Supreme Court New South Wales

• Medium Neutral Citation: Metropolitan Petar v Mitreski [2012] NSWSC 16
• Hearing dates: 2 - 30 August 2010
• Decision date: 03 February 2012
• Jurisdiction: Equity Division
• Before: Brereton J

Decision

(1)The plaintiffs are entitled to a declaration to the effect that all the property of the Association other than the litigation funds are held as trustee on the trust declared by Hamilton J. If the defendants desire to contend that any litigation funds remain, they may have an account of the litigation funds at their own risk as to costs.

(2)The plaintiffs are entitled to declarations to the effect that the Association has, in breach of trust: (a) excluded the diocesan Bishop, (b) excluded the parish priest appointed by the Bishop, (c) prevented a priest licensed by the Bishop to conduct services in the church from doing so, (d) employed priests not appointed by the Bishop, and (e) failed to accept applications for membership from believers in the doctrines of the Macedonian Orthodox Church who have satisfied the criteria for membership specified in the 1994 Church constitution, the diocesan statute and the by-laws.

(3)The plaintiffs are entitled to injunctive relief that has the effect of compelling the Association to comply with the rules of Macedonian Orthodox Church as they apply to parishes of the Macedonian Orthodox Church in respect of not excluding or impeding the Bishop, not excluding or impeding Fr Mitrev, and admitting into membership those who meet the requirements of church law for membership of a parish assembly.

(4)The plaintiffs are entitled to an order that the Association account to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski, save those paid prior to November 1997 in respect of which the claim is statute barred.

(5)The plaintiffs are entitled to an order that each of the Committee Members accounts to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski while that Committee Member remained in office, save those paid prior to November 1997 in respect of which the claim is statute barred .

Direct that the parties bring in Short Minutes to give effect to these this judgment.

• Catchwords: TRUSTS AND TRUSTEES - Charitable trusts - church trust - trust property - where certain property held by trustees to permit its use by unincorporated association as a church of the Macedonian Orthodox Religion - whether income generated by church and parish activities is trust income - whether other property acquired with trust income is held upon same trusts.; ASSOCIATIONS AND CLUBS - Incorporated associations - where property held by trustees to permit its use by a predecessor unincorporated association as a church of the Macedonian Orthodox Religion - where constitution of successor incorporated association provides that funds of association shall be applied to carry out the objects of the association - whether legislation and constitution impedes acquisition by incorporated association of further property on same trust.; TRUSTS AND TRUSTEES - Charitable trusts - church trust - whether certain provisions of church law were sufficiently fundamental to be terms of trust.; TRUSTS AND TRUSTEES - Breach of trust - defence of proceedings brought against trustee - whether resort to trust assets to fund defence is breach of trust.; LIMITATIONS - Breach of trust - charitable trusts - whether claim by plaintiffs suing not for the benefit of the public at large but by virtue of special interest in enforcing the trust is "an action on a cause of action in respect of a breach of trust" accruing to a plaintiff within Limitation Act, s 48(a).; TRUSTS AND TRUSTEES - Rights of trustees - Judicial advice - where advice obtained irrelevant to breaches established.; TRUSTS AND TRUSTEES - Excusable breaches - whether trustee ought fairly to be excused for omitting to obtain the direction of the Court in the matter in which the trustee committed the breach - where trustee did not believe that it was a trustee - whether trustee ought fairly to be excused for the breach of trust - relevant considerations - whether trustee has acted honestly and reasonably - where breaches involved repudiation of sworn promise to adhere to church law and to knowledge of trustee could achieve no religious purpose.; TRUSTS AND TRUSTEES - Charitable trusts - accessorial liability - whether mere engagement in conduct causative of breach attracts accessorial liability - necessity for consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour - where breaches involved repudiation of sworn promise to adhere to church law and to knowledge of trustee could achieve no religious purpose.
• Legislation Cited: (CTH) Corporations Act 2001, s 1318; (CTH) Trade Practices Act 1974, s 52; (NSW) Associations Incorporation Act 1984, s 6; (NSW) Associations Incorporation Act 2009 s 95; (NSW) Limitation Act 1969 s48(a); (NSW) Trustee Act 1925, s 59(4), s 63, s 85, s 93(3),; UCPR 42.25; UCPR 42.7
• Cases Cited: Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247; Application of Macedonian Orthodox Community Church St Petka Inc (No 4) [2007] NSWSC 254; Armitage v Nurse [1998] Ch 241; Attorney-General (ex rel Elisha) v Holy Apostolic and Catholic Church of the East (1989) 98 ALR 327; Attorney-General (Queensland); Ex rel Nye v Cathedral Church of Brisbane [1977] 136 CLR 353; Attorney-General v Cocke [1988] Ch 414; Attorney-General v Gould (1860) 28 Beav 485; Attorney-General v Wylde (1948) 48 SR(NSW) 366; Banque Commerciale SA v Akhil Holdings Limited [1990] 169 CLR 279; Barnes v Addy (1874) LR 9 Ch App 244; Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226; Corrigan v Farrelly (1897) QLJ 105; Craigdallie v Aikman (1820) 2 Bligh 529; Edwards v Attorney-General (2004) 60 NSWLR 667; Farah Constructions v Say-Dee (2007) 230 CLR 89; Fay v Moramba Services Pty Ltd [2010] NSWSC 725; Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) [2002] NSWCA 29; General Assembly of Free Church of Scotland v Lord Overtoun [1904] AC 515; His Grace Metropolitan Petar v Aco Kostovski; Alexander v Branov (unreported, VSC, 27 October 1997); In re Beddoe; Downes v Cottam [1893] 1 Ch 547; In re Grimthorpe [1985] Ch 615; Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550; Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar (2008) 237 CLR 66; Mead v Watson (2005) 23 ACLC 718; Metropolitan Petar v Mitreski [2003] NSWSC 262; Metropolitan Petar v Mitreski [2009] NSWSC 106; Miller v Cameron (1936) 54 CLR 572; Mitreski v Metropolitan Petar [2009] NSWSC 319; National Trustee Co of Australasia Ltd v General Finance Co of Australasia Pty Ltd [1905] AC 373; National Trustees Executors and Agency Co of Australasia v Barnes (1941) 64 CLR 268; Nolan v Collie [2004] HCATrans 22; Paul A Davies (Australia) Pty Limited v Davies [1983] 1 NSWLR 440; President and Scholars of St Mary Magdalen, Oxford v Attorney-General (1857) 6 HLC 189; Radmanovich v Nedeljkovic (2001) 52 NSWLR 641; Re Buckton [1907] 2 Ch 406; Re Llewellin; Llewellin v Williams (1887) 37 Ch D 317; Re Tollemache [1903] 1 Ch 457; Re Turner [1897] 1 Ch 536; Re Application of Macedonian Orthodox Community Church St Petka Inc [2004] NSWSC 388; Re Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441; [2005] NSWSC 558; Scandrett v Dowling (1992) 27 NSWLR 483; Solicitor-General v Wylde (1945) 46 SR(NSW) 83; Wylde v Attorney-General (NSW) ex rel Ashelford (1948) 78 CLR 224
• Texts Cited: Jacobs on Trusts, 7th edition, 2006; Lewin on Trusts, 18th edition, 2008
• Category: Principal judgment
• Parties: His Eminence Petar the Diocesan Bishop of the Macedonian Orthodox Diocese of Australia & New Zealand (first plaintiff); The Very Reverend Father Mitko Mitrev (second plaintiff); Lambe Mitreski (first defendant); Peco Damcevski (second defendant); Boris Minovski (third defendant); Eftim Eftimov (fourth defendant); Mile Marcevski (fifth defendant); Macedonian Orthodox Community Church St Petka Incorporated (sixth defendant); Naum Despotoski (eighth defendant); Attorney-General for the State of NSW (ninth defendant)
• Representation: Counsel: Mr TGR Parker SC w Mr RE Steele (Ps); Mr M Leeming SC w Ms L Goodchild (D1-6, 8); Mr M Izzo (D9); Solicitors: Sachs Gerace Lawyers (Ps); McConnell Jaffray Lawyers (D1-6, 8); Crown Solicitor (D9)
• File Number(s): 1997/25609

Judgment

1 HIS HONOUR : The first plaintiff his Eminence Metropolitan Petar is the diocesan Bishop of the Macedonian Orthodox Diocese of Australia and New Zealand. The second plaintiff the Very Reverend Father Mitko Mitrev was appointed by the Bishop as the parish priest of the parish of St Petka, located in the vicinity of the Sydney suburb of Rockdale, on 1 April 1996. The first five defendants Lambe Mitreski, Pero Damcevski, Boris Minovski, Eftim Eftimov and Mile Marcevski were in April 1997 elected members of the executive council of the sixth defendant the Macedonian Orthodox Community Church St Petka Incorporated, an incorporated association which is the legal owner of the land on which the church of St Petka stands and of other real and personal property associated with the parish. The eighth defendant Fr Naum Despotoski acted as parish priest, purportedly appointed by the Association, from March 1998 until June 2003. Proceedings against the former seventh defendant, Fr Kliment Dzeparovski, who acted as parish priest, also purportedly appointed by the Association, from 17 July 1997 until early 1998, have been discontinued. The ninth defendant, the Attorney-General, is a party because these are, in form, charitable trust proceedings. [References in this judgment to the defendants collectively are not intended to include the Attorney]. But at their core is a contest for control of the affairs of the parish of St Petka between the Church hierarchy represented by the Bishop and his appointed priest on the one hand, and on the other the Association which claims to represent the parishioners. At the heart of the dispute is a dichotomy between adherence to church law, and adherence to the constitution of the Association: those in control of the Association maintain that ownership and disposition of Association property reside with it, and are not amenable to control by the Bishop - in short that, except perhaps in relation to spiritual matters, they are legally bound by the constitution of the Association and not by the laws of the Church; whereas the Bishop contends that the Association is no more than a manifestation of the parish assembly, and that its affairs must be conducted not only in accordance with its constitution but also in accordance with church law.

BACKGROUND

2 For the following background concerning the Macedonian Orthodox Church, the foundation of St Petka, and the origins of the dispute, I am indebted to the submissions of Mr T.G.R. Parker SC, who appeared for the plaintiffs, from which it is largely taken.

The Macedonian Orthodox Church

3 The Macedonian Orthodox Church is an episcopal church, with the Archbishop of Ohrid and Macedonia as its head. The Church is organised into dioceses, each of which is administered by a diocesan Bishop, and comprises a number of parishes, each of which is headed by a parish priest appointed by the diocesan Bishop.

4 Although it shares the doctrines and traditions common to all churches in the Orthodox Church, the Macedonian Orthodox Church is independent and self-governing, with a written constitution as its over-arching governing document. A diocese may establish rules of government for the diocese, known as a "statute"; and a parish may establish rules of government for the parish, known as "by-laws". Together this body of doctrine, tradition and rules of government, as it relates to the Macedonian Orthodox Church, comprises "church law".

5 As an episcopal church, the Macedonian Orthodox Church is hierarchical, but there is substantial lay involvement in its work, on a participative basis. Each parish is administered by a parish council, elected by a parish assembly to which all adult parishioners belong. Members of the parish council are required to take an oath to uphold church law and to defend the interests of the Church. Day-to-day management is delegated by the parish council to a parish committee. The parish priest is ex officio a member of the parish council or the parish committee or both.

Foundation of St Petka

6 The parish of St Petka was founded as a result of an initiative by a group of Macedonian Orthodox Christians in the Rockdale area in the mid-1970s, who approached the Church hierarchy seeking to establish a new parish, within the diocese that then covered Australia, New Zealand and the United States. On 20 November 1976, they held a public meeting at which it was resolved to proceed with the plan. It was specifically resolved that the new parish would comply with the terms of the Macedonian Orthodox Church's constitution, and a "community council" was elected.

7 Subsequently, a set of proposed by-laws - which had either been approved at the meeting of 20 November 1976, or had been prepared pursuant to a resolution of that meeting - was sent to Macedonia. In May 1977, the Church authorities formally established the new parish and approved the proposed by-laws, with some amendments. Subsequently, the then diocesan Bishop approved a parish council, largely comprising those who had been elected to the community council on 20 November 1976.

8 In the meantime, moneys had been raised towards the acquisition of a property at No 65 Railway Street, Rockdale, as land upon which to build the new parish church; indeed, a holding deposit had been paid even before the public meeting in November 1976. Contracts were exchanged in December 1976, with the purchase being completed in April 1977. Construction of the church was completed, and the first service took place, in August 1977. The church was formally consecrated by the then Archbishop and the then diocesan Bishop in February 1978.

9 The purchase of No 65 Railway Street was completed in the name of a local solicitor, John Peetz, who in March 1977, before the purchase was completed, had executed a Deed of Trust whereby he agreed to acquire and hold the land on trust "to permit the trust property to be used by the proposed beneficiary as a site for a Church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox Religion".

10 In October 1977, an unincorporated association was constituted under the name "Macedonian Orthodox Church St Petka Rockdale New South Wales Australia". Its constitution provided for the property of the parish to be vested in ten individual trustees ("the Trustees"). Mr Peetz then transferred No 65 Railway Street into the names of the Trustees.

11 The affairs of the parish was conducted through the unincorporated association for more than 14 years. During this period, additional land adjoining No 65 Railway Street was purchased in the name of the Trustees, and a church hall constructed on it; subsequently, the titles were consolidated into a single parcel ("the Church Land"). Premises in Firth Street, Arncliffe were also acquired in the name of the Trustees - with the assistance of a Commonwealth government grant - and used as a child-care centre ("the Child Care Centre"). Three company title units in a residential block at No 64 Railway Street were later acquired in the name of the Trustees, for investment purposes.

12 In April 1992, the sixth defendant ("the Association") was incorporated pursuant to the provisions of the Associations Incorporation Act 1984 , as successor to the unincorporated association. Under its constitution, the new Association itself replaced the Trustees as the owner of the parish property, and the property previously held by the Trustees was transferred to the Association. Otherwise, the constitution of the new Association was essentially the same as the constitution of the former unincorporated association, and thereafter, the affairs of the parish were conducted through the Association in the same manner as they had previously been conducted through the unincorporated association.

13 Under the Association's constitution (and that of the unincorporated association before it), its structure essentially reflected the organs for administration of a parish under church law: the powers of the Association were vested in an executive council, corresponding (in this respect) with a parish council. The executive council was elected by the full (voting) members of the Association in general meeting, corresponding with a parish assembly. The constitution provided for a priest, who was to be an additional member of the executive council.

14 There were, however, some differences. Under church law, a parish council is a relatively large body that may comprise twenty or more members, whereas the Association's executive council has a lay membership of five, and in this regard is more analogous to a parish committee. Under the Association's constitution, the priest is appointed by the executive council, rather than holding office ex officio as a result of his appointment by the Bishop as parish priest, whereas the Association's constitution makes no provision for the Church hierarchy, or the priest, to have any role in convening and participating in general meetings, or otherwise directing the affairs of the Association. Nor does the constitution contain any requirement for executive council members to take the oath required under church law of members of a parish council.

15 While the evidence does not fully reveal how these divergences were resolved in practice, it appears that the parish priests appointed from time to time by the diocesan Bishop (including, initially, Fr Mitrev) were automatically accepted as members of the executive council. And, at least in October 1996, the election was (or purported to be) for an expanded committee, and oaths were administered to those elected in accordance with the applicable church law.

The origins of the dispute

16 Bishop Petar was appointed as diocesan Bishop in November 1995. In April 1996, he appointed Fr Mitrev as the parish priest for St Petka. By early 1997, not only in St Petka but also in some other Australian parishes of the Macedonian Orthodox Church, a faction in the Macedonian community opposed to Bishop Petar emerged. On 14 April 1997, this faction purported to convene a "special general meeting" of the Association, at which the first to fifth defendants ("the Committee Members") were elected as the five lay members of the executive council. Notwithstanding that the "special general meeting" was apparently convened without the notice required by the relevant provisions of church law and the relevant provisions of the Association's constitution, practical control has remained in the hands of the faction opposed to the Bishop, although the membership of the executive council has changed from time to time since then.

17 There was a meeting held in Newcastle on 10-11 May 1997 of communities who were opposed to the Bishop's initiatives. The Association sent a delegation, led by Mr Mitreski. The Newcastle meeting adopted a number of resolutions, including that moneys from weddings and other ceremonies that would have been remitted to the Diocese be used instead for the work of a new (national) association. The executive council decided to act in accordance with the Newcastle resolutions, copies of which were posted on the parish notice board.

18 After the Newcastle meeting, the executive council ceased remitting moneys to the Diocese in respect of fees collected for baptisms, funerals and weddings. In June 1997, the executive council received a letter from the Diocese to the effect that all fees for christenings and weddings were to be paid to the Diocese, until arrears were recouped. The executive council resolved not to comply with this diocesan direction. Fr Mitrev commenced to collect the fees for weddings, baptisms and funerals and remit them to the Diocese in reduction of outstanding diocesan contributions.

19 In July 1997, the Committee Members purported, on behalf of the Association, to dismiss Fr Mitrev as parish priest for disobedience to their instructions as to how moneys received by him from parishioners should be accounted for, and to employ Fr Kliment Dzeparovski to act as parish priest. When he left in the first half of 1998, they employed the Eighth Defendant, Fr Naum Despotoski, in his place. Neither purported appointment was sanctioned by Bishop Petar, and both Fr Dzeparovski and Fr Despotoski were defrocked.

20 Under the Association's constitution, the executive council determines whether to accept applications for membership of the Association, and this has perpetuated the status of voting control of the Association since 1997. Parishioners of St Petka loyal to the Church hierarchy have continued to accept the ministry of Fr Mitrev, and worship at a nearby former Uniting church.

THE PREVIOUSLY DECIDED QUESTIONS

21 The present proceedings were commenced in July 1997.

22 This case does not come before me as a clean slate. Earlier judgments of Hamilton J and Young CJ in Eq (as his Honour then was) on separate questions determine the questions that were subject to them. It would not only be wrong in law, but also wasteful in resources, to revisit the issues that have been decided by them.

Judgment of Hamilton J

23 In April 2003, in a judgment given following the hearing of separate preliminary questions [ Metropolitan Petar v Mitreski [2003] NSWSC 262], Hamilton J held, first , that the unincorporated association did not acquire a beneficial interest in the real property (including the company title investment units) acquired up to the incorporation of the Association in 1992 ("the Schedule A property"), but held it upon trust for the purpose of permitting its use by the parish organisation (then being the unincorporated association) as a church for the worship of the Macedonian Orthodox Religion, and ancillary purposes. This involved rejection both of the plaintiffs' primary case (that the Association held the property on trust for the purposes of the Macedonian Orthodox Church), and of the defendants' primary case (that the Association was the beneficial owner), in favour of the position that while the Association held the Schedule A property on trust, that trust was one to permit use of the property by a specified entity, namely the Association (originally, its predecessor unincorporated association) as a church of the Macedonian Orthodox Religion. Thus his Honour said (at [87]):

... the trust at its inception was not a gift to an unincorporated association. ... In my view, the use of the word "beneficiary" cannot be taken in the context to denominate that unincorporated association as the beneficial recipient of the gift. In my view, the intention of the settlors to be derived from the use of the expression in the particular context of the deed of trust is that there was a gift to a trustee for a purpose. The purpose was to permit the use of the property for a church of the Macedonian Orthodox Religion by a specified entity, namely the parish organisation denoted by the defined expression "the proposed beneficiary". It was not a gift for religious purposes of the Macedonian Orthodox Religion or the MOC in general terms, but a gift to a trustee to permit the use of the property by the specified entity for a specified purpose, ie, its use as a church for the worship of the Macedonian Orthodox Religion, and ancillary purposes. What the unincorporated association received under the terms of the gift was a nomination as the entity to use the land for the specified purpose. But in my view it was not the intention of the settlors by the deed of trust to confer any beneficial interest on that unincorporated association or its members.

24 His Honour observed (at [88]) that the parish organisation became incorporated as the sixth defendant and had until 1997 been regarded by all, including the authorities of the Church, as being the duly appointed parish organisation to manage the trust property under the deed of trust. But his Honour also observed (at [91]) that, if it were necessary, the principle that the parish organisation should be governed on a democratic basis - which was embodied in the by-laws (which were the only existing form of constitution at the time of the execution of the deed of trust) and has continued to be embodied in all constitutional documents which have, or may have, applied since that time to the parish organisation, and took the form of provision for openness of membership to all relevant believers on a basis of equality and for election of the committee by democratic vote of the members, and was in the forefront of the minds of the settlors at the time of the execution of the deed of trust - should be incorporated into the terms of the trust as declared; but this course was unnecessary because the principle was in any event incorporated in the terms of the trust as appeared from the deed of trust, by the specification of the parish organisation as the body which under the trust was to be permitted to use the property for the purposes of a church of the Macedonian Orthodox Religion and ancillary purposes:

91 The principle that the parish organisation should be governed on a democratic basis was embodied in the by-laws which were the only existing form of constitution at the time of the execution of the deed of trust. It took the form of provision for openness of membership to all relevant believers on a basis of equality and for election of the committee by democratic vote of the members. (Indeed, those provisions have continued to be embodied in all constitutional documents which have, or may have, applied since that time to the parish organisation.) I infer that the principle was in the forefront of the minds of the settlors at the time of the execution of the deed of trust. It is my view that, if it were necessary, it should be incorporated into the terms of the trust as declared by me in the manner laid down by Young CJ in Eq in the Serbian Church case at [202]. However, that in my view is unnecessary. This is because that principle is in any event incorporated in the terms of the trust as they appear from the deed of trust itself. The incorporation is effected by the specification of the parish organisation as the body which under this trust is to be permitted to use the property for the purposes of a church of the Macedonian Orthodox Religion and ancillary purposes. Although it had perhaps not taken final form, that body was organised with rules which embodied the contemplated democratic principle by providing for openness of membership and democratic election of the governing body. It is therefore my view, whether one approaches the situation with or without the evidence of surrounding circumstances, the terms of the trust were simply as specified in the deed of trust, namely, that the property was given:

"... upon trust to permit the trust property to be used by the proposed beneficiary as a site for a Church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox Religion."

That is upon the understanding that the proposed beneficiary is now represented by the incorporated association that is the sixth defendant.

25 Secondly, his Honour held (at [92]) that the trust was a valid charitable trust for the purposes of the Macedonian Orthodox Religion, although limited to the use of the subject property as a property for a church of that religion and ancillary purposes:

92 In my view the trust is a valid trust for the purposes of the Macedonian Orthodox Religion, although limited to the use of the subject property as a property for a church of that Religion and ancillary purposes. As I have already said, I take the view that the gift was a gift for that religious purpose and not a gift to an unincorporated association that conferred any beneficial estate or interest in the property: the only right of the unincorporated association was its entitlement to be the body permitted by the trustee to use the property for those purposes. Although there are many cases in which doubts have been cast upon whether a trust for the purposes or particular purposes of a church is bad as a charitable trust by being so wide as to extend to non-charitable purposes of the church ( Roman Catholic Archbishop of Melbourne v Lawlor (1934) 51 CLR 1; In re Moroney; Maguire v Reilly (1939) 39 SR(NSW) 249; McCracken v Attorney-General for Victoria [1995] 1 VR 67; and see generally G Dal Pont, Charity Law in Australia and New Zealand (2000) 154 - 157), that has not been argued in this case. No one has submitted that the ancillary purposes as defined in the deed of trust are so wide as to extend beyond charitable purposes. In my view that is the correct view. It is emphasised by the fact that the other buildings and activities must be concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox Religion. I am therefore of the view that the trust at its inception was a valid charitable trust.

26 Thirdly, his Honour held that when the properties after the first were acquired, they became subject to the same trust (at [93]):

93 So far as properties other than the first property are concerned, it is my view that, as they were acquired, they became subject to a trust on the same terms as the purpose stated above in respect of the first property. The only one of the properties in respect of which there is a separate declaration of trust is the Arncliffe property. There, in my view, the "Church Trust" referred to in the Arncliffe declaration of trust upon which that property was to be held was the trust as declared in the deed of trust and set out above. In relation to the other properties, all parties have proceeded on the basis, in the absence of any separate declarations of trust, that they became subject to the same trust upon acquisition. The only ones in relation to which there can be any difficulty arising from this are the second unit and the third unit, where the legal title upon acquisition was vested, not in separate trustees, but in the Macedonian Orthodox Church St Petka, which must be taken to have been at the time the unincorporated association. However, in my view, despite some awkwardness arising from the trustee and the proposed beneficiary being identical in those cases, the second unit and the third unit became subject to the same trust as the other properties. The trust was to permit the use by itself (or itself to use) the properties for the purpose of the original trust. It could be argued that the result would be different if those units were the only properties held on the trust. However, where there is a body of property, of which they were only a small part, held upon the same trust, in my view the trust should be regarded as being identical in respect of each property. I do not see in the evidence any indication that the second unit and the third unit were to be held on different terms. Everything in the evidence points to the intention that the whole body of property should be held on the same trust.

27 Fourthly, his Honour held (at [96]) that the subsequent vesting of the property in the incorporated Association did not affect the subsistence of the trust.

28 Accordingly, his Honour concluded (at [102]):

(1) that all of the Schedule A property was, prior to the transfer of the legal titles to the incorporated Association, held upon trust to permit the trust property to be used by the Macedonian Orthodox Church St Petka Rockdale (the unincorporated association that was the parish organisation) as a site for a church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox Religion;

(2) that the trust was a valid charity; and

(3) that the subsequent vesting of the property in the sixth defendant incorporated Association did not have the effect that it thereafter held the property free of the trust.

29 His Honour was not, on the evidence available, able to determine the trust status of property of the Association other than the Schedule A property.

30 The making of formal orders to give effect to his Honour's judgment was deferred, but ultimately, on 7 February 2007, his Honour made formal declarations in the following terms:

1. Declare that the property referred to in Schedule A hereto ("the trust property") was prior to the transfer of the legal titles to the sixth defendant held upon trust to permit the trust property to be used by the Macedonian Orthodox Church St Petka Rockdale NSW Australia as a site for a church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement practice and promotion of the Macedonian Orthodox Religion ("the trust").

2. Declare that in accordance with the terms of the trust and in the events which have happened the trustee is bound to permit the sixth defendant to use the trust property as a site for a church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement practice and promotion of the Macedonian Orthodox Religion.

31 Hamilton J did not address in detail the particular terms of the trust upon which the Schedule A property had been, and continued to be, held. His Honour did however explain that, when property was held upon charitable trust for an organised church, if it is to be used in accordance with the purpose of the charitable trust, the property must be used in accordance with the doctrines, rituals and practices laid down by the church hierarchy:

66 One of the questions to be determined by me at this trial is simply the question of what were the terms of the trust as created. This must be answered by reference to the intent of the settlors at the time of the creation of the trust. The effect upon subsidiary matters of the disputes between the combatants in these proceedings is a question for another day. In answering the question it is important to bear in mind the legal background as to trusts for organised churches. By organised churches I mean churches consisting of more than one parish or congregation, where precepts as to doctrine, ritual and practice are laid down by a central or common body of the church, or, as in the case of an established church, by statute or otherwise by the law of the land. If a church is a church in this sense, then when property is held on a charitable trust for the church, to be used in accordance with the purpose of the charitable trust the property must be used in accordance with the doctrines, rituals and practices laid down as set out above. It has been said in the US jurisprudence on this subject that churches may be characterised as hierarchical, presbyterian or congregational. The first two of these models both fall within the rule that the doctrines, rituals and practices laid down by the centralised church must be followed; the rule is not limited to hierarchical churches in the sense of churches which have bishops and a multi-layered hierarchical order; it applies to all churches with a centralised governance in the above sense. The rules were thus applied by the House of Lords to the Free Church of Scotland in the well known case of General Assembly of Free Church of Scotland v Lord Overtoun [1904] AC 515. The very notion of a church was enunciated in that case by the Earl of Halsbury LC at 612 - 613 as follows:

"Speaking generally, one would say that the identity of a religious community described as a Church must consist in the unity of its doctrines. Its creeds, confessions, formularies, tests, and so forth are apparently intended to ensure the unity of the faith which its adherents profess, and certainly among all Christian Churches the essential idea of a creed or confession of faith appears to be the public acknowledgment of such and such religious views as the bond of union which binds them together as one Christian community."

67 The consequences of a gift for the purposes of a church in this sense were set out as follows by Latham CJ in the Red Book case supra at 255:

"The suit is brought for the purpose of securing the performance of charitable trusts. The trusts upon which the church property is held are religious trusts and are therefore plainly charitable in character. Property devoted to a charitable trust must be used for the purposes, and only for the purposes, of the trust. Changes in circumstances may make it probable that the founder of the trust would, if he had been able to do so, have varied the terms of the trust for the purpose of meeting conditions created by such new circumstances. But when proceedings are instituted in a court for the purpose of securing the performance of such a trust there is no authority in the court to 'vary the original foundation, and to apply the charity estates in a manner which it conceives to be more beneficial to the public, or even such as the Court may surmise that the founder would himself have contemplated could he have foreseen the changes which have taken place by the lapse of time' ( Attorney-General v Sherborne Grammar School (1854) 18 Beav 256, at pp 280, 281 [52 ER 101 at p 111])."

32 His Honour also referred to the principle that in an hierarchical church, there was a strong presumption in favour of the property being the property of the national church, not of a local parish, which presumption was not affected by the circumstance that the physical property of the local church was purchased by the local congregation without any financial assistance from the parent body [at [70], with reference to Young J, as his Honour then was, in Radmanovich v Nedeljkovic (2001) 52 NSWLR 641 ("the Serbian Church Case ") , [168]; and also in Attorney-General (ex rel Elisha) v Holy Apostolic and Catholic Church of the East (Assyrian) Australia NSW Parish Association (1989) 37 NSWLR 293 , [315]], and that where one finds in Australia a group of persons of ethnic origin proclaiming that they are members of an overseas church with an identical name of an overseas church which services their people, one can assume that they are members of that overseas body or alternatively that the canon law and discipline of their church is mutatis mutandis identical with that of the overseas body [at [70]; Church of the East, [316]]; although it has been recognised that even in a hierarchical church it is possible that a local church's property can belong to it and not be subject to control by the hierarchy [ Church of the East, [317]].

33 In the course of his judgment, Hamilton J (at [73]) cited the following passage from the judgment of Byrne J in His Grace Metropolitan Petar v Aco Kostovski; Alexander v Branov (unreported, VSC, 27 October 1997) , which concerned a corresponding dispute in the Parish of St Nikola in Victoria:-

Moreover the evidence before me shows that, at least until 1994, the community which comprised the parish of St Nikola saw themselves as part of the Macedonian Orthodox Church under the canonic jurisdiction of the Archbishop in Skopje and the organs of that Church. They gladly accepted the priests which the Holy Synod sent them at their request; they sent delegates to the Archbishoprical Council of the Church and the People in Skopje which adopted the 1994 Constitution of the Church; they accept the validity of this Constitution; they submitted their by-laws to the Holy Synod for its approval in 1976 and again in 1981; and they accepted at least the canonical jurisdiction of Bishop Petar as Metropolitan of the Australian and New Zealand diocese. Further, it is clear from this and from the successive constitutions of the Macedonian Orthodox Church that that church falls within the class of church structures or polities described as hierarchical by Miller J in Watson v Jones 80 US 679 (1871). This is a structure in which the government of the church is entrusted to the superior clergy. The legal consequence of this is that the members of the parish are members of the world-wide Macedonian Orthodox Church of which the Metropolitan is the diocesan head and the Archbishop in Skopje is the ultimate head; as members of that Church they are bound by its doctrines, its ordinances, its rules and its discipline: Bishop of Natal v Gladstone (1866) LR 3 Eq 1 at 37, per Lord Romilly; Attorney-General (ex rel Elisha) v Holy Apostolic and Catholic Church of the East (Assyrian) Australia NSW Parish Association (1989) 98 ALR 327 at 348 - 9, per Young J.

Inasmuch as I am concerned with the trusts upon which the real property of the St Nikola parish is held, these are religious and charitable trusts. Although Article 3 speaks of the property belonging to 'the members of the Church General Meeting - the members of the Church', it is clear from Article 66 of the by-laws that the legal estate vests in the trustees. As a charitable trust the trustees hold the property, not for the benefit for particular individuals, but for the benefit of the relevant community as a whole. The charitable trust is a trust for a purpose not for a person: Attorney-General for New South Wales v The Perpetual Trustee Co (Ltd) (1940) 63 CLR 209 at 222, per Dixon and Evatt JJ. The purposes for which the trustees hold the trust property are the religious and charitable purposes of the St Nikola Church community as a community established as part of the Macedonian Orthodox Church and subject to its ordinances in force from time to time, including its constitution, any diocesan statute and its by-laws. Articles 66(g) and (h) confer and impose upon the trustees certain powers and obligations but these are to be exercised and observed within the framework of the purpose trusts to which I have referred. Insofar as the trusts are expressed in terms of 'the members of the church community of St Nikola', the religious and charitable purposes are those of these members in their capacity as members, not of an isolated community in Preston, but of the Macedonian Orthodox Church. See, Hall v Job (1952) 86 CLR 639 at 650. It is in this sense that the declaration pronounced by the Court in April must be understood, for the trusts described in the by-laws are trusts for those religious and charitable purposes. The real property of the parish, therefore, is held not upon trust for the purposes of only that part of the Macedonian Orthodox Church which comprises the parish, nor for the purposes of the Macedonian Orthodox Church only insofar as those purposes are approved by the members of the parish or only insofar as those purposes benefit or are thought by the parishioners to benefit all or some of the members of the parish. It is neither necessary nor desirable that I go further to specify how or to what extent the superior clergy or the organs of that church may exercise dominion over the church property in the parish notwithstanding the wishes of the parishioners, for that is a matter for the church as an institution. Provided the church property of St Nikola is held and applied for the charitable or religious purposes of the Macedonian Orthodox Church, this Court will not intervene.

34 In this case, the Court is asked to enforce the terms of a charitable trust for religious purposes. This Court does not regulate the practice of religions, nor enforce church law. However, it enforces trusts, and in particular the application of trust property in accordance with the terms of the trust. Where property is given on trust for the purposes of a particular church, there may be a breach of trust if it is applied to a purpose inconsistent with the law of that church. Use of trust property for purposes other than worshipping in accordance with the doctrine for the maintenance and furtherance of which the trust was settled is a breach of trust [ Craigdallie v Aikman (1820) 2 Bligh 529, 545 [4 ER 435, 441]; General Assembly of Free Church of Scotland v Lord Overtoun [1904] AC 515, 613-7; Wylde v Attorney-General (NSW) ex rel Ashelford (1948) 78 CLR 224 , 271, "the Red Book Case "]. In the context of a charitable trust for the purposes of a religion, where it is alleged that trust property is being used in breach of trust in the sense of preaching doctrines inconsistent with those intended by the settlor, the court's role is simply to determine what was the original purpose of the trust and whether it is being observed [ Free Church of Scotland , 613 (Lord Halsbury), 644-5 (Lord Davey); Wylde v Attorney-General , 263 (Latham CJ)]. According to Dixon J, albeit in dissent, before the Court finds that the manner of conduct of a religious service amounts to a breach of trust, it must be satisfied that the forms of worship depart so completely from those of the faith for which the property is held that the use of the building for the purpose is in truth the diversion of the property to another object [ Wylde v Attorney-General, 295]. Similarly, in Attorney-General v Gould (1860) 28 Beav 485, Lord Romilly said (at 495) that the question was whether the use of the building for the purpose of open communication was "such a perversion of the objects and trusts for which it was established, that is, whether it is a violation of those trusts which this Court will interfere to prevent".

35 As Young CJ in Eq explained in the Serbian Church case , it is not every provision of the church rules nor every matter of church doctrine that will necessarily be a term of the trust, breach of which will give rise to an action, but only those elements of them which are "fundamental" or "essential", and even then only if they affect property or its use; what must be decided is whether each relevant rule is so fundamental that it is a term of the trust, or whether it is merely an "incidental matter of regulation" which does not go to the core of the trust [ Radmanovich , 668-9]. In the present case, his Honour explained that there was no hard and fast rule for determining which church rules were fundamental, or which would be incorporated into a church trust, although decided cases did provide some guidance [ Metropolitan Petar v Mitreski [2009] NSWSC 106, [487]]: thus, in Attorney-General v Gould , the practice of strict or free communion was found to be "no part of what was essential for the maintenance of a congregation of particular Baptists" and consequently not to form a part of the foundation trusts on which the Church was held; whereas in Wylde v Attorney-General, Latham CJ and Williams J found that uniformity of worship in the Anglican Church of Australia as it existed in 1948 was a fundamental principle of the Church, breach of which constituted a breach of trust; while in Scandrett v Dowling (1992) 27 NSWLR 483, the Court of Appeal found that breaching a church rule that priests must be male would not be a breach of trust.

36 In this case, Young CJ in Eq's judgment relieves me largely, but not entirely, of the necessity to undertake this exercise.

Judgment of Young CJ in Eq

37 In March 2009, following a further separate question hearing (in circumstances where the parties were not ready to proceed to the final hearing at the time appointed), Young CJ in Eq (as his Honour had by then become) delivered a decision as to the terms of the trust, as they related to the plaintiffs' allegations of breach: Metropolitan Petar v Mitreski [2009] NSWSC 106. His Honour considered issues as to the content of the relevant church law applicable to St Petka, and whether church law (or all of it) was incorporated into the terms of the trust.

38 The plaintiffs advanced ten alleged breaches of church law said to amount to breaches of trust, designated in the judgment as (a) to (j). His Honour found (at [375] ff) that each of the matters complained of by the plaintiffs if established was a breach of church law. For present purposes, the following seven are relevant:

(a) preventing the diocesan Bishop from conducting services in the church (see judgment at [375]-[380]);

(b) preventing a priest appointed by the diocesan Bishop as parish priest from conducting services in the church ([381]-[[387]);

(c) preventing a priest licensed by the diocesan Bishop to conduct services in the church from doing so ([388]-[395]);

(d) excluding the parish priest appointed by the diocesan Bishop from the executive council of the body responsible for the administration of the parish ([396]-[397]);

(e) employing a priest not appointed by the diocesan Bishop to act as the parish priest ([398]-[422]);

(i) refusing or failing to accept applications for membership from believers in the doctrines of the Macedonian Orthodox Church who have satisfied the criteria for membership specified in the 1994 Church constitution, the diocesan statute and the by-laws ([445]-[455]); and

(j) failing to remit the parish's contribution to the diocese in accordance with the diocesan statute ([456]-[474]).

39 His Honour then considered (at [475] to [497]) whether the relevant provisions of church law were "fundamental", and concluded, relevantly, that those involved in alleged breaches (a), (b) "and their associated breaches" (which must include (c) and (e)) were fundamental (at [496]). His Honour said that there might be some doubt as to breaches (d), (i) and (j) (at [497]). Ultimately, his Honour answered (at [499]) the question posed, what were the terms of the trust "in so far as material" to the alleged breaches, as follows:

The question should be answered by saying that the terms of the relevant trust do not justify the exclusion of the Bishop from the parish Church of St Petka nor the employment of any priest not authorised by the Bishop nor the closing, alteration, addition to the Church building or its ornaments without the Bishop's approval.

The remaining issues

40 It is convenient to address the remaining issues in the proceedings in the following sequence:

(1) Trust property: whether property of the Association other than the Schedule A property is held by it on trust;

(2) Breaches: whether any breach of trust is established. This involves:

a. whether breach is established of any of those provisions of church law held by Young CJ in Eq in Metropolitan Petar v Mitreski [2009] NSWSC 106 to be terms of the trust;

b. whether any other provisions of church law relevant to the plaintiffs' complaints is a term of the trust and if so whether breach of it is established;

c. which if any established breaches have pecuniary consequences that might found a liability to account or pay compensation.

(3) Defences: in respect of any breach that is established, whether any of the affirmative defences raised (NSW) Limitation Act 1969 , s 48(a); (NSW) Trustee Act 1925 , s 63; and Trustee Act, s 85 are made good;

(4) Accessorial liability: whether the individual defendants (that is, the Committee Members and Fr Despotoski) are liable as accessories in respect of any breach of trust that is established; and

(5) Relief: what if any relief should be given.

TRUST PROPERTY

41 It is convenient first to deal with the status of such of the property held by the Association as was not dealt with by Hamilton J ("the non-Schedule A property"). At first the Trustees (until the incorporation of the Association), and subsequently the Association itself, have acquired property in categories that, conformably with the descriptions they were given during the proceedings, I shall call:

(a) the Church Land;

(b) the Child Care Centre, which was acquired in about August 1978;

(c) the church's Holy Objects. In the Orthodox Church, including the Macedonian Orthodox Church, a church is furnished with various objects of religious significance, including an altar upon which a holy cloth (antimensis) rests, icons, an iconostasis upon which the icons are placed, and a throne for the Bishop. I will refer to these, as they have been described in the proceedings, as "Holy Objects". A collection of icons and other Holy Objects had been installed in the church by the time of the inaugural service in August 1977. Presumably, the original Holy Objects were donated in specie or acquired with funds that had been donated for the establishment of the church. Over the following years they were supplemented, or in some cases replaced, with other Holy Objects, again presumably acquired by donation or from Association Funds;

(d) other moveable property such as furniture, supplies, office equipment etc ("Ancillary Property");

(e) the company title units in No 64 Railway Street ("Investment Properties"). Three of these (the "Pre-incorporation Investment Properties") were acquired before incorporation of the Association, namely Unit 2 (acquired in January 1985) and Units 1 and 5 (acquired in November 1991), while Units 4, 6 and 7 were acquired after incorporation;

(f) Church Donations. Worshippers traditionally make donations in a number of ways to support the Church and its work. Those who visit the church (whether or not services are being conducted at the time) light candles for themselves, their family and friends; for that purpose, a supply of candles is maintained in the church, and worshippers make a donation when they are used. Worshippers who wish to acknowledge the intercession of Jesus, the Virgin Mary, or a Saint place money on or near the relevant icon, which is later collected. Collections are also made in the course of church services. At Epiphany, the icons may be temporarily taken from the church and kept in worshippers' homes, for which privilege the worshippers make donations. It is also customary for worshippers to donate textiles and oils, the surplus of which is sold. Together, I refer to these donations as "Church Donations";

(g) other moneys received ("Other Funds").

42 As has been recorded, Hamilton J held that the Church Land, the Child Care Centre and the three Pre-incorporation Investment Properties ("the Schedule A Property") were trust property, and in reaching that conclusion, observed (at [93]) that he saw in the evidence no indication that the second unit and the third unit were to be held on different terms from the first; and that everything in the evidence pointed to the intention that the whole body of property should be held on the same trust. However, his Honour did not determine whether or not the Holy Objects, Ancillary Property and Other Funds acquired before as well as after incorporation of the Association, and the three post-incorporation Investment Properties, were trust property.

Other pre-incorporation property

43 The plaintiffs contend that the Holy Objects, Ancillary Property and Other Funds acquired pre-incorporation ("the Other Pre-incorporation Property") were and are held upon the same trust as applies to the Schedule A property. The defendants contend that personal property of the Association acquired by the trustees before its incorporation, and which subsequently vested in the Association upon incorporation, was acquired by the Association in the course of its business and operations and is held for the benefit of the Association pursuant to its constitution, and particularly clause 26 which provides:

The funds of the Church shall be applied to carry out the objects of the Church. Any surplus resulting from its operation during a financial year, after providing for depreciation in value of the Church's property or for contingent liabilities or loss shall be carried to reserve for the future and continued operation of the Church.

44 In the Association's constitution, "Church" means the Association.

45 The pre-incorporation accounts of the unincorporated association are incomplete. Those for the year ended 30 June 1991 record fixtures and office equipment, a pay phone, furniture, equipment and floor coverings, books, towels and face washers, toys and education equipment, plumbing installations and crockery, with a total (depreciated) value of $25,689; and current assets of $66,273. These assets appear to have been sourced, at least predominantly, from Church Donations and from income from the Child Care Centre and the Investment Properties. The acquisitions of 65 Railway Street and Units 1 and 5 were funded, at least in part, with bank loans, which were serviced and gradually repaid out of the unincorporated association's funds.

46 At least prior to 1993, no one drew the distinction, and no practical distinction existed or was recognised, between the unincorporated association and the parish assembly. Church Donations were made by worshippers in accordance with their religious tradition, for religious purposes, to further the objects of the church. The context in which they were made (to buy candles, borrow icons, and in the course of religious services) bespeaks a religious context and purpose. These donations were made as a result of the use of the Church Land, which was trust property.

47 The defendants submit, correctly, that income from trust property is not necessarily held upon the same trusts as the capital - as is reflected in the complex rules in respect of capital and income. However, while as a matter of principle a settlor can establish distinct trusts of capital and income, that requires specific provision, and there is not the slightest indication that that was done, or intended, here; to the contrary, the property was held "... upon trust to permit the trust property to be used by the proposed beneficiary as a site for a Church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement, practice and promotion of the Macedonian Orthodox Religion", and there is nothing to suggest that diversion of income generated from the trust property to some other purpose was to be permissible.

48 It follows, in my view, from the purpose for which they were made, and their source in the use of trust property, that the Church Donations were trust income. It also follows that, insofar as the Other Pre-incorporation Property was acquired with or comprised of funds sourced in Church Donations, it too represented and constituted trust property. Insofar as such property was acquired with or comprised of funds derived from income generated by the Child Care Centre and the Investment Properties, it was acquired with income generated by trust property, and likewise upon acquisition became trust property. No other sources for the acquisition of the Other Pre-incorporation Property have been identified or are apparent. So far as the evidence reveals, the Other Pre-incorporation Property was acquired for the same purposes as, and as a result of ownership or use of, the Schedule A property; it was therefore held on the same trusts as the Schedule A property.

49 Accordingly, the Holy Objects, Ancillary Property and Other Funds held at the time of incorporation of the Association passed to the Association subject to the same trust, and - to the extent that any such property is still held by the Association - remain held upon the same trust. Indeed, in the appeal proceedings resulting from Hamilton J's February 2007, the defendants apparently at one stage accepted that, insofar as the Schedule A property was held on trust, the trust extended to the Other Pre-incorporation Property [Submissions of the First to Seventh Cross-Appellants dated 20 July 2007, [80]], and although this position was not maintained in the submissions before me, it was acknowledged that in the context of this litigation the assets in question were so slight as not to warrant more detailed refutation.

50 Hamilton J's conclusion that vesting of the Schedule A property in the Association upon its incorporation did not affect its trust status is dispositive of the same question in respect of the Other Pre-incorporation Property. I otherwise deal with the effect of the Associations Incorporation Acts in connection with the post incorporation property, below.

Post-incorporation property

51 Following incorporation, further and replacement Holy Objects and Ancillary Property were acquired by the Association, and further Funds were received by it. The Association also acquired three further Investment Properties: Unit 6, in June 1992; Unit 7, in March 2002; and Unit 4, in April 2003.

52 The trust status of this property ("the Post-incorporation Property") was not determined by Hamilton J. Indeed, the defendants emphasise his Honour's conclusion (at [102]) that he was unable on the then evidence to answer the question as to the trust status of the non-Schedule A property, and submit that the plaintiffs bear the onus of establishing, by evidence additional to that before Hamilton J, that there was an intention that property acquired post-incorporation be held on charitable trust (said to be inconsistent with some of the terms of its constitution) by the Association, or some reason in law why it should be so held. However, I am unable to read his Honour's conclusion as determining any issue as to the status of the non-Schedule A property, or indeed as anything more than a statement to the effect that at that stage, in the context of a preliminary hearing which was not required to resolve all issues, the evidence was insufficient to enable a conclusion one way or the other. In particular, I do not read it as a determination that (as the evidence was insufficient to establish otherwise) it was not trust property, nor as in any way telling more against than in favour of a conclusion that the non-Schedule A property was held on the same trust as the Schedule A property. It simply left the question open, for later resolution.

53 The plaintiffs contend that the Post-incorporation Property is trust property. The defendants say that it is property of the Association for its own benefit in accordance with its constitution. Elaborate submissions were made in respect of the impact of the Associations Incorporation Act (in both the 1984 and 2009 versions) on the contention that the Association acquired property on trust; in particular, it was said that to hold property on terms of the trust declared by Hamilton J would be inconsistent with the Association's constitution and thus contrary to the legislation. However, I can see nothing in the legislation, or the constitution of the Association, that precludes it from acquiring or holding property on trust. Insofar as its constitution prescribes how the Association will deal with its property, that is to be construed as a reference to its beneficial property, not property that it holds as a trustee. I do not accept that the legislation gives paramountcy to the Association's constitution over the terms of any trust affecting property that it might acquire. In particular, clause 26 of the Association's constitution does not mean that the Association cannot receive and hold property upon trust, nor that property previously held upon trust by the trustees of the predecessor unincorporated association vested absolutely and free of any trust in the incorporated association upon incorporation.

54 The defendants submitted, correctly, that there was no suggestion at the time of the acquisition of the Post-incorporation Property that the directing minds of the Association believed that there was any such trust as has been declared, and that in those circumstances the requisite intent to establish a trust in respect of such property could not be established. However, the absence of subjective belief that there was such a trust, if accepted, does not preclude a conclusion that the property upon acquisition became trust property, if for example it was acquired with funds sourced in trust property, or it was acquired for the purposes of the trust.

55 It is also correct, as the defendants submit, that after the incorporation of the Association, one matter that told in favour of the pre-incorporation property being held in trust no longer operated, namely the legal difficulties then inherent in gifts to unincorporated associations. However, while mentioned by Hamilton J (at [63]), this did not loom large in his Honour's judgment, which in this respect depended primarily on ascertaining the settlor's intention from the terms of the trust deed and the circumstances surrounding the acquisition of the church land, and then on attribution to the settlors of the same intention in respect of the other Schedule A property. And contrary to the defendants' submissions, there are sound reasons why the express trust established by and pursuant to the 1977 deed should extend to property acquired later by a different legal entity, namely the incorporated Association, including first, that the Association is the successor of the Trustees; secondly, that the pre-incorporation trust property vested in it upon incorporation; and thirdly, that there was thereafter no segregation between trust and non-trust assets, income, expenditure, and activities. In those circumstances, at the very least the defendants bore the onus of showing what of its property was not attributable to the trust, which they did not essay to do - with one exception to which I shall come.

56 Association Funds . Although a full set of the Association's accounts is not available, there does not appear to have been any change in the manner in which the parish's finances were managed after its incorporation. Servicing of the loans obtained to acquire properties was taken over by the Association. There was no apparent change in the sourcing and collection of funds: Church Donations, income from the Investment Properties and income from the Child Care Centre continued to be received, and appear to have been applied as they were before incorporation. Post-incorporation assets, and the income derived from them, do not appear to have been segregated or treated differently in any way from the pre-incorporation assets.

57 When, in 1997, the faction opposed to the Bishop came into control of the Association, it kept the church open and services according to Macedonian Orthodox Church liturgy were celebrated there, at first by Fr Dzeparovski and then by Fr Despotoski. In 2001, these moved to the adjacent church hall, while the Church itself was renovated. Fr Despotoski's services appear to have ceased when Hamilton J granted an injunction in July 2003, but further (unauthorised) Orthodox Christmas services were conducted in January 2004. In March 2004, Hamilton J granted an injunction restraining the conduct by the Association of any services at St Petka, and income from collections in church services presumably substantially ceased from this point. However, the Association continued to open the church, at least from time to time, and to collect moneys donated for candles and other icons when this happened.

58 Even if some parishioners of St Petka were conscious, in making Church Donations, that the Association had become a corporate entity, this was no more than the uncommunicated subjective intention of a handful of parishioners, and does not prove the objectively ascertained intentions that informed the bulk of the Church Donations. And even if the Church Donations were, at law, gifts to the Association, equity would not permit the Association to assert its legal ownership free of any trust obligation where it received such gifts as a result of its status as trustee or as a result of its use of the trust property. In my view, this was clearly the case here. The church, and the icons and other Holy Objects in it, were used to solicit the Church Donations, while the Association purported to be carrying out its obligations under the trust to operate the church as a parish church of the Macedonian Orthodox Church. The Church Donations would never have come into the Association's hands otherwise. Accordingly, their proceeds are trust property.

59 A similar analysis applies to donations other than Church Donations (that is, donations made directly to the Association by will, or by gift inter vivos , including, for example, government grants shown in the accounts). Although such gifts may not have been solicited through the church, they were received by the Association because of its position as the entity that owned the church and administered the affairs of the parish; that is to say, because of its role as trustee.

60 The Association also continued to operate, and derive income from, the Child Care Centre, and to receive income from the Investment Properties (both pre-incorporation and, as they were purchased, post-incorporation as well). Income from the Child Care Centre and the pre-incorporation Investment Properties flowed from the ownership of trust property and is impressed with the same trust: a trustee is not allowed to profit personally from his status as trustee or from the use (authorised or not) of trust property [ Jacobs on Trusts (7 th edition, 2006), [1742]; Paul A Davies (Australia) Pty Limited v Davies [1983] 1 NSWLR 440].

61 This suffices to establish that the Parish Funds were substantially comprised of trust moneys. Once that conclusion is reached, the trustee will not be permitted to say, as against the interests of the trust, that it breached its obligations as trustee, one of which is an obligation not to mix trust funds with the trustee's personal funds. So far as can be ascertained, neither after the change in control of the Association in 1997, nor even after Hamilton J's decision in April 2003, was there any segregation of pre-incorporation assets or the income derived from them. Even if the Association were permitted to assert that other moneys in its accounts were its own personal property, at the least the onus falls upon the Association to make good such an assertion and to prove what component represents its personal funds.

62 Litigation Funds . The Association has contended - through an affidavit of Mr Kotevich - that certain donations made to it from about May 2004 were made specifically for the purpose of assisting it with the costs of these and related proceedings. The evidence relating to these so-called "litigation funds" is less than satisfactory, as it does not disclose in any admissible way the circumstances in which they were raised, and there is no evidence that they were segregated from the trust property. The Association would only be justified in treating a donation received by it as not being trust property if the donation were solicited otherwise than as trustee and without the use of any of the existing trust property - including the church, the Holy Objects and the Child Care Centre. That is unlikely to be so in respect of much of the "litigation funds"; for example, it appears from Mr Kotevich's affidavit that he has classified Church Donations received after December 2006 as "litigation funds".

63 Holy Objects and Ancillary Property . The same conclusions follow in respect of post-incorporation Holy Objects and Ancillary Property. To the extent that they were acquired out of Association Funds, they are impressed with the trust that attached to the funds applied to their acquisition. To the extent that any Holy Objects or Ancillary Property were acquired by donation, the conclusions set out above with respect to donations of money apply: Holy Objects at least were self-evidently donated for religious purposes because of the role of the Association in furthering the religion of the Macedonian Orthodox Church.

64 Investment Properties . Units 7 and 4 were acquired, in 2002 and 2003 respectively, after incorporation of the Association, with deposits, apparently sourced from Association Funds. It is probable that the same was so for the earlier acquisition of unit 6 in 1992. The balance of the purchase moneys for Units 7 and 4 was sourced in funds borrowed for that purpose from the National Australia Bank, and again it is probable that the same was so for the earlier acquisition of unit 6. All three units have since been sold.

65 There are many bases for concluding that, notwithstanding that the then directing minds of the Association may not have believed that there was any such trust as has since been declared, these properties upon acquisition became trust property. One is that these units were in the same building as the pre-incorporation investment units, and were acquired as part of a long-term plan to acquire all of the units in the building and then convert it to strata title, presumably in the hope of increasing its value as a result. As trustee in respect of the pre-incorporation units, the Association was bound to use the opportunity of acquiring the later units, if at all, in its capacity as trustee for the benefit of the trust. It is beside the point that under its constitution the Association's purposes were substantially if not wholly charitable, if they were not the purposes of the trust. For example, if a professional trustee company were the trustee of several charitable trusts, and it used the trust property of one to acquire property upon trust for another of them, the property would nonetheless be held upon constructive trust for the first charity. A second is that the loans were secured, not only on the newly purchased units, but also on the existing (pre-incorporation) units, representing a use of trust property. Related to that is that the borrowings were supported by the availability of ongoing income (including Church Donations and income from the pre-incorporation Investment Units and the Child Care Centre). This is not irrelevant: while it is correct that whether land is subject to a trust is assessed at the time of acquisition, the circumstance that at that time it was intended that trust assets and/or income be used to service loan repayments informs a judgment that it was intended to be held on those trusts. In these circumstances, the proceeds of the loans, and the properties into which they can be traced, are trust property [ Paul A Davies (Australia) Pty Limited v Davies, 448B, 451, 457]. A third is that the Association did not maintain any segregation of trust and non-trust assets, but treated all as held on the same basis and for the same purposes. This manifests an intention that the post-incorporation units be held on the same basis and for the same purpose as the Schedule A property.

Conclusion

66 The characterisation of the non-Schedule A property depends on the Association (and its unincorporated predecessor) receiving it in the capacity of, or because of its status as, a trustee. Before 1993, there was no corporation, and the legal owner was a number of individuals - the Trustees - expressly as trustees. As at 1993, bank accounts were held in names of the Trustees; it could not have been for themselves, and it could not have been for a trust different from that applicable to the Church land. Until 1993, all property was held on the same trust. Later, when the older (trust) properties were used as security for borrowings to acquire the newer properties, and income was generated from use of trust properties, and where there was no segregation of pre- and post-incorporation funds, with all being deposited into general bank accounts, so that all were mixed, there is no basis for supposing that they were held on different bases, and all should be regarded as an accretion to the single pool of trust property. While it is not impossible that accretions to a charitable trust can be held on narrower terms than the original corpus, as in Attorney-General for the State of Queensland; ex rel Nye and Others v The Corporation of the Lesser Chapter of the Cathedral Church of Brisbane and Another (1977) 136 CLR 353, that was in circumstances where the accretion was sourced in donations and intent of the donors that their gifts be for a particular narrower purpose was plain, a situation far removed from accretions arising from the use of extant trust property.

67 Accordingly, the whole of the Association's assets acquired up to May 2004 were and are trust property, as also are its assets acquired since then, except to the extent that the Association demonstrates that identifiable moneys held by it were donated for the purpose of funding the litigation. As expenditure on costs of litigation has exceeded, by a very substantial margin, moneys received from such donations, it is improbable that any remaining property of the Association represents these donations.

68 My reasoning supports the conclusion that, if the Court of Appeal were to uphold the plaintiffs' appeal from Hamilton J's judgment, to the effect that the trust was not as declared by Hamilton J for use of the property by the Association, but rather for religious purposes of the Macedonian Orthodox Religion or the Macedonian Orthodox Church in more general terms, the non-Schedule A property would still be held on the terms of any trust that applied to the Schedule A property.

BREACHES

69 In so far as Young CJ in Eq has found the terms of the trust, the question for me is simply whether breach of those terms is established. In so far as it has not yet been determined whether certain provisions of church law said to have been breached are terms of the trust, the questions for me are first, whether (notwithstanding that his Honour did not so hold) I should conclude that any of them is a term of the trust, and secondly, if so, whether breach of any such term is established.

70 The plaintiffs contend that I should find alleged breaches (a), (b), (c) and (e) established in fact (Young CJ in Eq having held that if established they would be breaches of trust), and that I should also find that alleged breaches (d), (i) and (j) would if established be of fundamental provisions of church law such as to be breaches of trust (Young CJ in Eq not having done so), and to be established in fact. The defendants submit that I should go no further than Young CJ in Eq's conclusions, and not proceed to make any findings in respect of breaches other than (a), (b) and (h), and that to do so would be inconsistent with Young CJ in Eq's conclusions on the question he determined. [Breach (h), though found by Young CJ in Eq to be a term of the trust, was not further agitated by the plaintiffs, because it was of historical interest only]. However, the Court of Appeal, in the application for leave to appeal from the judgments of Hamilton J and Young CJ in Eq [ Mitreski v Metropolitan Petar [2009] NSWSC 319], suggested that I should not so limit myself, Allsop P saying:

17 Given the passage of time and the continued complexity and burden of this case both on the Court and on the parties, in any further hearing in the Equity Division one would have thought that the case managing judge and/or the trial judge, if they be different, would be alive to the clear necessity to ensure that the totality of the controversy between the parties was quelled at first instance. That aim, one would have thought, would outweigh any technical consequence of the earlier employment of the separate issue process, though, of course, any such questions are matters for the judge in the Equity Division. There would be the mechanisms available for the reception of any evidence subject to relevance and the making of findings which may only be relevant on the hypothesis that Justice Hamilton was wrong in some respect in his earlier reasons.

71 In my view, Young CJ in Eq's answer to the question was not intended to be exhaustive, in the sense of excluding the potential for other breaches of church law to be found to be fundamental and thus breaches of trust, and in any event, given the pending appeals, it is preferable that, within reason, I endeavour to cover alternative permutations that might prevail on appeal, insofar as they are relevant.

Alleged breaches of terms found by Young CJ in Eq

72 Young CJ in Eq's conclusion, to the effect that the terms of the trust "do not justify the exclusion of the Bishop from the parish church of St Petka nor the employment of any priest not authorised by the Bishop", is an express finding that breaches (a) (exclusion of the diocesan Bishop) and (e) (employment of a priest not appointed by the Bishop) are breaches of trust. His Honour plainly regarded alleged breach (b) (exclusion of the parish priest appointed by the Bishop) as raising the same issue (see [398]), and as his Honour concluded that it too was fundamental (see [496]), it necessarily involves also a finding that exclusion of the duly appointed parish priest is a breach of trust, even though that was not expressly referred to in his Honour's formal order. It seems highly likely that his Honour regarded alleged breach (c) (preventing a priest licensed by the Bishop to conduct services in the church from doing so) as in the same category, but in the circumstances it adds little if anything to alleged breach (b).

73 Bishop Petar was not welcome at St Petka after the events of mid-1997. As has been recorded, when - at the Bishop's direction - Fr Mitrev commenced to collect the fees for weddings, baptisms and funerals and remit them to the Diocese in reduction of outstanding diocesan contributions, the Association, under the governance of the Committee Members, purported to dismiss him as parish priest, for disobedience to their instructions as to how moneys received by him from parishioners should be accounted for, and to appoint Fr Dzeparovski to act as priest in his place.

74 The defendants successfully opposed an interlocutory application for the reinstatement of Fr Mitrev made at or about the time of the commencement of the proceedings in July 1997, which Hamilton J refused in late August. In January 1998, following attempts by supporters of the Bishop to get Fr Mitrev back into the Church, the defendants made application for injunctions to restrain both Bishop Petar and Fr Mitrev from conducting any services in the Church, which was settled by the giving of undertakings not to do so, which undertakings thereafter remained in force. These undertakings underpinned the continuing refusal of the defendants to permit Bishop Petar and Fr Mitrev to fulfil their roles as diocesan Bishop and parish priest.

75 When, in the first half of 1998, Fr Dzeparovski resigned, the Association purported to appoint Fr Despotoski to act as parish priest, and he did so until mid-2003.

76 From about 2001, renovations were carried out to the church, which involved some remodelling of the church and the relocation of icons. Bishop Petar was not informed, nor his approval sought, let alone obtained. This not only establishes breach (h), but also informs a judgment as to whether the Bishop was excluded.

77 Following the delivery of Hamilton J's judgment, the Bishop and Fr Mitrev sought to have their undertakings dissolved, so that they could return to the church. Over the opposition of the defendants, Hamilton J granted a conditional and partial release of the undertakings, so as to permit the Bishop to reconsecrate the church, and Fr Mitrev to share the church with another priest approved by the Bishop. However, this arrangement could not be implemented, because when the Bishop arrived at the church to reconsecrate it, his entrance was blocked by a crowd of picketers. Macready M (as his Honour then was) varied the orders of Hamilton J so as to release the Bishop from any undertaking to licence any other priest, unless and until the Church was reconsecrated.

78 No reconsecration took place. The Bishop, who had learned for the first time of the unauthorised alterations when he visited the church to reconsecrate it, sought unsuccessfully to obtain the plans showing what had been done.

79 In July 2003, Hamilton J had also granted an injunction restraining Fr Despotoski from conducting services at St Petka. In late December 2003, the Association made a last-minute request to the Bishop to conduct Orthodox Christmas services at St Petka in January 2004, but without Fr Mitrev. When this was not accepted, the Association sought authorisation for Fr Velimir Poposki (then under suspension) to conduct such services. This was refused in categorical terms, but the Association went ahead with Fr Poposki anyway. It appears that unauthorised services largely ceased as a result of the injunction granted by Hamilton in March 2004.

80 While there was occasional further correspondence about the resumption of services under the auspices of the Bishop Petar, the defendants, however, refused to release the undertakings given by Fr Mitrev and insisted upon making the release of the undertakings given by the Bishop dependent upon him complying with certain conditions. Nothing eventuated until December 2008, when Young CJ in Eq, in the course of the hearing before him, made clear to the defendants that they could not expect to continue to maintain the undertakings restricting the Bishop and Fr Mitrev and yet at the same time delay further progress of the proceedings. Eventually, the defendants consented to the release of the undertakings, but only "under protest".

81 Following the release of the undertakings, the Bishop made arrangements to reconsecrate the church during the Orthodox Christmas season, to take place in early January 2009. The priests who were to assist him were to include Fr Mitrev. The Association refused to permit the Bishop to conduct the service on this basis. In vacation, it obtained judicial advice from Adams J, at an ex parte hearing at which the plaintiffs were not represented, to the effect that pending the delivery of Young CJ in Eq's judgment on the separate questions, they would be justified in excluding Fr Mitrev from the church if they conscientiously believed that "due decorum" required it. Claiming that these conditions were satisfied, they thereafter refused to permit the service to take place if Fr Mitrev were present.

82 Following the delivery of Young CJ in Eq's judgment, the Bishop and Fr Mitrev renewed their request to be permitted to return to St Petka. Undertakings were sought that the Association would permit them unconditionally to conduct services, and would take all reasonable steps to facilitate the conduct of such services. After some prevarication on the part of the Association, it refused to consent to Fr Mitrev coming to the church at all, or to Bishop Petar coming to the church if accompanied by Fr Mitrev.

83 Ultimately, the defendants do not dispute that - as is clear from the foregoing summary of events - there has been a breach of the term of the trust found by Young CJ in Eq relating to exclusion of the parish priest. Although the Association has recently offered to allow Fr Mitrev into St Petka, it is still on terms that he not be the sole officiating priest. Such a conditional offer amounts to a constructive refusal, still, to admit Fr Mitrev. The Association's refusal to permit Fr Mitrev to conduct services and otherwise to act as parish priest is, on the holding of Young CJ in Eq, a breach of trust. Alleged breaches (b) and (c) are established, and are continuing.

84 The Association claims that there is intense opposition to Fr Mitrev among the local Macedonian community, and that it is concerned about possible violence in the event that Fr Mitrev tries to come back to St Petka. Even if genuine, such claims are irrelevant at this point. At the highest, they might be relevant to a defence under s 85, or the exercise of discretion in respect of relief. However, as has previously been pointed out (by Young CJ in Eq, at [191]), the Association's duty is to ensure that the trust property is used consistently with church law, as incorporated into the terms of the trust, and this involves admitting the Bishop and Fr Mitrev.

85 The defendants dispute that it has been established that they have otherwise excluded the Bishop, and point to his presence on 22 March 2004, and on 6 January 2009, and say that he was repeatedly invited to conduct services at the Church, so long as not accompanied by Fr Mitrev. But even if this were the extent of the exclusion of the Bishop, it remains an exclusion; to impose on his attendance conditions that were not in accordance with church law was the equivalent of excluding him. On the holding of Young CJ in Eq, the Association's refusal to allow the Bishop to conduct services, with the assistance of Fr Mitrev if he should so choose, is a breach of trust. Alleged breach (a) is established, and is continuing.

86 The defendants do not dispute that they employed priests - first Fr Dzeparovski, and then Fr Despotoski - who had not been appointed by the Bishop, to act as the parish priest. This falls within the express terms of Young CJ in Eq's answer, and alleged breach (e) is therefore established.

87 The unauthorised 2001 renovations and relocation of icons establishes breach (h), but it is of little more than historical interest, and the plaintiffs sought no particular relief in respect of it.

Alleged breaches of terms not found by Young CJ in Eq

88 While his Honour found that alleged breaches (d) (exclusion of the parish priest from the executive body responsible for administration of the affairs of the parish), (i) (failure to ensure that membership of the body which elects the executive body responsible for administration of the affairs of the parish is determined in accordance with the prescribed eligibility requirements) and (j) (failure to remit to the diocesan Bishop the contribution from parish income specified in the diocesan statute) would be breaches of church law, he said (at [497]) that there may be some doubt as to whether they were "fundamental", and his Honour's formal answer to the question, to the effect that the terms of the relevant trust do not justify the exclusion of the Bishop from the parish Church of St Petka nor the employment of any priest not authorised by the Bishop nor the closing, alteration, or addition to the Church building or its ornaments without the Bishop's approval, did not include those alleged breaches.

89 Exclusion of parish priest from executive council . As to breach (d) (exclusion of the parish priest from the executive body responsible for administration of the affairs of the parish), Young CJ in Eq, while accepting that church law required that the parish priest be a member of the executive council, entertained some doubt as to whether this was "fundamental". I have concluded that it was not. Exclusion of the priest from that body could not be said to result in the trust property being used otherwise than for the purposes of the Macedonian Orthodox religion, or being diverted to some other purpose.

90 There is evidence supporting the view that, at least initially after 14 April 1997, Fr Mitrev did not attend meetings of the executive council as a result of allegiance to the Bishop and the plaintiffs' view that the Committee was unlawful. On the other hand, there can be little doubt that after his purported removal as priest, Fr Mitrev would have been persona non grata at such meetings. As a matter of fact, I would find that, at least from the date of his purported dismissal, he was excluded from the executive council. But I am not satisfied that this alleged breach adds anything of substance to breach (b) (exclusion of the parish priest appointed by the Bishop). In any event, to the extent that Fr Mitrev was excluded from the executive council, that did not amount to a further breach of trust.

91 Voting membership of the Association . In respect of alleged breach (i) (failure to ensure that membership of the body which elects the executive body responsible for administration of the affairs of the parish is determined in accordance with the prescribed eligibility requirements), Young CJ in Eq, while finding that church law required that membership of the body which elects the executive body responsible for administration of the affairs of the parish be determined in accordance with the prescribed eligibility requirements, entertained some doubt as to whether this was so fundamental as to be a term of the trust.

92 The diocesan statute prescribes the membership of the parish assembly. Articles 67, 69, 77 and 82 have the effect that the voting membership of the parish assembly must consist, and consist only, of believing Macedonian Orthodox Christians within the parish. The practice of the Macedonian Orthodox Church is that the parish priest maintains a register of those to whom he ministers as parishioners ("the Parish Register"). The Parish Register is recognised by the diocesan statute, article 119. This in effect means that all of the voting members should appear on the Parish Register.

93 Since his expulsion from St Petka, Fr Mitrev has continued to keep the Parish Register required by the diocesan statute. It currently includes hundreds of individuals (although some of them are children).

94 The constitution of the Association provides, by clause 8, for several classes of membership. By clause 8.A, the right to vote and to hold office is confined to full members, who must be persons of Macedonian birth or descent "who are adherents to the teachings of the Christian Orthodox Denomination" and who are aged 18 or over. Clause 8(1) requires that applications for membership be in writing, in such form and containing such requirements as the executive council prescribes from time to time. Clause 8(2) provides that the executive council determines the admission or rejection of an applicant. The Association claims to have about 200 members.

95 Following the delivery of Young CJ in Eq's judgment, the plaintiffs' solicitors lodged a large number of applications from Fr Mitrev's parishioners for membership of the Association. Those applications disclosed all details necessary to demonstrate eligibility for membership of the parish assembly under the diocesan statute. Ultimately, the Association refused to entertain the applications, on the ground (reflected in the Association's printed membership application form, and presumably reflecting a requirement prescribed by the executive council) that they were not proposed and seconded by existing members. As a result, voting membership of the Association does not correspond with that required for a parish assembly under the diocesan statute. On the findings of Young CJ in Eq, this is a breach of church law.

96 The practical consequence is that the organisation which has responsibility for the affairs and property of the parish, and which is entitled to use the Church and the other trust property, has a membership that differs from that required by church law. In particular, it excludes a significant number of believing Macedonian Orthodox Christians within the parish.

97 Although I am hesitant, particularly in a field in which his Honour has such unique experience and learning, to go further than Young CJ in Eq was prepared - or perhaps more accurately, found it necessary - to go, I have concluded that this requirement of church law is fundamental in the relevant sense, for the following reasons. This requirement impacts not only on control of the trustee, but more importantly on achievement of the purpose of the trust. When the trust was originally established providing for use of the church by the unincorporated association, no distinction was drawn or recognised between the parish assembly and the unincorporated association. The trust contemplated that the membership of the user of the trust property - originally the unincorporated association, to whose position the Association later succeeded - would be the equivalent of the parish assembly. In my view, it is implicit in the trust "to permit the sixth defendant to use the trust property as a site for a church of the Macedonian Orthodox Religion and for other buildings and activities concerned with or ancillary to the encouragement practice and promotion of the Macedonian Orthodox Religion" that the membership of the sixth defendant would be substantially in accordance with that of a parish assembly under church law.

98 To exclude from membership a significant number of believing Macedonian Orthodox Christians within the parish is to exclude a portion of those who were intended to be able to use the Church. If a significant number of believing Macedonian Orthodox Christians within the parish are excluded from the body entitled to use the church under the trust, the trust property is not being used for the Macedonian Orthodox Church or religion, but for a schismatic purpose, representing a diversion from the authorised purpose. Accordingly, this is not just a requirement of church law, but a term of the trust. While the Association says that eligibility for membership is determined by its constitution, and that applications for membership must comply with the requirements prescribed by or under its constitution, it is open to the executive council under Article 8(1) to alter the form of application. Breach (i) is established, is a breach of trust, and is continuing.

99 Diocesan financial contributions . In respect of alleged breach (j) (failure to remit to the diocesan Bishop the contribution from parish income specified in the diocesan statute), Young CJ in Eq held that the obligation to pay diocesan contributions, was a requirement of church law, but was in doubt as to whether it was so fundamental as to be a term of the trust.

100 To my mind, failure to pay such contributions does not represent anything like an application of the trust property to an unauthorised purpose. It is a matter of mere internal regulation. I am not satisfied that the obligation is so fundamental as to be a term of the trust.

101 Accordingly while, on Young CJ in Eq's findings, the Association's admitted failure since 1997 to pay diocesan contributions since 1997 is a breach of church law, it was not a breach of trust.

Pecuniary consequences

102 The plaintiffs seek inquiries to quantify the financial consequences of the breaches found. However, in order to facilitate those inquiries and narrow the issues on them, they ask the Court to make various determinations of general principle. They identify two categories in which it is said that breaches have had financial consequences, namely remuneration paid to the unauthorised priests Fr Dzeparovski and Fr Despotoski, and legal expenditure in connection with the ensuing litigation.

103 Payments to Fr Dzeparovski . It is uncontroversial that the Association paid Fr Dzeparovski for acting as parish priest between July 1997 and 1998. The employment of Fr Dzeparovski to act as parish priest being a breach of trust, payment of his remuneration out of trust property was a breach of trust.

104 Payments to Fr Despotoski . It is also uncontroversial that the Association paid Fr Despotoski for his services as purported parish priest between 1998 and 2003. Again, his employment being in breach of trust, payment of his remuneration out of trust property was also a breach of trust.

105 Payment of litigation costs . Unsurprisingly - as it occurred after the commencement of the proceedings - the funding of the defence (and associated proceedings in connection with obtaining judicial advice) was not one of the pleaded breaches of trust that was considered by Young CJ in Eq. Before me, all parties agreed that the question of costs - including the making of any order under Trustee Act , s 93(3) - should abide the outcome of the proceedings and further argument. Nonetheless, the plaintiffs sought that I determine at this stage that there had been a breach of trust in the application of trust assets to the litigation. They contend that, to the extent that legal fees attributable to certain aspects of the defence which themselves involve acting contrary to the Association's duty as trustee - namely, denying that the property was held on trust, and obtaining the undertakings that prevented the Bishop and Fr Mitrev from conducting services in accordance with the terms of the Trust, and resisting release of those undertakings - have been paid out of trust property, those payments are themselves breaches of trust. More generally, the plaintiffs contend that there are breaches of trust in paying litigation costs of these and related proceedings except in accordance with authorisation from the Court. Essentially, the plaintiffs submit that until and unless final costs orders are made which give the Association the right to costs out of trust assets, then any appropriation of trust assets to pay costs is a breach of trust. The Association concedes that trust assets (being funds not raised specifically for the purpose of the litigation) were used, but only to the extent authorised by judicial advice, and that otherwise, they used litigation funds contributed for that specific purpose.

106 For reasons that I will explain, in my view the plaintiffs' contentions in this respect are misconceived. Whether there has been a breach of trust in the application of trust assets to the defence will be ascertainable only after costs orders, including any s 93(3) order, have been made.

107 The plaintiffs refer to the jurisdiction asserted by the Court of Chancery, in cases dealing with the trust status of property or the administration of trust property, to make orders as to the payment of the parties' costs (either awarded against them or incurred by them) out of trust property [see, for example, Re Buckton [1907] 2 Ch 406, 414-5 (Kekewich J)], a jurisdiction that is now reflected in Trustee Act , s 93(3), which authorises the court not only to award costs out of trust assets, but also to deny such recovery. They next refer to UCPR r 42.25, which provides that where a trustee is party to proceedings in that capacity, then unless the Court otherwise orders , it is entitled to his costs out of the assets. Finally, they refer to UCPR r 42.7, which is to the effect that, unless the Court otherwise orders, its costs discretions are to be exercised at the end of the case. However, this rule is concerned with costs as between parties, and not with the liabilities incurred between parties and their own lawyers. It does not impinge on the principles relating to a trustee's right of indemnity to which I now come, and it does not mean that those rights of indemnity are suspended until any s 93(3) order is made at the conclusion of the proceedings.

108 A trustee is entitled to an indemnity for expenses not improperly incurred, and may reimburse itself, or pay or discharge out of the trust property, all expenses so incurred in or about the execution of the trustee's trusts or powers [ Trustee Act, s 59(4); In re Grimthorpe [1985] Ch 615, 623 (Danckwerts J); Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar (2008) 237 CLR 66, [69]]. This right is a first charge on the trust assets and confers on the trustee, to that extent, a proprietary interest in the trust property [ Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226, [49], [51]]. It could not be a breach of trust for the trustee to resort to the trust property, to that extent, for that purpose.

109 This right of indemnity accrues at the time when the obligation is incurred [ Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd (2008) 74 NSWLR 550, [19]], and applies not only in respect of claims by a third party against the trustee, but also on an application by the beneficiaries, for example, to remove the trustee [Lewin on Trusts, 18 th ed 2008, 711-712]. Although the view has been expressed that a trustee who defends an action for removal thereby represents his or her own interests and not those of the trust estate [ Miller v Cameron (1936) 54 CLR 572, 578 (Latham CJ)], the predominant view is that if the costs are incurred as an incident of administration of the estate, the trustee is entitled to be indemnified in respect of them, and where trustees are sued by beneficiaries complaining of some act or omission, the trustee is entitled to defend his or her conduct as an incident of administration and to be indemnified in respect of the costs of so doing [ Re Llewellin; Llewellin v Williams (1887) 37 Ch D 317, 327; National Trustees Executors and Agency Co of Australasia v Barnes (1941) 64 CLR 268 , 278-9 ; Fay v Moramba Services Pty Ltd [2010] NSWSC 725, [4].

110 There are limits to this indemnity, although precisely what they are is unsettled. In Gatsios Holdings Pty Ltd v Nick Kritharas Holdings Pty Ltd (in liq) [2002] NSWCA 29, [2002] ATPR 41-864 (SLR), the Court of Appeal held that a trustee who had been found liable for a contravention of Trade Practices Act, s 52, was entitled to be indemnified from the assets for $400,000 damages, interest and costs. Meagher JA suggested (at [47]) that the indemnity would not extend to liabilities arising from a breach of trust, a breach of the criminal law, or fraud. Spigelman CJ agreed, adding that the right of indemnity could not be availed of if a trustee incurred expenses as a result of conduct in breach of a duty owed to the trust, including a duty to execute the trust with reasonable diligence and care. His Honour referred to the observation of Lord Selborne LC that "these rights ... can only be lost or curtailed by such inequitable conduct on the part of the ... trustee as may amount to a violation or culpable neglect of his duty under the contract [ Cotterell v Stratton (1872) 8 ChD 295, 302; applied by Griffith CJ in Corrigan v Farrelly (1897) QLJ 105, 111-2]. In refusing special leave to appeal in Nolan v Collie [2004] HCATrans 22, Gummow and Heydon JJ said that they did not read Meagher JA's dictum as supporting a proposition that any breach of trust would deprive the trustee of the indemnity. In Mead v Watson (2005) 23 ACLC 718, the Court of Appeal, apparently without reference to Gatsios , discussed and applied a test derived from In re Beddoe , the essence of which is that the indemnity is not availability in respect of liabilities incurred though "unreasonable or negligent" conduct - a test which had been said, in Gatsios , to be unhelpful.

111 In the High Court appeal in the judicial advice proceedings, Macedonian Church v His Eminence Petar (2008) 237 CLR 66, the Court (at 114, [144]-[146]) noted that there was some disagreement as to the limits of the indemnity under the general law corresponding to s 59(4), but observed that, having regard to the breaches of trust pleaded:

Depending on what findings of fact are eventually made by the trial judge, it is possible that the Association has committed very serious misconduct. If so, it is highly doubtful that it could employ s 59(4) to protect itself from the consequences of an order that it pay the costs of the plaintiffs.

112 What is clear is that, even in cases where costs are awarded against the trustee, the trustee is not invariably disqualified from recovering indemnity from the trust fund, and this even in proceedings brought by the beneficiary, though this might be exceptional. As Lord Millett explained in Armitage v Nurse [1998] Ch 241, 262-3:

As Ungoed-Thomas J pointed out in Re Spurling's Will Trusts, it is not enough to deprive trustees of their right to recoup their costs out of the trust fund that the claim is a claim to recover money from them for the benefit of the trust. If the trustees succeed, then the claim was not well founded, and they cannot be denied their right of recoupment. I would add that even if the claim succeeds, yet they may not have so conducted themselves as to lose their right of recoupment.

In the present case the Judge deprived the Respondents of 20% of their costs because they had put forward arguments on which they had been unsuccessful. That was a proper exercise of his discretion. But he also deprived them of their right to recoup themselves out of the trust fund to the extent of that 20% on the ground that the claim was a hostile claim against them personally for breach of trust. In my opinion that was not a sufficient ground for denying them their contractual rights.

113 In the judicial advice proceedings, Palmer J said [ Re Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247, [49]]:

I am unable to accept Mr Parker's submission. Taken to its logical conclusion, the submission means that if a claim is made against a trustee for breach of trust and for restoration of the trust fund, it is always the duty of the trustee, even though entirely innocent of any wrongdoing, to surrender to the claim without a fight because surrender and a consequent payment to the trust fund will result in an increase in the trust fund. An increase in the trust fund is in the interest of the trust and a trustee who does not act in the interest of the trust is in breach of trust. It follows that an innocent trustee who defends a claim to restore the fund, by that very act becomes a guilty trustee and a claim for breach of trust which should fail if it were not defended will succeed only because it is defended. It is a pretty paradox - but it is not the law: see eg National Trustees Executors & Agency Co of Australasia Ltd v Barnes (1941) 64 CLR 268 at 278-279.

114 I therefore do not accept that it can be said that there is a breach of trust in resorting to trust assets to fund the defence of litigation brought against the trustee. Upon incurring a liability in the course of its duties as such, the trustee is entitled to be indemnified out of the trust assets. If it is not improperly defending proceedings brought against it as trustee, the trustee is entitled to resort to the trust assets to fund its defence. Only if the trustee takes more than the proper limit of its right of indemnity would there be a breach of trust. What costs orders will be made, and to what extent the Association will be held entitled or disentitled to indemnity out of the trust assets, will be known only following the outcome of these proceedings, and any consequential issues in respect of costs. It is not possible to say now that the Association has, by resorting to trust assets to fund the defence of these proceedings and the associated litigation, thereby committed a breach of trust; it may have taken no more than it was entitled to take in exercise of its right of indemnity. If, when the question of costs is ultimately determined and quantified, it transpires that the Association has helped itself to more than its legitimate entitlement, that will then be a different question.

115 The plaintiffs also complain that a "small but appreciable portion" of the costs of the defence of the proceedings would have been solely referable to the position of the Committee Members and Fr Dzeparovski ("the Individual Defendants"), and that to the extent that any payments which made out of trust property represent costs of the Individual Defendants, they are not authorized and are in breach of trust. They accept that after McConnell Jaffray commenced to act for the defendants, the Individual Defendants had no personal liability for defence costs, even where they were attributable to the defence of the individuals, because of an agreement that the firm would not look to them for fees, and that the Association would indemnify them. But in the absence of equivalent evidence about arrangements with earlier solicitors, it is said that the individuals and the Association were jointly and severally liable for the solicitors' costs, and that to the extent that the Association paid, it provided a benefit to the Individual Defendants.

116 In my view, even before the more formal arrangements were established with McConnell Jaffray, the Individual Defendants were being sued because of their office as a Committee Member of the Association, and they were entitled to be indemnified by the Association, or at least it was not improper for the Association to indemnify them. I do not accept that there was a breach of trust in this respect.

DEFENCES

117 The defendants pressed affirmative defences under the (NSW) Limitation Act , s 48(a); Trustee Act , s 63; and Trustee Act, s 85.

Limitation period

118 The defendants plead that the six year limitation period under section 48(a) of the Limitation Act applies to the claims against them "by analogy", and that, by operation of (former) SCR r 20.1(3A), the periods of time for which some of the claims can be made against them are limited because the claims were not introduced by amendments until more than 6 year had elapsed. This is said to bar any claim in respect of moneys paid to Fr Dzeparovski before November 1997.

119 It has been held that a limitation provision in respect of an "action by a beneficiary" does not apply to a claim where the Attorney-General sues for the benefit of the public at large, since the Attorney neither was a beneficiary, nor sued on behalf of a beneficiary [ Attorney-General v Cocke [1988] Ch 414 (Harman J)]. On the other hand, where the relevant provision referred to "an action by a person entitled to an estate, interest or right in land", it has been held - in the context of a trust for the poor of two parishes - that the Attorney-General, though not himself a person claiming an estate or interest in land, was in reality making such a claim on behalf of the poor of the two parishes, and that accordingly the limitation provision applied [ President and Scholars of St Mary Magdalen, Oxford v Attorney-General (1857) 6 HLC 189 [10 ER 1267] (Lord Cranworth LC)].

120 In the present case, s 48(a) refers to "an action on a cause of action in respect of a breach of trust" accruing to a "plaintiff" or a person though whom the plaintiff claims. On its face, this applies to the Bishop and Father Mitrev, who are the plaintiffs in the proceedings, and who sue not, as the Attorney might, for the benefit of the public at large, but by virtue of the "special interest" they have in enforcing the trust. Where, as here, the plaintiffs are permitted to pursue the usual range of remedies available at private law to a beneficiary, it is appropriate that the defendants be entitled to assert limitation defences. In my judgment, they are caught by s 48(a). The plaintiffs rightly acknowledge that the claims in respect of payments to Fr Dzeparovski and Fr Despotoski are not claims for a remedy for the conversion to a person's own use of trust property received by the person while a trustee such as to fall within the lengthier limitation period provided by s 47(1)(b) and s 48(b).

121 Accordingly, claims in respect of the payments made to Fr Dzeparovski prior to November 1997 are statute-barred.

Judicial advice

122 The defendants invoke Trustee Act 1925, s 63, which relevantly provides as follows:

63 Advice

(1) A trustee may apply to the Court for an opinion advice or direction on any question respecting the management or administration of the trust property, or respecting the interpretation of the trust instrument.

(2) If the trustee acts in accordance with the opinion advice or direction, the trustee shall be deemed, so far as regards the trustee's own responsibility, to have discharged the trustee's duty as trustee in the subject matter of the application, provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction.

123 The Association obtained judicial advice from Palmer J on 7 May 2004, 10 June 2005 and 23 November 2006, authorising the expenditure of its funds for the purposes of defending these proceedings.

124 On 7 May 2004, Palmer J held that, in the absence of an opinion from counsel that the Association had sufficient prospects of success in the main proceedings to justify it in defending them and to justify it in expending trust funds in defence of them, it would not be right to give the association advice in unqualified terms that it was so justified. However, he directed that the Association was justified in taking such steps as were necessary to comply with the court's directions and preparing its case for trial, up to and including 9 July 2004, and that the Association was justified in having recourse to the Schedule A property (other than the Church Land) for the purpose of paying its reasonable legal costs incurred in two respects: complying with the existing directions of the court and in preparation of its case up to 9 July 2004, when it was expected that the interlocutory applications on foot would have been completed; and procuring an opinion of counsel as to its prospects of success in the main proceedings [ Re Application of Macedonian Orthodox Community Church St Petka Inc [2004] NSWSC 388].

125 On 10 June 2005, Palmer J directed that for the purpose of paying its further reasonable legal costs and expenses, up to an amount of $60,000, in procuring a preliminary opinion of counsel as to its prospects of success in the main proceedings, the Association was justified in having recourse to the Schedule A property (other than the Church Land) [ Re Application of Macedonian Orthodox Community Church St Petka Inc (No 2) (2005) 63 NSWLR 441; [2005] NSWSC 558].

126 On 23 November 2006, Palmer J indicated that he would give advice favourable to the association [ Application of Macedonian Orthodox Community Church St Petka Inc (No 3) [2006] NSWSC 1247] , and on 22 March 2007 [ Application of Macedonian Orthodox Community Church St Petka Inc (No 4) [2007] NSWSC 254] made orders to the following effect :

1. The Association would be justified in defending the Main Proceedings on the issue of the terms of the trust declared by Hamilton J on 7 February 2007 and without limiting its generality:

(a) the allegations in paragraphs 7A and 22 of Statement of Claim (version 8);

(b) the allegations that are raised by the plaintiff by way of defence to the allegations in paragraphs 7A and 22 of Statement of Claim (version 8);

2. The Association be entitled to have recourse to the property in Schedule A in the judgment Metropolitan Petar v Mitreski [2003] NSWSC 262, other than the Church Land, for the purpose of paying its reasonable costs of defending the Main Proceedings as to the Schedule A Property Issue as follows:

(a) $78,666.01 for the period from 9 July 2004 to 9 February 2007;

(b) up to $216,295.00 for future costs.

127 The advice given by Palmer J related to the defence of these proceedings, and recourse to trust assets to fund that defence. It did not relate to any of the breaches that I have held to be established. It may be relevant on any ultimate exercise of the court's power under Trustee Act, s 93(3), but it is does not provide a defence in respect of any of the established breaches.

128 As has been mentioned, the Association also obtained judicial advice from Adams J, sitting as vacation judge, in January 2009, in respect of the exclusion of Fr Mitrev. The breach in respect of which such advice might potentially have provided protection was a "one-off" exclusion of Fr Mitrev, and it does not protect the Association in respect of his ongoing, or future, exclusion. As nothing depends on the one-off exclusion of January 2009, there is no utility in examining in detail whether the proviso is satisfied in respect of this advice. It does not provide a defence to breaches (b) and (c).

129 The plaintiffs contended that the proviso to s 63(2) was not satisfied in respect of any of the judicial advices, so that the judicial advice does not have the prophylactic effect claimed for it, namely that if the trustee acts in accordance with the advice, it will be deemed to have discharged its duty "provided that the trustee has not been guilty of any fraud or wilful concealment or misrepresentation in obtaining the opinion advice or direction". On this, the plaintiffs bear the onus of proving "fraud or wilful concealment or misrepresentation", and given the serious nature of the allegations, the standard of proof required is informed by cases such as Briginshaw v Briginshaw. Associated with this is an issue as to whether in order to trigger the proviso a misrepresentation must be wilful.

130 I have considered whether I should resolve these issues now, notwithstanding that the judicial advice does not afford a defence to the only breaches established, to clear away future issues. However, I have concluded that I should not, first because it would be premature to do so, when it is conceivable that the issue may never arise; and secondly, because had it been necessary to resolve the issue at this point, I would (for the reasons set out below) have refused to allow the plaintiffs to rely on their particulars served on 27 August 2010.

131 The defendants complained that they were prejudiced by the late notice of the supposed misrepresentations, which were not particularised until after the evidence had closed, although some of them were the subject of cross-examination of some of the defendants' witnesses, in particular Mr McConnell. The background is that, in their Reply, the plaintiffs admitted that the Association had obtained judicial advice, and "do not admit that the Association was not guilty of fraud or concealment or wilful misrepresentation". At a pre-trial directions hearing, the plaintiffs sought access to various opinions of counsel, privilege in which it was contended has been waived by the raising of the s 63 and s 85 defences; it was said that the Reply could not be particularised in the absence of full disclosure. Mr Holmes QC, then appearing for the defendants, sought time to consider and address this. In the course of discussion, it was ultimately resolved that even if the waiver issue were dealt with there and then, it would not resolve the matter, because more might emerge in the cross-examination of the defendants' witnesses at the final hearing. Accordingly, the motion for access to the relevant documents was adjourned to the hearing, to be dealt with at some appropriate time, most probably during the defendants' case. In their pre-trial skeleton argument, the plaintiffs maintained the position that the s 63(2) issue could not be elaborated in the absence of full disclosure, and advanced arguments on the waiver of privilege issue. As it transpired, the motion and the waiver argument did not have to be dealt with because, shortly before the commencement of the hearing, the defendants ceased to maintain their claim for privilege. It was almost four weeks and 19 hearing days later, when the evidence was practically closed, that a document containing 17 particulars of fraud, wilful concealment or misrepresentation was served.

132 As has often been said, the concept of fraud is not only serious but multi-faceted, and therefore needs to be pleaded specifically and with particularity; this applies not only where fraud is a cause of action, but also where it is a reply to a defence such a limitation defence [see Banque Commerciale SA v Akhil Holdings Limited (1990) 169 CLR 279, 285-7, in which, while the reply contained a clear allegation of "fraudulent breach of trust", it was unparticularised, and the absence of sufficient particulars precluded the plaintiff from relying on "fraudulent breach of trust"].

133 These proceedings have an obviously unhappy procedural history. There have been many defaults, mainly but not exclusively by the defendants. In order that they ultimately be brought to resolution, I adopted the approach that while late evidence and amendments that could clearly be accommodated without prejudice to the other party and without occasioning further delay would be permitted, in cases of doubt they would not. This approach resulted in the refusal of leave to the defendants to amend their defence, and the rejection of an amount of evidence tendered, and some lines of cross-examination sought to be pursued, by the defendants.

134 Some of the "particulars" were admittedly raised in cross-examination of the defendants' witnesses, albeit even then at a late stage of the hearing. However, forensic decisions were made in the absence of the particulars: for example, the defendants decided not to call Mr Damceski, when they were unaware that it would be alleged that his affidavit used in the application before Adams J engaged s 63(2); nor did they have a proper opportunity to consider whether to call Mr Blake SC. Inferences are sought to be drawn from the absence of explanation for the change in the dates attributed to the fundraising appeal - it being suggested that absent any explanation it should be inferred that it was a "cover up". Given the stage of the hearing, and the imperative of bringing these long drawn out proceedings to a close, it was unlikely that the defendants would have a fair opportunity to answer these particulars without extending their case, and potentially recalling witnesses. Given the stage of the hearing, in the course of which constraints had been placed on the defendants' case as a result of certain indulgences granted to them, and the imperative of bringing these long drawn out proceedings to a close, the prospect was that if this course were permitted, the proceedings would become part-heard, and further protracted. In those circumstances, consistent with the approach taken to other attempts to amend and adduce late evidence, it would have been inappropriate to permit these particulars to be relied upon.

135 Given the enormous impact of the costs incurred in these proceedings, it would have been unfortunate if, for that reason, the plaintiffs had been deprived of the opportunity of advancing their case under s 63(2). The same objection will not be available if any s 63 issue remains to be resolved, once the position concerning costs and s 93(3) is known.

Relief for excusable breaches

136 The Association also invokes Trustee Act, s 85, which is relevantly 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 the trustee committed the breach.

137 Section 85 gives the court a discretion to relieve a trustee of personal liability in respect of a past breach of trust, if the conditions referred to in subsection (2) are satisfied, namely:

(1) that the trustee has acted honestly and reasonably,

(2) that the trustee ought fairly to be excused for the breach of trust; and

(3) that the trustee ought fairly to be excused for omitting to obtain the direction of the Court in the matter in which the trustee committed the breach.

138 Relief under s 85 does not amount to an approval of the breach; nor does it prospectively authorise continuation or repetition of the breach [ Re Tollemache [1903] 1 Ch 457, 466; cf Edwards v Attorney-General (2004) 60 NSWLR 667 (re (CTH) Corporations Act 2001, s 1318)].

139 It is important to focus on those breaches that have been established, in respect of which there is potential for personal liability: it is from liability for those breaches that relief is sought. In substance, this means the pecuniary breaches, namely the payments to Fr Dzeparovski and Fr Despotoski. Elaborate submissions were developed, on both sides, respectively to support the reasonableness and honesty, and expose the unreasonableness or dishonesty, of the Association's directing minds in relation to its continued exclusion of Fr Mitrev after Hamilton J's judgment, its continued resistance of the Bishop's authority, its defence of the proceedings generally, its expenditure of assets on legal costs, and in other respects; but these do not relate to the breaches in respect of which there is potentially personal liability on the part of the Association.

140 The question then is whether the Association ought to be relieved under s 85 of liability in respect of its payment of emoluments to Fr Dzeparovski and Fr Despotoski. Importantly, this took place in the period 1997 to mid-2003 - Fr Despotoski's engagement came to an end in mid-2003 - almost entirely before Hamilton J's judgment established that the Schedule A property was held upon charitable trust, and the essential decisions - to employ Fr Dzeparovski and Fr Despotoski - were made in mid-1997 and mid-1998 respectively.

141 As to whether the Association ought fairly to be excused for omitting to obtain the direction of the Court in respect of the engagement of the two priests, its office bearers were not then aware of the availability of judicial advice. More importantly, they believed that the Association was not a trustee, as they argued before Hamilton J, and that the Association's constitution, not any trust, was the paramount authority. Believing that the Association was not a trustee, seeking judicial advice was not a course that was practically open. Even at a later stage, the plaintiffs contended that the Association was not entitled to seek judicial advice while it maintained an appeal against Hamilton J's judgment that it was a trustee. The fact that the Association's officers honestly and reasonably believed that it was not a trustee is sufficient and reasonable excuse for not seeking judicial advice.

142 As to whether the trustee ought fairly to be excused for the breach of trust, the Committee Members were all volunteers - amateurs who were endeavouring to serve their community. That the trustee is a volunteer is a relevant factor, telling in favour of granting relief [ National Trustee Co of Australasia Ltd v General Finance Co of Australasia Pty Ltd [1905] AC 373]. So too is their degree of education and ability [ Re Turner [1897] 1 Ch 536]. While the acumen and education of the Committee members varied, they were generally not sophisticated; they spoke in their native Macedonian language, and for the most part their English was limited. They were not at all versed in the law of trusts, and at least in some cases did not understand what a trust was, and though they knew to some extent of the existence of church law, they did not understand its detail. Moreover, the employment of both the priests generated revenue for the trust, which swelled its coffers, but rapidly dried up when Fr Despotoski ceased to minister at St Petka in mid-2003. These considerations also favour granting relief.

143 As to honesty and reasonableness, the question is complicated by the circumstance that the honesty and reasonableness of the Association's conduct must be determined by consideration of the state of mind of its officers. Each of the Committee Member defendants other than Mr Damcevski was called and cross-examined. What follows is but a selection of some relevant aspects of the evidence of some of them.

144 Mr Minovski has been a parishioner of St Petka since its establishment in 1976, and a member of the Association since 1991. He was a member of the executive council of the Association and its treasurer from 14 April 1997 until 9 January 1998, but has not participated in deliberations of the executive council since then. Although vaguely aware that the Church had its own rules - he was aware, in 1996, that the Church was governed by the Holy Canons, its constitution, and the diocesan statute - he had no real understanding of church law. He said that he regarded the Association's constitution as authoritative, regardless of church law. He gave the following evidence [T 605, 613, 633]:

Q. And you have always understood if you wanted to be a member of the Macedonian Orthodox Church you had to follow its rules. That's right, isn't it?

A. WITNESS: Yes. But the rules in the frame of the incorporated association. ... Only thing I know after that election they been informed in the hierarchy because we believe we build the churches here and the committee run the community of the church by their own constitution of incorporated association by the members. Now, the spiritual part of the church, they take care of it.

...

Q. And the rules were set by the church?

A. WITNESS: I don't agree with that.

Q. If you didn't know about them how could you say that the priest was wrong?

A. WITNESS: Because I am working in Australia. This is my country. This has good law. This law under this constitution incorporated association I understand what rights I got. We guaranteed to come to Australia to doing that job in our religion things to do. I never interfering with his job so I believe I have to doing service in my members in my community what I supposed to do. That's what I do. That's what I did.

...

Q. When Mr Mitreski said to the members of the association, "You have the power", you knew very well that they didn't have the power under church law to remove the priest, didn't you?

A. WITNESS: Like I say, I don't know what to say regard these thing. I think we did the right thing to protect the constitution, to protect what we been selected to do. I thought we doing our job and by--

HIS HONOUR

Q. By our constitution you mean the association?

A. WITNESS: Our constitution, incorporated association, yes. I'm not lawyer to know details how much rights so much, no, but people more educated than me we rely on them more or less. That's how I understood.

145 Mr Eftimov was a Committee Member from 14 April 1997 until 18 July 1998, but has not participated in its deliberations since then. He did not endeavour to dispute having sworn an oath of office - which referred to the Holy Canons, the Church constitution and the diocesan statute - save to say that there was no diocesan statute. Although he disputes that it was read out and repeated by Fr Mitrev, he agrees that he read the oath, but sought to emphasise that he did not swear the oath in the Church , but in the meeting room. He supported the employment of Fr Dzeparovski. He said that he believed that they were obliged to find another priest. He says that he did not believe that doing so would involve breaching any trust. He signed the employment agreement for Fr Dzeparovski. He did not ask the Bishop if it would be acceptable to employ Fr Dzeparovski, and believed that it would be against the wishes of the Bishop to do so. He was present at meetings at which the appointment of Fr Despotoski was discussed. He does not remember the discussion, but was not against some priest being appointed. He said that he believed that the Association owned the land and building, and that he did not know or believe that it was held on any trust: he recalled that there had once been individual trustees, but believed that in 1992 the property was transferred to the Association, and that there were no trustees or trusts after that. So far as he was concerned, the executive council followed the Association's constitution, not the Bishop's direction.

146 Mr Marcevski was a member of executive council from 14 April 1997 to 18 July 1998. He did not participate in deliberations thereafter, until re-elected to the executive council on 16 December 2009. He was raised in Macedonia, and left school aged 15. He was involved in the establishment of St Petka, and was a member of the Committee of the unincorporated association at various times between 1977 and 1990. He said that he was not involved in, but was supportive of, the decision to employ Fr Dzeparovski, whom - he says - he did not know had been suspended and banned until a few weeks after his employment by the Association had commenced, following which the Association continued to employ him, because they needed a priest. However, he was in fact one of the signatories to the employment agreement with Fr Dzeparovski dated 18 July 1997. He agreed with the appointment of Fr Despotoski, again, he said, because a priest was needed. He said that he understood that the Bishop had initially agreed, and that he did not know that Fr Despotoski had been suspended and defrocked until after his employment had commenced. He said that he was not aware of the existence of any trust and did not understand what a trust was. He believed that church law was relevant only to what happened inside the Church, and not to the Community Association and its affairs.

147 Fr Despotoski, who had an understandably better understanding of church law, said of the Committee members, whose understanding of it was relatively poor, "All they wanted was to have a priest". He continued (T581):

Q. They didn't care whether you had been appointed or not, did they?

A. INTERPRETER: Absolutely.

Q. They didn't care about church law at all, did they?

A. INTERPRETER: They are not interested in it, even today.

Q. Did you say even today?

A. WITNESS: Correct.

148 I do not accept without reservation everything that the Committee Members say, and in some respects their credit was significantly damaged: for example, Mr Mitreski falsely denied having sworn an oath of office, including allegiance to church laws. However, for present purposes, I accept that they honestly believed that the Association was beneficially entitled to its property and did not hold it on trust; and that the parish property was Association property and not trust property. That was a not unreasonable position, as until the decision of Hamilton J, there was doubt as to the trust status of the Association's property.

149 I further find - on the totality of their evidence and that of Fr Despotoski, in the light of the surrounding circumstances - that the Association's decision to employ Fr Dzeparovski and later Fr Despotoski was actuated by a perceived need, consequent on the expulsion of Fr Mitrev, to have a priest in the church to perform priestly duties in order to fulfil the main function of the church and administer the sacraments to parishioners. In itself, this is neither dishonest nor unreasonable. But it is affected by two features.

150 The first is that the Association by its officers also knew that such a course would be opposed to the will of the Bishop. This was in circumstances where, but a few months earlier, those officers had sworn a solemn oath of office by which they undertook in substance to uphold the constitution of the Church, the diocesan statute and the by-laws. By employing the priests without the Bishop's sanction, the executive council acted inconsistently with that oath. I readily accept that it is not necessarily dishonest to make a promise and later not adhere to it, at least if it was genuinely intended when made. A change in intentions after a promise is made is not necessarily dishonest, though it is dishonest to make a promise without any intent of adhering to it. But a sworn promise, as an oath is, is somewhat different, because it involves a solemn oath to adhere to the promise, which is absent from the ordinary contractual promise. The repudiation of a sworn promise, unexplained by changed circumstances frustrating its performance, would be judged dishonest by the ordinary standards of honest behaviour. I think there is particular significance in Mr Mitreski's false denial that he had sworn such an oath, and in Mr Eftimov's insistence that the oath was not sworn in the church - the former reflects conscious or unconscious appreciation of the difficulty of reconciling that oath with the subsequent course of conduct, and the latter is an attempt to reduce the significance of the oath for the same reason.

151 The second is that it is a fundamental proposition of the Macedonian Orthodox faith, that if not known to the Committee Members who had sworn to uphold church law should have been known to them, that it is the Bishop who administers sacraments, albeit via the medium of a duly appointed priest as his agent; the corollary of which is that a priest who has not been duly appointed by the Bishop cannot validly administer the sacraments and from the Church's perspective achieves nothing. Accordingly, the Association was paying these priests remuneration for performing a role that, in the eyes of the Church, achieved absolutely no purpose.

152 Notwithstanding that the Association's constitution provides that the priest is appointed by the executive council, I cannot reconcile the conduct of the Committee Members, having sworn an oath of allegiance to church law, in engaging and remunerating the two priests without the Bishop's approval, to achieve no useful religious purpose, with what would commonly be regarded as honest behaviour. While I accept that they did not understand the niceties of church law, they did understand at least (and if they did not, ought to have by reason of the oath they took) the fundamental proposition that the Bishop's approval was essential for the effective appointment of a priest. Resort to the provision of the Association's constitution, in the face of the oath of office, savours of the type of unconscionable insistence on strict legal right on which equity has always frowned. In my judgment, those considerations preclude me from being satisfied that in engaging the two priests, the Association acted honestly and reasonably. Accordingly, I am not prepared to relieve the Association of liability for the established pecuniary breaches under s 85.

153 A similar defence (under (CTH) Corporations Act 2001, s 1318) was raised on behalf of the Committee Members who, not themselves being trustees, do not have the benefit of s 85. However, that part of the Corporations Act does not operate in relation to an incorporated association [ Associations Incorporation Act 1984, s 6; Associations Incorporation Act 2009, s 95]. Had it been available, the above reasoning would have resulted in its rejection.

ACCESSORIAL LIABILITY

154 Against Fr Despotoski, the plaintiffs make a claim of "knowing receipt" under the first limb of Barnes v Addy in respect of the remuneration received by him. Against the Committee Members, the plaintiffs assert that they are personally liable in respect of the proven breaches on several bases of accessorial liability.

Claim against Fr Despotoski

155 The plaintiffs contend that Fr Despotoski would have been on notice of facts rendering the payments breaches of trust at the time he received the moneys that were his remuneration and accordingly, that he is liable on the basis of "knowing receipt" under the first limb of Barnes v Addy .

156 Liability under the first limb of Barnes v Addy depends on notice, actual or constructive, that the funds received are trust moneys; for this purpose (though not for the second limb) knowledge of circumstances that would put a reasonable person on inquiry will suffice. Fr Despotoski knew that the Bishop wanted Fr Mitrev to be the parish priest at St Petka, and with that knowledge accepted the appointment at St Petka. By the time of his appointment these proceedings, in which it was alleged that the Association held its assets upon trust, were on foot. In those circumstances, I would accept that Fr Despotoski had the requisite notice.

157 However, as the defendants submit, he gave value for what he was paid (even if not in the eyes of the Church hierarchy), by officiating at services, and - save for the want of authorisation - performed the role of priest. Moreover, his presence resulted in revenue for the Association - and thus for the trust. Without a priest, the revenue declined. There was no loss to the Association; to the contrary, his employment generated income - which I have found was trust income - that far exceeded his wage. In those circumstances, he is entitled to a just allowance for his labours, which corresponds to the modest amount he was in fact paid. The result is that he is not liable to account to the trust.

Claim against Committee Members

158 The principles for which Barnes v Addy (1874) LR 9 Ch App 244 is commonly cited have been stated in the context of trusts for persons, not trusts for purposes. In the context of charitable trusts, injunctive relief has been granted against a person other than the trustee who instigated or encouraged a breach of trust. In the Red Book Case , the churches in question were vested in various bodies under trusts which provided (as was ultimately held) for worship in accordance with the Book of Common Prayer. Bishop Wylde, who was using and promoting a different form of worship, was not himself a trustee. Nonetheless injunctions were granted against him personally to restrain conduct on his part which would result in a breach of trust, and costs were also awarded against him. In Solicitor-General v Wylde (1945) 46 SR(NSW) 83, Jordan CJ said (at 97):

When the objects of a voluntary association are in law charitable, any property which it acquires becomes impressed with a charitable trust for its application to those objects, and anyone who participates in its application for any purpose inconsistent with those objects is guilty of a breach of trust, a breach of the law of the land. A court of equity has, and will exercise, jurisdiction to restrain such a breach. ...

A church, that is, a voluntary association which is charitable because it has as its object the practice of a lawful form of religion in accordance with lawful rules of the association, stands in the same position as any other charitable voluntary association in the respects to which I have referred ...

159 As the plaintiffs submit, this statement contains no reference to "knowledge" as a requisite element of liability; and it was applied by Roper CJ in Eq in the subsequent proceedings, Attorney-General v Wylde (1948) 48 SR(NSW) 366, to restrain the Bishop from committing an act that caused the public charitable trust to be breached, again without any mention of knowledge as a requisite element (at 388.4-5):

The next question which arises is whether the Bishop commits a breach of trust and is personally subject to injunctions in respect of it. He is not the trustee because the trust property is not vested in him. True he is a member, by requirement of the Act of Parliament creating it, of the defendant corporation which is the trustee; but here he is being dealt with in his personal capacity and not as one of the corporators of that corporation. He is, however, entitled under the rules of the Church to conduct services in the churches in his diocese. The corporation, that is the trustee, cannot prevent him from doing so and in my opinion on principle and on authority he is personally liable to be injuncted if his acts cause the church property to be used in breach of trust: see Solicitor-General v Wylde (1945) 46 SR 83; Attorney-General v Murdoch (1849) 7 Hare 445 at 469-470; 68 ER 183].

160 In the High Court appeal [78 CLR 224], the judgment of Roper CJ in Eq was upheld. Dixon J, as he then was, who was one of the dissentients, observed (at 289) that the orders against the Bishop appeared to have been made on the footing that he was instigating breaches of trust. Analysis of the judgments at the various stages of the litigation reveals that the predominant view was that it was sufficient to impose liability upon Bishop Wylde personally that he was himself deliberately engaging in, and inducing others to engage in, conduct which resulted in the church buildings being used in a manner inconsistent with the terms of the trusts.

161 The plaintiffs submit that, on the application of this principle, the intentional and deliberate conduct of the Committee Members is sufficient to render them personally liable for the proven breaches of trust. Once again, only the pecuniary breaches involving payment of remuneration to the two priests are practically relevant. On this approach, it would be unnecessary to consider whether the Committee Members were dishonest participants in the Association's breaches of trust so as to attract personal liability under the second limb of Barnes v Addy . However, t he researches of counsel and of the Court revealed no case in which this doctrine has been used to found liability to account or to pay compensation. It is one thing to restrain conduct by a third party which is causing a breach of trust; it is another to impose on that third party a liability to account. It is difficult to see why a more stringent liability to account would apply to third parties in respect of a charitable trust than a conventional trust. In my view, if the plaintiffs are to succeed against the Committee Members, they must bring the case within the established bases on which a third party may be held personally liable for a breach of trust.

162 Lord Selborne's classical statement of the law relating to accessorial liability for breach of trust in Barnes v Addy was cited by the High Court of Australia in Farah Constructions v Say-Dee (2007) 230 CLR 89 (footnotes omitted):

[111] The "rule in Barnes " stated : In Barnes Lord Selborne LC said:

Those who create a trust clothe the trustee with a legal power and control over the trust property, imposing on him a corresponding responsibility. That responsibility may no doubt be extended in equity to others who are not properly trustees, if they are found either making themselves trustees de son tort , or actually participating in any fraudulent conduct of the trustee to the injury of the cestui que trust . But, on the other hand, strangers are not to be made constructive trustees merely because they act as the agents of trustees in transactions within their legal powers, transactions, perhaps of which a Court of Equity may disapprove, unless those agents receive and become chargeable with some part of the trust property, or unless they assist with knowledge in a dishonest and fraudulent design on the part of the trustees.

The form of liability referred to in the first part of the last sentence is often called the "first limb" of Barnes , and the form of liability referred to in the second part of the last sentence is often called the "second limb".

163 The Court observed that the second limb was not an exhaustive statement of the circumstances in which a third party who has not received trust property and who has not acted as a trustee de son tort nevertheless may be accountable as a constructive trustee, and did not address the situation of a third party who intentionally procures an (unwitting) trustee to commit a breach of trust (footnotes omitted):

[161] Several points of a general nature should be made here. The first concerns the scope of the second limb. This was not expressed by Lord Selborne LC as an exhaustive statement of the circumstances in which a third party who has not received trust property and who has not acted as a trustee de son tort nevertheless may be accountable as a constructive trustee. Before Barnes , there was a line of cases in which it was accepted that a third party might be treated as a participant in a breach of trust where the third party had knowingly induced or immediately procured breaches of duty by a trustee where the trustee had acted with no improper purpose; these were not cases of a third party assisting the trustee in any dishonest and fraudulent design on the part of the trustee.

[162] Secondly, the distinction has been recognised in the Australian case law but, on one reading of Royal Brunei , may have been displaced by the Privy Council in favour of a general principle of "accessory liability" expressed as follows:

A liability in equity to make good resulting loss attaches to a person who dishonestly procures or assists in a breach of trust or fiduciary obligation. It is not necessary that, in addition, the trustee or fiduciary was acting dishonestly, although this will usually be so where the third party who is assisting him is acting dishonestly. "Knowingly" is better avoided as a defining ingredient of the principle.

[163] Thirdly, while the different formulations of principle may lead to the same result in particular circumstances, there is a distinction between rendering liable a defendant participating with knowledge in a dishonest and fraudulent design, and rendering liable a defendant who dishonestly procures or assists in a breach of trust or fiduciary obligation where the trustee or fiduciary need not have engaged in a dishonest or fraudulent design. The decision in Royal Brunei has been referred to in this court several times but not in terms foreclosing further consideration of the subject in this court: in particular, further consideration of the apparent necessity to displace the acceptance in Consul Development of the formulation of the second limb of Barnes were Royal Brunei to be adopted in this country. Until such an occasion arises in this court, Australian courts should continue to observe the distinction mentioned above and, in particular, apply the formulation in the second limb of Barnes .

[164] On the present appeal, specific reliance was not placed by Say-Dee upon Royal Brunei , although there was a suggestion, not soundly based, discounting any difference between what might be called the traditional approach and that adopted in Royal Brunei . The changes to the law in Australia which were sought by Say-Dee did not include any adoption of a cause of action of the kind expressed in the passage in Royal Brunei set out above. Accordingly, it is unnecessary to decide now how far Royal Brunei , and subsequent decisions in the House of Lords and Privy Council, have modified the second limb of Barnes or, rather, restated the form of liability operating antecedently to and independently of Barnes , and if so, whether these changes should be adopted in Australia.

[165] However, for the sake of completeness, we should add that whatever view be taken of Royal Brunei , whether it be an independent doctrine or a replacement of the second limb of Barnes , its requirements are not satisfied in the present case. To apply the most recent formulation, by Lord Hoffmann in Barlow Clowes , on the evidence there is nothing to show that Mrs Elias and her daughters had "consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour".

164 In my view, the effect of what the High Court here said is that quite apart from accessorial liability under the so-called first and second limbs, a stranger to a trust can still be held liable for breach of trust on the footing of knowingly inducing or immediately procuring a breach of trust. This is consistent with the emphasis that the second limb is not exhaustive. In distinction from the decisions, referred to above, in the Red Book Case, it involves an element of knowledge.

165 Unlike the so-called first limb, but like the second limb, liability on this basis does not depend on receipt of the trust funds. Accordingly, the "knowledge" requirement should be treated as the same as that for the second limb. This accords with the High Court's description of this basis of accessorial liability in Say-Dee as " rendering liable a defendant who dishonestly procures or assists in a breach of trust or fiduciary obligation where the trustee or fiduciary need not have engaged in a dishonest or fraudulent design" [ Say-Dee , [163]], which in turn requires "consciousness of those elements of the transaction which make participation transgress ordinary standards of honest behaviour" [ Say-Dee , [165]].

166 For substantially the same reasons that found my conclusion that, for the purposes of s 85, the Association did not act honestly and reasonably, I am compelled to conclude that the Committee Members were conscious of those elements of the engagement of the two priests that made their participation transgress ordinary standards of honest behaviour. They knew, or at the least ought to have known, that what they were doing involved repudiation of a recently sworn undertaking to uphold church law, and yet would achieve no religious purpose in the eye of the Church for want of the Bishop's approval. While I accept that considerable doubt attended whether the Association would be held to be a trustee, about which minds could reasonably differ, until Hamilton J's judgment, and that the Committee Members did not understand the niceties of church law, I cannot accept that it accorded with ordinary standards of honest behaviour for them to repudiate their recent oath of office. Mr Eftimov's evidence establishes that all the Committee members were present when the oaths were taken.

167 Although the defendants submitted that there was insufficient particularisation of any allegation of dishonesty for the purpose of a "second limb" case, they accepted that a "participation" case was open on the pleadings. In any event, the issue of the oaths of office was raised in cross-examination on multiple occasions, and the Committee Members had ample opportunity to address it. In this respect, I am unpersuaded that lack of earlier, further or better particularisation of the allegation deprived them of a fair opportunity to address it.

168 Accordingly, I would hold each of the Committee Members liable as an accessory to account to the trust for the emoluments paid to Fr Dzeparovski and Fr Despotoski while that Committee Member remained in office - except payments made prior to November 1997, in respect of which the claim is statute-barred.

CONCLUSION

169 My conclusions may be summarised as follows.

170 The Other Pre-incorporation Property was acquired for the same purposes as, and as a result of ownership or use of, the Schedule A property, and was held on the same trusts as the Schedule A property, namely the trust declared by Hamilton J. The Holy Objects, Ancillary Property and Other Funds held at the time of incorporation of the Association passed to the Association subject to the same trust, and - to the extent that any such property is still held by the Association - remain held upon the same trust.

171 The Post-incorporation Property - including further and replacement Holy Objects and Ancillary Property acquired by the Association, further Funds received by it and the three further Investment Properties: Units 6, 7, and 4 were acquired and held by the Association subject to the same trust. Accordingly, the whole of the Association's assets acquired up to May 2004 were and are trust property, as also are its assets acquired since then, except to the extent that the Association demonstrates that identifiable moneys held by it were donated for the purpose of funding the litigation. As expenditure on costs of litigation has exceeded, by a very substantial margin, moneys received from such donations, it is improbable that any remaining property of the Association represents these donations.

172 My reasoning supports the conclusion that, if the Court of Appeal were to uphold the plaintiffs' appeal from Hamilton J's judgment, to the effect that the trust was not as declared by Hamilton J for use of the property by the Association, but rather for religious purposes of the Macedonian Orthodox Religion or the Macedonian Orthodox Church in more general terms, the non-Schedule A property would still be held on the terms of any trust that applied to the Schedule A property.

173 Alleged breaches (a) (exclusion of the diocesan Bishop), (b) (exclusion of the parish priest appointed by the Bishop), (c) (preventing a priest licensed by the Bishop to conduct services in the church from doing so), and (e) (employment of a priest not appointed by the Bishop) are established. Breaches (a), (b) and (c) are continuing.

174 Alleged breach (d) (exclusion of the parish priest from the executive body responsible for administration of the affairs of the parish) adds little if anything of substance to breach (b) (exclusion of the parish priest appointed by the Bishop). I am not satisfied that this requirement of church law that the priest be a member of the parish council is so fundamental that breach of it is a breach of trust. To the extent that Fr Mitrev was excluded from the executive council, that did not amount to a breach of trust.

175 As to alleged breach (i), to exclude from membership a significant number of believing Macedonian Orthodox Christians within the parish is to exclude a portion of those who were intended to be able to use the Church, and divert use of the trust property from its proper use for the Macedonian Orthodox Church or religion, to a schismatic purpose. Accordingly, this was not just a breach of church law, but of a term of the trust. While the Association says that eligibility for membership is determined by its constitution, and that applications for membership must comply with the requirements prescribed by or under its constitution, it is open to the executive council under Article 8(1) to alter the form of application. Alleged breach (i) is established, is a breach of trust, and is continuing.

176 In respect of alleged breach (j) (failure to remit to the diocesan Bishop the contribution from parish income specified in the diocesan statute), I am not satisfied that the obligation is so fundamental as to be a term of the trust., and while the Association's admitted failure since 1997 to pay diocesan contributions since 1997 is a breach of church law, it was not a breach of trust.

177 The employment of Fr Dzeparovski to act as parish priest being a breach of trust, payment of his remuneration out of trust property was a breach of trust.

178 Similarly, the employment of Fr Despotoski to act as parish priest being a breach of trust, payment of his remuneration out of trust property was a breach of trust.

179 A trustee who is not improperly defending proceedings brought against it as trustee, is entitled to resort to the trust assets to fund the defence. Only if the trustee takes more than the proper limit of its right of indemnity would there be a breach of trust. What costs orders will be made, and to what extent the Association will be held entitled or disentitled to indemnity out of the trust assets, will be known only following the outcome of these proceedings. It is not possible to say now that the Association has, by resorting to trust assets to fund the defence of these proceedings and the associated litigation, thereby committed a breach of trust; it may have done no more than it was entitled to do in exercise of its right of indemnity. If, when the question of costs is ultimately determined and quantified, it transpires that the Association has helped itself to more than its entitlement, that will then be a different question.

180 Claims in respect of the payments made to Fr Dzeparovski prior to November 1997 are statute-barred.

181 The judicial advice given by Palmer J related to the defence of these proceedings, and recourse to trust assets to fund that defence. It may be relevant on any ultimate exercise of the court's power under Trustee Act, s 93(3), but it is not a defence in respect of any of the established breaches.

182 The judicial advice given by Adams J does not protect the Association in respect of Fr Mitrev's exclusion, except potentially on one occasion, on which nothing turns. It does not provide a defence to breaches (b) and (c) as found. As nothing depends on the one-off exclusion of January 2009, there is no utility in examining in detail whether the proviso is satisfied in respect of this advice.

183 In those circumstances, it is unnecessary to resolve whether the proviso to s 63(2) was satisfied in connection with any of the judicial advices given by Palmer J, and preferable not to do so, before the resolution of questions of costs and indemnity, first because it would be premature to do so, when it is conceivable that the issue may never arise; and secondly because had it been necessary to resolve the issue at this point, I would have refused to allow the plaintiffs to rely on their particulars belatedly delivered on 27 August 2010, whereas in a future hearing of this issue they will be available to be relied upon.

184 Notwithstanding that the Association's constitution provides that the priest is appointed by the executive council, I cannot reconcile the conduct of the Committee Members, having sworn an oath of allegiance to church law, in engaging and remunerating the two priests without the Bishop's approval, to achieve no useful religious purpose, with what would commonly be regarded as honest behaviour. While I accept that they did not understand the niceties of church law, they did understand at least (and if they did not, ought to have by reason of the oath they took) the fundamental proposition that the Bishop's approval was essential for the effective appointment of a priest. Resort to the provision of the Association's constitution, in the face of the oath of office, savours of the type of unconscionable insistence on strict legal right on which equity has always frowned. In my judgment, those considerations preclude me from being satisfied that in engaging the two priests, the Association acted honestly and reasonably.

185 Accordingly, I am not prepared to relieve the Association of liability for the established pecuniary breaches under s 85. The Association is liable to account to the trust for payments made to Fr Dzeparovski and Fr Despotoski, save in so far as they are statute-barred.

186 Although I would accept that Fr Despotoski had the requisite notice to be liable under the first limb of Barnes v Addy in respect of the emoluments received by him, he gave value for what he was paid, and his employment generated trust income that far exceeded his remuneration. In those circumstances, he is entitled to a just allowance for his labours, which corresponds to the modest amount he was in fact paid. The result is that he is not liable to account to the trust.

187 For substantially the same reasons that found my conclusion that, for the purposes of s 85, the Association did not act honestly and reasonably, I am compelled to conclude that the Committee Members were conscious of those elements of the engagement of the two priests that made their participation transgress ordinary standards of honest behaviour. They knew, or at the least ought to have known, that what they were doing repudiated their recently sworn undertaking to uphold church law, and yet would achieve no religious purpose in the eye of the Church for want of the Bishop's approval. While I accept that considerable doubt attended whether the Association would be held to be a trustee, about which minds could reasonably differ, until Hamilton J's judgment, and that the Committee Members did not understand the niceties of church law, I cannot accept that it accorded with ordinary standards of honest behaviour for them to repudiate their recent oath of office. Mr Eftimov's evidence establishes that all the Committee members were present when the oaths were taken. Accordingly, I would hold each of the Committee members liable as an accessory to account to the trust for the emoluments paid to Fr Dzeparovski and Fr Despotoski while that Committee Member remained in office, but not in respect of moneys so paid prior to November 1997 as to which extent the claim is statute-barred.

RELIEF

188 I will direct that the parties bring in Short Minutes to give effect to these this judgment. In principle:

(1) The plaintiffs are entitled to a declaration to the effect that all the property of the Association other than the litigation funds are held as trustee on the trust declared by Hamilton J. If the defendants desire to contend that any litigation funds remain, they may have an account of the litigation funds at their own risk as to costs.

(2) The plaintiffs are entitled to declarations to the effect that the Association has, in breach of trust:

(a) excluded the diocesan Bishop,

(b) excluded the parish priest appointed by the Bishop,

(c) prevented a priest licensed by the Bishop to conduct services in the church from doing so,

(d) employed priests not appointed by the Bishop, and

(e) failed to accept applications for membership from believers in the doctrines of the Macedonian Orthodox Church who have satisfied the criteria for membership specified in the 1994 Constitution, the diocesan statute and the by-laws.

(3) The plaintiffs are entitled to injunctive relief that has the effect of compelling the Association to comply with the rules of Macedonian Orthodox Church as they apply to parishes of the Macedonian Orthodox Church in respect of not excluding or impeding the Bishop, not excluding or impeding Father Mitrev, and admitting into membership those who meet the requirements of church law for membership of a parish assembly.

(4) The plaintiffs are entitled to an order that the Association account to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski, save those paid prior to November 1997 in respect of which the claim is statute barred.

(5) The plaintiffs are entitled to an order that each of the Committee Members accounts to the trust for the moneys paid to Fr Dzeparovski and Fr Despotoski while that Committee Member remained in office, save those paid prior to November 1997 in respect of which the claim is statute barred .

(6) Upon the voting membership of the Association being brought into line with the requirements of the diocesan statute, the state of hostilities between the Association and the Macedonian Orthodox Church will probably come to an end, and there is no requirement to consider removal of the sixth defendant as trustee. In any event, there would be significant difficulties in removing and replacing the trustee, given the nature of the trust and the role of the Association as user of the church. This is all the moreso in the absence of a viable proposal for a replacement trustee.

(7) Save in the limited respects to which I have referred, I am not inclined to order a general account. An account is a discretionary remedy, and particularly in the case of a charity the Court has regard to the utility of an account, and the prejudice to the charity of prolonged litigation. The liability to account can be sufficiently identified from and limited to the proven breaches.

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Decision last updated: 23 February 2012