it seems to me that the submission of the fourth defendants fails to take account of the highly unusual nature of the trust property in this case. The property consisted of six units in a hotel building. The evidence does not enable me to identify with precision the size, position or physical features of each unit, but they included the hotel restaurant and kitchen, bar, one or more function rooms, the hotel office presumably including reception desk, and a shop. The value of each of these units must have depended upon the viability of the hotel. The viability of the hotel in turn would have depended upon each of the units being used efficiently for its intended purpose. The period of time during which the trustee is criticised for not having arranged the immediate sale of each of the units was one in which there was, as a matter of public knowledge, a dispute between Mrs Phillips, who owned 42 hotel room units, and most if not all of the individual owners of the other 114 hotel room units. The fourth defendants criticise Mr Kazar for not obtaining valuations of the units more promptly, but it seems to me that in respect of such units, the process of valuation must to a large extent be an artificial one. A valuation is usually most helpful when it is based on recent sales of comparable property. A valuation based on such background information is likely to be a useful predictor of the price likely to be achieved on sale. However, the units comprising the trust property were property of a highly unusual, probably almost unique, kind. It could reasonably be assumed by Mr Kazar and those advising him that the number of prospective purchasers, either for individual units or for the six units as a group, would be extremely small, and that he might experience great difficulty in attracting a purchaser at all.

31. It was also clear to Mr Kazar that the beneficiaries had an interest not merely in obtaining the best price for the ROF units, but in the continuing operation of the hotel. As I have explained earlier in these reasons, Mr Kazar satisfied himself that the majority of the hotel room unit owners did not want the ROF units sold until their litigation against the first defendant had been completed. Mrs Phillips at one point sought to force a sale but changed her position, and a time came when none of the unit owners favoured the sale of the ROF units. It seems to me that at the time, Mr Kazar, in difficult circumstances, did his best to protect the interests of the various groups of unit owners.

32. The fourth defendants next submit that Mr Kazar should have explained to the beneficiaries generally, including the fourth defendants, the likely extent of his professional changes. This submission does not seem to me a reasonable one. No one, Mr Kazar included, could have known at the outset precisely how much time he would have to spend on the trust, and how much work he and his staff would have to do. I am satisfied that he explained in great detail the basis upon which he would be charging. It is generally well understood that there are some tasks carried out by professionals such as accountants and solicitors where a precise fee can be quoted in advance and agreed to. There are other tasks which are open-ended, where the amount of work required may depend on future actions of persons other than the client, and in those cases it is commonplace for professionals to disclose the basis upon which they propose to charge fees, and to explain that it is not possible to provide an estimated total fee with any accuracy at the time of the retainer. For solicitors, an example in the first category would be a will or conveyance; an example in the second category would be a piece of contested commercial litigation. Similar examples could be postulated in the accounting profession. Mr Kazar was appointed because he was an accountant, and the trusteeship was clearly in the second, open-ended category.

33. The application by the trustee is made either under O 58 r 1 or pursuant to the inherent jurisdiction of the Court, and seeks approval of the trustee's remuneration, and consequential orders. Order 58 r 1 relevantly provides:

. . . the trustees under any deed . . . may take out, as of course, an originating application and a notice of motion for such relief of the nature or kind following as is specified by the application, and as the circumstances of the case require, that is to say, the determination . . . of any of the following questions or matters:

. . .

g) the determination of any question arising in the administration of the trust.

The fourth defendants do not take issue with the contention that the Court has the power to make the orders sought.

34. During the course of argument, counsel for the trustee conceded that he had committed breaches of trust in appropriating trust funds towards his remuneration, and asked that those breaches be excused pursuant to s 85 of the Trustee Act 1925. That section is in the following terms:

85. Excusable breaches of trust

(1) Where a trustee is or may be personally liable for any breach of trust, the Court may relieve the trustee either wholly or partly from personal liability for the breach.

(2) The relief may not be given unless it appears to the Court that the trustee has acted honestly and reasonably, and ought fairly to be excused for the breach of trust and for omitting to obtain the direction of the Court in the matter in which he or she committed the breach.

. . .

35. As I have explained, I am satisfied that Mr Kazar acted honestly and reasonably throughout. There was a suggestion in submissions made on behalf of the fourth defendant that his interests conflicted with those of the unit holders, on the basis that they would have benefited from an early sale of the trust property, whereas Mr Kazar benefited by continuing to act as trustee for an extended period. I am far from satisfied that an early sale was achievable or likely to have been of greater benefit to the unit holders than the outcome which Mr Kazar ultimately achieved. Apart from this, any perceived conflict arising from the fact that the trustee was to be paid for his work is one which is inevitable in any professional instruction other than one where a task is to be performed for a fixed fee. I am certainly not persuaded that Mr Kazar deliberately protracted the life of the trust in order to earn increased fees. On the contrary, I am satisfied that he acted honestly and responsibly with the motive of achieving the best outcome for the beneficiaries. I am not satisfied that the length of time taken to achieve the sale of the trust property placed Mr Kazar in breach of trust. Had I come to a contrary conclusion, I would have relieved him wholly from any personal liability for the breach.

36. I am satisfied that Mr Kazar is entitled to remuneration, and that it is appropriate that the remuneration be calculated by reference to the work actually done, rather than by a formula related to the valuation of the trust capital and income. Such a formula may be appropriate for corporate and statutory trustees, especially of deceased estates, where this is their business and there is an element of swings and roundabouts. Mr Kazar is not a professional trustee, and was probably selected in preference to a corporate trustee because of his experience as an insolvency practitioner, and the perceived similarity of the tasks expected to be required of him to typical insolvency work.

37. I am satisfied that the resolution of the body corporate on 10 June 1999, though later found not to give rise to any liability in the body corporate for Mr Kazar's fees, had the effect of putting all beneficiaries on notice of the basis of his intended charges. Costs were to be paid in accordance with the IPAA scale as promulgated from time to time. A difficulty is that, according to Mr Hill's evidence, the charges made, although consistent with market rates, exceeded the IPAA scale, and that the scale ceased to exist during 2000. In July 2000 Mr Kazar increased his hourly rate very considerably (from $289.00 to $388.00). The rate was virtually unchanged until 2003, when there was a further increase to $425.00 per hour. These increases appear to have been implemented without any attempt to obtain the agreement of the beneficiaries, although as I have said, I am satisfied that the beneficiaries were kept informed in a most detailed fashion of the rates, the work done and the total charges. There was nevertheless a significant increase in the charge rate from July 2000, which could not be said to have been in accordance with the IPAA scale, and to which specific agreement from the beneficiaries was not sought or obtained. I should say that I recognise the practical difficulties in obtaining agreement to an increase in hourly charge rates from each of more than 100 beneficiaries.

38. The same observations apply to the increase from $390.00 to $425.00 from the beginning of 2003. It should also be said that from 1 July 2000 the charges included GST, which Mr Kazar was required to pay to the Australian Taxation Office. This was calculated at 10 percent of the base charges, and thus represented one-eleventh of the total charge. It can reasonably be assumed that each of the investors was entitled to claim an input credit for the GST.

39. My task is to attempt to do justice between the trustee, who is entitled to be fairly remunerated for his efforts, and the beneficiaries, whose financial position should not be adversely affected by charges imposed by the trustee on the trust to which they have not agreed. I am concerned at the very substantial increase in hourly chargeout rate from 1 July 2000 and the further increase from 1 January 2003. I accept that having regard to the normal inflationary increases in the outgoings of an accounting practice, some increase over the period of more than five years since the trustee was appointed is appropriate.

40. I propose to allow remuneration for the trustee for the period from 12 May 1999 to 30 June 2000 at the claimed rate of $289.00 per hour, and the proportionate rates claimed in respect of support staff. Doing the best I can without the benefit of evidence as to increases in relevant statistical indices, I am disposed to allow an hourly rate for Mr Kazar from 1 January 2001 to $330.00, from 1 January 2002 of $350.00, from 1 January 2003 of $380.00, and from 1 January 2004 at $400.00. I would allow the fees in respect of the time claimed for support staff on a proportional basis. It will be necessary for the applicant to recalculate the charges consistently with these reasons, and to provide the fourth defendants with an opportunity for comment.

41. It is conceded on behalf of the applicant that his appropriation of trust funds towards his remuneration and disbursements was authorised neither by the trust deed nor by the Court, and in those circumstances amounted to a breach of trust. Because of the rates at which I have indicated I am prepared to allow remuneration, it may be that the trustee has been overpaid in the past to some extent. This is a matter which can readily be adjusted. It does not appear to me that there has been any disadvantage to the beneficiaries by reason of the breach of trust: the trustee would, it seems to me, have been entitled to claim a lien over the trust property in respect of his unpaid fees, so that little if any additional amount would have been payable to the beneficiaries. In the circumstances, I regard it as appropriate to relieve the trustee from any personal liability in respect of the breach or breaches constituted by these appropriations.

42. Under s 93 of the Trustee Act, the Court has power to make such order as it thinks fit as to the costs of all or any of the parties to an application under the Act. I am persuaded that it is reasonable to permit the trustee to be indemnified out of the trust property for his costs of the application. Equally, I take the view that the fourth defendants were reasonably represented before the Court, and provided helpful submissions as to the issues which arose for determination, and that in those circumstances their costs should also be met out of the trust property.

43. I propose to adjourn the application generally, to provide the trustee with an opportunity to bring in short minutes giving effect to these reasons.

I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Master.

Associate:

Date: 3 December 2004

Counsel for the plaintiff: Mr R Arthur

Solicitor for the plaintiff: Bradley Allen

Counsel for the defendant: Mr S Gillespie-Jones

Solicitor for the defendant: Gillespie-Jones & Co

Date of hearing: 12 October 2004

Date of judgment: 3 December 2004